Rising Costs and Development Risks Loom Despite Vicinity’s Strong FY25 Results
Vicinity Centres reported a doubling of net profit and delivered funds from operations at the top of guidance, underpinned by strategic acquisitions and strong portfolio performance.
- Statutory net profit after tax doubles to $1.0 billion in FY25
- Funds From Operations per security hits top guidance at 14.8 cents
- Acquisition of Lakeside Joondalup and divestment of non-strategic assets at premiums
- Chadstone’s Market Pavilion opens with visitation up 36%, Chatswood Chase redevelopment on track
- FY26 guidance anticipates further growth with FFO per security of 15.0 to 15.2 cents
Robust Financial Performance
Vicinity Centres has delivered a standout financial year for FY25, reporting a statutory net profit after tax of $1.0046 billion, nearly doubling the previous year’s $547.1 million. Funds From Operations (FFO) rose modestly by 1.4% to $673.8 million, but when adjusted for one-off items and development-related rent losses, the increase was a more robust 3.6%. The company’s FFO per security reached 14.8 cents, sitting at the top end of its guidance range, reflecting strong operational execution.
Strategic Asset Management
Vicinity’s investment strategy continues to focus on premium, fortress-style retail assets in high-demand locations. The acquisition of a 50% stake in Lakeside Joondalup for $420 million exemplifies this approach, adding a high-quality asset with strong growth potential. Concurrently, the divestment of three non-strategic properties at premiums exceeding 5% above book value has sharpened the portfolio’s focus and quality.
Development Progress and Retail Momentum
Significant development milestones were achieved, notably the opening of Chadstone’s revitalised fresh food and dining precinct, The Market Pavilion, which is outperforming expectations with a 36% increase in visitation in the fourth quarter compared to the prior year. The redevelopment of Chatswood Chase is progressing well, with major structural works complete and leasing largely secured, positioning it to open in stages starting in the second quarter of FY26. These developments are expected to reinforce Vicinity’s position in key retail hubs.
Strong Portfolio Metrics Amid Positive Retail Environment
Vicinity’s portfolio metrics remain robust, with occupancy at an impressive 99.5% and leasing spreads improving to +2.5%. Specialty and mini-major retail sales grew by 4.7% in the second half of FY25, supported by a specialty occupancy cost ratio of 14.1%, indicating healthy rent affordability and potential for future growth. Comparable net property income grew by 3.7%, driven by the premium asset portfolio’s outperformance.
Outlook and Capital Management
Looking ahead, Vicinity projects FY26 FFO per security between 15.0 and 15.2 cents, with a distribution payout ratio targeted between 95% and 100% of adjusted FFO. Capital expenditure is expected to increase to $400–450 million, reflecting ongoing investment in developments and growth initiatives. The company maintains a conservative gearing level at 26.6%, providing flexibility to pursue strategic opportunities while preserving financial strength.
Bottom Line?
Vicinity’s disciplined strategy and development momentum set the stage for sustained growth amid evolving retail dynamics.
Questions in the middle?
- How will the completion of Chatswood Chase’s redevelopment impact overall portfolio income?
- What is the expected timeline and scale for mixed-use residential developments at Bankstown Central and Chatswood Chase?
- How might rising capital expenditure influence Vicinity’s gearing and distribution policy in FY26 and beyond?
