Release Date: August 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Vicinity Centres (CNRAF, Financial) delivered an FFO per security of $0.146, exceeding their guidance range.
- The company declared a final distribution of $0.059 per security, bringing the full year to $0.1175.
- Net profit after tax for the 12 months was $547 million.
- Comparable NPI was up strongly at 4.1%, with leasing spreads remaining positive.
- Occupancy rates reached their highest level since before the pandemic at 99.3%.
Negative Points
- Elevated living costs impacted retail sales growth in the second half of FY24.
- FFO was slightly below the prior year at $665 million.
- The cost of living pressures weighed on retail sales growth, with MAT sales growth at only 1.9%.
- Net property valuation showed a modest full-year net property valuation loss.
- Operating expenses increased due to higher land tax, wage increases, and property insurance costs.
Q & A Highlights
Q: What was the passing yield on the Lakeside Joondalup acquisition?
A: The passing yield on the Joondalup transaction on today's cash flows is around 6.5%. (Peter Huddle, CEO)
Q: Can you explain the one-off items related to the Joondalup acquisition?
A: We expect Joondalup to be about a $5 million benefit into FY25. We've excluded that in one-off items. The asset sales are expected to have about a $10 million negative impact, resulting in a net negative $5 million impact from the asset transactions for FY25. (Adrian Chye, CFO)
Q: What is the next likely development project after Chadstone and Chatswood?
A: After finishing Chadstone and Chatswood, we anticipate moving into Galleria and a development in uptown Brisbane CBD towards the later part of FY26. (Peter Huddle, CEO)
Q: How do you think about the property and retail build notoriety in terms of earning additional fee income from Lakeside Joondalup?
A: An important part of the transaction was transferring the management rights to unlock value, which we forecast to be an incremental $2 million. (Peter Huddle, CEO)
Q: Should we expect gearing to move up throughout the year with the flagged $250 million of additional divestments and $470 million of deployment?
A: We expect gearing to pop up a little bit to about 29%, which is still within our target range of 25% to 30%. (Adrian Chye, CFO)
Q: How do you see the corresponding capitalized interest and capitalized development costs offsetting the incoming rent from developments?
A: We capitalize interest to the balance sheet until developments open. The blended cash-on-cash yield across developments is around 5.5%, with a current weighted average cost of debt at 5.1%, providing an incremental benefit. (Peter Huddle, CEO)
Q: What are the fundamentals for Lakeside Joondalup, and what opportunities do you see for adding value?
A: Lakeside Joondalup has strong sales around $750 million, an occupancy cost ratio of about 15%, and an occupancy rate of around 97%. We see opportunities in leasing remixing, entertainment precincts, and potential non-retail developments. (Peter Huddle, CEO)
Q: What impact does the Lakeside Joondalup acquisition have on values' assumptions across the portfolio?
A: The transaction at a 6.5% yield is a key indicator for similar assets. We are comfortable with our asset valuations and believe the acquisition was made below replacement cost. (Peter Huddle, CEO)
Q: What is the expected impact on leasing spreads for the next year?
A: We anticipate leasing spreads to be broadly in line with this year's result, around the low 1% positive mark moving into FY25. (Peter Huddle, CEO)
Q: Have you used up your contingency around budget or time delays for the Chatswood Chase project?
A: We have used up some contingency due to latent conditions but nothing abnormal. The project is a little behind schedule but not materially so. (Peter Huddle, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
