CREATING BEAUTIFUL PLACES Annual Report 2018 Inside 01 Highlights 02 Our Value Chain 04 Market-Leading Destinations 06 Chairman’s Review 09 CEO and Managing Director’s Review 12 Our Operating and Financial Review 28 Our Portfolio 38 Our Intelligence Platform 40 Our People 42 Our Board 45 Our Executive Committee 48 Tax Transparency 52 Sustainability Assurance Statement 53 Financial Report 54 Director’s Report 58 Remuneration Report 78 Financial Statements 118 Independent Auditor’s Report 124 Summary of Securityholders 125 Corporate Directory Queen Victoria Building, NSW About this report This annual report discloses Vicinity’s financial and non- elected to receive a printed copy. This report is printed This annual report is a summary of Vicinity Centres’ operations, financial performance for FY18 and has been prepared using on environmentally responsible paper manufactured under activities and financial position as at 30 June 2018. In this elements of the International Integrated Reporting Council’s ISO 14001 environmental standards. report references to ‘Vicinity’, ‘Group’, ‘we’, ‘us’ and ‘our’ (IIRC) Integrated Reporting <IR> framework. More information, The following symbols are used in this report to cross-refer refer to Vicinity Centres unless otherwise stated. particularly latest company announcements and detailed to more information on a topic: sustainability reporting can be found on Vicinity’s website. References in this report to a ‘year’ and ‘FY18’ refer to the financial year ended 30 June 2018 unless otherwise stated. Vicinity is committed to reducing the environmental footprint References additional information within this All dollar figures are expressed in Australian dollars (AUD) associated with the production of the annual report and printed Annual Report unless otherwise stated. copies are only posted to securityholders who have References additional information available 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 (15 August 2018). 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 undertake no obligation to update these forward-looking statements. 2018 INTEGRATED ANNUAL REPORT Highlights Our vision is to reimagine destinations of the future, creating places where people love to connect. Chadstone is Australia’s Total return No.1 11.1 % retail, dining and for FY18 entertainment destination Most sustainable retail property company across Australia and Asia Pacific and #4 globally as recognised by Global Real Estate Sustainability Benchmark (GRESB) in 2017 DFOs Significant Australia’s No. 1 Pipeline outlet centre portfolio of development and mixed-use opportunities Unrivalled premium CBD retail offer across Australia’s three largest CBDs Commitment to reconciliation $28m Released Reflect Reconciliation Action Australia’s largest Plan (RAP) this year, commencing shopping centre solar our reconciliation journey investment project commenced Vicinity Centres Annual Report 2018 01 Our Value Chain Our resources Our business model Real estate Vicinity’s strategy is to deliver strong and sustainable growth via focus on: People • Market-leading destinations Capital • Expanding our wholesale funds platform Data and systems • Realising mixed-use opportunities Brand External Destination influences assets Financial and property markets Consumer and retail trends Wholesale Mixed-use Local communities assets developments Environment Deliver the best retail Enhance our portfolio Intensively managing mix and engaging quality through select our centres to drive experiences to attract retail and mixed-use income growth consumers and support developments, divestments and operational our retail partners. and acquisitions. efficiencies. 02 Vicinity Centres Annual Report 2018 Our outcomes Our external recognition Solid investor Most intelligent retail Total return returns building project 2018 RealComm | IBcon Digie Awards 11.1 % Best redeveloped shopping centre FY17: 15.5% 22nd Annual MAPIC International Awards RobecoSAM sustainability award Successful silver class 2018 Specialty MAT/sqm retailers Dow Jones Sustainability Indices Gold award for ‘best bitesize $10,133 learning solution’ FY17: $9,429 LearnX Summit & Awards Highly commended for Engaged ‘best implementation of consumers Net promoter score (inaugural) a blended learning solution’ Australian Institute of Training 39 and Development Construction & real estate team of the year 2018 Corporate Counsel Awards Dedicated Engagement score people Site/Team of the Year First Contact Executive 73% ASX100: Best ESG, Best FY17: 71% Accurate & Timely Briefings, Best Remuneration Policy and Best Disclosure Better 2017 East Coles Awards Community investment communities Environmental and Social QualityScore of 1 $3.0m ISS transparency and disclosure rating June 2018 FY17: $1.8m Vicinity Centres Annual Report 2018 03 Market-Leading Destinations Chadstone Australia’s No.1 retail, dining and entertainment destination Chadstone, VIC Premium CBD assets Unrivalled premium retail offer across Australia’s three largest CBDs DFOs Australia’s No.1 outlet centre portfolio Queen Victoria Building, NSW The Glen, VIC – Artist’s impression High potential Strong Regional and Sub Regional assets, and assets with development potential DFO Homebush, NSW 04 Vicinity Centres Annual Report 2018 The Strand Arcade, NSW Vicinity Centres Annual Report 2018 05 Chairman’s Review Dear Securityholders, It is my pleasure to present to you Vicinity Centres (Vicinity’s) 2018 Annual Report. Vicinity’s delivery on strategy since the 11.1% merger in 2015, including our strong focus Total return for FY183 on building a resilient portfolio of assets and our active capital recycling program, has created significant value for securityholders. Over the past three years, we have divested FFO per security of 18.2 cents was delivered, interests in 24 non-core retail assets for up 1.1% on the prior year. Adjusting for the $1.9 billion at a 2.4% premium to book impact of acquisitions and divestments, value1. These proceeds have been reinvested comparable FFO per security growth was “Vicinity now has a into developments, acquisitions, the buy-back 2.2%. The full year distribution per security premium retail offer of Vicinity securities and to repay borrowings, was 16.3 cents, compared to 17.3 cents in the prior year. This reflects both the across Australia’s contributing to net tangible assets per security (NTA) growth of 21% over that impact of asset sales and the adoption three largest CBDs.” time. This continued focus on repositioning of a new distribution payout ratio. the portfolio to the most resilient and high-quality assets has also resulted in the Vicinity now has a premium retail offer average asset value in Vicinity’s portfolio across Australia’s three largest CBDs, increasing 48% and specialty sales per sqm with 50% ownership interests in, and being up 20% to $10,1332. management of, three strongly-performing and highly resilient Sydney CBD assets, During the 2018 financial year (FY18), Queen Victoria Building, The Galeries and our ongoing focus on repositioning, The Strand Arcade (Sydney CBD Centres), enhancing and optimising the portfolio, following a strategic asset swap with GIC collaborating with our retailers, and creating during the year. Coupled with Emporium beautiful places where people choose Melbourne, Myer Bourke Street and to connect and experience the best in Brisbane’s QueensPlaza and The Myer shopping, dining and leisure, is reflected Centre Brisbane, Vicinity now has a unique by the improvement across our portfolio competitive advantage in attracting best-in- metrics and has strengthened Vicinity’s class international and domestic retailers position for the future. into the portfolio. Statutory net profit after tax for the Our premier asset, Chadstone, recently 12 months to 30 June 2018 was surpassed $2.0 billion in annual sales, $1,218.7 million, reflecting steady growth placing it firmly as a top retail destination in funds from operations (FFO) and strong globally. Chadstone’s expanded offer asset valuation gains. In line with guidance, including international flagships, additional 1. Includes the divestment of Flinders Square, WA, which was contracted for sale in July 2018, settlement expected in August 2018. 2. Excludes divestments and development-impacted centres in accordance with Shopping Centre Council of Australia (SCCA) guidelines and includes Chadstone same-store sales. 3. Calculated as: (Change in NTA during the period + distributions declared)/opening NTA. 06 Vicinity Centres Annual Report 2018 Chadstone, VIC by continuing to focus on our directly-owned RAP, we aim to create a truly inclusive portfolio of market-leading destination workplace that celebrates Australia’s rich “Following an early stage assets,