This article is from the Australian Property Journal archive
CONSUMER demand and retailer confidence in the resilient retail sector enabled Vicinity Centres (ASX:VCX) to continue its recovery over the first quarter.
1Q FY23 saw a continuation of the leasing momentum reported in FY22, with VCX reporting flat leasing spreads of -0.4%, compared to -4.8% at the close of the previous financial year.
Over the quarter, VCX completed 376 comparable leasing deals, for a marginal increase on 1Q FY22’s 369 deals.
“Our first quarter operating metrics reflect a continuation of the positive momentum delivered in FY22 and the ongoing resilience of the retail sector,” said Grant Kelley, CEO and managing director at Vicinity Centres.
“While we are yet to see the full impact of recent consecutive interest rate hikes on consumer spending, we continue to be cautiously optimistic of a soft landing for the Australian economy given the strong employment market as well as household income 5 growth and savings rates remaining in line with historical averages.”
Across the group’s portfolio, there was a marginal increase in occupancy from 98.3% in June to 98.4%.
95% gross rental billings were collected over the quarter, up from 91% in FY22, with Vicinity still focusing on collecting SME tenant debt, which improved from 80% to 88%.
When compared to the same quarter in 2019—prior to the onset of COVID-19—retail sales were up 21.2%, for a three-year CAGR of 6.6%.
Visitation also continued its recovery over the period, with total portfolio visitation—excluding CBDs—at 92% of pre-COVID levels, for an additional four million visits over the quarter.
“We were particularly pleased to see Vicinity’s improved portfolio visitation being driven by the continued recovery of CBDs. While traffic remains below pre-COVID levels, the recovery profile supports our view that CBDs remain a focal point of metropolitan areas for business, tourism, and leisure, and we expect them to return to their former vibrancy over time,” said Kelley.
Total portfolio visitation reached 90% of 2019 levels for the first time since the onset of the pandemic over September.
While visitation across Vicinity’s CBD assets in September averaged 74% of 2019, up from 66% reported in the June 2022 quarter.
With spend per visit continuing at an elevated level of 1.3x 2019 levels, stable from FY22.
All retail segments in 1Q FY23 were up on 2019, with majors up 15.5%, mini majors up 33.2% and specialties up 23.7%. Excluding luxury, specialties grew 19.9% relative to 2019.
“Our prudent approach to managing our balance sheet, together with a disciplined hedging strategy (with approximately 80% of drawn debt hedged in FY23), means we are well positioned to continue investing in our growth priorities, such as our development pipeline and acquisition opportunities, despite the uncertain macroeconomic outlook,” said Kelley.
Vicinity reaffirmed its FY23 earnings guidance with FFO per security expected to be in the range of 13.0-13.6 cents and AFFO per security expected to be in the range of 10.9-11.5 cents.
