- Portfolio occupancy of 98 per cent
- Valuations increased by $25.8M to $4.5B
- Funds from operations was $94.1M
Formerly SCA Property Group (ASX: SCP), Region Group (ASX: RGN) recently announced its half-year results.
The period saw improved sales figures across the board, with the company also making strides forward in its commitment to sustainability.
Region Group Chief Executive Officer, Anthony Mellowes said: “The last six months have continued to prove the resilience of our convenience-based shopping centres. Tenant sales have grown across all sales categories, with non-discretionary sales increasing by 6.4%. Anchor tenant sales have continued to grow with an additional four tenants paying turnover rent. Our leasing spreads, average specialty gross rent and sales productivity have shown positive results.
“The progress we have made in executing our sustainability initiatives in 1H FY23 has put us in good stead to deliver our Net Zero target earlier than expected. We have completed the installation of 9.0MW of solar to date, of our 25MW target by FY26, and have commenced the construction of another 5.6MW solar and the design of a further 12.6MW solar.
“We continue to take a disciplined approach toward accretive acquisition and divestment opportunities, which has seen the acquisition of five new shopping centres, the contracted sale of Carrara Shopping Centre and the divestment of securities in CQR. The Metro Fund will continue to be a platform to gives us access to metropolitan neighbourhood centres, while growing our management fee income.”
Region Group Chief Financial Officer, Evan Walsh said: “The performance of our core business remains strong and continues to be our focus as we strive to achieve our goal of ensuring defensive, resilient cashflows to support secure and growing long-term distributions to our security holders.
“Excluding the impact of the rising market interest rates, our adjusted funds from operations have increased by a strong 11.1% which has been driven by our comparable NOI growing by 4.2%.
“We maintain a prudent debt and capital management position with proforma gearing, post the sale of Carrara Shopping Centre, CQR and the January 2023 DRP, decreasing to under our target range and no debt expiries until June 2024.”
Region Group Chief Operating Officer, Mark Fleming said: “Convenience-based shopping centre performance is resilient, with solid leasing and sales results driving the performance of our core business.
“Our non-discretionary tenants continue to deliver solid sales. We remain strategically focused on remixing our retail properties toward non-discretionary categories and reducing our long-term vacancies where deals are accretive.
“We pride ourselves on being essentially local – our shopping centres are located within local regional and metro communities, which means we are well placed for last mile logistics. We continue to support the growing online supermarket offering through co-investment opportunities that support Coles and Woolworths Direct to Boot and Home Delivery concepts which continue to evolve.”
Financial performance
Region Group recorded a statutory net loss after tax of $95.1 million, the company said this was most due to the decrease invaluationof investment properties.
Funds from operations (FFO) were down 0.2% to $94.1 million (excluding non-cash and one-off items). The company added that, excluding the impact of rising interest rates, FFO increased 5.3 per cent.
Among the key drivers of the FFO, Region said net property income moved up by 4.2 per cent, compared to 1H FY22, driven by comparable NOI growth of 4.2 per cent ($4.4 million, with the impact of net acquisitions. Region also saw funds management income growth of $1.5 million or 25 per cent compared to 1H FY22, driven by fees on increased assets under management.
Adjusted FFO increased by $4.8 million with maintenance capital expenditure and leasing incentives $5.0 million lower than that the prior period.
Portfolio and valuations
Region said valuations increased by $25.8 million to $4,486.7 million, with the acquisition of convenience-based shopping centres in July 2022 for $180 million largely offset by the decrease in the fair value of the existing portfolio driven by a 0,23 per cent softening of the weighted average market capitalisation rate.
The occupancy rate was reported at 98 per cent, with specialty vacancy rate improved by 0.1 per cent to 4.9 per cent and specialty tenant holdovers is 3.9 per cent of gross income.
