2019 Annual Report
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Discover more Annual Report 2019 Join us as we discover Inside how Vicinity Centres creates market-leading 01 Highlights 42 Our Board 02 Our Value Chain 45 Our Executive Committee destinations. 04 Market-Leading Destinations 48 Tax Transparency 06 Chairman’s Review 52 Sustainability Assurance Destinations that 08 CEO and Managing Statement enhance communities Director’s Review 53 Financial Report 12 Our Operating and 54 Director’s Report and offer so much more Financial Review 58 Remuneration Report than an exceptional 29 Our Portfolio 80 Financial Statements 34 Integrated Energy Platform 122 Independent Auditor’s retail experience. 36 Our Communities Report 38 Our Data and Analytics 128 Summary of Securityholders 40 Our People 129 Corporate Directory About this report This annual report discloses Vicinity’s financial and non- environmentally responsible paper manufactured under This annual report is a summary of Vicinity Centres’ operations, financial performance for FY19 and has been prepared using IAO 14001 environmental standards. activities and financial position as at 30 June 2019. In this elements of the International Integrated Reporting Council The following symbols are used in this report to cross-refer report references to ‘Vicinity’, ‘Group’, ‘we’, ‘us’ and ‘our’ refer (IIRC) Integrated Reporting <IR> framework. More information, to more information on a topic: to Vicinity Centres unless otherwise stated. particularly latest company announcements and detailed sustainability reporting, can be found on Vicinity’s website. References in this report to a ‘year’ and ‘FY19’ refer to the References additional information within financial year ended 30 June 2019 unless otherwise stated. Vicinity is committed to reducing the environmental footprint this Annual Report All dollar figures are expressed in Australian dollars (AUD) associated with the production of the annual report and unless otherwise stated. printed copies are only posted to securityholders who have References additional information available elected to receive a printed copy. This report is printed on on the Vicinity Centres website Disclaimer This report contains forward-looking statements, including statements, indications and guidance regarding future earnings, distributions and performance. The forward-looking statements are based on information available to Vicinity Centres as at the date of this report (14 August 2019). These forward-looking statements are not guarantees or predictions of future results or performance expressed or implied by the forward-looking statements and involve known and unknown risks, uncertainties, assumptions and other factors, many of which are beyond the control of Vicinity Centres. The actual results of Vicinity Centres may differ materially from those expressed or implied by these forward-looking statements, and you should not place undue reliance on such forward-looking statements. Except as required by law or regulation (including the ASX Listing Rules), we do not undertake to update these forward-looking statements. 2019 Integrated Annual Report Highlights Our vision is to reimagine destinations of the future, creating places where people love to connect. No. 1 No. 1 Chadstone, VIC has The Strand Arcade, Australia’s highest NSW is Australia’s moving annual turnover highest ranked CBD (MAT) for the 18th centre by specialty consecutive year1 MAT per sqm2 Net Zero No. 3 Targeting Net Zero Third most sustainable carbon emissions real estate company by 20303 globally4 Luxury 4 Star Leading landlord Australia’s highest to luxury retailers Green Star – in Australia Performance rated retail property portfolio A/A2 $11,083 Investment grade Portfolio specialty credit ratings from MAT per sqm, S&P Global and up 9.4% over FY19 Moody’s 1. Big Guns Survey 2019. Chadstone, VIC 2. CBD Guns Survey 2019. 3. For common areas in Vicinity’s wholly-owned retail assets. 4. Rated by RobecoSAM Dow Jones Sustainability Index. Vicinity Centres Annual Report 2019 01 Our Value Chain Vicinity’s points of differentiation Our resources Our business model Real estate People Capital Data and systems Community non trentenn portolo ree te portolo retein External estintins influences Arete eelopent Financial and etent property markets an auton Consumer and n rce ese retail trends cre ts ssets Environment Cit Cit n ees n ees eise ns iese neent rtnities iese ssets Our values We always We embrace We imagine collaborate difference a better way 02 Vicinity Centres Annual Report 2019 Our outcomes Our external recognition Chadstone’s $660 million development – International Council of Shopping Centres’ VIVA (Vision, Innovation, Value, Achievement) award Investor for design and development excellence returns 3.7% Total returns ‘People’s Choice Award’ – Property Council FY18: 11.1% of Australia’s Innovation and Excellence Awards for Vicinity’s $73 million solar program RobecoSAM (Dow Jones Sustainability Indices) awarded as the third most sustainable real Successful estate company in 2018 retailers $11,083 4 Star Green Star – Performance rating across Specialty MAT/sqm our portfolio – highest and largest Green Star – FY18: $10,133 Performance rated portfolio in Australia – Green Building Council of Australia 5 Star Green Star Interiors V1.1 certification for Vicinity National Office fit out – Green Building Engaged Council of Australia consumers 33 Net promoter score Chadstone – Shopping Centre News No.1 FY18: 39 Australian retail centre by MAT (moving annual turnover) in the 2019 Big Guns survey The Strand Arcade – Shopping Centre News Dedicated No.1 CBD retail centre by specialty MAT/sqm 68% and six of the top ten centres for specialty people MAT/sqm in the 2019 CBD Guns survey Engagement score FY18: 73% 2019 Clean Energy Council Awards – Marketing and Communications Award for promotion of the integrated energy strategy ABA100® Winner for Sustainability Better awarded for climate resilience program – communities $3.1m The Australian Business Awards Community contribution 2018 Frank Lowy Fellowship winner – FY18: $4.3m Genevieve Elliott, General Manager, Data Science and Insights Vicinity Centres Annual Report 2019 03 Market-Leading Destinations Chadstone, VIC Chadstone Australia’s No.1 retail asset Premium CBD Locations Unrivalled Australian east coast retail offer Queen Victoria Building, NSW 04 Vicinity Centres Annual Report 2019 DFOs Australia’s No.1 Outlet Centre portfolio DFO South Wharf, VIC Leading Luxury Offer Australia’s No.1 landlord to this growing segment QueensPlaza, QLD Vicinity Centres Annual Report 2019 05 Chairman’s Review Dear Securityholders It is my pleasure to present to you Vicinity Centres (Vicinity’s) 2019 Annual Report. This time last year, we announced Vicinity’s (7.95 cents for both half-year periods), under the on-market buy-back program at a new strategy to unlock significant potential compared to 16.3 cents in FY18. This 12.3% discount to June 2019 net tangible in the business and deliver strong and decrease was largely due to the impact assets per security (NTA). Development sustainable growth for securityholders. of asset divestments and reflects an highlights included opening DFO Perth, This involved focusing our directly-owned adjusted FFO (AFFO) payout ratio of 99.8%. delivering five smaller projects at Chadstone portfolio on market-leading destination and the completion of the final major stage assets, realising mixed-use opportunities Our results were underpinned by the strong of The Glen in August 2019. and expanding our funds management performance of Vicinity’s Flagship portfolio platform over time. of Chadstone, premium CBD assets and Also fundamental to our focus on value DFO Outlet Centres. This reinforces our creation is recognising that the retail Our results for the twelve months to belief that having the right collection of operating environment is constantly 30 June 2019 (FY19) affirm the benefits retail, dining and entertainment offers for evolving. This drives our determination of our strategy in what has been a each asset is essential to driving success. to continue to innovate and we are using challenging retail environment. Our Flagship portfolio is unrivalled in a broader range of both internal and Australia, making Vicinity a first port of call external data to better understand Statutory net profit after tax was for domestic and international retailers changing customer expectations and $346.1 million. Funds from operations looking to reach Australian consumers the trends that matter most. (FFO) totalled $689.1 million, or 18.0 cents and visitors. on a per security basis, down 1.1% on Online retail is a growing segment of the FY18. Adjusting for divestments and Major value creation activities during the industry which can compete with physical one-off items, comparable FFO per security year included selling $670 million of non- retail on convenience and/or price, but was up 2.0% on the prior year. Full-year core assets, progressing developments and often not on experience, customer distribution per security was 15.9 cents acquiring $255 million of Vicinity securities engagement, or on the cost and ease of returning products when they are not quite right. That is why 91%1 of Australian retail transactions continue to be completed in-store. We are also seeing pure-play online retailers looking to expand their customer reach and brand exposure by opening physical stores as two-thirds of online sales2 go to retailers with a physical store presence. Vicinity is focused on creating destinations that excite and engage