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  • Statutory NPAT was $271.5 million.
  • FFO was $684.8 million.
  • Occupancy was 98.8%.

Vicinity Centres (ASX: VCX) has announced its FY23 annual results.

The financials revealed a statutory net profit after tax (NPAT) of $271.5 million for FY23, down from the $1,215.2 million reported in the previous fiscal year (FY22). The statutory NPAT principally comprised $684.8 million of funds from operations (FFO), offset by a non-cash net property valuation loss of $338.4 million and other statutory and non-cash items.

The company recorded an increased FFO. FY23 was $684.8 million, up from last year’s $598.3 million, or up to 15 cps from 13.1 cps in FY22. Similarly, adjusted FFO (AFFO) increased, reaching $576.0 million or 12.7 cps compared to the previous year’s $496.8 million or 10.9 cps.

The 14.5% increase to FFO was largely driven by a 12.1% uplift in Net Property Income (NPI) to $900.2 million; Vicinity noted NPI is now at pre-Covid levels.

The NPI uplift was a result of multiple factors, including:

  • Improved cash collections from current and prior years,
  • Positive rental growth,
  • Percentage rent uplift,
  • Continued ancillary income growth, led by carparks and media sales, and
  • Higher occupancy.

NPI was partially offset by higher net interest expense due to higher funding for development activity as well as higher interest rates.

“FY23 has been a year of resilience and growth at Vicinity,” said Vicinity Centres’ CEO and managing director, Peter Huddle.

“During the year, we deliberately executed at pace while the retail sector was favourable. We delivered a significant level of high-quality leasing outcomes, focused on enhancing the retail mix of each centre and reducing our income at risk, while simultaneously negotiating favourable leasing spreads which support current and future NPI growth.”

“Furthermore, we have continued to invest our capital to progress development approvals and execute project activity that will ultimately deliver long-term value to our stakeholders, despite near-term, heightened macroeconomic uncertainty.”

Portfolio valuations declined by 1.6% or $229.1 million in total asset valuation for the six months to 30 June 2023.

The valuation result reflects a 16 basis points softening of the portfolio’s weighted average capitalisation rate, partially offset by robust income growth. Longer term income growth has been supported by Vicinity’s strong leasing performance which in turn, reflects the quality of Vicinity’s asset portfolio.

Of particular note, Chadstone’s $28.2 million increase in valuation reflected strong income growth and the completion of The Social Quarter, partially offset by a 12.5 basis point softening capitalisation rate.

“In the final quarter, we were pleased to sell a 50% interest in the shopping centre at Broadmeadows Central, at a 5.2% premium to 31 December 2022 book value. In the immediate term, the transaction strengthened our balance sheet, and we are now poised to recycle the capital into value accretive opportunities that align with our strategy,” said Huddle.

Among other highlights, retail sales rose 8.0% in 2H FY23 relative to the previous corresponding period, and occupancy increased to 98.8% from 98.3% in FY22.

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