ANNUAL REPORT 2022
2022 HIGHLIGHTS
+15.5%
2H FY22 sales above
2H FY19 levels
98.3%
Occupancy rate
A/A2
Investment-grade
credit ratings
+21.8%
Total Securityholder Return
DISCLAIMER: This report contains forward-looking statements, including statements, indications and guidance regarding future performance. The forward-looking
statements are based on information available to Vicinity Centres as at the date of this report (17 August 2022). 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.
Vicinity Annual Report 2022Our Business SnapshotChairman’s LetterCEO's LetterOur PerformanceOur PeopleOur Destinations 1
ACKNOWLEDGEMENT
OF COUNTRY
Vicinity Centres acknowledge the
Traditional Custodians of the land
and pay respect to Elders past and
present. As a business that operates
across many locations across the
nation, we recognise and respect
the cultural heritage, beliefs and
relationship with the land, which
continue to be important to the
Traditional Custodians living today.
ABOUT THIS REPORT
This Annual Report is a summary
of Vicinity Centres’ operations,
activities and financial position as at
30 June 2022. In this report, references
to ‘Vicinity’, ‘Group’, ‘Company’, ‘we’,
‘us’ and ‘our’ refer to Vicinity Centres
unless otherwise stated. References in
this report to a ‘year’ and ‘FY22’ refer to
the financial year ended 30 June 2022
unless otherwise stated. All dollar
figures are expressed in Australian
dollars (AUD) unless otherwise stated.
This Annual Report discloses Vicinity’s
financial and non-financial performance
for FY22. More information, particularly
latest Company announcements and
detailed sustainability reporting, can be
found on Vicinity’s website.
Vicinity is committed to reducing the
environmental footprint associated with
the production of the Annual Report
and printed copies are only posted to
securityholders who have elected to
receive a printed copy. This report is
printed on environmentally responsible
paper manufactured under IAO 14001
environmental standards.
The following symbols are used in
this report to cross-refer to more
information on a topic:
References additional information
available on Vicinity’s website
References additional information
within this Annual Report
$1,215m
Statutory Net Profit After Tax
$554m
Uplift in asset valuations
7%
Increase in Funds From
Operations (FFO) per security
Green Bond
Issued inaugural $300m
Green Bond
Our Business Snapshot
Chairman’s Letter
CEO's Letter
Our Performance
Our People
Our Destinations
2
4
6
10
14
20
Net Zero
Our Management of Risk
Governance
Tax Transparency
Sustainability Assurance Statement
Financial Report
26
30
34
40
46
48
Directors’ Report
Remuneration Report
Financial Statements
Independent Auditor’s Report
Summary of Securityholders
Corporate Directory
49
52
73
115
120
121
Net ZeroOur Management of RiskGovernanceTax TransparencySustainability AssuranceFinancial ReportSecurityholder Information 2
OUR BUSINESS SNAPSHOT
ASSETS UNDER MANAGEMENT
TOTAL PORTFOLIO SALES
$15.7bn
(FY21: $14.2bn)
ASSETS MANAGED
FOR PARTNERS
29
(Jun 21: 30)
GROSS LETTABLE AREA
2.5m SQM
(Jun 21: 2.4m sqm)
DIRECT PORTFOLIO
PORTFOLIO VALUE
$14.5bn
(Jun 21: $14.3bn)
ASSETS
59
(Jun 21: 59)
PORTFOLIO OCCUPANCY
98.3%
(Jun 21: 98.2%)
EMPLOYEES
1,266
(Jun 21: 1,212)
EMPLOYEE
SATISFACTION
68%
(Jun 21: 61%)
COMMUNITY INVESTMENT
$2.9m
(FY21: $3.2m)
CARBON INTENSITY
55kg CO2-e
(FY21: 54kg CO2-e / sqm)
NABERS ENERGY RATING
4.6 Stars
(FY21: 4.4 Stars)
Vicinity Annual Report 2022Chairman’s LetterCEO's LetterOur PerformanceOur PeopleOur DestinationsOur Business Snapshot 3
TENANTS
6,874
(Jun 21: 6,981)
PARTNER AUM
$9.2bn
(Jun 21: $8.8bn)
PARTNERS
23
(Jun 21: 23)
NET TANGIBLE ASSETS PER
SECURITY (NTA)
$2.36
(FY21: $2.13)
PROPORTION OF
DEBT HEDGED
85%
(Jun 21: 96%)
CENTRE VISITS
333m
(FY21: 344m)
DATABASE MEMBERS
1.07m
(Jun 21: 953,000)
GEARING
25.1%
(Jun 21: 23.6%)
NET PROMOTER SCORE
42
(Jun 21: 45)
Net ZeroOur Management of RiskGovernanceTax TransparencySustainability AssuranceFinancial ReportSecurityholder Information 4
CHAIRMAN’S LETTER
Dear Securityholders,
I am pleased to present Vicinity Centres’
(Vicinity) Annual Report for the 12 months
ended 30 June 2022 (FY22).
Trevor Gerber
Chairman
The Board was pleased to declare a final
distribution of 5.7 cents per security,
bringing the total FY22 distribution to
10.4 cents per security and representing a
payout of 95.3% of Adjusted FFO (AFFO);
within Vicinity’s distribution payout range
of 95–100% of AFFO.
The underlying strength of the retail sector
was also demonstrated by a solid recovery
in valuations, which increased $554 million
over FY22. This result was driven by
income growth, particularly across our
flagship Premium and Outlet centres,
while the valuations of Sub Regional and
Regional centres benefitted from strong
transactional evidence.
Vicinity continued its disciplined approach
to financial stewardship. Despite the
disruption and cost of the pandemic, we
maintained our strong balance sheet
and credit metrics. During the year,
Vicinity’s credit ratings were affirmed
A/stable outlook by Standard & Poor’s and
A2/stable outlook by Moody’s Investors
Service. Owing to a number of successful
capital initiatives undertaken during and
since the pandemic, we are well positioned
to execute on our long-term growth agenda.
Vicinity’s commitment to creating
sustainable precincts and transitioning
our assets to a low carbon economy
was recognised by investors as part of
our inaugural Green Bond issuance of
$300 million of six-year AUD-denominated
medium-term notes (MTN).
Despite increased volatility in local and
offshore bond markets at the time, the
issuance was oversubscribed.
While managing the near-term challenges
of the pandemic, Vicinity has also remained
focused on long-term strategy, namely
to optimise and grow our core retail
portfolio, execute our retail and mixed-use
development pipeline and deepen our funds
management relationships with strategically
aligned capital partners.
During the year, we enhanced our
investment portfolio by selectively acquiring
and disposing of assets and delivering
high-quality asset management, notably
across property management and leasing.
Vicinity demonstrated its willingness
to recycle capital from well-optimised
assets into higher growth assets, with the
acquisition of Harbour Town Premium Outlets
Gold Coast and the subsequent sale of
Runaway Bay Centre, also on the Gold Coast.
These transactions were accretive to FFO
per security in FY22, and the acquisition of
Harbour Town further bolstered Vicinity’s
category leadership position in the growing
Outlet sector.
Vicinity has also made significant progress
on delivering its $2.9 billion retail and
mixed-use development pipeline, with most
of the development spend focused on six
key assets: Chadstone, Box Hill Central and
Victoria Gardens Shopping Centre in Victoria;
Chatswood Chase Sydney and Bankstown
Central in New South Wales; and Buranda
Village in Queensland.
FY22 has been another remarkable year
for Vicinity. While our two largest states –
Victoria and New South Wales – were
in lockdown for much of the first half of
the year, we observed a significant and
sustained rebound in retailer confidence
and retail trading conditions in the six
months that followed.
Retail sales across the total portfolio
surpassed pre-COVID-19 levels in the
second half of FY22, despite the outbreak
of Omicron in late December 2021,
demonstrating the underlying resilience of
the Australian retail sector. Furthermore,
the acceleration of online shopping slowed,
with consumers showing a preference for
omnichannel shopping, which combines
the power of the physical store with an
online presence.
The resilient retail sector, combined with
Vicinity’s execution of its strategy and
focus on delivering quality operational and
leasing outcomes, continues to underpin
our ongoing recovery from the pandemic.
In FY22, Vicinity delivered Statutory
Net Profit After Tax of $1,215 million,
representing a $1,473 million uplift on the
prior year. Funds From Operations (FFO)
increased 7% to $598.3 million driven by
8% growth in Net Property Income, partially
offset by higher net interest costs, as well as
increased corporate costs.
$554m
Uplift in asset valuations
Vicinity Annual Report 2022Our Business SnapshotCEO's LetterOur PerformanceOur PeopleOur DestinationsChairman’s Letter 5
STATUTORY NET PROFIT
AFTER TAX
DISTRIBUTION
PER SECURITY
FUNDS FROM
OPERATIONS
$1,215m
($1,473m uplift on FY21)
10.4 cents
(Increased from 10.0 cents in FY21)
$598.3m
(Increased by 7% since FY21)
As part of our strategy to grow our third-party
capital partnerships and bolster our funds
management credentials, we appointed a
Director, Funds Management to the Executive
Committee in January 2022. Enhancing
our capabilities and focus in this area
will help attract high-quality, strategically
aligned partners to help fund our significant
development pipeline and grow our funds
management business.
Sustainability is fundamental to the
successful execution of our strategy and
the long-term performance of our business.
During FY22, Vicinity strengthened a number
of its sustainability credentials across its
Community Significance, Low Carbon Smart
Assets and Climate Resilience pillars.
Once again, Vicinity improved its ranking
on the Dow Jones Sustainability Index from
7th to 5th and was ranked Oceania Sector
Leader and 3rd globally in Listed Retail
Shopping Centre category by Global Real
Estate Sustainability Benchmark (GRESB).
Also of note, Vicinity became a supporter of
the Task Force on Climate-Related Financial
Disclosures and published its second Modern
Slavery statement as well as its second
Innovate Reconciliation Action Plan.
Together with my fellow Directors, I am
delighted with the progress Vicinity has made
to date in sustainability and look forward
to further strengthening our credentials
in FY23. Our approach to sustainability is
anchored by our objective to drive value for
all our stakeholders.
FY22 was a busy year and we have been
very pleased with the momentum of Vicinity’s
recovery from the pandemic and the
opportunities for future growth ahead.
Your Board continues to ensure good
governance, which as we know, is the
bedrock of good business outcomes and
securityholder value accretion. In my role as
Chairman, I am pleased with how the Board
is operating and of course, reviewing the
mix of skills, experience and diversity on our
Board is an ongoing commitment.
As announced in May, Ms Karen Penrose
has indicated her intention to resign from the
Vicinity Board, effective 15 September 2022.
Together with my fellow Directors, I would
like to acknowledge and thank Karen for her
significant and lasting contribution to Vicinity
and its Board of Directors. Karen has brought
valuable insights and experience to our Board
for many years. In her role as Chair of the
Audit Committee, Karen has played a critical
role in driving robust financial stewardship
at Vicinity.
As we look ahead to FY23 and beyond, I am
confident that Vicinity has the team and the
assets to deliver on our long-term growth
agenda and at the same time, adapt to the
increasingly uncertain macroeconomic
outlook. Vicinity takes pride in its prudent
approach to allocating capital while
preserving its flexible balance sheet, credit
metrics and ultimately, its disciplined
approach to paying distributions.
In summary, FY22 was a year of significant
progress and delivery at Vicinity, despite
the continued challenges of the pandemic.
Together with the Board, I would like to
acknowledge and thank Management
and the entire Vicinity team for their
continued resilience and steadfast focus
on delivering value for our customers, retail
partners, communities and importantly, our
securityholders.
Additionally, I would like to thank my fellow
Directors for their valuable contribution and
support in FY22.
And finally, thank you to our securityholders
and indeed all our stakeholders for your
support of Vicinity.
Best regards,
Trevor Gerber
Chairman
Net ZeroOur Management of RiskGovernanceTax TransparencySustainability AssuranceFinancial ReportSecurityholder Information 6
CEO’S LETTER
Dear Securityholders,
FY22 was another extraordinary year for Vicinity and the retail sector generally.
Despite the challenges that Vicinity faced in
early FY22, we delivered significant progress
against our strategy, and our recovery
from the pandemic gathered momentum,
particularly in the second half (2H FY22).
We also observed the continued resilience
of the Australian retail sector as it delivered
a marked rebound in retail sales and retailer
confidence in 2H FY22, underpinned by
purposeful shopping and a growing customer
preference for visiting physical stores.
Throughout FY22, our team remained
disciplined in executing our long-term
strategy, while managing the near-term
challenges of the pandemic.
Together with business performance, the
health, safety and wellbeing of our people
and communities remained our highest
priority throughout the year. We continued
to focus on wellbeing programs across the
business and further enhanced our focus
on hybrid working. Our efforts over the past
12 months saw a substantial improvement
in employee engagement, which was a core
driver of our success in FY22.
NET PROPERTY INCOME
+ 8%
(Growth vs. FY21)
IN FY22, WE COMPLETED
1,378
New leasing deals
HIGH QUALITY EXECUTION DRIVES
STRONG PERFORMANCE IN FY22
Our FY22 performance, measured by
growth in FFO of 7% and in net property
income of 8% when compared to FY21, was
underpinned by improved retail trading
conditions combined with strong operational
execution and prudent financial stewardship.
The health of the Australian retail sector was
strong during FY22, supported by elevated
household savings and an extremely tight
employment market. Consumers continued
to show confidence and capacity to spend.
Purposeful shopping remained a key
observable trend, so while FY22 centre
visitation was below the pre-COVID-19 levels
of FY19, average spend per visit remained
1.3 times 2019 levels.
Higher spend per visit, combined with the
introduction of on-trend retailers and the
particular success of luxury retail in Vicinity’s
centres, supported total portfolio retail sales 1
growth of 15.5% in 2H FY22 relative to the
same period in 2019. Excluding CBDs, which
have been more impacted by the pandemic,
retail sales were 16.9% higher.
Despite four months of lockdown in
Victoria and New South Wales in 1H FY22,
total portfolio moving annual turnover
(MAT) was up 6.7%, with strong growth
reported across mini majors and specialty
stores. The key drivers were discretionary
categories, including Jewellery, Apparel
and Food Catering.
Vicinity’s highly targeted approach to
leasing negotiations preserved the weighted
average lease expiry profile, improved leasing
spreads and enhanced retailer mix across
Vicinity’s centres.
During FY22, our team completed 1,378
leasing deals, 121 more deals than in FY21.
After a moderation in leasing activity
in January and February 2022, due to
seasonality as well as the outbreak of
Omicron, deal momentum accelerated with
the number of deals completed in June 2022
being 49% higher than the number of deals
completed in June 2021.
Our recovery over the past 12 months is
also demonstrated by improving leasing
spreads and new leasing deals being
negotiated on appropriate terms.
We also saw positive momentum in leasing
spreads with the average for FY22 at -4.8%
relative to -6.4% in 1H FY22 and -12.7%
in FY21. Additionally, of all new leasing
deals agreed in FY22, 71% were negotiated
with fixed annual increases of 5%, and
cumulatively, 94% of all new deals were
negotiated with fixed annual increases
of at least 4%.
Importantly, while spreads continue to be
negative, the fixed annual increases support
current and future NPI growth.
Pleasingly, Vicinity leased 374 vacant stores
in FY22 and increased overall occupancy
to 98.3% at the end of June 2022, a slight
increase versus the 98.2% reported at
31 December 2021.
At the height of the pandemic, we were
proud to support the retail sector, partly
through the introduction of the SME Code.
Working in partnership with our retailers and,
in particular SME businesses, is and always
has been a high priority as their success
is our success.
1. Sales are reported on a comparable basis, which excludes acquisitions, divestments and development-impacted centres in accordance with Shopping Centre Council
Australia (SCCA) guidelines. Also excludes travel sales.
Vicinity Annual Report 2022Our Business SnapshotChairman’s LetterOur PerformanceOur PeopleOur DestinationsCEO's Letter 7
Grant Kelley
CEO and Managing
Director
As we transitioned to living with COVID-19,
and with the expiration of the remaining state
SME Codes in March 2022, we continued
to support our retail partners. In FY22, we
provided assistance to small businesses
and other retail partners in categories and
locations most impacted by the pandemic,
such as food and beverage, travel and
CBD locations.
COVID-19 lease variation negotiations with
non-SME retail tenants continued to focus on
driving mutual value and leasing outcomes
that supported retail partners experiencing
hardship, balanced against the quality of
Vicinity’s assets.
The improvement in retail sales and therefore
retailer confidence positively impacted our
cash collections. Collection of gross rental
billings averaged 91% for FY22 1, and 93%
for 2H FY22.
One of the highlights from the second half
of FY22 was the improvement in SME retail
sales, now broadly in line with non-SME
specialty sales, improving the collection of
current and overdue rent from 66% of gross
billings 1H FY22 to 80% for FY22.
The team worked diligently to complete
outstanding negotiations with SME retailer
partners, and COVID-19 lease negotiations
are expected to be substantially finalised by
the end of 1H FY23.
Our Retailer First Program has been well
received, with Vicinity increasingly being
recognised as a partner of choice for
growth-oriented retailers. Of note, our
national retail tenants ranked Vicinity number
one on the retailer net promoter score, and
number two overall across 10 retail landlords,
as we have focused on building stronger
and more long-term relationships with our
retailers, enhanced tenant experiences and
have driven higher retention.
Over the past 12 months, we had
approximately 333 million customer visits
through our centres. Our team has focused
on creating a safe environment for retailers
and shoppers, improving the convenience
of shopping, and identifying opportunities
to connect with our customers in new
and unique ways.
We launched a new national marketing
campaign, Monopoly ‘Shop, Scan, Win’, which
provided another way for our customers
to engage with retailers by visiting their
favourite stores or exploring new ones within
our centres. Throughout Victoria and New
South Wales, we launched our Shop Local
campaign and Retailer Series – highlighting
the retailer partners we have within our
centres and encouraging our customers
to shop locally.
It was also great to see new types of
engagement, including the unveiling of
an NFT 2 Christmas tree at The Galeries in
Sydney, the support of local musicians and
entertainers as part of our Spotlight Series
in various centres, and a new partnership
with Birrunga Gallery to bring contemporary
Indigenous art to QueensPlaza in Brisbane.
OCCUPANCY RATE
98.3%
Up from 98.2%
OVER THE PAST 12 MONTHS
333m
Customer visits through
our centres
1. Cash collections reported for the period in which they are billed, with collections reported as at 4 August 2022.
2. Non-fungible token.
Net ZeroOur Management of RiskGovernanceTax TransparencySustainability AssuranceFinancial ReportSecurityholder Information 8
CEO’S LETTER CONTINUED
DELIVERING AGAINST
OUR STRATEGY
In 2018, we launched a long-term strategy
focused on enhancing our core retail
portfolio and growing our funds management
and third-party capital business, while
accelerating our retail and mixed-use
development projects by leveraging
existing assets and capabilities.
In FY22, we made strategic decisions
to enhance the overall quality of our
portfolio through selective acquisitions and
divestments, further diversifying our asset
base, and upweighting in the attractive
Outlet sector.
APPROXIMATELY
85%
major mixed-use
of the development
spend is focused on
opportunities:6 Chadstone, Box Hill
Central and Victoria;
Gardens Shopping Centre
in Victoria, Chatswood
Chase Sydney and
Bankstown Central in
New South Wales; and
Buranda Village in
Queensland.
Artist’s impression –
Chadstone Place, Vic
With the appointment of a new Director,
Funds Management to the Executive
Committee we have already seen a shift in
our credibility with investors and have been
able to participate in potential opportunities
in a more targeted and focused manner.
Our development pipeline saw great
momentum in FY22 and represents an
exciting phase of growth for Vicinity. Our
$2.9 billion retail and mixed-use development
program includes projects that are expected
to be completed between FY23 and FY27.
Approximately 85% of the development
spend is focused on six major mixed-use
opportunities at: Chadstone, Box Hill Central
and Victoria Gardens Shopping Centre in
Victoria; Chatswood Chase Sydney and
Bankstown Central in New South Wales; and
Buranda Village in Queensland.
Importantly, given we own the land
parcels earmarked for retail and mixed-use
development, the pipeline is able to be flexed
up and down in order to preserve the risk and
return parameters of projects, and the pace
of capital deployment, thereby maintaining
our strong balance sheet, credit ratings and
disciplined approach to paying distributions.
During FY22, Vicinity invested in number
of retail and mixed-use projects.
In Victoria, this included progressing
retail projects, such as Chadstone’s new
Entertainment and Leisure Precinct, expected
to be completed by the end of FY23; a remix
and upgrade of the southern precinct of
Box Hill Central; and a modernisation and
extensive ambience upgrade at Mornington
Central. In New South Wales, we have
commenced work on elevating the food and
mini majors precinct at Bankstown Central.
Progress during the period across our major
mixed-use developments included the
upgrade and refurbishment of the Chadstone
Place office, which is expected to complete
in 2Q 2023, ahead of Officeworks’ head office
relocation to Chadstone. A new A-grade
office space over four levels in the southern
precinct of Box Hill Central is 100% leased
to Hub Australia and is expected to open
in FY23.
Over the past 12 months we have seen the
‘work near home’ trend grow, leading to huge
impacts on the way Australians live, work
and play. We have been listening to our local
communities, understanding their evolving
needs and enhancing our mixed-use plans
to meet these expectations now and into
the future.
Vicinity Annual Report 2022Our Business SnapshotChairman’s LetterOur PerformanceOur PeopleOur DestinationsCEO's Letter 9
We will continue to drive strong performance across all areas
of the business and identify opportunities to deliver greater
efficiencies and value to our securityholders.
DRIVING SUSTAINABLE OUTCOMES
AND INNOVATION TO DELIVER
VALUE TO STAKEHOLDERS
Creating sustainable destinations across
our portfolio remains a key focus for our
team as it is fundamental to the successful
execution of our strategy and the long-term
performance of our business.
LOOKING AHEAD
In summary, FY22 was a year of recovery
and substantial progress at Vicinity. Our
results highlight strong operational and
financial execution in a recovering retail
landscape, where consumers continued
to show confidence and capacity to
spend and retailer confidence was robust.
To date, Vicinity has made meaningful
progress in sustainability with recognition as
a strong performer across a number of global
ratings. The completion of our inaugural
Green Bond in FY22 was a key milestone.
Our approach continues to be anchored by
our overall objective to drive shared value
for all stakeholders.
The past several years accelerated a number
of structural shifts in the retail sector, such as
an increase in omnichannel retail, preference
for flagship stores and the importance of
data, digital and technology solutions.
We have leveraged our existing assets and
capabilities to facilitate these shifts, but
more importantly, we focus on innovation to
enhance customer and retailer experiences.
Our inhouse data science and insights teams
developed a new Leasing Optimisation tool
and a Retail Insights platform – both creating
shared value with our retailers.
Innovating to meet the changing needs of
our customers is vital to how we continue
enhancing their experiences with us. During
the year, we partnered with drone delivery
business, Wing, to trial direct-to-door drone
delivery. To further drive our Net Zero by 2030
carbon target 1, we are working with Engie, a
low carbon energy company, to install electric
charging stations to 30 centres over the next
two years.
We expect FY23 to be a year of continued
recovery and progress, edging us closer
towards post-COVID-19 stabilisation. While
we are mindful of inflation and rising interest
rates, we continue to observe positive retail
sales trends in our centres, and we cautiously
anticipate a soft landing for the Australian
economy over the next 12 to 18 months,
assuming there is no material deterioration
in existing economic and COVID-19-related
conditions. Our asset portfolio is diverse
in terms of asset type, location and retail
mix, which, as demonstrated during the
pandemic, provides resilience to a range
of possible outcomes.
Vicinity is also relatively well positioned
for a rising interest rate environment given
our prudent approach to hedging. Vicinity
concluded FY22 with approximately 85% of
its drawn debt hedged and approximately
80% of its drawn debt is hedged over FY23,
with a very modest step down in FY24. We
will maintain an active focus on hedging this
year and in the years ahead.
We will continue to drive strong performance
across all areas of the business and identify
opportunities to deliver greater efficiencies
and value to our securityholders.
Our strong execution capability and robust
balance sheet position us extremely well
to deliver our growth strategy and provide
confidence in our ability to navigate a
complex external environment.
1. For wholly-owned retail assets. Consistent with GHG Protocol, this applies to common mall areas.
Queen Victoria Building, NSW
CONCLUDED FY22 WITH
85%
of drawn debt hedged
OUR TEAM IS THE FOUNDATION
OF OUR PERFORMANCE
I would like to acknowledge and thank the
Vicinity team, who are responsible for our
FY22 results and achievements – without
them we could not have delivered what
we did. Their resilience, dedication and
passion to do the right thing by each other,
our customers and our retail partners
is outstanding.
And, to our Board and Executive team,
thank you for continuing to drive our
strategic priorities and remaining
disciplined on executing our plans,
despite multiple challenges.
To our customers, retail partners, joint venture
partners and securityholders, thank you
for your continued support. Everything we
do is to ensure we are creating value for all
our stakeholders.
We are excited to be building on the
momentum we have seen in FY22.
Grant Kelley
CEO and Managing Director
Net ZeroOur Management of RiskGovernanceTax TransparencySustainability AssuranceFinancial ReportSecurityholder Information 10
OUR PERFORMANCE
OUR STRATEGY
Vicinity is a leading retail property group with a fully integrated funds and asset
management platform.
As the custodian of a diverse portfolio of
retail assets across Australia, we attract
333 million visits per year, and generate
nearly $15.3 billion 1 of annual retail sales.
We have over 6,800 retail partners,
23 strategic partners and manage more
than $23 billion of assets, of which $9 billion
is on behalf of third-party capital.
Our fiduciary approach to managing
third-party capital underpins our reputation
as a disciplined investment manager focused
on driving long-term value both responsibly
and, importantly, sustainably.
Vicinity’s strategy is focused on delivering
long-term growth from our portfolio of
destination assets and driving returns by
owning the right assets across the spectrum.
We will continue to focus on optimising our
core retail portfolio to deliver sector-leading
performance with our well-developed retailer,
consumer and operations strategies.
Our portfolio provides access to significant
parcels of developable land that is suitable
for the creation of mixed-use precincts. After
a period of capital conservation in the height
of the COVID-19 pandemic, we have now
transitioned to execution of our $2.9 billion
retail and mixed-use development pipeline,
which will further strengthen the retail
value proposition.
Growing our third-party capital partnerships
and a funds management business is a core
part of our strategy as it will assist in funding
our significant development pipeline while
also driving new fee income.
– sustained rebound in retail sales and
retailer confidence, notably in 2H FY22,
highlighting retail sector resilience
– focus on delivering quality leasing
outcomes that lock in future growth
Data, insights and innovation are critical to
ensuring our assets remain at the forefront of
the evolving retail landscape in terms of how,
what and where consumers shop. We will
continue to identify opportunities to create
new adjacent products and services utilising
our core assets.
OUR OPERATING AND FINANCIAL
PERFORMANCE
Our operating and financial performance for
FY22 reflects the ongoing resilience of the
retail sector as the COVID-19 recovery gained
momentum, particularly in the second half.
The main drivers of FY22 performance
included:
– retail industry recovery gained momentum
in 2H FY22 after four months of lockdown
across Victoria and New South Wales
between July and October 2021, and the
reintroduction of SME Codes across these
states between July 2021 and March 2022
– execution of strategy via portfolio
enhancement, execution of retail and
mixed-use development and progressing
third-party capital opportunities
– increased centre occupancy to 98.3%
driven by retention of tenants whose leases
expired and the addition of new flagship
stores, notably in CBD locations
– significant recovery in cash collections
in the second half of FY22, underpinned
by strong retail sales, Vicinity’s focus on
collecting due and overdue rent, and the
expiry of the SME Codes in March 2022
– strong customer preference for physical
store shopping and continued consumer
trend of purposeful shopping, with spend
per visit remaining 1.3 times 2019 levels
– limited changes to energy costs for Vicinity
and its retailers given fixed-price energy
contracts in place from prior years
– divestment of Vicinity’s 50% interest in
the recently redeveloped Runaway Bay
Centre for an 18% premium to book value
and reinvestment into a 50% interest in
Harbour Town Premium Outlets Gold
Coast in Queensland
– robust balance sheet maintained, with
low gearing of 25.1% and liquidity
of $1.4 billion 2, as a result of capital
management initiatives.
1. Vicinity-owned portfolio.
2. All treasury data is pro forma 30 June 2022 data, adjusted for post year-end capital management activities undertaken.
INCREASED
CENTRE OCCUPANCY
98.3%
Up from 98.2%
GEARING
25.1%
(Jun 21: 23.6%)
DFO Homebush, NSW
Vicinity Annual Report 2022Our Business SnapshotChairman’s LetterCEO's LetterOur PeopleOur DestinationsOur Performance 11
FINANCIAL PERFORMANCE
The following table outlines Vicinity’s key measures of financial performance. Statutory Net Profit After Tax is adjusted for fair value movements
and certain unrealised and non-cash items to calculate Funds From Operations (FFO) 1. FFO is further adjusted for maintenance capital
expenditure and static tenant leasing costs incurred during the period to calculate Adjusted FFO (AFFO) 1. Vicinity’s distribution policy is a
payout ratio of between 95% and 100% of AFFO.
Net property income
External fees
Total segment income
Net corporate overheads
Net interest expense
Funds from operations
Adjusted for 2
Property revaluation increment / (decrement)
Other items
Statutory net profit / (loss) after tax
Funds from operations
Maintenance capital expenditure and static tenant leasing costs
Adjusted funds from operations
Distributions declared
Weighted average number of securities
FFO per security (cents)
AFFO per security (cents)
Distribution per security (DPS) (cents)
AFFO payout ratio (total distributions declared $m/AFFO $m) (%)
FY22
$m
802.8
52.5
855.3
(94.7)
(162.3)
598.3
633.3
(16.4)
1,215.2
598.3
(101.5)
496.8
473.4
FY21
$m
743.4
45.7
789.1
(86.4)
(143.9)
558.8
(642.7)
(174.1)
(258.0)
558.8
(73.1)
485.7
455.2
4,552.2
4,551.5
13.14
10.91
10.40
95.3
12.28
10.67
10.00
93.7
Vicinity’s recovery from the pandemic gained momentum in FY22 with Funds From Operations up 7.1% to $598.3 million driven by:
– net property income increase of $59.4 million or 8.0%. Lower waivers and provisions underpinned by improved collection of gross rental
billings and rebound in retailer sales post lockdowns, underlying rental growth from fixed annual rent increases net of negative leasing
spreads, and the acquisition of Harbour Town Premium Outlets
– external fees increase of $6.8 million or 14.9%. Increased development and leasing activity supported higher fee income, offset by
lower funds management fees
– net corporate overheads increase of $8.3 million or 9.6%. One-off benefit of JobKeeper in FY21, not repeated in FY22
– net interest expense increase of $18.4 million or 12.8%. One-off benefit from reduction in swap reset in FY21 and increase in total debt
drawn in FY22 due to higher development spend and net investment activity.
AFFO increased 11.1 million or 2.3%. Maintenance capital expenditure (capex) is elevated reflecting some catch up spend from prior years
after capital was constrained during the midst of the pandemic, while tenant retention of 75% was higher than long-term average, reducing
the requirement for tenant incentives in FY22.
Statutory net profit of $1,215.2 million is a significant rebound from the net loss reported in FY21. This was primarily driven by the 7.1%
increase in FFO and the impact of strong transactional evidence and COVID-19 recovery momentum, driving a rebound in asset valuations
from $753.7 million net loss in FY21 to a $553.5 million net gain in FY22 3.
Segment Information page 79
1. FFO and AFFO are two key metrics Vicinity uses to measure its operating performance. They are widely accepted measures of real estate operating performance.
FFO and AFFO are determined with reference to the guidelines published by the Property Council of Australia (PCA) and are non-IFRS measures.
2. Full reconciliation between statutory net profit after tax and FFO is included in Note 1 (b) to the Financial Report.
3. Valuation movements exclude statutory accounting adjustments.
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FINANCIAL POSITION
The following table shows a summarised balance sheet.
DEBT SOURCES 1
Cash and cash equivalents
Investment properties
Equity accounted investments
Intangible assets
Other assets
Total assets
Borrowings
Distribution payable
Other liabilities
Total liabilities
Net assets
30 Jun 22
$m
30 Jun 21
$m
55.6
47.2
14,366.4
13,294.3
513.8
164.2
452.6
15,552.6
3,752.5
–
915.0
4,667.5
10,885.1
479.4
164.2
312.7
14,297.8
3,281.9
300.4
834.2
4,416.5
9,881.3
Key items impacting the balance sheet movement in FY22 include:
– increase in investment properties and equity accounted investments of
1,106.5 million or 8.0%. Net valuation gains largely driven by stronger demand for
retail property observed in the past 12 months, which resulted in the tightening of
capitalisation and discount rates, and the acquisition of a 50% interest in Harbour
Town Premium Outlets Gold Coast, partially offset by divestment of Vicinity’s 50%
interest in Runaway Bay Centre in Queensland
– increase in other assets of $139.9 million or 44.7%. Driven by increase in the fair
value of derivative financial instruments
– increase in borrowings of $470.6 million or 38.5%. Driven by net investments and
higher capital expenditure, including development spend
– change in distribution record date. With the change in record date from 30 June 2021
(for FY21) to 23 August 2022 (for FY22), there is no distribution payable as at 30 June
2022 (30 Jun 21: $300.4 million). The distribution for the six months to 30 June 2022 is
expected to be paid on 12 September 2022.
Balance Sheet page 74
CAPITAL MANAGEMENT1
Vicinity commenced FY22 in a strong capital position with low gearing, high hedging,
an appropriate level of liquidity and limited near-term debt expiries. This has been
further enhanced with the following capital management initiatives (including post
period end):
– Vicinity launched its inaugural Green Bond with a $300 million issuance with
relatively attractive pricing despite increased volatility in local and offshore bond
markets in May 2022
– a total of $800 million of bank debt facilities have been repaid and cancelled
– $475 million of bank debt facilities were extended to FY28.
As a result, Vicinity remains in a strong financial position. In a rising interest rate
environment, Vicinity’s debt is approximately 85% hedged at 30 June 2022, gearing
remains at the bottom end of the 25% to 35% guidance range at 25.1% and the debt
book is well diversified by instrument type, lender and expiry profile with a weighted
average debt duration of 4.8 years based on drawn debt (4.3 years based on debt
limits). Consequently, Vicinity maintains investment-grade credit ratings of A/stable
with Standard & Poor’s and A2/stable with Moody’s Investors Service.
1. All treasury data is pro forma 30 June 2022 data, adjusted for post year-end capital management activities undertaken.
Bank debt drawn
Bank debt undrawn
AMTN
EUMTN
HKMTN
GBMTN
USPP
5%
27%
23%
16%
2%
13%
14%
NATIONAL RETAILERS
RANKED VICINITY
#1On the retailer
net promoter score
AND
#2Overall across 10
retail landlords
Vicinity is increasingly
recognised as a partner
of choice for growth-
oriented retailers.
OUR PERFORMANCE CONTINUEDVicinity Annual Report 2022Our Business SnapshotChairman’s LetterCEO's LetterOur PeopleOur DestinationsOur Performance DEBT MATURITY PROFILE 1
($million)
125
309
655
59
142
133
400
700
100
200
60
FY23
FY24
FY25
FY26
200
FY27
40
435
84
108
300
114
812
FY28
FY29
FY30
AMTN
EUMTN
HKMTN
GBMTN
USPP
Bank debt drawn
Bank debt undrawn
13
169
FY31
OPERATIONAL PERFORMANCE
During FY22, Vicinity completed 1,378 leasing
deals, 121 more deals than the prior year
(FY21: 1,257).
After a moderation in leasing activity
in January and February 2022, due to
seasonality as well as the outbreak of
Omicron, deal momentum accelerated with
the number of deals completed in June
2022 being 49% higher than the number
completed in June 2021.
Leasing spreads continued to show positive
momentum, with the average leasing spread
for FY22 at -4.8% relative to -6.4% in 1H FY22
and -12.7% in FY21.
Of all new leasing deals agreed in FY22, 71%
were negotiated with fixed annual increases
of 5% and cumulatively, 94% of all new
deals were negotiated with fixed annual
increases of at least 4%. Importantly, while
spreads continue to be negative, the fixed
annual increases support current and future
NPI growth.
Vicinity leased 374 vacant stores in FY22,
occupancy increased to 98.3% at the end
of June 2022, representing a slight increase
versus the 98.2% reported at 30 June 2021.
In addition to fulfilling its obligations
imposed by the SME Codes 2 until their
expiration in March 2022, Vicinity
continued to support small businesses
and other retail partners in categories
and locations most impacted by the
pandemic, such as food and beverage,
travel and CBD locations.
COVID-19 lease variation negotiations with
non-SME retail tenants continued to focus on
driving mutual value and leasing outcomes
that support retail partners experiencing
hardship, while also reflecting the quality of
Vicinity’s assets.
Vicinity’s highly targeted approach to
negotiations preserved the weighted average
lease expiry profile, improved leasing
spreads and enhanced retailer mix across
the portfolio.
Collection of gross rental billings averaged
91% for FY223, and 93% for 2H FY22. Of
note, SME retail sales performance is now
broadly in line with non-SME specialty sales,
which has further supported the collection
of current and overdue rent. Cash collections
from SME tenants improved from 66% of
gross billings at 1H FY22 to 80% for FY22.
Vicinity expects to substantially complete all
remaining lease variation negotiations with
SME tenants by the end of 1H FY23.
The Australian retail sector has benefitted
from elevated household savings and an
extremely tight employment market.
Consumers are continuing to show
confidence and capacity to spend while
maintaining a strong preference for
physical store shopping.
Our customers continued to shop with
purpose. While visitation remained below 2019
levels, average spend per visit remained
1.3 times
THAT RECORDED IN 2019
Higher spend per visit, combined with the
introduction of on-trend retailers, and the
particular success of luxury retail in Vicinity’s
centres, supported total portfolio retail sales 4
growth of 15.5% in 2H FY22 relative to the
same period in 2019. Excluding CBDs, sales
are 16.9% higher.
Despite four months of lockdown in
1H FY22 in Victoria and New South Wales,
total portfolio moving annual turnover
was up 6.7%, with strong growth reported
across mini majors and specialty stores.
The key drivers were discretionary
categories, including Jewellery, Apparel and
Food Catering.
Finally, continued execution of Vicinity’s
Retailer First program has been well received,
with Vicinity increasingly being recognised
as a partner of choice for growth-oriented
retailers. National retailers ranked Vicinity
number one on the retailer net promoter
score, and number two overall across
10 retail landlords.
As part of its Retailer First program,
Vicinity has increased its focus on
building strong long-term relationships
with retailers, enhancing tenant
experiences and driving higher
tenant retention.
1. All treasury data is pro forma 30 June 2022 data, adjusted for post year-end capital management activities undertaken.
2. Refers to the Federal Government’s SME Commercial Code of Conduct and Leasing Principles During COVID-19, or the regulations implemented in Victoria and New
South Wales, collectively referred to as the ‘SME Codes’.
3. Cash collections reported for the period in which they are billed, with collections reported as at 4 August 2022.
4. Sales are reported on a comparable basis, which excludes divestments and development-impacted centres in accordance with SCCA guidelines. Also excludes travel sales.
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14
In our FY22 annual employee experience
survey, we achieved an 7% increase in
overall employee engagement from FY21.
Encouragingly, positive shifts were recorded
across all five culture factors identified
as areas of focus from our November
2020 survey.
Contributing to our increased engagement
was the embedding of our systemic change
program, The Vicinity Way.
CONNECTING WITH PEOPLE ACROSS
ALL ASPECTS OF OUR BUSINESS
Building a high-performance culture
– The Vicinity Way
Our team of 1,200+ people is our greatest
asset and a key competitive advantage.
While there were challenges over the past
12 months, the collective efforts of our team
enabled us to deliver our achievements and
make Vicinity a great place to work.
As we focused on delivering strong
business performance, the health,
safety and wellbeing of our people and
communities remained our highest priority.
We continued to implement wellbeing
programs across the business, including a
series of wellbeing sessions hosted by our
team members and external guests.
Flexibility has always been part of our
culture. As we welcomed our state and
national office teams back into the physical
workplace, we enhanced our focus on
hybrid working. This provides us with all the
benefits of face-to-face collaboration, while
allowing our team members to maintain the
flexibility and work life balance that working
from home offers.
Our continuous listening methodology
provides valuable insights from our people
about their experience at Vicinity. Through
listening to our team on a regular basis, we
can identify the areas we need to focus on
to create a high-performance culture.
The Vicinity Way comprises five elements that bring together our ways of working:
G M O D E L
OPER A TI N
LEA
D
E
R
The Vicinity
Way
E
R
U
T
L
U
C
PERFORMA N C E
S
H
I
P
C
A
P
A
BILITIES
E R ATING MOD
E
L
P
O
L E A DERSHIP
C A PABILITIES
E R F ORMANCE
P
C U LTURE
Ensuring our
business is set up
for success
Leading
inclusively
Building our
collective skills
Aligning on our
common goals
Creating
high-performing
teams
In FY21, our senior leadership engagement program (Growth Edge) focused on opportunities that would unlock long-term growth using
The Vicinity Way and setting the foundations of our operating model. As a result, we saw our cross-functional teams further establish clear ways
of working, leverage the right capabilities within the business and display leadership attributes to drive our strategic priorities and goals.
OUR PEOPLEVicinity Annual Report 2022Our Business SnapshotChairman’s LetterCEO's LetterOur PerformanceOur DestinationsOur People 15
LEADING INCLUSIVELY
Our Diversity, Inclusion and Belonging
(DIBs) strategy is fundamental to our
success. We know that harnessing different
perspectives and ideas drives better
performance outcomes and is critical
to fostering a workplace where everyone
feels they are included and supported to
perform at their best.
As we grow and adapt as an organisation,
we are consciously evolving our approach
to DIBs from being ‘something you do’ to
being an integrated part of how we do
business at Vicinity.
Our team members told us that taking
steps to shift their sense of inclusion and
belonging at work is one of the most
important and impactful things we can
focus on.
In FY21, we launched our Leading
Inclusively Program for our Leaders to
educate them on the importance of their
role in shifting Vicinity’s performance and
culture. We had over 80% of our Leaders
complete the program. These Leaders
then led their own teams through the
content and conversations to ensure
they understand that everyone has
a role to play in creating an inclusive
and high-performing organisation.
In FY22, we launched our new 16-week
parental leave policy – Every Family.
We also removed references to primary
and secondary carer roles, promoting
equality in the workplace and enabling all
employees – regardless of tenure – to have
access to this leave.
We continued to work towards our targets
to improve gender diversity within our
business. In FY22, 49% of our leadership
were women. We recognise, however, that
further focus is required to achieve our
gender target of 40:40:20 in our Senior
Leader cohort.
Our team of 1,200+ people
is our greatest asset and a key
competitive advantage.
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CASE STUDY
Every Family – David Palamara
Since its launch, 42 Vicinity parents, have
been able to take advantage of the Every
Family policy’s new provisions.
David Palamara, dad and General Manager,
Data Science, used his 16 weeks of leave
following the birth of his son, Wesley.
Wesley is a rainbow baby who follows his
brother Lucian who was born in 2020.
Wesley’s first weeks of life got off to a rocky
start. Not only was he born in the middle of
the COVID-19 pandemic, but he developed
an infection that resulted in an extended
period in hospital. In addition, once he was
able to finally go home, David’s wife had to
remain in hospital, which resulted in David
becoming the primary caregiver for his son.
Knowing that he was fully
supported by Vicinity and
his team allowed David to
be fully present during the
crucial first few weeks of
Wesley’s life, without the
distraction of work.
Plus, with the added flexibility and choice of
our progressive policy, it meant David could
actively support his partner during this
significant time in both their lives, be there
for important milestones and build a special
bond with his son.
David is proud to work for a company that
puts its people first, recognises all parents
as caregivers, understands every family’s
circumstance is different, and cares for and
supports them during unforeseen situations.
Over the past 12 months, we continued
our focus on communication, education,
resources and initiatives anchored to
diversity and inclusion moments. As a
team, we raised awareness on key diversity
days and months through lunch and learn
sessions, guest speakers and storytelling.
Some of these included International
Women’s Day, Pride Month, Harmony
Week and R U OK Day.
OUR PEOPLE CONTINUEDVicinity Annual Report 2022Our Business SnapshotChairman’s LetterCEO's LetterOur PerformanceOur DestinationsOur People 17
OUR TEAM
VOLUNTEERED
86hrs
MADE
69
Blood donations
AND SAVED
207
Lives through
Lifeblood
Team Vicinity, Chain Reaction Challenge
CASE STUDY
Giving Back – Chris Pratt
Chris Pratt, Development Project
Director, used his two days of volunteer
leave to participate in the Chain
Reaction Challenge, a phenomenal
seven-day 1,000 km cycling event, which
raises money for children’s charities.
Giving back to his community and
supporting causes that help those
less fortunate is something Chris is
passionate about. This was the seventh
year in which he participated, and
was also the lead for Team Vicinity,
and a member of the Chain Reaction
Challenge’s organising committee.
Team Vicinity helped raise over $113,000,
which included Vicinity matching, dollar
for dollar, donations that were made
through our Workplace Giving Platform.
In addition to volunteer days, Vicinity
sponsored Team Vicinity, alongside
seven of our suppliers.
Through Chris’s recommendation, the
Chain Reaction Challenge Foundation
gave an additional donation of $25,000
in support of our collaboration with
SEDA College.
OUR COMMUNITIES
Creating shared value within the
communities in which we operate
We know we play a critical role in
connecting people in our communities
through positive social change. Through
our targeted community investment
program, we have contributed $2.9 million
in FY22. Vicinity also provided
approximately $36 million in COVID-19
rental relief to our tenants.
As part of our sustainability strategy, we
are committed to enabling our people to
give back to the community in ways that
suit them. Our Workplace Giving program
enables our team to choose charities to
donate to, and we match up to $500 per
team member, per year. Through our
Volunteering program, we provide two days
of volunteer leave each year.
In June 2022, we celebrated the first year
of our three-year strategic partnership
with the Australian Red Cross (ARC). Over
the past 12 months, we have worked with
the ARC to help raise awareness across
multiple campaigns, including:
– raising awareness for the Act of
Humanity campaign and Emergency
Ready Week across our centres, using
our digital media screens
– supporting Christmas fundraising
campaigns, including High Tea at the
Queen Victoria Building (QVB)
– raising funds through workplace giving
appeals to support the New South
Wales / Queensland floods and Ukraine
crisis appeal
– volunteering 86 hours, making 69 blood
donations and helping save 207 lives
through Lifeblood.
As we enter our second year of
partnership, we are looking forward
to building on the work we have
done together.
Our community significance focus
also encompasses working with social,
Indigenous and local enterprises to meet
our procurement needs. Partnering
with social enterprises gives us the
opportunity to make a positive impact
in local communities through our day-
to-day operations. Where possible, we
partner with social enterprises working
to alleviate social issues that are aligned
with our own community investment or
diversity and inclusion focus areas. In
FY22, we spent $1.27 million with social
and Indigenous enterprises.
Net ZeroOur Management of RiskGovernanceTax TransparencySustainability AssuranceFinancial ReportSecurityholder Information 18
OUR PEOPLE CONTINUED
RECONCILIATION ACTION PLAN
Vicinity’s Reconciliation Action Plan (RAP)
is a cornerstone of our connection with
our people and communities. In FY22, in
collaboration with our external Indigenous
advisors, we began work on our third RAP.
This is our second Innovate RAP that will
reflect the efforts and relationships we
have established in this space and push
us further towards our commitment to a
reconciled Australia.
We have continued to engage with our
team, our external stakeholders and
Reconciliation Australia to deliver our key
achievements, and while we have more to
do, we are proud of our progress.
Over the past 12 months, we continued to
focus on increasing our procurement with
Indigenous businesses. We created a new
internal Indigenous Procurement Roadmap.
As a result of this Roadmap, Vicinity has
utilised our membership with Supply
Nation and engaged with new Indigenous
suppliers on projects across our business in
FY22, with an annual spend of $580,000.
Our teams across our state offices and
centres raised awareness of the cultures
of Aboriginal and Torres Strait Islander
peoples through events during NAIDOC
and National Reconciliation weeks. We
also launched cultural awareness training,
in which 260 team members participated,
and introduced Aboriginal and Torres Strait
Islander Cultural Protocols within our team.
CASE STUDY
QVB Flag Raising
On 26 October 2021, the QVB in New South Wales marked another step forward
in their reconciliation journey with the Traditional Custodians, the Gadigal People
of the Eora Nation, raising the Australian National, Australian Aboriginal and
Torres Strait Islander flags atop the QVB.
The flags were flown to mark the anniversary of Uluru being handed back to
its Traditional Custodians, the Anangu people, in 1985, as a sign of reflection
and remembrance.
A Welcome to Country was performed by Gadigal Elder, Uncle Allen Madden,
with a didgeridoo performance by Russell Dawson and smoking ceremony
by cultural leader and songman Reika Alley of the Koomurri Aboriginal Dance
Troupe. Blkfsch, a majority-owned Indigenous company, which supports
cultural awareness and social equity through the power of storytelling, was
commissioned to capture the significant event through photography and video.
The flags will remain indefinitely, flying high above the roof of the QVB as a
proud and enduring symbol of inclusion and respect for all to appreciate.
Vicinity Annual Report 2022Our Business SnapshotChairman’s LetterCEO's LetterOur PerformanceOur DestinationsOur People 19
MODERN SLAVERY ACT
COMMITMENT
We continued to welcome interest
from our investors, retailers and other
stakeholders on how we are responding to
modern slavery risks in our business and
supply chain. In December, we published
our second Modern Slavery Statement
in response to the Modern Slavery Act
2018 (Cth), that outlined the actions
undertaken in FY21 to assess and address
modern slavery risks in our operations
and supply chain.
We have enhanced our approach
to modern slavery through:
– continued supply chain due diligence
activities, including the risk mapping of
all FY21 suppliers in our supply chain,
and further deep dives into identified
high-risk supplier categories, including
solar and Christmas decorations
– quarterly internal Modern Slavery
Working Group meetings, chaired
by our Chief Operating Officer
– implementing modern slavery training
for our Board Members and continuing
our modern slavery compliance
training for all team members
– completing our first Communication
of Progress as participants of the
United Nations Global Compact.
CASE STUDY
Collaboration with SEDA Group
On National Close the Gap Day 2022, we established a collaboration with
SEDA – an independent secondary college and a supporter of educational
support programs for Aboriginal and Torres Strait Islander students. Together,
with fundraising partner Bridging the Gap Foundation, we are helping to raise
awareness and create scholarships for Indigenous students to attend SEDA
secondary colleges across Australia.
In May, four Indigenous SEDA students attended our National Head Office
at Chadstone where they participated in a yarning circle with Vicinity team
members to share their personal stories. The four students created an artwork on
the day to symbolise these stories and the partnership between Vicinity, SEDA
and Bridging the Gap Foundation. Their unique artwork is featured on tote bags
in participating centres in NAIDOC Week, as a gift with donation in order to raise
funds for the scholarships.
Net ZeroOur Management of RiskGovernanceTax TransparencySustainability AssuranceFinancial ReportSecurityholder Information 20
OUR DESTINATIONS
OUR DEVELOPMENT PIPELINE
We have been investing in our development
pipeline for many years and the past
12 months saw us only increase our efforts
and focus on delivering long-term growth
from our portfolio of assets.
Our $2.9 billion retail and mixed-use
development pipeline is diverse, in both
geography and format, and is a key driver of
growth for our business. It leverages several
of our key assets in strategically important
locations across Australia’s major cities.
Our projects are closely aligned to
government planning and policy settings.
They respond to the growing demand
for residential and commercial uses in
metropolitan activity centres that are serviced
by multiple public transport modes, health
and education services and are in close
proximity to employment hubs.
Our pipeline is focused on both large-scale,
retail-led mixed-use development projects
and smaller modernisation projects. All of our
developments are conceived of by listening
to our local customers and communities,
understanding their evolving needs,
and responding with plans to meet their
expectations now and into the future.
Artist’s impression - Box Hill North, Vic
Artist’s impression - Chadstone, Vic
DRIVING A LONG-TERM OUTLOOK
With a portfolio of strategically located retail
assets, Vicinity is in a leading position to
utilise its land and assets to deliver precincts
where people want to shop, work, live and
play. Our mixed-use strategy and retail
development opportunities are a key driver
of growth for the business.
Vicinity has been investing in its retail
and mixed-use development pipeline for
many years. However, with the onset of the
pandemic in March 2020, decisive action
was taken to conserve capital in order to
navigate the considerable volatility and
disruption of the pandemic itself. FY22
marked the resumption of investment into
our development pipeline.
We used this period, to continue our work in
gaining larger, more meaningful development
approvals, working hand in hand with both
local and, importantly, state governments to
be in a position to be shovel-ready emerging
from the pandemic.
Data and insights inform how we approach
our projects and their alignment to
government town planning and population
growth. We leveraged research into the
changing patterns of customer behaviour and
the role they play in shaping our future and
incorporated these learnings into our long-
term plans.
We engaged with the communities that
surround our assets to seek their feedback
and understand their needs and expectations.
We also explored the rich history of the
places where our assets are located and
reflected on their past, current and future
needs. We wove these stories and learnings
into the design of our projects to ensure they
resonated with the communities in which
we operate.
Our objective to create sustainable
places was embedded into the design of
our projects to ensure they are resilient to
withstand different manifestations of climate
change today and in the future.
The consequences of the pandemic
accelerated the case for the ‘work near
home’ model as people longed for social
connection while working from home, but
without the commute time. There was a rise
in demand from employers seeking locations
that combine quality office space with great
amenity and the added experience of a
shopping centre.
This validated the strategy we had developed
for a number of our larger assets and
increased our focus on progressing our retail-
led, mixed-use strategy. We worked closely
with both local and state governments
to ensure we were ready to act as we
progressed through the recovery phase.
Vicinity Annual Report 2022Our Business SnapshotChairman’s LetterCEO's LetterOur PerformanceOur PeopleOur Destinations 21
EMBEDDING SUSTAINABILITY
ACROSS OUR PORTFOLIO
How we think about our development
strategy is entirely aligned with our approach
and commitment to sustainability, and our
core belief that sustainable places and
business drive real value over time.
Our sustainability strategy
for developments is focused
on delivering precincts
that create opportunities
to connect, drive a sense of
belonging and embody
sustainable design.
We are committed to using sustainable
design and emerging technology to reduce
energy intensity, grow our renewable energy
program, and promote greener choices.
We also focus on asset resilience and
creating safe and reliable hubs for our
communities by endeavouring to ensure our
centres are and remain physically resilient in
a changing climate.
Artist’s impression - Box Hill North, Vic
Artist’s impression – Chatswood Chase Sydney, NSWNet ZeroOur Management of RiskGovernanceTax TransparencySustainability AssuranceFinancial ReportSecurityholder Information 22
OUR DESTINATIONS CONTINUED
OUR PROJECTS
DEVELOPMENT APPLICATIONS LODGED FOR OUR PRIORITY
MIXED-USE ASSETS
Victoria Gardens Shopping Centre
Vicinity and co-owner Salta Properties
have submitted plans to redevelop Victoria
Gardens, elevating the Richmond shopping
centre into a thriving and sustainable retail,
commercial and residential village.
The proposed masterplan consists of two
precincts: the Doonside precinct located on
the centre’s south-west corner, and the River
Boulevard precinct, which connects the east
side of the centre to the Yarra River.
Combined, the precincts will deliver more
than 1,600 new residences, an additional
45,000 sqm of commercial and retail space,
and almost 10,000 sqm of new publicly
accessible open space for the community to
enjoy, including a network of laneways, civic
plazas and active street frontages.
Vicinity’s share in the project is represented
by the Doonside precinct, which will be
delivered in stages and in partnership with
Salta Properties.
The Doonside precinct contains more than
800 of the new residences, more than
12,000 sqm of new retail and commercial
floorspace and 3,500 sqm of open space,
including improved street frontage, plazas
and gardens.
Woven through the plans is Vicinity’s
commitment to sustainability, with net
zero carbon emissions for residential
common areas and back-of-house services
complemented by extensive landscaped
laneways and open spaces.
Artist’s impression – Victoria Gardens Shopping Centre, Vic
Owner
Management
Retail Category
Development Stage
Project Type
Development Manager
Leasing
Vicinity Centres and Salta Properties
Vicinity Centres
Sub Regional
Development application submitted
Mixed-use redevelopment
Vicinity Centres
Vicinity Centres
Artist’s impression – Buranda Village, Qld
Buranda Village
Vicinity has submitted plans to
transform the long-serving Buranda
Village retail precinct into a mixed-use
village well positioned to support
the Princess Alexandra Hospital and
Boggo Road Research and Innovation
Precinct while also sitting just 5 km
from Brisbane CBD.
The plans include a redesigned,
laneway-based, supermarket-
anchored, open-air retail and dining
village, complemented by beautifully
landscaped public spaces, flanked
by a state-of-the-art 620-apartment
residential zone and 50,000 sqm of
commercial office space spread across
three buildings.
Vicinity’s commitment to sustainability
is evident in its plans for Buranda Village
with the project targeting a 5-Star
Green Star certification and utilising
initiatives, such as solar energy systems,
sustainable travel facilitation and passive
design strategies.
Owner
Management
Retail Category
Development Stage
Project Type
Start Date
Completion Date
Development
Manager
Leasing
Vicinity Centres
Vicinity Centres
Sub Regional
Plans submitted
Mixed-use
redevelopment
Target 2023
Target 2026
Vicinity Centres
Vicinity Centres
Vicinity Annual Report 2022Our Business SnapshotChairman’s LetterCEO's LetterOur PerformanceOur PeopleOur Destinations 23
Owner
Management
Retail Category
Vicinity Centres and Private Investor
Vicinity Centres
Major Regional
Development Stage
In development; plans approved; awaiting masterplan approval
Project Type
Start Date
Mixed-use redevelopment
2022
Completion Date
2022 (Fresh food and retail precincts 2022), 2024 (Bankstown Exchange)
Development Manager
Leasing
Vicinity Centres
Vicinity Centres
Box Hill Central
Vicinity’s plans to revitalise Box Hill
Central into a mixed-use precinct boasting
residential, commercial and retail spaces
have continued at pace over the course
of FY22.
In April, Vicinity welcomed customers to
experience the first stage of its $46 million
redevelopment of the popular Box Hill
Central South retail precinct, which includes
new retailers, a new entrance, improved
accessibility and fresh, vibrant interior design,
with new dual-frontage restaurants, and a
new Coles supermarket expected later in
2022. Also part of the Box Hill Central South
site is a new commercial building being
delivered for a leading co-work operator, Hub
Australia, who has committed to a long-term
lease on the entire building.
Meanwhile, Vicinity secured council approval
for the first stage of the proposed mixed-use
development of Box Hill Central’s North
precinct, paving the way for state-of-the-art
office and residential towers, complemented
by a new town square.
The city-shaping developments at Box Hill
Central will service over 26 million customer
visits each year, and are made possible by
the continued integration with the public
transport network of buses, trains and trams,
with Suburban Rail Loop also earmarked for
the future.
Owner
Development Stage
Project Type
Start Date
Completion Date
Development Manager
Leasing
Artist’s impression – Box Hill Central, Vic
Retail – delivered. Mixed-use – plans approved
Vicinity Centres
Retail - extension and refurb. Mixed-use – ground-up development
2022 (retail), 2026 Stage one (mixed-use)
2021
Vicinity Centres
Vicinity Centres
Artist’s impression – Bankstown Central, NSW
Bankstown Central
Vicinity’s vision to transform Bankstown
Central into a vibrant mixed-use urban
neighbourhood took a major step
forward in 2022 with a retail remix
development commenced as well as
an upgrade to the fresh food precinct,
and a range of exciting development
approvals granted by Council.
Central to the approved applications
is that of Bankstown Exchange –
a business precinct comprising
30,000 sqm of A-grade office space
spread across three buildings,
complemented by ground-floor retail, a
new ‘Eat Street’, new landscaped public
open space, and expanded car parking.
Bankstown Exchange will leverage
its strategic location in the heart of
Bankstown, supported by convenient
transport links and proximity to an
upgraded Bankstown Central retail
precinct that is in the process of
welcoming a new international retailer
and valuable local services.
Both developments represent the
first steps in Vicinity’s commitment
to deliver its 2050 masterplan to
transform Bankstown CBD into a vibrant
mixed-use area to support a future
health and education precinct. In April
2022, council unanimously endorsed
Vicinity’s planning proposal that gives
effect to the masterplan and is now
progressing through the gateway
approval process with an outcome
expected in CY23.
Net ZeroOur Management of RiskGovernanceTax TransparencySustainability AssuranceFinancial ReportSecurityholder Information 24
OUR DESTINATIONS CONTINUED
Chatswood Chase Sydney
Chatswood Chase Sydney is one of
Vicinity’s most exciting large-scale retail
development opportunities.
As the North Shore’s premier shopping
destination, far-reaching plans to transform
the centre comprise two major development
phases and contribute to Vicinity’s
broader development strategy to deliver
market-leading, mixed-use destinations.
Phase One will see the redevelopment of
the centre’s lower ground level fresh food
and dining precinct, transforming the area
to deliver a premium fresh food and dining
experience. Once construction commences,
the development is expected to take
12 months to deliver with major retailers
remaining open throughout.
Phase Two is the redevelopment of the
centre’s retail precinct and new rooftop office
village. Building on Vicinity’s position as
Australia’s leader in luxury retailing, the
development will introduce a new luxury
retail offer, including the best of Australian
and international designers curated
especially for the Chatswood Chase
Sydney customer.
Among the introduction of new luxury
brands, the retail precinct will receive a
major reconfiguration, design refresh and
new skylight-atria features throughout.
The Victoria Street entrance will also
receive a major upgrade, reframing it as
the front entrance and gateway to the new
Chatswood Chase Sydney.
Owner
Vicinity Centres and GIC
Vicinity Centres
Major Regional
Awaiting approval
Mixed-use development
Delivered in two stages,
Stage one commencing late
2022, Stage two TBC
2023 (Fresh food and
dining precinct), Phase 2
pending approval
Management
Retail Category
Development
Stage
Project Type
Start Date
Completion Date
Development
Manager
Leasing
Artist’s impression - Chatswood Chase Sydney, NSW
Chadstone – The Fashion Capital
Already a leading example of Vicinity’s
mixed-use strategy with a luxury 5-Star
Green Star – rated hotel and approximately
30,000 sqm of commercial office space
located adjacent to Australia’s premier
retail destination: Chadstone – The
Fashion Capital.
A recently extended solar-shaded car
park serves as the first post-pandemic
development completed at Chadstone, with
the 1.6 MW system providing enough clean
energy to power more than 340 average
Australian homes each year. This car park
development also features an art façade that
is the first stage of a multi stage strategy
to wrap the centre carparks in a ribbon
of integrated urban art. A new dining and
entertainment terrace is also underway.
Owner
Management
Retail Category
Vicinity also revealed plans for further
developments at Chadstone, including a
major renovation of the Chadstone Place
office building to deliver net zero carbon
certification and state-of-the-art office
amenities prior to the arrival of Officeworks
in 2023. Other plans include the major
redevelopment of Chadstone’s fresh food
precinct as a European inspired Market Hall,
5,300 sqm of additional health and wellbeing
services, a 20,000 sqm A-Grade nine-storey
office building, One Middle Road, and new
car parking spaces.
Vicinity Centres and Gandel Group
Vicinity Centres
Super Regional
Underway
Mixed-use development
2021
2025
Vicinity Centres
Vicinity Centres
Vicinity Centres
Development Stage
Vicinity Centres
Project Type
Start Date
Completion Date
Development Manager
Leasing
Vicinity Annual Report 2022Our Business SnapshotChairman’s LetterCEO's LetterOur PerformanceOur PeopleOur Destinations 25
RETAIL MODERNISATION PROJECTS
Mornington Central
Modernisation and refurbishment,
including a new Woolworths, mix of
major specialty retailers, and extensive
ambience upgrades.
Box Hill Central South
Major redesign and refurbishment of
the southern shopping precinct of Box
Hill Central, including a new entrance
from Carrington Road, new Coles
supermarket, the addition of new
dual frontage dining outlets, and a
major ambience upgrade.
Altona Gate
Refreshed retail and food offering
and extensive ambience upgrades.
Bankstown Central
Modernisation and refurbishment
of the centre’s fresh food market,
including a new Coles supermarket
and revitalisation of the mix of major
specialty retailers, including UNIQLO,
Glue Store and Services Australia,
and extensive ambience upgrades.
Artist’s impression - Bankstown Central, NSW
MIXED-USE CO-WORKING AND 'WORK NEAR HOME' MODEL
Chadstone Place
Chadstone Place, one of four existing office buildings at Chadstone is
currently being redeveloped for a sole tenant, Officeworks.
One Middle Road
One Middle Road offers 20,000 sqm of energy efficient, A-Grade office
space over nine levels, with direct access to Chadstone – The Fashion
Capital. It will utilise adaptable campus-style floors, natural light and a
rooftop Sky Garden to enhance productivity and wellbeing.
Artist’s impression – 12 Balmoral Walk, Vic
12 Balmoral Walk, Frankston
Development of a new office building located adjacent to Bayside Centre,
12 Balmoral Walk offers 14,000 sqm of A-Grade office space over eight
levels, complemented by an external terrace space with bay views.
Box Hill Central – Hub Australia
Partnered with Hub Australia to introduce a premium 4,100 sqm
four storey co-working space as part of the redevelopment of Box Hill
Central’s South retail precinct, currently under construction.
Artist’s impression – One Middle Road, VicArtist’s impression – Box Hill Central South, VicNet ZeroOur Management of RiskGovernanceTax TransparencySustainability AssuranceFinancial ReportSecurityholder Information 26
NET ZERO
Our Net Zero by 2030 carbon target,
established in 2019, for common mall
areas of our wholly-owned centres, is
our long-term target aligning to The
Paris Agreement. Our progress towards
achieving this target is driven by our
Integrated Energy Strategy, made up of
our large-scale onsite solar program and
scaled-up energy efficiency initiatives. We
are also planning to transition away from
carbon intensive energy sources through
scaling back fossil fuel reliant equipment.
We are tracking well towards our Net Zero
by 2030 carbon target having reduced
our energy intensity by 27% and carbon
intensity by 38% since June 2016.
ENERGY INTENSITY
REDUCED BY
27%
Since June 2016
CARBON INTENSITY
REDUCED BY
38%
Since June 2016
Elizabeth City Centre, SA
Vicinity Annual Report 2022Our Business SnapshotChairman’s LetterCEO's LetterOur PerformanceOur PeopleOur Destinations 27
INTEGRATED ENERGY STRATEGY
Since 2017, we have been implementing
our Integrated Energy Strategy to make our
business more sustainable, energy resilient
and cost effective. The Strategy focuses on
four-pillars: Renewable Generation, Storage,
Energy Efficiency and Demand Management.
Our objectives are to deliver long-term
outcomes through creating energy-smart
destinations, improving energy resilience,
reducing the consumption of electricity
generated from the national grid, and
significantly reducing our carbon emissions.
In 2018 we committed to a $73 million
investment in on-site solar generation to
deliver energy resilience and efficiencies.
Since the first solar panels were installed at
Castle Plaza, South Australia in December
2018, we have installed more than 32 MW
worth of solar capacity across 22 centres,
including 1.55 MW at Chadstone, 0.92
MW at The Glen and 0.78 MW at Nepean
Village in FY22. To date, our solar systems
have the capacity to generate around
46,977 MWH per year – the equivalent of
powering approximately 8,000 average
Australian homes.
Energy efficiency is one part of our broader
resource efficiency program that also focuses
on driving continuous improvements in
how we manage operational energy, water,
and waste across our assets. The program
is supported by ambitious portfolio and
centre level stretch targets and initiatives,
including a lifecycle replacement program
focussing on lighting, vertical transport,
heating and cooling along with optimising
building operations and performance through
building controls.
Utilising the Internet of Things, the vast
amount of energy data we gather has
provided a granular view into how our
centres operate day-to-day through real-time
analytics. The analytics provide us with the
information we need to make the right energy
reductions at the right times, optimising
the energy we consume. By connecting,
integrating, and automating our energy and
demand management we can optimise how
our buildings operate, reduce energy costs,
and most importantly free up more time for
our centre teams to focus on retailer and
customer experiences.
Castle Plaza, SA
CASE STUDY
Automated Demand Management
We have developed a machine learning algorithm that leverages our virtual
Building Management System (BMS) solutions and defines the correlations
between energy demand and external factors such as weather forces, foot traffic
and time of day. This algorithm predicts demand curves accurately and shows
where we can achieve energy efficiencies during those times.
We undertook a trial across five centres in Victoria and Western Australia in FY21
as a proof of concept. In FY22 we rolled out aspects of the program to the rest of
our Western Australia portfolio, with rollout nationally to follow.
Our Management of RiskGovernanceTax TransparencySustainability AssuranceFinancial ReportSecurityholder InformationNet Zero 28
NET ZERO CONTINUED
KEY PERFORMANCE METRICS
Vicinity has continued to perform well on its journey to Net Zero by 2030 across its common mall areas
for wholly-owned assets and has reduced energy intensity across its managed portfolio.
Since FY16 the managed portfolio has reduced energy intensity by 19%, while the wholly-owned portfolio across its common mall areas
reduced energy intensity by 27%. Carbon intensity reduced by 30% and 38% from the FY16 baseline for managed and wholly-owned,
common mall area portfolios respectively.
As our centres transitioned to a post-COVID-19 scenario there was a modest increase in both carbon and energy intensity, reflecting a return
to full centre operations, increasing by 2% and 4% respectively across our managed portfolio. Our wholly-owned portfolio saw our energy
intensity increase by 3% and carbon intensity by 0.5%.
All increases were a consequence of centres that were more heavily impacted by COVID-19-related lockdowns utilising major energy
infrastructure such as boilers, coolers, heaters and lighting at a greater rate than during periods impacted by COVID shutdowns. As our
centres continue to recover and visitation increases we anticipate a slight upward trend across these metrics which will subsequently flatten
as we realign our energy efficiency efforts across centres and offices.
Net Zero by 2030 common mall areas, wholly-owned assets
Metric
Energy Intensity
Reduction against Net Zero
by 2030, common mall
areas, wholly-owned assets
(specific to baseline year
FY16)
Scope 1 + Scope 2
Emissions Intensity
Scope 1 + Scope 2 against
Net Zero by 2030, common
mall areas, wholly owned
assets (specific to baseline
year FY16)
Managed Portfolio
Metric
Energy Intensity
% Movement in Energy
Intensity (specific to
baseline year FY16)
Scope 1 + Scope 2
Emissions Intensity
% Movement in Scope
1 + 2 Emissions Intensity
(specific to baseline year
FY16)
Materials Diverted
from Landfill
Renewable Energy
Consumption1
Renewable Energy
Generation
UoM
MJ/sqm
%
kg CO2-e/
sqm
%
UoM
MJ/sqm
%
kg CO2-e/
sqm
%
%
MWh
MWh
2016
305
73
2016
324
78
2017
292
-4%
66
-9%
2017
311
-4%
73
7%
2018
285
-6%
2019
261
-14%
2020
220
-27%
2021
215
-29%
2022
221
-27%
64
59
46
45
45
-12%
-19%
-36%
-39%
-38%
2018
306
-6%
2019
299
-8%
2020
267
-18%
2021
245
-22%
2022
264
-19%
71
68
58
54
55
-10%
-12%
-26%
-31%
-30%
36%
37%
40%
45%
49%
52%
53%
4,891
29,244
34,746
41,665
4,964
31,098
38,913
46,215
1. % Renewable Energy consumed on-site (base+tenant).
Vicinity Annual Report 2022Our Business SnapshotChairman’s LetterCEO's LetterOur PerformanceOur PeopleOur Destinations 29
Australian Sustainability Benchmarks
We use recognised national frameworks such as the Green Star Performance and the National Australian Built Environment Rating System
(NABERS) to benchmark our operational performance. These measures help drive continuous improvement across our asset portfolio and
provide us with opportunities to implement best practice initiatives. By implementing these initiatives we aim to provide positive outcomes
for all our stakeholders, including our consumers, retail partners, suppliers and people.
Vicinity is one of the largest and highest rated Green Star Performance portfolios in Australia, achieving a 4 Star Green Star Performance
Portfolio rating in June 2019. In FY22 we joined the Green Star Performance Early Access Program to assist with the development and
implementation of the new Green Star Performance tool.
Vicinity was ranked in the top five and top three for NABERS Energy and NABERS Water respectively, for Shopping Centres in the NABERS
Sustainable Portfolios Index 2022; achieving 4.6 Stars NABERS Energy and 4 Stars NABERS Water Portfolio ratings.
We also increased our NABERS Energy and Water assessments to cover 100% of our rateable portfolio2, up from 91% in FY21.
VICINITY CENTRES PORTFOLIO SUSTAINABILITY PERFORMANCE RATINGS
Framework
Green Star
Performance 1
Portfolio coverage
# of centres with
a rating of 5 Stars
and above
NABERS Energy2
# of centres with
a rating of 5 Stars
and above
NABERS Water3
# of centres with
a rating of 5 Stars
and above
FY16
FY17
FY18
FY19
FY20
FY21
FY22
2 Stars
Average
Practice
100%
3 Stars
Good
Practice
100%
3 Stars
Good
Practice
100%
4 Stars
Australian
Best Practice
4 Stars
Australian
Best Practice
4 Stars
Australian
Best Practice
4 Stars
Australian
Best Practice
100%
100%
38 / 65
100%
33 / 62
100%
42 / 59
3.4 Stars
Coverage:
56%
3.7 Stars
Coverage:
44%
3.6 Stars
Coverage:
85%
3.8 Stars
Coverage:
76%
3.9 Stars
Coverage:
86%
4.4 Stars
Coverage:
91%
4.6 Stars
Coverage:
100%
4
15
21
2.9 Stars
Coverage:
50%
3.2 Stars
Coverage:
44%
3.1 Stars
Coverage:
82%
3.3 Stars
Coverage:
76%
3.4 Stars
Coverage:
86%
3.4 Stars
Coverage:
91%
4.0 Stars
Coverage:
100%
3
5
14
Global Sustainability Benchmarks
We continue to participate in a number of voluntary investor sustainability surveys on an annual basis. This helps us benchmark our
performance in environmental, social and governance (ESG) criteria and identify areas of risk, opportunity and impact across our business.
Our participation in FY22 included:
– Global Real Estate Sustainability Benchmark (GRESB) where Vicinity ranked 3rd in the Global Listed Retail Category.
– Dow Jones Sustainability Index (DJSI) where Vicinity ranked 5th globally in the Real Estate Sector.
– CDP, Vicinity received a leadership ranking with a score of A-.
1. Managed Portfolio.
2. NABERS Sustainable Portfolio Index 2022, based on Vicinity’s ownership interest and 2021 rating as at December 2021
with 100% portfolio coverage.
Our Management of RiskGovernanceTax TransparencySustainability AssuranceFinancial ReportSecurityholder InformationNet Zero 30
OUR MANAGEMENT OF RISK
Identifying and managing risks and opportunities is essential in supporting
the achievement of Vicinity’s strategy and objectives.
Vicinity adopts a structured and comprehensive approach to managing risk to help provide benefits to its stakeholders, including securityholders,
employees, consumers, retailers and the communities in which Vicinity operates.
Vicinity’s risk management approach facilitates the identification, assessment and management of risks to its operations and strategy, ensuring a
clear understanding of risks and enabling informed decision-making in line with the business strategy and risk appetite.
The table below outlines the key risks and opportunities that may affect Vicinity’s ability to create value over the short, medium and long term;
their potential impacts and how Vicinity is managing them. Vicinity’s risk profile will continue to evolve as our business model adjusts and
responds to changes in the global and domestic macro-economic environment, including the long-term impacts of COVID-19, and to structural
changes in the industry.
Risks and opportunities and the
potential impact on value creation
Economic conditions and rapidly evolving markets
Vicinity’s financial performance depends heavily on
rental income generated from its property assets,
which is closely linked to customer foot traffic and
expenditure in its centres.
Adverse economic conditions, a subdued retail market,
structural changes in the industry, including online
retail penetration, changing customer preferences
and disruptive innovations (including as a result of
COVID-19) may restrict growth opportunities and
impact Vicinity’s ability to compete appropriately
without significant changes to its strategy and/or
business model.
Measures implemented by authorities to combat
COVID-19 impacted the operating and financial
performance of Vicinity in FY22. COVID-19 continues to
impact operating performance, with reduced shopping
centre visitation, particularly in CBD locations, and
through supply chain and resourcing impacts on
retailer activity and sales.
Domestic and global macro-economic conditions,
including cost of living increases, inflationary pressures
and increases in interest rates present risks to
consumer confidence and spending and to costs of
doing business.
How Vicinity manages the risks and opportunities
– Vicinity’s long-term strategy is focused on enhancing its core retail portfolio and its growing
funds management and third-party capital business, while executing its retail and mixed-
use development projects by leveraging existing assets and capabilities. Vicinity’s intensive
asset management approach is focused on creating compelling consumer experiences,
improving portfolio quality, actively reweighting the tenant mix to reflect changing
consumer preferences, in line with each centre’s Vision, Strategy and Action Plan and tightly
managing operational costs. This includes partnering with strong performing retailers to
expand their presence across the portfolio and introducing new retail concepts and non-
retail uses which aim to drive greater consumer visitation and should translate into higher
sales and rental growth over the longer term.
– Vicinity takes a ‘Retailer First’ approach, supporting retailers with tools and information, and
enabling their channel strategies.
– Vicinity actively manages existing ancillary income streams and invests in new adjacent
products and services which are closely aligned to its core business.
– With continuing cases of COVID-19 impacting supply chain, customer visitation and
resourcing, Vicinity’s COVID-19 response remains focused on:
– ensuring its centres are safe
– supporting its retailers and customers through targeted marketing and promotional
activities aimed at increasing centre visitation and shopper dwell times
– providing targeted support to retailers in categories and/or locations that continue
to be impacted, such as SME and CBD based retailers
– closely monitoring and managing cash collections
– supporting CBD recovery and reinvigoration through industry bodies.
Vicinity Annual Report 2022Our Business SnapshotChairman’s LetterCEO's LetterOur PerformanceOur PeopleOur Destinations
31
Risks and opportunities and the
potential impact on value creation
Achievement of target portfolio composition
There is the potential that acquisition, divestment and
development opportunities may be limited and/or not
deliver the intended financial results.
Vicinity may be unable to identify or execute on
opportunities that meet its investment objectives due
to price, timing, market demand, and/or the funding
capacity of Vicinity and any co-owner of the asset.
Uncertainty in macroeconomic factors, including
inflationary pressures and rising interest rates,
together with supply chain and resourcing issue, have
potential to impact on construction costs, development
feasibilities, the cost of capital and the leasing and
transactional markets.
How Vicinity manages the risks and opportunities
– Vicinity has clear investment criteria for evaluating assets and regularly assesses asset
quality and prospective performance using both qualitative and quantitative factors. This
information is used to inform capital allocation and investment decisions. Vicinity provides
strong governance and oversight of capital allocation decisions through its Investment and
Capital Committee and Board approval processes.
– Vicinity continues to focus on identifying and pursuing selective acquisition opportunities
and will leverage third-party capital where feasible.
– Vicinity may consider asset divestments as a source of funds for reinvestment into
developments or value accretive acquisitions, where Vicinity expects to generate a superior
return from the development or acquisition.
– Development opportunities are assessed and prioritised against set criteria which must
meet minimum risk-adjusted financial return hurdles. While Vicinity has remained prudent
with its capital, it is now transitioning from the planning to execution phase on a number of
priority retail and mixed-use development projects.
Adoption of data analytics and technological advancements
The inability to adapt and adopt technological
advancements and adequately utilise data analytics
and ’big data’ to achieve market intelligence may
significantly affect Vicinity’s ability to unlock its
strategic and operational potential or impact
Vicinity’s competitiveness. This includes the effective
management of legacy technologies as they become
unsupported, decommissioned and/or replaced.
Information/data security
The inability to adequately protect Vicinity’s systems
from cyber-attack, theft or other malicious or accidental
act (from internal or external sources) could result in a
data breach, damage its brand, impact operations and
cause a loss of customer trust.
– Vicinity leverages its data and digital assets to enable data-driven analysis and decision
making. This includes optimising leasing decisions, providing retailer insights, informing
development decisions and improving operational performance.
– Vicinity has a dedicated Information and Innovation (I&I) team that actively explores, invests
in and manages new products, services and data assets that are complementary to and
leverages its retail portfolio.
– Vicinity’s technology strategy is designed to ensure it is positioned from a technology
perspective to achieve its strategic goals. This includes a planned program for the phased
modernisation of legacy systems and progressively updating systems and technology
architecture to deliver a platform that allows Vicinity to take advantage of advancements
in technology.
– Vicinity has a robust information security and data governance strategy and framework.
This includes tools, training, systems and processes to address data collection, use and
management (Data Governance) and protection (Information Security).
– Vicinity continues to progress activities in its comprehensive Data Governance and Cyber
Security Plans, which are constantly reviewed to ensure Vicinity keeps pace with the
evolving external threat and regulatory environment.
– Vicinity has recently appointed a dedicated General Manager, Cyber and Information
Security to its Senior Leadership team to provide functional leadership of its information
security and data governance program.
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OUR MANAGEMENT OF RISK CONTINUED
Risks and opportunities and the
potential impact on value creation
Funding and investment opportunities
Access to funding or capital at the appropriate price
and in the required timeframes or deployed into
investment opportunities for an acceptable risk/return
trade-off is crucial to Vicinity’s ability to create value
over time.
How Vicinity manages the risks and opportunities
– Vicinity maintains a robust capital management structure with low gearing, significant
available liquidity, and low levels of upcoming expiring debt. In addition, Vicinity maintained
its strong investment grade ratings of A/A2 from Standard and Poor’s and Moody’s.
– Vicinity continues to closely monitor asset valuations, rent collection, drawn debt, cost of
capital and compliance with financial covenants.
– Vicinity is well positioned on its debt maturity profile with no expiries in FY23, having also
successfully issued its inaugural Green Bond ($300m) in May 2022 and extended $475m of
bank debt.
– Vicinity has established treasury risk management policies and remains well hedged
against interest rate movements and foreign exchange exposures.
– There is strong oversight on balance sheet management and investment decisions through
its Committees.
People
Vicinity’s succession challenges and ability to attract
and retain top talent may limit its ability to achieve
operational targets. Loss of and the inability to attract
talent also impacts Vicinity’s ability to execute within
target timeframes.
– Vicinity’s People Strategy focuses on driving performance through optimising the operating
model and ways of working, driving cultural change and building the future capability of our
leaders and team members to deliver increased commercial performance.
– Vicinity encourages an inclusive workplace where diversity is valued and leveraged as a
driver of a performance culture.
Conduct and culture
A failure to promote a healthy culture, including where
employees feel able to speak up, could adversely
impact business performance and reputation.
Climate change
Having a robust approach to managing physical
and transition risks related to climate change is
important for Vicinity to ensure it operates a resilient
portfolio which can withstand acute weather events
and chronic climate impacts, realise opportunities
related to transitioning to a low carbon economy, and
meet stakeholder expectations around climate risk
management and reporting.
– A range of leadership and learning and development programs are in place to build
capability, create succession and retain talent.
– Vicinity has fit for purpose remuneration, benefits, reward and recognition frameworks.
– Vicinity’s Code of Conduct sets clear behavioural standards and ethical expectations.
– Team members are assessed against the values and behavioural standards outlined in the
Code of Conduct as part of the annual performance review process.
– Vicinity has had a continued focus on culture and is actively working towards the delivery
of its desired culture state. The Vicinity Way and systemic change program are deliberate
interventions to ensure that Vicinity’s drives the right culture through its focus on Operating
Model, Leadership, Capability and Performance.
– Vicinity has moved to a hybrid working model, providing team members with the flexibility
to work in a way that suits them while continuing to connect with colleagues. This also links
to attracting and retaining talent.
– Vicinity’s sustainability strategy addresses both the physical and transition risks related
to climate change through creating low carbon, smart assets and increasing the climate
resilience of its centres. The strategy will be updated in FY23.
– At an asset level, Vicinity is refreshing its climate risk review assessments, including a
detailed centre by centre review of climate exposures, risk levels and potential mitigation
strategies, based on 2030 and 2050 climate change scenarios.
Vicinity Annual Report 2022Our Business SnapshotChairman’s LetterCEO's LetterOur PerformanceOur PeopleOur Destinations
33
Risks and opportunities and the
potential impact on value creation
Health and safety
How Vicinity manages the risks and opportunities
Vicinity’s operations expose team members,
contractors, retailers and consumers to the risk of injury
or illness.
– Vicinity has a comprehensive and mature Health and Safety Management System
(H&SMS) that is supported by high levels of awareness, competency, capability, an audit
program and a strong safety culture.
Management of COVID-19 continues to challenge our
operating environment and requires vigilance around
health and sanitation measures.
– Vicinity maintains additional measures across all of its centres to minimise the
spread of COVID-19, including COVID Safe Plans to trade safely and in line with
government directives.
Security and intelligence
An act of high impact civil disturbance, terror, active
armed offender or other hostile aggressor activity
would have significant consequences on shopping
centre safety impacting retailer, customer and team
member welfare, sales, rental and brand.
– Vicinity adheres to the recommendations from the Australian Government’s Crowded
Places Strategy across all centres. Counter Terror Plans are in place for all assets and
ongoing review of asset hardening measures are incorporated in all centres, future
developments and refurbishments.
– Vicinity maintains a Crisis and Emergency Management System which provides the
framework for Vicinity to respond to a major incident or crisis. This system is supported by
regular training and exercises to increase preparedness and to identify any opportunities for
improvement.
– Vicinity continues to build its intelligence and response capability by maintaining key
relationships with law enforcement, intelligence, other government agencies, industry
specialists and peers.
– Vicinity’s community investment program focuses on addressing youth disengagement and
unemployment in the communities in which it operates and helps to alleviate youth-related
safety and security concerns at its centres.
Regulatory changes
Changes in legislation or regulations could
impact Vicinity’s operations, introduce legal or
administrative hurdles, restrict Vicinity’s business
and impact profitability.
– Vicinity is a member of various industry bodies that actively engage with government
on policy areas and reform. Vicinity’s Corporate Affairs function acts to strategically and
proactively enhance industry and government relations and protect Vicinity’s position in the
market, including for regulatory change.
– Vicinity is implementing a consistent, centralised approach for identifying, assessing and
managing regulatory changes.
The Glen, VIC
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34
GOVERNANCE
OUR BOARD
Our Board is committed to high
standards of corporate governance.
Our corporate governance
platform is integral to supporting
our strategy, protecting the
rights of our securityholders
and creating sustainable growth.
CORPORATE GOVERNANCE
During FY22, our corporate
governance framework was
consistent with the 4th edition of
the ASX Corporate Governance
Council’s Corporate Governance
Principles and Recommendations.
Our 2022 Corporate Governance
Statement is available in the
Corporate Governance section
of our website.
FURTHER INFORMATION
You can find more disclosure on
the following topics:
Corporate Governance
vicinity.com.au/about-us/
corporate-governance
Governance and Partnerships
vicinity.com.au/sustainability/
governance-and-partnerships
Our Management of Risk
Page 30
Tax Transparency Page 40
Contact Us Page 121
COMPANY SECRETARIES
Vicinity has two company secretaries.
Carolyn Reynolds
Refer to page 37 for biographical
details.
Rohan Abeyewardene
Rohan Abeyewardene was appointed
Group Company Secretary in October
2018 following his appointment as
Company Secretary in February 2018.
Prior to this, Mr Abeyewardene held
a range of company secretarial and
governance roles. Mr Abeyewardene is
a Fellow of the Governance Institute of
Australia and a Chartered Accountant,
and holds a Bachelor of Commerce
and Bachelor of Economics from the
University of Queensland.
Trevor Gerber
BACC, CA, SA
Independent Non-executive
Chairman
Appointed June 2015
Grant Kelley
LLB, MSc Econ, MBA
CEO and Managing
Director
Appointed January 2018
Clive Appleton
BEC, MBA, AMP (Harvard),
GradDip (Mktg), FAICD
Non-executive Director
Appointed September 2018
Trevor Gerber worked for 14 years
at Westfield, initially as Group
Treasurer and subsequently as
Director of Funds Management
responsible for Westfield Trust
and Westfield America Trust. He
has been a professional director
since 2000, and has experience
in property, funds management,
hotels and tourism, infrastructure
and aquaculture.
Mr Gerber is the Chairman of the
Nominations Committee and a
member of the Audit Committee
and the Remuneration and
Human Resources Committee.
Mr Gerber was elected as
Vicinity’s Chairman effective
from the conclusion of the 2019
Annual General Meeting on 14
November 2019.
Mr Gerber is a member of
Chartered Accountants Australia
and New Zealand.
Current Listed Directorships
Nil.
Past Listed Directorships
(last three years)
CIMIC Group Limited (held from
2014 to 2019), Sydney Airport
(Chairman from 2015 to 2021 and
Director from 2002) and Tassal
Group Limited (held from 2012
to 2020).
Clive Appleton has extensive
experience in property and
funds management and property
development, having worked for
several of Australia’s leading retail
property investment, management
and development groups.
Mr Appleton’s executive
experience includes Chief
Executive Officer of Gandel Retail
Trust and various senior executive
positions with Jennings Group,
where he was responsible for
managing and developing its
retail assets before a subsidiary
was restructured to become
Centro Properties Limited, of
which he became Managing
Director. Mr Appleton also held
roles as Managing Director of
The Gandel Group Pty Limited
where he was involved in the
development of $1 billion worth of
property and Managing Director
of APN Property Group, including
being instrumental in its float
and responsible for managing its
Private Funds division.
Mr Appleton was also previously
a Non-executive Director of
Federation Centres and the RE
from December 2011 to the time of
the merger with Novion Property
Group in June 2015.
Mr Appleton is currently Chairman
of Aspen Group and Pancare
Foundation, Deputy Chairman of
The Gandel Group Pty Limited,
and a Director of Perth Airport
Pty Ltd and Perth Airport
Development Group Pty Ltd.
Current Listed Directorships
Aspen Group (Chairman)
(since 2012).
Past Listed Directorships
(last three years)
APN Property Group Limited
(held from 2004 to 2021).
Grant Kelley has over 30 years’
of global experience in real
estate investment, corporate
strategy, funds management
and private equity.
Previously, Mr Kelley was CEO
at City Developments Limited,
a Singapore-based global real
estate company with operations
in over 20 countries. Prior to this,
Mr Kelley was the Co-Head of
Asia Pacific for Apollo Global
Management, and also led their
real estate investment activities
in the region. In 2008, Mr Kelley
founded Holdfast Capital Limited,
an Asian-based real estate
investment firm, which was
acquired by Apollo in 2010.
From 2004 to 2008, Mr Kelley
was the CEO of Colony Capital
Asia where he guided acquisition
and asset management activities
in Asia. From 2002 to 2004,
he was based in New York,
where he was a Principal at
Colony with responsibility for
US and European investment
opportunities. Mr Kelley
commenced his career in 1989
at Booz Allen & Hamilton,
advising CEOs of major listed
companies in the financial
services, natural resources
and healthcare industries.
Mr Kelley is Chairman of the
Adelaide 36ers, Chairman of
Holdfast Assets, a Director of
the Shopping Centre Council of
Australia, Deputy Chair of the
Board of Governors of Pulteney
Grammar School and a Council
Member of the Asia Society
Policy Institute.
Mr Kelley holds a Bachelor of
Laws degree from the University
of Adelaide, a Masters in
Economic Sciences from the
London School of Economics,
and an MBA from the Harvard
Business School.
Current Listed Directorships
Nil.
Past Listed Directorships
(last three years)
Nil.
Vicinity Annual Report 2022Our Business SnapshotChairman’s LetterCEO's LetterOur PerformanceOur PeopleOur Destinations 35
Tim Hammon
BCOMM, LLB, MAICD
Peter Kahan
BCOMM, BACC, CA, MAICD
Janette Kendall
BBUS MARKETING, FAICD
Independent Non-executive
Director
Appointed December 2011
Independent Non-executive
Director
Appointed June 2015
Independent Non-executive
Director
Appointed December 2017
Karen Penrose
BCOMM (UNSW), CPA,
FAICD
Dr David Thurin AM
MBBS, DIP RACOG, FRACGP,
MS in Management, MAICD
Independent Non-executive
Director
Appointed June 2015
Non-executive Director
Appointed June 2015
Peter Kahan has had a long
career in property funds
management, with prior roles
including Executive Deputy
Chairman, Chief Executive
Officer and Finance Director
of The Gandel Group. Mr
Kahan was the Finance
Director of The Gandel Group
at the time of the merger
between Gandel Retail Trust
and Colonial First State Retail
Property Trust in 2002.
Prior to joining The Gandel
Group in 1994, Mr Kahan
worked as a Chartered
Accountant and held several
senior financial roles across a
variety of industry sectors.
Mr Kahan is Chairman of the
Remuneration and Human
Resources Committee
and a member of the
Audit Committee and the
Nominations Committee.
Mr Kahan was previously
a Director of Charter Hall
Group from 2009 to 2016
and a Director of Dexus
Wholesale Property Limited.
Current Listed Directorships
Nil.
Past Listed Directorships
(last three years)
Nil.
Tim Hammon has extensive
wealth management,
property services and
legal experience.
Mr Hammon was previously
Chief Executive Officer of
Mutual Trust Pty Limited
and worked for Coles
Myer Ltd reporting to the
Chief Executive Officer in
a range of senior executive
roles including Chief
Officer, Corporate and
Property Services with
responsibility for property
development, leasing and
corporate strategy. He was
also Managing Partner of
various offices of the law
firm previously known as
Mallesons Stephen Jaques.
Mr Hammon is the Chairman
of the Risk and Compliance
Committee and a member
of the Remuneration
and Human Resources
Committee and the
Nominations Committee.
Mr Hammon is also the
Chairman and a member,
respectively, of the advisory
boards of the Pacific Group
of Companies and of Liuzzi
Property Group, a Director
of EQT Holdings Limited and
an advisor to EMT Partners
Pty Ltd.
Current Listed Directorships
EQT Holdings Limited
(since 2018).
Past Listed Directorships
(last three years)
Nil.
Janette Kendall has
significant expertise in
strategic planning, digital
innovation, marketing,
operations and leadership
across a number of industry
sectors including digital and
technology, marketing and
communications, media,
retail, fast-moving consumer
goods, hospitality, gaming,
property and manufacturing.
Ms Kendall’s executive
experience, both in Australia
and China, includes Senior
Vice President of Marketing at
Galaxy Entertainment Group,
China, Executive General
Manager of Marketing at
Crown Resorts, General
Manager and Divisional
Manager roles at Pacific
Brands, Executive Director
at Singleton Ogilvy & Mather,
CEO of emitch Limited,
and Executive Director of
Clemenger BBDO.
Ms Kendall is a member
of the Remuneration
and Human Resources
Committee and the Risk and
Compliance Committee.
Ms Kendall is also a
Director of Costa Group,
Tabcorp Holdings Limited,
KM Property Funds and
Visit Victoria.
Current Listed Directorships
Costa Group (since 2016) and
Tabcorp Holdings Limited
(since 2021).
Past Listed Directorships
(last three years)
Wellcom Worldwide (held
from 2016 to 2019).
Karen Penrose’s executive
experience was in leadership
and CFO roles, mainly
in financial services. Ms
Penrose is passionate about
customer outcomes and
financial management and is
well-versed in operating in a
rapidly changing regulatory
environment, which stems
from her 20 years in banking
with Commonwealth Bank
of Australia and HSBC, and
eight years to early 2014
as a listed-company CFO
and COO.
Ms Penrose has been a
full-time Director since 2014
and is a member of Chief
Executive Women.
Ms Penrose is Chairman of
the Audit Committee and
a member of the Risk and
Compliance Committee.
Ms Penrose is a Director
of Bank of Queensland
Limited, Cochlear Limited,
Estia Health Limited,
Ramsay Health Care and
Ramsay Santé. She is also
on the board of Rugby
Australia Ltd and Marshall
Investments Pty Limited.
Current Listed Directorships
Bank of Queensland Limited
(since 2015), Cochlear
Limited (since July 2022),
Estia Health Limited (since
2018), Ramsay Health Care
(since 2020) and Ramsay
Santé (since 2021 – listed on
Eurolist by Euronext Paris and
associated with Ms Penrose’s
directorship of Ramsay
Health Care).
Past Listed Directorships
(last three years)
Spark Infrastructure Group
(held from 2014 to 2020).
David Thurin has had
extensive experience in
the property industry that
includes senior roles within
The Gandel Group and
associated companies,
including being the Joint
Managing Director. Dr Thurin
was a Director of The Gandel
Group at the time of the
merger between Gandel
Retail Trust and Colonial First
State Retail Property Trust
in 2002.
Dr Thurin is the Chairman,
Chief Executive Officer and
Founder of Tigcorp Pty Ltd,
which has property interests
in retirement villages and
land subdivision. He has a
background in medicine,
having been in private
practice for over a decade.
He was a prior President of
the International Diabetes
Institute, a prior Director
of The Baker Heart and
Diabetes Institute and a prior
Director of the Melbourne
Football Club in the
Australian Football League.
He is a member of the World
President’s Organisation and
the Australian Institute of
Company Directors.
Dr Thurin was made a
Member of the Order
of Australia (AM) for his
significant service to
sporting organisations and
to community health. He is
a Life Governor of the Baker
Heart and Diabetes Institute
and a Life Member of the
Melbourne Football Club.
Current Listed Directorships
Nil.
Past Listed Directorships
(last three years)
Nil.
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EXECUTIVE COMMITTEE
Our CEO and Managing Director
(CEO), together with the members
of our Executive Committee and
senior leaders, are responsible for
implementing Vicinity’s strategy,
achieving Vicinity’s business and
financial objectives, and carrying
out the day-to-day management
of Vicinity.
Management is also responsible for
supplying our Board with accurate,
timely and transparent information
to enable the Board to perform its
responsibilities.
MANAGEMENT COMMITTEES
Our CEO has established
management committees to
facilitate decision making by
management as outlined below:
– Executive Committee
comprised of 10 members
outlined on the current page
and overleaf
– Capital Management Committee
comprised of the CEO, Chief
Financial Officer (CFO)
(Committee Chairman), Chief
Development Officer (CDO),
Director Operational Finance
& Property Management and
General Manager Strategy &
Corporate Finance
– Investment and Capital
Committee
comprised of the CEO
(Committee Chairman), Chief
Operating Officer (COO),
CFO and Chief Legal & Risk
Officer (CLRO)
– Sustainability Committee
comprised of the CEO
(Committee Chairman), CFO,
Chief Corporate Affairs Officer,
Chief Innovation & Information
Officer, COO, CDO, Chief People
& Organisational Development
Officer, CLRO, Head of
Sustainability, Head of Investor
Relations, Director Property
Management, Group Company
Secretary, General Manager
Strategy & Corporate Finance
and Director Marketing
Grant Kelley
CEO and Managing
Director
Peter Huddle
Chief Operating
Officer
Adrian Chye
Chief Financial
Officer
Peter Huddle joined Vicinity
in March 2019 and has over
20 years’ experience in Real
Estate Development and Asset
Management. As Chief Operating
Officer, Peter is responsible
for leading the teams on all
aspects within our shopping
centres including Management,
Operations, Leasing, Development
and Marketing.
Prior to joining Vicinity, Peter
has had extensive experience in
multiple global markets through
a number of senior roles within
the Westfield Group. Peter was
most recently COO of Unibail-
Rodamco-Westfield, USA post
acquisition of Westfield. Before
the acquisition, Peter was Senior
Executive Vice President and
Co-Country Head of the USA,
where he led the US Development
teams through a prolific period of
expansion. Before the US, he was
COO of a Westfield Joint Venture
in Brazil. Previous to Brazil, Peter
had extensive Asset Management
and Development experience
within the Australian market.
Adrian Chye joined Vicinity in
June 2015 following the merger
of Federation Centres and
Novion Property Group (Novion).
Adrian is an experienced finance
executive with over 20 years’
experience in strategy, corporate
finance and accounting roles.
Prior to his current appointment,
Adrian was Director, Strategy and
Corporate Finance. Previous to
this, Adrian was Head of Strategy
at Novion (formerly CFSGAM
Property) and Head of Strategy
and Corporate Transactions at
CFSGAM Property.
Adrian is responsible for the
finance and strategy function. His
responsibilities include financial
planning and analysis, reporting,
tax, treasury, group strategy,
mergers and acquisitions and
capital transactions.
Adrian is a Member of Chartered
Accountants Australia and
New Zealand.
Grant Kelley joined Vicinity in
January 2018 and has over 30
years’ of global experience in
real estate investment, corporate
strategy, funds management and
private equity.
Grant was formerly CEO at
City Developments Limited, a
Singapore-based global real
estate company with operations
in over 20 countries. Prior to
this, Grant was the Co-Head of
Asia Pacific for Apollo Global
Management, and also led
their real estate investment
activities in the region. In 2008,
Grant founded Holdfast Capital
Limited, an Asian-based real
estate investment firm, which
was acquired by Apollo in 2010.
From 2004 to 2008, Grant was
the CEO of Colony Capital Asia
where he guided acquisition and
asset management activities
in Asia. From 2002 to 2004,
he was based in New York,
where he was a Principal at
Colony with responsibility
for US and European
investment opportunities.
Grant holds a Bachelor of Laws
degree from the University of
Adelaide, a Masters in Economic
Sciences from the London School
of Economics, and an MBA from
the Harvard Business School.
Grant is Chairman of the Adelaide
36ers, Chairman of Holdfast
Assets, a Director of the Shopping
Centre Council of Australia,
Deputy Chair of the Board of
Governors of Pulteney Grammar
School and a Council Member of
the Asia Society Policy Institute.
GOVERNANCE CONTINUEDVicinity Annual Report 2022Our Business SnapshotChairman’s LetterCEO's LetterOur PerformanceOur PeopleOur Destinations 37
Carolyn Reynolds
Chief Legal & Risk
Officer
Carolyn Viney
Chief Development
Officer
David Marcun
Director, Operational Finance
& Property Management
David McNamara
Director, Funds
Management
Carolyn Reynolds joined Vicinity
in May 2014 and has more than 25
years’ experience as a commercial
litigation and corporate lawyer.
In her current role, Carolyn has
oversight of the legal, safety,
risk, compliance and company
secretarial functions for Vicinity,
and is a Director of the Vicinity
subsidiary Boards.
Prior to her current appointment,
Carolyn was a partner at law
firm Minter Ellison from July
2003. Carolyn gained extensive
experience over this time which
featured work on Las Vegas
Sands Corp.’s bid for the rights to
develop and operate the Marina
Bay Sands Integrated Resort
in Singapore. Carolyn has also
gained diverse experience relating
to boards from her legal work and
involvement with not-for-profit
organisations such as Ovarian
Cancer Australia.
Carolyn is a member of the
Australian Institute of Company
Directors, Chief Executive Women
and ACC Australia.
Carolyn Viney joined
Vicinity in October 2016 and
has more than 20 years’
experience in construction,
property development and
real estate investment.
Prior to her current appointment,
Carolyn was with Grocon where
she held a number of senior roles
over a 13-year period, including
CEO, Deputy CEO and Head
of Development.
Carolyn is the Chair of the
Victorian Government’s Office
of Projects Victoria, an Advisory
Board Member of Women’s
Property Initiatives, a not-for-profit
housing provider to women and
children at risk of homelessness.
Carolyn is also a Non-executive
Director of The Big Issue and
Homes for Homes, both of which
are not-for-profit providers of
employment and support to
homeless, marginalised and
disadvantaged people, as well as
being a Non-executive Director
of the Walter + Eliza Hall Institute
of Medical Research. Carolyn is a
former President of the Victorian
Division of the Property Council
of Australia.
David Marcun joined Vicinity in
June 2015 as part of the merger
of Federation Centres and
Novion Property Group (Novion).
David has more than 25 years’
experience in the retail property
sector, predominantly in finance
and operations roles.
Prior to his current appointment,
David was EGM Business
Development. Previous to this,
David was Chief Operating
Officer and Head of Asset
Management at Novion (formerly
CFSGAM Property). Over this
time, David played a significant
role in the merger of Federation
Centres and Novion, as well as
the internalisation of CFSGAM
Property from Commonwealth
Bank of Australia in 2013-14.
Having joined The Gandel Group
in 1993, David was also involved
in the acquisition of Gandel
Retail Management by CFSGAM
Property in 2002.
David is a member of Chartered
Accountants Australia and
New Zealand.
David McNamara joined Vicinity
in February 2022 and has over 30
years’ experience in retail sector
Funds and Asset Management.
As Director, Funds Management,
David is responsible for Funds
Management initiatives
for Vicinity.
Prior to joining Vicinity,
David held senior roles with
Lendlease including Head of
Asset Management – Retail, as
well as Fund Manager of the
Australian Prime Property Fund
Retail (APPFR). Prior to this,
he worked for The GPT Group
including senior roles in Capital
Transactions and as Head of
Asset Management – USA, where
he was based for several years.
Before joining GPT David gained
extensive Asset Management,
Leasing and Development
experience within the Australian
retail market working on major
regional assets.
David holds a Bachelor of
Commerce (Marketing) from
University of NSW and a Master
of Applied Finance from Kaplan
Professional.
Net ZeroOur Management of RiskTax TransparencySustainability AssuranceFinancial ReportSecurityholder InformationGovernance 38
Justin Mills
Chief Innovation & Information
Officer
Marie Festa
Chief Corporate Affairs
Officer
Tanya Southey
Chief People & Organisational
Development Officer
Marie Festa joined Vicinity in
July 2021 with almost 20 years’
experience in corporate and
ASX listed companies across a
number of industries including
property, fintech, mining and
transport logistics.
Prior to joining Vicinity, Marie
held the position of Executive
Vice President, Communications
and Investor Relations at top 20
ASX fintech company, Afterpay.
Previous to this, Marie was the
Head of Culture and Reputation
at ASX listed property company
Mirvac Group, which included
responsibility for communications,
human resources, investor
relations, sustainability, safety
and innovation.
With a strong background in
communications and external
relations, Marie has managed
relationships with media, investors
and other key stakeholders
through several significant and
complex corporate transactions,
including IPOs, capital raisings
and major acquisitions. Marie
has also provided strategic
communications advice to Boards
and executive teams in areas such
as issues and crisis management,
stakeholder engagement,
sustainability, brand, industrial
relations and safety.
Tanya Southey joined Vicinity in
October 2019 and has more than
25 years’ experience in Human
Resources. Prior to joining Vicinity,
Tanya held Executive Human
Resources roles at General
Electric, Jetstar and Carlton
and United Breweries (CUB). In
addition, Tanya has consulted
within the Human Resources
strategy space.
During her career Tanya has
been involved in major cultural
transformations, including due
diligences, acquisitions, building
employee value propositions
and creating high performance
cultures. In her time at CUB,
Tanya was involved in the global
transaction to sell SABMiller
to AB Inbev, a US$106 billion
deal which was the largest in
the history of the London Stock
Exchange. Tanya has worked in
the United States of America,
South Africa and Australia and
has been accountable for Human
Resources teams across the
Asia Pacific in multiple roles.
Tanya has been on the Victorian
Board for The Hunger Project, a
global organisation which aims
to end world hunger through
the empowerment of people in
developing countries.
Justin Mills joined Vicinity in June
2015 following the merger of
Federation Centres and Novion
Property Group (Novion) and has
more than 20 years’ experience
in the retail property sector. In
this newly created role, Justin is
responsible for developing and
testing new concepts and ideas
that are aligned to the corporate
and departmental strategies,
specifically where these can
be accelerated and enabled by
technology, digital and data. Justin
oversees Enterprise Technology
including Cyber Security,
Business Development, Energy,
Media, Research & Insights,
Data Science, Digital Product
Management and Delivery.
Prior to his current appointment,
Justin oversaw the strategy
function of Vicinity including
Alternative Income, Data
Science & Insights, Security
and Intelligence, Sustainability,
Strategy and strategic delivery,
Corporate Communications and
Investor Relations. Justin has also
held the positions of Executive
General Manager Shopping
Centre Management and General
Manager, Retail Management
and Strategy at Novion (formerly
CFSGAM Property) from 2009.
In 2002, Justin joined CFSGAM
Property where his roles included
Assistant Fund Manager of
CFS Retail Property Trust,
Centre Manager of Chadstone
shopping centre and regional
responsibilities across several
Victorian assets.
Justin holds a Bachelor of
Business degree, Master of
Business Administration and is a
member of the Australian Institute
of Company Directors.
GOVERNANCE CONTINUEDThe Glen, VICVicinity Annual Report 2022Our Business SnapshotChairman’s LetterCEO's LetterOur PerformanceOur PeopleOur Destinations 39
The Glen, VIC
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TAX TRANSPARENCY
Vicinity exists to enrich community experiences and reimagine destinations
of the future. We create places where people love to connect for leisure, living,
and work, generating long-term value for all stakeholders.
Vicinity drives sustainable growth from our
portfolio of retail assets with a focus on
enhancing the communities in which we
operate. Aligning with this approach, Vicinity
is committed to strong corporate governance
policies and business practices, across
all of its functions, including meeting its
tax responsibilities.
Vicinity voluntarily publishes this statement
as part of its commitment to provide
transparent and useful information on its
tax affairs.
AUSTRALIAN TAX TRANSPARENCY
To improve the transparency of business
tax affairs in Australia, the Board of Taxation
designed the Tax Transparency Code
(TTC) to outline a set of principles and
minimum standards to guide the disclosure
of tax information. Vicinity adopts the TTC
recommendations in this statement.
Vicinity applies the Framework across its
business to integrate the assessment of the
tax implications of transactions, projects
and business initiatives, into day-to-day
business. This enables Vicinity to assess the
tax implications of all transactions before
committing to them and mitigate any tax risks
that might arise.
Vicinity values having good relationships
with all external regulatory bodies. Vicinity
engages and consults with regulatory bodies
regarding tax policy, tax reform and tax
law design on matters that affect Vicinity’s
business and its securityholders.
Further information on Vicinity’s corporate
governance is available in its 2022 Corporate
Governance Statement.
2022 Corporate Governance Statement
Vicinity.com.au
OUR APPROACH TO TAX
Vicinity’s Audit Committee oversees tax
matters and has endorsed the Tax Risk
Management Framework (the Framework),
which reflects Vicinity’s low risk approach
to taxation. When carrying out its
activities, Vicinity:
– has a low risk appetite and does not
engage in aggressive tax planning
and strategies;
– complies with all of its statutory obligations
in a timely and transparent manner and
protects its reputation;
– has robust tax governance, with ongoing
oversight and escalation points for
managing tax risk from Vicinity’s key
executives to the Audit Committee and
Board of Directors; and
– has a commitment to engage and maintain
transparent and professional relationships
with tax authorities including the Australian
Taxation Office (ATO).
A robust set of internal controls and policies
exists to support the operational effectiveness
of the Framework within Vicinity.
Furthermore, the Audit Committee and
independent assurance functions such as
internal and external audits provide periodic
independent and objective assurance on the
effectiveness of risk management, control
and governance processes.
Vicinity Annual Report 2022Our Business SnapshotChairman’s LetterCEO's LetterOur PerformanceOur PeopleOur Destinations 41
CONTRIBUTIONS TO THE
AUSTRALIAN TAX SYSTEM
As a business that operates in the Australian
property industry, Vicinity is subject to
various other taxes at federal, state and local
government levels. In FY22, these taxes
amounted to approximately $217.4 million and
are either borne by Vicinity as a cost of our
business, or are remitted by Vicinity as part of
our contribution to the administration of the
tax system1.
The taxes remitted by Vicinity include pay as
you go (PAYG) withholding taxes paid by our
employees and goods and services tax (GST)
collected from our retailers who rent space in
our centres, net of GST claimed by Vicinity on
its own purchases.
The following information summarises
Vicinity's Australian tax contribution for FY22.
VICINITY’S GROUP STRUCTURE
TAXATION OF VICINITY
Vicinity securities consist of one share in
the company (Vicinity Limited) and one
unit in the trust (Vicinity Centres Trust).
The shares and units are stapled together
as Vicinity Centres securities listed on the
ASX. However, Vicinity Limited and Vicinity
Centres Trust remain separate legal entities
in accordance with the Corporations Act 2001
and under the tax law.
Vicinity Limited, and its wholly-owned
group of entities, undertakes the business
of managing Vicinity’s shopping centre
portfolio including property management,
development management and responsible
entity and trustee services for Vicinity
Centres Trust, its sub-trusts and external
wholesale funds. Vicinity Limited also
provides property and development
management services for joint owners of
Vicinity's assets and other third parties.
Vicinity Centres Trust is a managed
investment scheme operating in accordance
with the Corporations Act 2001, and is
regulated by the Australian Securities
and Investments Commission (ASIC).
Vicinity Centres Trust and its controlled trusts
(Vicinity Centres Trust Group) hold
the majority of the real estate investments
for Vicinity.
For the purposes of financial reporting,
Vicinity Limited and Vicinity Centres Trust
prepare a single consolidated set of financial
reports. However, under tax law, Vicinity
Limited and Vicinity Centres Trust are treated
differently and require separate consideration.
Vicinity Limited
Vicinity Limited and its wholly-owned entities
are consolidated for income tax purposes,
resulting in all members of the consolidated
group being treated as a single corporate
taxpayer under Vicinity Limited. Under
Australian tax law, companies are subject to
income tax at the applicable corporate tax
rate (30% for FY22) on their taxable income.
Vicinity Centres Trust Group
The Vicinity Centres Trust has elected into
the Attribution Managed Investment Trust
(AMIT) regime and where it attributes its
taxable income to securityholders, is not
liable to pay income tax.
The taxable income from the real estate
investments held by the Vicinity Centres
Trust Group is attributed as income to
its securityholders. Australian resident
securityholders pay tax on this income at
their marginal tax rates and non-resident
securityholders are taxed under the AMIT
withholding tax rules.
1. In this regard, Vicinity includes entities which have been equity accounted in this financial report.
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42
TAX TRANSPARENCY CONTINUED
TOTAL TAXES BORNE BY VICINITY ($M)
$94.3 million (FY21: $78.8 million)
Stamp duty 1
0.1
Local rates and levies 1
Land tax 1,2
Payroll tax 3
Fringe benefits tax (FBT) 3
0.2
0.3
7.3
9.3
22.6
27.9
20.1
43.3
42.0
0.0
10.0
20.0
30.0
40.0
50.0
FY21
FY22
TOTAL TAXES REMITTED BY VICINITY ($M)
$123.1 million (FY21: $119.6 million)
Net GST remitted 3, 4
PAYG withholding 3
Taxes withheld
from investors 5
0.5
1.1
78.5
72.1
40.6
49.9
0
20
40
60
80
100
FY21
FY22
The basis of preparation for Vicinity’s Australian tax contribution information is outlined below. Vicinity undertakes an internal review process
through its Finance and Internal Audit functions to verify the Australian tax contribution disclosures made.
1. Stamp duty, land tax, local rates and levies data have been reported on an accrual basis and therefore may vary from the actual taxes paid in FY21 and FY22.
The increase in stamp duty in FY22 is primarily due to the acquisition of a 50% interest in Harbour Town Premium Outlet Centre.
2. As part of State Governments’ response to COVID-19, land tax relief and deferrals have been obtained across all states which has resulted in lower net land
taxes in FY22 relative to FY21.
3. Payroll tax, FBT, GST and PAYG withholding data has been reported based on the amounts paid in respect of tax returns or notices of assessment issued to
Vicinity for FY22 from the respective revenue authorities.
4. Net GST remitted for FY22 is comprised of $150.6 million of GST collected (FY21: $144.1 million) and $78.5 million of GST claimed (FY21: $65.6million).
5. This represents taxes withheld from Vicinity’s securityholders, which has been prepared based on information maintained by Vicinity’s external security
registry provider. As the majority of our securityholders either supply their tax file number or in the case of non-residents, hold their interests indirectly, this
figure is not representative of the taxes actually paid by our securityholders.
Vicinity Annual Report 2022Our Business SnapshotChairman’s LetterCEO's LetterOur PerformanceOur PeopleOur Destinations 43
Northland, VIC
Net ZeroOur Management of RiskGovernanceSustainability AssuranceFinancial ReportSecurityholder InformationTax Transparency 44
RECONCILIATION OF ACCOUNTING PROFIT TO INCOME TAX PAID AND PAYABLE
A full reconciliation of Vicinity’s accounting net profit to income tax benefit is included in the Tax note in Note 3 to the Financial Report.
Accounting net profit is determined in accordance with the Australian Accounting Standards. Taxable income, in contrast, is an income tax
concept, which is calculated by subtracting allowable deductions from assessable income. A taxpayer’s income tax liability is calculated by
multiplying its taxable income by its applicable tax rate.
Vicinity Limited
The FY22 reconciliation from income tax benefit to income tax paid or payable is outlined below.
Income tax benefit (refer to Note 3 to the Financial Report)
Adjust for:
Movement in deferred tax assets including the utilisation of Australian Group tax losses
Income tax benefit relating to the recognition of deferred tax assets
Adjustment of current tax for prior periods and other
Income tax payable
$m
7.6
4.6
(12.7)
0.5
0.0
In FY22, the Vicinity Limited consolidated group generated taxable income of approximately $16.4 million prior to the utilisation of carry-forward
losses ($16.4 million) and no income tax payable.
The effective tax rate1 (ETR) based on current year income tax benefit for Vicinity Limited is (58.0%).
The negative ETR in FY22 arises predominately due to the recognition of deferred tax assets. For further explanation, Note 3(b) to the Financial
Report provides a reconciliation of prima facie income tax expense at 30% to the income tax benefit recognised.
Vicinity Centres Trust Group
The accounting net profit attributable to the securityholders of Vicinity Centres Trust Group was $1,194.5 million for FY22. Vicinity Centres Trust
has derived taxable income of $313.8 million which will be attributed to the securityholders under the AMIT rules and taxed in the hands of
securityholders, as described above.
The Vicinity Centres Trust Group does not pay income tax (rather, tax is paid by Vicinity’s securityholders), it has no income tax expense and
therefore a zero ETR.
1. The negative ETR has been calculated as income tax benefit ($7.6m) divided by net profit before tax attributable to Vicinity Limited ($13.1m) (in accordance with
Australian Accounting Standard AASB 112 Income Taxes). The ETR should not be compared to the corporate tax rate without appreciating the differences between
accounting profit and taxable income (as explained above). Further information is available on the ATO’s tax transparency webpage.
TAX TRANSPARENCY CONTINUEDVicinity Annual Report 2022Our Business SnapshotChairman’s LetterCEO's LetterOur PerformanceOur PeopleOur Destinations 45
RECONCILIATION TO ATO TAX TRANSPARENCY DISCLOSURE
The Vicinity Limited income tax consolidated group has a total income in excess of $100 million and is subject to public disclosure in the ATO’s
Report of Entity Tax Information that is released annually.
For the FY21 income year, this report will be published on the ATO’s website 1 and it is anticipated to disclose the following information:
$m
202.5
0.5
0.0
$m
202.5
(197.4)
5.1
3.7
21.9
(30.2)
0.5
0.2
(0.2)
0.0
Total income
Taxable income
Tax payable
The summary below provides a reconciliation of these disclosures:
Total income
Total expenses
Profit before income tax
Net adjustments for:
Permanent differences
Timing differences2
Tax losses utilised
Total taxable income
Prima facie income tax payable
Less tax offsets
Tax payable
FURTHER INFORMATION
– Vicinity Limited taxes paid information as published by the ATO in the Report of Entity Tax Information:
data.gov.au/dataset/corporate-transparency
– ATO’s webpage on tax transparency for corporate tax entities, including background information and explanations:
ato.gov.au/Business/Large-business/Corporate-Tax-Transparency/Report-of-entity-tax-information/
– A breakdown of the taxable components that securityholders receive via their annual taxation statements will be available
in September 2022 on Vicinity’s website: vicinity.com.au/investors/tax-information
1. Expected to be available in December 2022.
2. Adjustments that arise due to differences between when income or expenses are recognised for accounting and tax purpose.
Net ZeroOur Management of RiskGovernanceSustainability AssuranceFinancial ReportSecurityholder InformationTax Transparency 46
SUSTAINABILITY ASSURANCE STATEMENT
Independent Limited Assurance Report to the Directors of Vicinity Centres PM Pty Ltd
Conclusion
Based on the evidence we obtained from the procedures performed, we are not aware of any material
misstatements in the Selected Sustainability Performance Data included in Vicinity Centres PM Pty
Ltd’s (Vicinity Centres) 2022 Annual Report, which has been prepared by Vicinity Centres in accordance
with the Criteria for the year ended 30 June 2022.
Information Subject to Assurance
Vicinity Centres engaged KPMG to perform a limited assurance engagement in relation to Vicinity
Centre’s 2022 Annual Report. The 2022 Annual Report covers Vicinity Centre’s operations for the year
ended 30 June 2022 unless otherwise indicated. KPMG’s scope of work included limited assurance over
the following Selected Sustainability Performance Data within the Annual Report:
Selected Sustainability Performance Data
Scope 1 and 2 greenhouse gas (GHG) emissions intensity (kg tCO2-e)
Energy intensity (MJ/sqm)
Materials diverted from landfill (%)
Community investment ($m)
Women in leadership (%)
NABERS Energy rating (portfolio average)
NABERS Water rating (portfolio average)
Total social and indigenous enterprise spend ($m)
Total indigenous procurement spend ($,000)
Progress against net zero targets (Scope 1 and 2 emissions intensity since
2016 baseline)(%) (wholly owned portfolio)
Progress against net zero target (energy intensity since 2016 baseline)
(%) (wholly owned portfolio)
Renewable energy consumption (MWh)
Renewable energy generation (MWh)
Performance Result
55
264
53
2.9
49
4.6
4.0
1.27
580
38
27
41,665
46,215
Criteria Used
The Selected Sustainability Performance Data have been prepared in accordance with Vicinity’s “FY22
Sustainability Reporting Criteria”, available on Vicinity Centres’ website (“the Criteria”).
Basis for Conclusion
We conducted our work in accordance with Australian Standard on Assurance Engagements ASAE 3000
(Standard). In accordance with the Standard we have:
• used our professional judgement to plan and perform the engagement to obtain limited assurance that
we are not aware of any material misstatements in the Selected Sustainability Performance Data,
whether due to fraud or error;
• considered relevant internal controls when designing our assurance procedures, however we do not
express a conclusion on their effectiveness; and
• ensured that the engagement team possess the appropriate knowledge, skills and professional
competencies.
Summary of Procedures Performed
Our limited assurance conclusion is based on the evidence obtained from performing the following
procedures:
• gaining an understanding of the reporting processes supporting the business activities related to the
Selected Sustainability Performance Data;
1
©2022 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated
with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are
trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme
approved under Professional Standards Legislation.
Vicinity Annual Report 2022Our Business SnapshotChairman’s LetterCEO's LetterOur PerformanceOur PeopleOur Destinations
47
• conducting interviews with relevant Vicinity personnel to understand the internal controls, governance
structure and reporting process over the Selected Sustainability Performance Data;
• evaluating the appropriateness of the Criteria with respect to the Selected Sustainability Performance
Data;
• undertaking analytical review procedures to support the reasonableness of the data;
• walkthroughs and testing of the Selected Sustainability Performance Data to source documentation on
•
•
a sample basis;
identifying and testing assumptions supporting the calculations; and
reviewing the Vicinity Centres Annual Report 2022 for consistency with the Selected Sustainability
Performance Data.
How the Standard Defines Limited Assurance and Material Misstatement
The procedures performed in a limited assurance engagement vary in nature and timing from, and are less
in extent than for a reasonable assurance engagement. Consequently the level of assurance obtained in a
limited assurance engagement is substantially lower than the assurance that would have been obtained had
a reasonable assurance engagement been performed.
Misstatements, including omissions, are considered material if, individually or in the aggregate, they could
reasonably be expected to influence relevant decisions of the Directors of Vicinity Centres.
Use of this Assurance Report
This report has been prepared for the Directors of Vicinity Centres for the purpose of providing an assurance
conclusion on the Selected Sustainability Performance Data within the Vicinity 2022 Annual Report and may
not be suitable for another purpose. We disclaim any assumption of responsibility for any reliance on this
report, to any person other than the Directors of Vicinity Centres, or for any other purpose than that for
which it was prepared.
Management’s responsibility
Management are responsible for:
• determining that the Criteria is appropriate to
meet their needs;
• preparing
and presenting
the Selected
Sustainability Performance Data in accordance
with the Criteria; and
• establishing internal controls that enable the
preparation and presentation of the Selected
Sustainability Performance Data that is free from
material misstatement, whether due to fraud or
error.
in
to
relation
Our Responsibility
Our responsibility is to perform a limited assurance
engagement
the Selected
Sustainability Performance Data for the year ended
30 June 2022, and to issue an assurance report
that includes our conclusion.
Our Independence and Quality Control
We have complied with our independence and
other relevant ethical requirements of the Code of
Ethics for Professional Accountants (including
Independence Standards) issued by the Australian
Professional and Ethical Standards Board, and
complied with the applicable requirements of
Australian Standard on Quality Control 1 to
maintain a comprehensive system of quality
control.
KPMG
Adrian King
Partner
Melbourne
12 August 2022
Sarah Newman
Director
Melbourne
12 August 2022
2
©2022 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated
with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are
trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme
approved under Professional Standards Legislation.
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48
FINANCIAL REPORT
FOR THE YEAR ENDED 30 JUNE 2022
Directors’ Report
Auditor’s Independence Declaration
Statement of Comprehensive Income
Balance Sheet
Statement of Changes in Equity
Cash Flow Statement
NOTES TO THE FINANCIAL STATEMENTS
About this Report
Operations
1. Segment information
2. Revenue and income
3. Taxes
4.
5. Equity accounted investments
6. Earnings per security
Investment properties
Capital structure and financial risk management
7.
Interest bearing liabilities and derivatives
8. Capital and financial risk management
9. Contributed equity
10. Distributions
Working capital
11. Trade receivables and other assets
12. Payables and other financial liabilities
13. Provisions
Remuneration
14. Key Management Personnel
15. Employee benefits expense
16. Share based payments
Intangible assets
Other disclosures
17.
18. Leases
19. Operating cash flow reconciliation
20. Auditor’s remuneration
21. Parent entity financial information
22. Related parties
23. Commitments and contingencies
24. Other Group accounting matters
25. Events occurring after the end of the reporting period
Directors’ Declaration
Independent Auditor’s Report
49
72
73
74
75
76
77
79
81
83
85
91
92
93
96
100
100
101
103
104
105
105
105
108
109
110
111
111
112
112
113
113
114
115
Vicinity Annual Report 2022Chairman’s LetterCEO's LetterOur PerformanceOur PeopleOur DestinationsOur Business Snapshot DIRECTORS’ REPORT
49
The Directors of Vicinity Limited present the Financial Report of
Vicinity Centres (Vicinity or the Group) for the year ended 30 June
2022. Vicinity Centres is a stapled group comprising Vicinity Limited
(the Company) and Vicinity Centres Trust (the Trust). Although
separate entities, the Stapling Deed entered into by the Company and
the Trust ensures that shares in the Company and units in the Trust
are ‘stapled’ together and are traded collectively on the Australian
Securities Exchange (ASX), under the code ‘VCX’.
PRINCIPAL ACTIVITIES
The principal activities of the Group during the year continued to be
property investment, property management, property development,
leasing and funds management. The Group has its principal place of
business at Level 4, Chadstone Tower One, 1341 Dandenong Road,
Chadstone, Victoria 3148.
DIRECTORS
The Boards of Directors of the Company and Vicinity Centres RE Ltd,
as Responsible Entity (RE) of the Trust (together, the Vicinity Board)
consist of the same Directors. The following persons were members
of the Vicinity Board from 1 July 2021 and up to the date of this report
unless otherwise stated:
1. Chairman
Trevor Gerber (Independent)
2. Non-executive Directors
Clive Appleton
David Thurin AM
Janette Kendall (Independent)
Karen Penrose 1 (Independent)
Peter Kahan (Independent)
Tim Hammon (Independent)
3. Executive Director
Grant Kelley (CEO and Managing Director)
Further information on the background and experience of the
Directors is contained on pages 34 to 35 of this report.
COMPANY SECRETARIES
Carolyn Reynolds
Rohan Abeyewardene
Further information on the background and experience of the
Company Secretaries is contained on page 34 of this report.
REVIEW OF RESULTS AND OPERATIONS
The Operating and Financial Review is contained on pages 79 to 104
of this report.
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
The Group’s performance continued to be adversely impacted by
COVID-19 pandemic (‘COVID-19’ or ‘the pandemic’) related disruptions
during the year. Key factors impacting Vicinity’s financial and
operational performance included:
– The extended lockdowns with mandated closure of non-essential
retail in New South Wales (NSW) and Victoria (VIC) from July
2021 until late October 2021. Together, these states account for
approximately two thirds of the Group’s portfolio by value. Foot
traffic was once again affected in certain assets following the
outbreak of Omicron in late December 2021, however retail sales
remained strong as shoppers visited centres less frequently but
purchased more.
– Assets located in central business districts (‘CBD’) continue
to experience headwinds as foot traffic has yet to return to
pre-pandemic levels, impacted by the protracted return of office
workers, and domestic and international travellers. The second
half of the financial year saw an improvement in foot traffic to
CBD centres on weekends.
– The Group continued to provide rental assistance in the form
of rental waivers, payment deferrals and other temporary
modifications to leases to eligible SME tenants and other tenants
in categories and locations that continue to experience financial
hardship and distress. These negotiations were undertaken
in accordance with the general principles of the Australian
Government’s SME Commercial Code of Conduct and Leasing
Principles During COVID-19 or with the applicable regulations in
Victoria and NSW (collectively referred to as the ‘SME Codes’).
Following the expiry of the SME Codes in March 2022, the Group
continued to provide rental support to tenants in locations and
categories most impacted by the pandemic, notably SME and
CBD retailers.
The full extent of the pandemic and its impact on the economy
and consumers remains uncertain. As a result, certain significant
judgements, estimates and assumptions have been made in
determining the carrying value of certain assets and liabilities at
30 June 2022. These are further discussed in the ‘About this Report’
section of the financial report.
1. As announced to the ASX on 26 May 2022, Ms Karen Penrose intends to resign from Vicinity’s Board with her resignation to take effect on 15 September 2022.
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DIRECTORS’ REPORT
DISTRIBUTIONS
Total distributions declared by the Group during the year and up to the date of this report were as follows:
Interim, for the six-month period ended 31 December 2021
Final, for the six-month period ended 30 June 2022
Total Distributions, for the year ended 30 June 2022
Total
$m
213.9
259.5
473.4
Cents per
VCX stapled
security
4.7
5.7
10.4
An interim distribution of 4.7 cents per VCX stapled security, which equates to $213.9 million, was paid on 8 March 2022.
On 17 August 2022, the Directors declared a distribution in respect of the Group’s earnings for the six-month ended 30 June 2022 of 5.7 cents per
VCX stapled security, which equates to total final distribution of $259.5 million. The final distribution will be paid on 12 September 2022.
DIRECTOR-RELATED INFORMATION
Meetings of Directors held during the year 1
Board
Special Purpose
Board 2
Audit Committee
Remuneration and
Human Resources
Committee
Risk and
Compliance
Committee
Nominations
Committee
Eligible Attended Eligible Attended Eligible Attended Eligible Attended Eligible Attended Eligible Attended
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
19
19
19
19
19
19
19
19
19
18
19
19
19
19
17
19
4
–
–
–
–
4
4
–
4
–
–
–
–
4
4
–
5
–
–
–
5
–
5
5
4
–
–
–
5
–
4
5
–
–
–
–
5
5
–
5
–
–
–
–
5
5
–
5
2
–
–
–
–
–
2
2
2
–
–
–
–
–
2
2
Trevor Gerber
Clive Appleton
David Thurin AM
Grant Kelley
Janette Kendall
Karen Penrose
Peter Kahan
Tim Hammon
1. All Directors have a standing invitation to attend Committee meetings and regularly attend meetings of Committees of which they are not members. Such attendance
is not reflected in the above table.
2. Special purpose Board meetings were convened to consider a range of special purpose matters, including Vicinity’s response to COVID-19, corporate transactions
(including but not limited to Vicinity’s acquisition of a 50% interest in Harbour Town Premium Outlets Centre and sale of its 50% interest in Runaway Bay Centre) and
property development.
Director security holdings
Director security holdings are detailed within the Remuneration Report.
Indemnification and insurance of Directors and Officers
The Company must indemnify the Directors, on a full indemnity basis and to the full extent permitted by law, against all losses or liabilities
incurred by the Directors as officers of the Company or of a related body corporate provided that the loss or liability does not arise out of
misconduct, including lack of good faith.
During the financial year, the Company insured its Directors, Secretaries and Officers against liability to third parties and for costs incurred in
defending any civil or criminal proceedings that may be brought against them in their capacity as Directors, Secretaries or Officers of Vicinity.
This excludes a liability that arises out of wilful breach of duty or improper use of inside information. The policy also insures the Company for any
indemnity payments it may make to its Officers in respect of costs and liabilities incurred. Disclosure of the premium payable is prohibited under
the conditions of the policy.
Vicinity Annual Report 2022Chairman’s LetterCEO's LetterOur PerformanceOur PeopleOur DestinationsOur Business Snapshot DIRECTORS’ REPORT
AUDITOR-RELATED INFORMATION
OPTIONS OVER UNISSUED SECURITIES
51
There were 11,220,194 unissued ordinary securities under option in
the form of performance and restricted rights as at 30 June 2022 and
at the date of this report. Refer to the Remuneration Report for further
details of the options outstanding for Key Management Personnel.
Option holders do not have any rights, by virtue of the option, to
participate in any security issue of the Group.
EVENTS OCCURRING AFTER THE END OF THE
REPORTING PERIOD
Capital management activities
Subsequent to 30 June 2022, the following transactions were completed:
– Extended the maturity of $475.0 million bank debt facilities by
at least four years to July 2027;
– Repaid $40.0 million of US Private Placement Notes;
– Cancelled $400.0 million of bank debt limit with FY24 maturities; and
– Entered into $500.0 million of new interest rate swaps.
Other than the matters described above, no other matters have
arisen since the end of the reporting period which have significantly
affected, or may significantly affect, the operations of the Group, the
results of those operations, or the state of affairs of the Group in future
financial periods.
ROUNDING OF AMOUNTS
The Company is an entity of a kind referred to in Legislative Instrument
2016/191, issued by the Australian Securities and Investments
Commission (ASIC), relating to the “rounding off” of amounts in the
Directors’ Report. Accordingly, amounts in the Directors’ Report have
been rounded off to the nearest tenth of a million dollars ($m) in
accordance with that Legislative Instrument, unless stated otherwise.
Signed in accordance with a resolution of Directors.
Trevor Gerber
Chairman
17 August 2022
Ernst & Young (EY) is the auditor of the Group and is located at 8
Exhibition Street, Melbourne, Victoria 3000.
Indemnification of the auditor
To the extent permitted by law, the Company has agreed to indemnify
EY, as part of the terms of its audit engagement agreement, against
claims by third parties arising from the audit (for an unspecified
amount). The indemnity does not apply to any loss arising out of any
breach of the audit engagement agreement or from EY’s negligent,
wrongful or wilful acts or omissions. No payment has been made under
this indemnity to EY during or since the end of the financial year.
Non-audit services
The Group may decide to employ the auditor on assignments
additional to statutory audit duties where the auditor’s expertise
and experience with the Group is essential and will not compromise
auditor independence.
Details of the amounts paid or payable to EY for audit and assurance
and non-audit services provided during the year are set out in Note 20
to the financial statements.
The Board has considered the non-audit services provided during
the year and is satisfied these services are compatible with the
general standard of independence for auditors imposed by the
Corporations Act 2001 (Cth) for the following reasons:
– The non-audit services and the ratio of non-audit to audit
services provided by EY are reviewed by the Audit Committee in
accordance with the External Audit Policy to ensure that, in the
Audit Committee’s opinion, they do not impact the impartiality
and objectivity of the auditor; and
– None of the services undermine the general principles relating
to auditor independence as set out in APES 110 Code of Ethics
for Professional Accountants (including Independence Standards)
as they did not involve reviewing or auditing the auditor’s own
work, acting in a management or decision-making capacity for
the Group, acting as an advocate for the Group or jointly sharing
economic risks and rewards.
Auditor’s independence declaration
A copy of the Auditor’s Independence Declaration as required
under section 307C of the Corporations Act 2001 (Cth) is included
immediately following the Directors’ Report.
ENVIRONMENTAL REGULATION
The Group is subject to the reporting obligations under the National
Greenhouse and Energy Reporting (NGER) Act 2007 (Cth). This requires
the Group to report annual greenhouse gas emissions, energy use
and production for all assets under management for years ending
30 June. The Group met this obligation by submitting its NGER report
to the Department of the Environment and Energy for the year ended
30 June 2021 by 31 October 2021. The 2022 NGER report will be
submitted by the 31 October 2022 submission date.
CORPORATE GOVERNANCE
In recognition of the need for high standards of corporate behaviour
and accountability, the Directors of the Company have adopted and
report against the fourth edition of the ASX Corporate Governance
Council’s Corporate Governance Principles and Recommendations.
The full Corporate Governance Statement is available on the Corporate
Governance section of Vicinity’s website at vicinity.com.au.
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LETTER FROM THE CHAIRMAN OF THE REMUNERATION
AND HUMAN RESOURCES COMMITTEE
Dear Securityholders,
On behalf of the Remuneration and Human Resources Committee of the Board (the Committee), I am
pleased to present Vicinity’s Remuneration Report for the financial year ended 30 June 2022 (FY22).
Our people
Good progress was made against key people initiatives. The Diversity,
Inclusion and Belonging strategy was refreshed and a very positive
result was achieved in the Employee Experience survey, with strong
participation, a favourable engagement uplift and improved results
across all factors. The easing of workplace restrictions has seen team
members spending more face-to-face time with their colleagues, while
continuing to utilise our ‘hybrid working’ arrangements.
In November 2021, 923 team members were gifted $1,000 worth of
securities under the Tax Exempt Restricted Securities Plan.
FY22 Remuneration framework
Following a detailed review of the measures and hurdles for the LTI,
the Total Return (TR) hurdles and the Total Securityholder Return
(TSR) comparator group were revised.
The FY22 LTI grant of performance rights for the CEO was supported
by securityholders at the 2021 Annual General Meeting.
Conclusion
Our financial performance for FY22 improved significantly and solid
progress was made against our strategic objectives. We significantly
outperformed key peers and the broader A-REIT index over FY22.
The executive remuneration outcomes for FY22 are aligned with our
business performance and with securityholder experience.
We will continue to monitor the LTI TSR and TR components and
update these as appropriate.
We look forward to ongoing dialogue with, and the support of, our
securityholders, and welcome your feedback and comments on any
aspect of this Report.
Peter Kahan
Chairman – Remuneration and
Human Resources Committee
The Remuneration Report describes Vicinity’s remuneration
framework and the link between Company and individual
performance, Vicinity’s long-term strategy and values, and
remuneration outcomes for FY22.
Executive changes during FY22
During FY22, we made several changes to the Executive Committee
(EC). Adrian Chye was appointed as Acting Chief Financial Officer
(CFO) on 1 July 2021 and was appointed as CFO on 13 September
2021. Marie Festa joined the EC on 5 July 2021 in the newly created
role of Chief Corporate Affairs Officer and David McNamara joined
the EC on 1 February 2022 in the newly created role of Director,
Funds Management.
Year in review
In FY22, we saw a strong recovery in our financial results
with our performance significantly exceeding forecasts at
the start of FY22. This included better than expected cash
collections due to sustained retail sector recovery and improved
operating performance. Additionally, our capital management
initiatives over the past few years position us well in the current
macroeconomic environment.
The investment portfolio was enhanced through strategic
acquisitions and disposals, and we are transitioning from planning
to execution on our retail and mixed-use development pipeline to
drive long term growth.
FY22 remuneration outcomes
Other than for the appointment of the CFO, no changes were made
to any elements of Executive Key Management Personnel (KMP)
remuneration or Non-Executive Director fees in FY22.
Total statutory remuneration for each Executive KMP was
higher than in FY21, primarily due to higher outcomes under
the Short Term Incentive (STI). The FY22 STI outcomes for the
Executive KMP are summarised in the table below.
Executive KMP
Chief Executive Officer and Managing Director,
Grant Kelley
Chief Operating Officer, Peter Huddle
Chief Financial Officer, Adrian Chye
FY22 STI
% of maximum
75.6
72.9
79.7
From FY20, the performance period for the performance rights
granted under the Long Term Incentive (LTI) Plan was increased
from three to four years. Accordingly, the performance period for
the FY20 LTI ends on 30 June 2023 and there was no testing of
performance rights granted under the LTI Plan for FY22.
The Board determined that the first tranche of the FY21 discounted
restricted rights vested. This represents 25% of the total one-off
restricted rights granted for FY21, and these rights will be released
to participants in September 2022.
Vicinity Annual Report 2022Chairman’s LetterCEO's LetterOur PerformanceOur PeopleOur DestinationsOur Business Snapshot REMUNERATION REPORT
Contents
1. Remuneration Report overview
2. Remuneration framework
3. Company performance and executive remuneration outcomes
4. Executive remuneration – further information
5. Non-executive Director remuneration
6. Other remuneration information
1. REMUNERATION REPORT OVERVIEW
This Remuneration Report outlines:
– Vicinity’s reward principles and framework
53
53
53
56
64
68
70
– Vicinity’s performance for FY22 and the link between Vicinity’s performance, strategy execution and the remuneration outcomes for our
Executive Key Management Personnel (KMP)
– remuneration received by Directors and Executive KMP
The contents of the Remuneration Report (as set out below) are governed by s300A of the Corporations Act 2001 (Cth) and the Corporations
Legislation. Unless otherwise noted, figures contained within this report are prepared on a basis consistent with the requirements of
Australian Accounting Standards and have been audited.
1.1 Key Management Personnel
Vicinity’s KMP include all Non-executive Directors and those executives who are deemed to have authority and responsibility for planning,
directing and controlling the activities of Vicinity (Executive KMP). A KMP assessment is completed annually to determine which members of the
EC should be disclosed as Executive KMP for the financial year. A summary of Executive KMP during the current and prior financial year is shown
in Table 1.1 below.
Table 1.1: Executive KMP
Name
Position
Grant Kelley
Chief Executive Officer and Managing Director (CEO)
Peter Huddle
Chief Operating Officer (COO)
FY22
FY21
Adrian Chye1
Chief Financial Officer (CFO) (appointed 13 September 2021)
Part-year
Nick Schiffer2
CFO
KMP for full year
not a KMP during the year
1. As announced on 13 September 2021, Adrian Chye was appointed to the role of CFO. The quantitative disclosures in this report are pro-rated for the period from 13
September 2021 to 30 June 2022.
2. As announced on 30 June 2021, Nick Schiffer resigned from the role of CFO and left the business on 1 July 2021. The quantitative disclosures in this report have been
determined based on 30 June 2021 being the effective date of cessation of employment.
The list of Non-executive Directors during the current and prior financial year is included in section 5.2.
2. REMUNERATION FRAMEWORK
2.1 Reward principles and framework
The objective of Vicinity’s remuneration framework is to build capability by attracting, retaining, and engaging a talented executive team capable
of managing and enhancing the business, while aligning their actions with securityholder interests. We recognise that remuneration represents
just one of the factors that enables the attraction and retention of talent. We also seek to engage our executives over the long-term and to provide
challenging work and development opportunities. This is assisted through linking executive remuneration to both short and long-term Company
performance. Our framework encourages executives to focus on creating long term value and growth and complements our purpose of enriching
community experiences while ensuring that short-term actions do not have a detrimental effect in the longer term.
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REMUNERATION REPORT
2. REMUNERATION FRAMEWORK CONTINUED
The diagram below provides an overview of how our reward principles are linked to the components of our remuneration framework and how
these components are measured to ensure that executive and securityholder interests are aligned.
Attract, retain and engage
high-performing executives
Demonstrate the link between performance,
strategy execution and reward
Encourage executives to manage from
the perspective of securityholders
REWARD PRINCIPLES
COMPONENTS
Total Fixed Remuneration (TFR)
Base salary, superannuation and any
salary sacrifice amounts.
Further details are included in section 4.1.
Short Term Incentive (STI)
Annual STI opportunity, 12-month
performance period subject to
performance targets.
50% paid in cash and 50% deferred
into equity (24-month deferral for the CEO
and two equal amounts payable after
12 months and 24 months respectively
for other Executive KMP).
Further details are included in section 4.2.
Long Term Incentive (LTI)
Total Return (TR) and Total Shareholder
Returns (TSR) performance rights,
four-year performance period for awards
granted from and including FY20.
For FY21, a one-off grant of discounted
restricted rights was granted in lieu of the
Total Return (TR) performance rights.
Further details are included in section 4.3.
REMUNERATION FRAMEWORK
CONSIDERATIONS /
PERFORMANCE MEASURES
Considerations in setting TFR include:
– External Australian benchmarking and
internal relativities.
– The size, scope, and complexity of the role.
– The individual’s experience, skills,
capability, and performance.
Executives are assessed against a scorecard
of financial and non-financial measures:
– Financial: measures include funds from
operations, net property income and
retailer cash collection.
– Strategy and portfolio enhancement:
measures relate to growth and portfolio
enhancement (including the development
pipeline and mixed-use), funds or assets
under management, capital and cost
management, adjacent products and
services, operational efficiencies, risk,
and governance.
– Leadership and operational excellence:
measures relate to corporate reputation and
sustainability, people, organisational capability,
innovation, diversity, inclusion and belonging.
The performance rights vest subject
to achievement of an:
– Internal hurdle based on TR –
not applicable for the FY21 LTI
– For FY22 - external hurdle based on TSR
relative to a comparator group comprising:
Scentre Group (25%); Charter Hall Retail
REIT (25%); Shopping Centres Australasia
Property Group (25%); The GPT Group
(12.5%) and Dexus (12.5%)
– For FY20 and FY21 - external hurdle based
on TSR relative to the S&P/ASX 200
A-REIT (Australian Real Estate Investment
Trust) Index at grant date, excluding
Unibail-Rodamco-Westfield (ASX:URW)
The restricted rights granted for FY21 vest
subject to ongoing employment and effective
performance as assessed by the Board, taking
into consideration the financial, strategy,
portfolio, leadership, risk, governance,
and other applicable objectives over the
respective performance periods.
ALIGNMENT WITH STRATEGY
AND PERFORMANCE
– Remuneration set at competitive levels,
to attract, retain and engage key talent.
– Financial measures relate to Vicinity’s
capacity to pay distributions and
generate securityholder returns.
– Strategy and portfolio enhancement
measures focus on asset and business
performance, development projects
and the long-term strategic direction
of Vicinity.
– Leadership and operational excellence
measures aim to promote a culture
and behaviours that drive Company
performance, operational excellence
and reflect our long-term objectives.
– The LTI aligns a significant portion of
overall remuneration to securityholder
value over the longer term.
– Encourages sustainable high performance
over the medium to long term and
securityholder value creation.
– Provides a retention element.
– TR measures the extent to which Vicinity
efficiently manages and extracts value
from Vicinity’s assets and alignment with
underlying growth in securityholder value.
– The relative TSR hurdle aligns remuneration
with Vicinity’s long-term return relative to
the nominated comparator groups.
– The FY22 TSR comparator group achieves
a suitable balance between retail and
appropriate non-retail group exposure.
– Restricted rights support retention,
engagement and the competitiveness
of the remuneration package and
provide alignment with
securityholder experience.
Vicinity Annual Report 2022Chairman’s LetterCEO's LetterOur PerformanceOur PeopleOur DestinationsOur Business Snapshot REMUNERATION REPORT
55
2. REMUNERATION FRAMEWORK CONTINUED
2.2 Pay mix
A significant component of executive remuneration is linked to short and long-term Company performance to assist with aligning executive
interests with those of securityholders. The components of total remuneration and the relative weightings of the fixed and at-risk components of
total target remuneration (using fair value and face value of the FY22 LTI granted on 10 December 2021) and total maximum remuneration (using
face value of the FY22 LTI) for the Executive KMP are detailed in Table 2.1 below.
The LTI fair value is the value of the LTI calculated in accordance with AASB 2 Share Based Payments and takes into account the probability of
performance hurdles being achieved for the TSR rights and the time value of the four-year vesting period for the TR performance rights. The LTI
face value has not been adjusted for the probability of performance targets being achieved or potential changes in security price.
Table 2.1. Pay mix
CHIEF EXECUTIVE OFFICER
Target remuneration
(Fair value LTI)1
Target remuneration
(Face value LTI)2
Maximum remuneration
(Face value LTI)2,3
$1,500 (38%)
$1,125 (29%)
$1,287 (33%)
Total: $3,912
$1,500 (32%)
$1,125 (24%)
$2,025 (44%)
Total: $4,650
$1,500 (30%)
$1,500 (30%)
$2,025 (40%)
Total: $5,025
$0
$1,000
$2,000
$3,000
$4,000
$5,000
CHIEF OPERATING OFFICER
Target remuneration
(Fair value LTI)1
Target remuneration
(Face value LTI)2
Maximum remuneration
(Face value LTI)2,3
$1,150 (40%)
$1,001 (35%)
$699 (25%)
$1,150 (35%)
$1,001 (31%)
$1,100 (34%)
Total: $2,850
Total: $3,251
$1,150 (31%)
$1,501 (40%)
$1,100 (29%)
Total: $3,751
$0
$1,000
$2,000
$3,000
$4,000
$5,000
CHIEF FINANCIAL OFFICER
Target remuneration
(Fair value LTI)1
Target remuneration
(Face value LTI)2
$700 (46%)
$455 (30%)
$356 (24%)
$700 (41%)
$455 (26%)
$560 (33%)
Maximum remuneration
(Face value LTI)2,3
$700 (36%)
$683 (35%)
$560 (29%)
Total: $1,511
Total: $1,715
Total: $1,943
$0
$1,000
$2,000
$3,000
$4,000
$5,000
Total remuneration ($'000)
TFR
STI
LTI
1. Includes the FY22 LTI based on the fair value of the performance rights awarded at the time of grant, valued in accordance with AASB 2 Share Based Payments, and the
FY22 STI at target.
2. Includes the FY22 LTI based on the face value of the performance rights awarded at the time of grant, which differs from the fair values, which are valued in accordance
with AASB 2 Share Based Payments, and the FY22 STI at target.
3. Includes the FY22 STI at maximum.
While there were no increases to Executive KMP remuneration in FY22, when compared to the equivalent pay mix tables in the FY21 Remuneration
Report, the FY22 target and maximum remuneration for the CEO and COO is higher than in FY21, due to the 50% discount applied for the one-off
use of restricted rights in FY21. The amounts for the Chief Financial Officer are based on the full value of the remuneration package and are not
pro-rated for the period from 13 September 2021 to 30 June 2022.
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REMUNERATION REPORT
2. REMUNERATION FRAMEWORK CONTINUED
Table 2.2. When remuneration is delivered
The diagram below provides a timeline of when remuneration is delivered, using FY22 as an example.
YEAR 1
YEAR 2
YEAR 3
YEAR 4
– FY22 TFR effective
– FY22 STI and FY22 LTI
performance period
commences
– FY22 STI determined
– 50% of FY22 STI
paid in Sep 2022
– 50% of FY22
deferred STI vests
(excluding CEO)
– Remaining 50% of
FY22 deferred STI vests
(excluding CEO)
– Full FY22 deferred
ST1 vests for CEO
– End of performance
period for FY22 TSR
and TR performance
rights
Performance measured
(4 years for SR and TR performance rights)
Performance measured
(1 year)
50% of STI deferred in Vicinity securities
(24 months for CEO / 12 & 24 months for other Executive KMP)
LTI
STI
TFR
1 Jul
2021
30 June
2022
30 June
2023
30 June
2024
30 June
2025
3. COMPANY PERFORMANCE AND EXECUTIVE REMUNERATION OUTCOMES
3.1 Overview of Company performance
Vicinity reported a statutory net profit after tax of $1,215 million
in FY22, representing a $1,473 million increase on the prior
corresponding period. Statutory net profit principally comprised
$598.3 million of Funds From Operations (‘FFO’) and a non-cash
net property valuation gain of $553.5 million 1.
Vicinity has also advanced the delivery of its $2.9 billion retail and
mixed-development pipeline, with most of the development spend
focused on six key assets; Chadstone, Box Hill Central and Victoria
Gardens Shopping Centre in Victoria, Chatswood Chase Sydney
and Bankstown Central in New South Wales and Buranda Central
in Queensland.
Vicinity delivered 7.1% FFO growth in FY22, despite continued
disruption from COVID-related lockdowns in New South Wales
(‘NSW’) and Victoria during the 1H FY22 and the national outbreak
of Omicron from late December 2021.
FFO growth was driven by an 8.0% uplift in Net Property Income
(‘NPI’) to $802.8 million, largely reflecting lower waivers and
provisions, rental growth and improved ancillary income. This was
partially offset by higher net interest costs and increased corporate
overheads as Vicinity invested in capability in 2H FY22.
Retail sales surpassed pre-COVID levels in the second half of
FY22, despite the outbreak of Omicron in late December 2021,
demonstrating the resilience and underlying health of the Australian
consumer. The resilient retail sector, combined with Vicinity’s
execution of its strategy and focus on delivering quality operational
and leasing outcomes, continues to underpin the Company’s
ongoing positive recovery from the pandemic.
During the year, Vicinity enhanced its investment portfolio by
acquiring and disposing of assets and delivered high quality asset
management, notably across property management and leasing.
Vicinity demonstrated its willingness to recycle capital from well
optimised assets into higher growth assets, with the acquisition of
Harbour Town Premium Outlets Gold Coast (‘Harbour Town’) and
the sale of Runaway Bay, also on the Gold Coast. These transactions
were accretive to FFO per security in FY22 and the acquisition
of Harbour Town further bolstered Vicinity’s category leadership
position in the growing Outlet sector.
As part of Vicinity’s strategy to grow third party capital partnerships
and bolster funds management credentials, David McNamara was
appointed to the EC on 1 February 2022 in the newly created role of
Director, Funds Management. Enhancing Vicinity’s capabilities and
focus in this area is intended to attract high quality, strategically-
aligned partners to fund Vicinity’s significant development pipeline
and grow its funds management business.
Gearing of 25.1% remains at the lower end of the target range of
25%-35% and Vicinity has available liquidity of $1.4 billion 2. Vicinity
maintained its investment grade credit ratings of A/stable (S&P) and
A2/stable (Moody’s) and repaid and cancelled $800 million of bank
debt facilities. Vicinity’s weighted average cost of debt 3 was slightly
higher at 4.0% and the weighted average debt maturity is 4.3 years
based on limits and 4.8 years based on drawn debt.
Table 3.1 highlights key FY22 business performance metrics and
executive remuneration outcomes. Further detail on these metrics
and achievements is contained in Table 3.4.
1. Excludes statutory accounting adjustments.
2. Includes debt cancelled post period end.
3. The average over the 12 months ended 30 June 2022 and inclusive of margin, drawn line fees and drawn establishment fees.
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REMUNERATION REPORT
57
3. COMPANY PERFORMANCE AND EXECUTIVE REMUNERATION OUTCOMES
Table 3.1. Company performance and executive remuneration overview
What Vicinity achieved
FY22 performance
What executives received
– Financial performance was strong when compared to FY21
and against forecasts at the start of FY22.
– FFO was $598.3 million, up 7.1% compared to FY21.
FY22 fixed remuneration
– In FY22, other than for the CFO, the fixed remuneration
for the CEO and Executive KMP remained unchanged.
– On a per security basis, FFO was 13.14 cents, compared to 12.28 cents in FY21.
– Distribution per security was 10.4 cents, up from 10.0 cents in FY21.
– Vicinity significantly outperformed key peers and the broader A-REIT index
over FY22.
– Progressed strategic objectives:
■ Enhanced the investment portfolio by delivering high quality asset
management and strategic acquisitions and disposals;
■ Transitioned from planning to execution across a number of strategic retail
and mixed-use developments to drive long term growth;
■ Progressed third party capital by appointing Director, Funds Management
and identifying potential opportunities to grow this part of the business;
■ Successfully implemented capital management initiatives
to maintain balance sheet flexibility;
■ Leveraged strengthened sustainability credentials and ratings to deliver
inaugural green bond;
■ Continued disciplined approach to locking in high quality leasing deals
that support future growth; and
■ 94% of new leasing deals with fixed growth of >4%.
– Refer to further commentary within Table 3.4.
Two-year performance period (1 July 2020 - 30 June 2022)
– The first tranche of the FY21 discounted restricted rights, which represents
25% of the total one-off restricted rights granted for FY21, had a performance
period which ended on 30 June 2022.
– The vesting of the restricted rights is subject to ongoing employment and
effective performance as assessed by the Board, taking into consideration
the financial, strategy, portfolio, leadership, risk, governance, and other
applicable objectives over the respective performance periods.
– The Board reviewed the performance conditions for vesting of these
restricted rights in August 2022.
FY22 STI outcomes
– The FY22 STI outcomes for Executive KMP, presented
as a percentage of the maximum STI opportunity, are
summarised below.
CEO
COO
CFO
FY22
STI outcome
% of maximum
75.6
72.9
79.7
– Additional information is provided in section 3.3.
LTI outcomes
– The Board determined that the first tranche of the FY21
discounted restricted rights vested. These rights will be
released to participants in September 2022.
– The restricted rights that vested for Executive KMP are
as follows: CEO: 76,251, COO: 41,420 and CFO: 6,227.
– There was no testing of performance rights for the
period ended 30 June 2022 as the performance period
for the performance rights granted from FY20 was
increased from three to four years and accordingly,
the performance period for the FY20 LTI ends on
30 June 2023.
– Additional information is provided in section 3.4 and
Table 4.1.1.
Table 3.2 below summarises details of Vicinity’s financial performance for the current and past four financial years.
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REMUNERATION REPORT
3. COMPANY PERFORMANCE AND EXECUTIVE REMUNERATION OUTCOMES CONTINUED
Table 3.2. Five-year securityholder performance metrics
Operational performance continued to be disrupted by COVID-19 in FY22, however there were a number of clear signs that recovery was gaining
momentum with improvements in retail sales, cash collection and asset valuations. Consequently, Vicinity was the second highest performer in
the ASX 200 A-REIT sector in the past 12 months, after Arena REIT.
Securityholder performance metrics
Security price as at 30 June ($) 1
Net tangible assets per security ($) 2
Distributions declared per security (cents)
TR 4
TSR of VCX for the year ended 30 June 5
TSR of the S&P/ASX 200 A-REIT Index 5
TSR of the FY22 LTI comparator group 6
FY18
2.59
2.97
16.3
11.1%
7.0%
13.0%
–
FY19
2.45
2.92
15.9
3.7%
0.6%
19.3%
–
FY20
1.43
2.29
7.7
(18.6%)
(39.9%)
(21.3%)
–
FY21
1.54
2.13
10.0 3
(2.6%)
15.0%
33.2%
–
FY22
1.835
2.36
10.4
12.5%
21.8%
(12.3%)
2.1%
1. Security price as at the last trading day of the financial year.
2. Calculated as Balance Sheet net assets less intangible assets, divided by the number of stapled securities on issue at period end. Includes right of use assets and
net investments in leases.
3. Included 2.5 cents attributable to a number of one-off items.
4. Calculated at period end as: (change in NTA during the year + distributions declared)/opening NTA. As explained in section 3.4, certain adjustments may be made to the
TR outcome included in this table for the purposes of determining the vesting of LTI awards.
5. TSR is calculated as the combination of security price movement from the opening security price, plus distributions (assumed to be reinvested) over the period,
expressed as a percentage. Source: UBS.
6. The FY22 TSR comparator group comprises: Scentre Group (25%); Charter Hall Retail REIT (25%); Shopping Centres Australasia Property Group (25%); The GPT Group
(12.5%) and Dexus (12.5%).
3.2 Fixed Remuneration outcomes
Summary
Vicinity reviews the fixed remuneration component of Executive KMP packages annually to ensure they remain competitive to attract, retain,
and engage key talent. External benchmarking is undertaken periodically that incorporates the size, scope, and complexity of each role, which is
overlaid with an individual’s experience, capability, and performance to determine their fixed remuneration.
Outcomes
In FY22, other than for the new CFO, the fixed remuneration for the CEO and Executive KMP remained unchanged.
3.3 FY22 Short Term Incentive (STI) outcomes
Summary
Vicinity’s STI provides Executive KMP and other members of the EC with the opportunity to be rewarded for achieving a combination of Vicinity’s
financial, strategy and portfolio enhancement, and leadership, governance, and operational excellence performance objectives through an annual
performance-based reward. Many of these objectives contribute towards medium to long-term performance outcomes aligned to Vicinity’s
strategy. The STI outcome for Executive KMP was weighted against the three performance categories as outlined in Table 3.3.
Specific measures for individuals are set within these performance categories and are approved by the Board. Further details of the STI are set
out in section 4.2.
Access to the STI is normally contingent on the achievement of a FFO gateway of 97.5% of target. This ensures that a minimum financial hurdle
must be met before any incentive is paid. If the gateway is achieved, performance for each measure is assessed on a range from ‘threshold’ to
‘maximum’. Maximum is set at a level that ensures that the maximum amount of STI is payable only when performance has significantly exceeded
target measures.
The FFO gateway did not apply for FY22, given the extreme difficulties with setting robust financial targets. As was the case last year, the Board
assessed the FY22 financial performance, taking into consideration overall securityholder experience and expectations.
Further detail on the assessment against the performance categories and measure are included in Tables 3.3 and 3.4. Details of the FY22 STI
outcomes for Executive KMP are included in Table 3.5.
Outcomes
Tables 3.3, 3.4 and 3.5 outline performance against FY22 measures.
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3. COMPANY PERFORMANCE AND EXECUTIVE REMUNERATION OUTCOMES CONTINUED
Table 3.3. FY22 Executive KMP performance level achieved
Most objectives included in the strategy and portfolio category have financial milestones and budgets and will significantly impact financial
performance. The combined financial and strategic and portfolio enhancement category weightings for each Executive KMP was 70%.
Performance level achieved 1
Performance category
Weighting at target
Minimum
Target
Maximum
Financial
Strategy and portfolio enhancement
Leadership and operational excellence
40%
30%
30%
1. The line represents the range of outcomes, and the circles represent the average outcomes achieved by the Executive KMP. Please refer to Table 3.4 for more detail
on business performance against FY22 measures.
Table 3.4: Executive KMP performance against FY22 measures
Reason chosen
Performance outcome
Performance
category
and weighting
Financial
(40%)
Performance
measure
Funds from
operations (FFO),
net property
income (NPI)
and retailer cash
collection.
FFO and NPI
are key financial
measures of
performance
and retailer cash
collection is a
critical measure
relating to recovery
from the pandemic.
– Due to COVID-19, business conditions were extremely volatile and
unpredictable at the start of FY22. Financial targets were set for FY22,
but the targets were highly uncertain and no FY22 market guidance
was able to be provided. Despite more extensive lockdowns in Victoria
and New South Wales than expected, the financial results materially
exceeded initial expectations.
– FFO up 7.1% to $598.3 million, or 13.13 cents on a per security basis.
– NPI up 8.0% to $802.8 million largely driven by lower waivers and
provisions, growth in base rent and improved ancillary income.
– Rent cash collection improved to 91% of gross rental billings for FY22.
– Robust operational metrics benefited FY22 performance (including
a favourable rebound in Victoria/New South Wales post lockdowns)
as well as proactive initiatives to maximise outcomes, including:
■ completing COVID-19 lease variations pertaining to lockdowns in 2021
■ favourable rent relief outcomes and therefore cash collections in
FY22 compared to FY21
– Enhanced the investment portfolio with successful acquisition of a 50%
interest in Harbour Town Gold Coast and sale of Runaway Bay at an
18% premium to book value.
– Moved from planning to execution on the retail and mixed-use
development pipeline to drive long term growth. Secured development
approvals for key mixed-use opportunities, including Box Hill Central
and Bankstown Central; development approvals lodged in respect of
Victoria Gardens and Buranda Village.
– Owner approvals for key projects including Chadstone (Dining and
Entertainment Terrace), Bankstown Central (Coles Fresh Food/Mini
Majors) and Box Hill Central (Coles Mall and Hub Australia offices).
– Asset remediation projects either concluded or under construction
at 10 assets.
– Successfully implemented capital management initiatives to maintain
balance sheet flexibility.
– Leveraged strengthened sustainability credentials and ratings to issue
$300 million inaugural Green Bond.
– Progress achieved on adjacent products and services, particularly
distribution, energy, and media related objectives.
– Expanded strategic partnerships via investments in the Taronga
Ventures fund focusing on emerging technology and innovation
across the built environment; and Global Marketplace to leverage
e-commerce insights and omnichannel opportunities.
Strategy
and portfolio
enhancement
(30%)
Objectives linked to
growth and portfolio
enhancement
(including the
development
pipeline and mixed-
use), funds or assets
under management,
capital and cost
management,
adjacent products
and services,
operational
efficiencies, risk,
and governance.
Developing and
implementing
Vicinity’s key
strategic initiatives
will underpin future
value creation
opportunities and
growth.
Focus on improving
portfolio quality
and operational
efficiency, will
underpin sustainable
performance.
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3. COMPANY PERFORMANCE AND EXECUTIVE REMUNERATION OUTCOMES CONTINUED
Table 3.4. Executive KMP performance against FY22 measures continued
Performance
category
and weighting
Leadership and
operational
excellence
(30%)
Performance
measure
Objectives linked to
corporate reputation
and sustainability,
people,
organisational
capability, diversity,
inclusion and
belonging.
Reason chosen
Performance outcome
Non-financial
objectives underpin
growth and
sustainability of
our business.
– Completed a refresh of the sustainability strategy.
– Improved rankings in GRESB and DJSI benchmarks.
– Successfully embedded new leadership and organisational capabilities
supported by related development programs and resources.
– Delivered operating model and organisational design changes across
multiple business units.
– Achieved a very positive result in the 2022 Employee Experience (EX)
survey, with strong participation, favourable engagement uplift and
improved results across all factors.
– While we have an overall 40:40:20 gender balance, improving the
gender balance across our Senior Leadership Group remains an
ongoing priority.
– Strengthened relationships with existing JV partners and strong focus
on establishing relationships with new partners.
– Tenant satisfaction (TenSAT/CenteSAT) scores improved significantly
amid challenging retail conditions.
Table 3.5. FY22 STI outcomes for Executive KMP
Executive KMP
Grant Kelley
Peter Huddle
Adrian Chye 2
Target STI
as % of TFR
Maximum STI
opportunity
as % of TFR 1
Actual STI
awarded
($)
% of
target STI
opportunity
awarded
% of
maximum STI
opportunity
awarded
% of
maximum STI
opportunity
forfeited
75%
87%
65%
100%
1,134,113
130.5%
1,094,447
97.5%
433,490
100.8
109.4
119.5
75.6
72.9
79.7
24.4
27.1
20.3
1. The maximum STI opportunity as % of TFR is the theoretical maximum the Executive KMP can receive. The maximum STI opportunity as a percentage of the target
opportunity is 1.33 times and 1.5 times respectively for the CEO and other Executive KMP.
2. The target and maximum STI opportunity apply from 13 September 2021 and the actual FY22 STI awarded represents the STI awarded for the period as CFO from
13 September 2021 to 30 June 2022.
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3. COMPANY PERFORMANCE AND EXECUTIVE REMUNERATION OUTCOMES CONTINUED
3.4 FY22 Long Term Incentive (LTI) outcomes and FY22 LTI grant
Summary
The first tranche of the FY21 restricted rights, which represents 25% of the total one-off restricted rights granted for FY21, had a performance
period ending on 30 June 2022.
For LTI grants made from FY20, the performance period for performance rights is four years. Please refer to section 4.3 for further details of the
LTI Plan, including details of the performance period for the restricted rights granted in FY21.
LTI outcomes for the period ended 30 June 2022
The Board determined that the first tranche of the FY21 discounted restricted rights vested. These rights will be released to participants in
September 2022. The restricted rights that vested for Executive KMP are as follows: CEO: 76,251, COO: 41,420 and CFO: 6,227.
There was no testing of other performance rights for the period ended 30 June 2022 as the performance period for the performance rights
granted from FY20 was increased from three to four years and accordingly, the performance period for the FY20 LTI ends on 30 June 2023.
Details of all current LTI holdings for Executive KMP are included in section 4.5.
FY22 LTI grant
The FY22 LTI grant (FY22 LTI) was made to the Executive KMP, other members of the EC and other senior executives with effect from 1 July 2021,
with a four-year performance period that ends on 30 June 2025. The FY22 LTI grant for the CEO was supported by securityholders at the AGM.
Table 3.6 shows the number of performance rights granted to the Executive KMP under the FY22 LTI. The number of performance rights granted
was allocated using the ‘face value’ methodology. The fair value of the performance rights at grant date are also included in Table 3.6. Fair values
are calculated in accordance with AASB 2 Share Based Payments.
As outlined, the performance rights may vest after four years provided the TSR and TR hurdles are met. Further details on the LTI performance
hurdles are included in section 4.3.
Table 3.6. FY22 LTI grants
Executive KMP
Grant date
Grant Kelley
10 December 2021
Peter Huddle
10 December 2021
Adrian Chye
10 December 2021
Total
Face value of
rights on grant
date
($)
Number of
performance
rights 1
LTI face value as
a percentage
of TFR at
grant date
(%)
Fair value
of rights on
2
grant date
($)
LTI fair value as
a percentage
of TFR at
grant date
(%)
2,025,000
1,100,000
560,000
3,685,000
1,165,065
632,875
322,190
2,120,130
135%
95.65%
80%
1,287,397
699,326
356,020
2,342,743
85.8%
60.8%
50.9%
1. The grants made to Executive KMP represent the face value LTI opportunity with effect from 1 July 2021. The security price used in the calculation is the volume weighted
average price (VWAP) of Vicinity’s securities 10 trading days immediately following the 2021 Annual General Meeting of $1.7381.
2. Calculated based on a fair value per right of:
Grant date
10 December 2021
TR rights
($)
1.44
TSR rights
($)
0.77
Overall fair value
of LTI grants
($)
Overall fair value
of LTI grants as a
% of face value
1.105
63.6
The fair value of the performance rights as at the grant date was valued by independent consultants. The valuation of the TSR performance rights incorporates the
probability of achieving market conditions whereas the valuation of the TR performance rights does not. This results in a lower fair value for TSR performance rights
than for TR performance rights. Further details on the assumptions used to determine the fair value of the performance rights and the accounting for expenses relating
to performance rights are included in Note 16 to the Financial Report. The minimum total value of the grant to the Executive KMP is nil should none of the applicable
performance conditions be met.
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REMUNERATION REPORT
3. COMPANY PERFORMANCE AND EXECUTIVE REMUNERATION OUTCOMES CONTINUED
3.5 Statutory remuneration tables
Table 3.7 sets out the statutory remuneration received by each current and former Executive KMP during the current and prior year. This table
has been prepared in accordance with the requirements of the Corporations Act 2001 (Cth) and relevant Australian Accounting Standards.
The figures provided under the performance rights and STI deferred columns are accounting values and do not reflect actual payments received
or the full value of future deferred entitlements awarded during the year.
Table 3.7. Executive KMP statutory remuneration for FY22
Short-term benefits
benefits Share based payments
Other
Post-
employ-
ment
Executive KMP
Period
Base
salary 1
($)
STI
cash 2
($)
Non -
monetary 3
($)
Leave
entitle -
ments 4
($)
Perform -
ance and
restricted
rights 5
($)
STI
deferred 6
($)
Super -
annuation
contrib -
utions
($)
Termin -
ation
benefits 8
($)
%
Perfor -
mance -
related 9
Total
($)
–
–
–
–
–
–
–
–
3,267,561
2,781,458
2,497,163
2,140,861
1,015,757
–
6,780,481
4,922,319
–
50%
42%
52%
37%
41%
50%
40%
19%
50%
35%
–
–
FY22
1,476,432
567,056
8,220
115,272
758,792
318,221
23,568
FY21
1,486,367
388,125
7,179
105,108
503,113
269,872
21,694
FY22
1,126,432
547,223
3,892
40,168
361,213
394,667
23,568
FY21
1,180,025
400,175
3,641
144,065
186,382
204,879
21,694
FY22
543,747
216,745
1,170
35,340
99,555
100,255
18,945
FY21
–
–
–
–
–
–
–
FY22
3,146,611
1,331,024
13,282
190,780
1,219,560
813,143
66,081
FY21
2,666,392
788,300
10,820
249,173
689,495
474,751
43,388
Grant Kelley
Peter Huddle
Adrian Chye 7
Total current
Executive KMP
Nick Schiffer
FY22
–
–
–
–
–
FY21
731,892
259,000
3,415
61,350
32,270
–
–
–
21,694
397,000
1,506,621
Total current and
former Executive KMP
FY22
3,146,611
1,331,024
13,282
190,780
1,219,560
813,143
66,081
–
6,780,481
FY21
3,398,284
1,047,300
14,235
310,523
721,765
474,751
65,082
397,000 6,428,940
1. Base salary excludes the annual leave expense recognised in the financial statements for the period in accordance with AASB 119 Employee Benefits.
2. The cash component is 50% of the STI awarded for Executive KMP (including the CEO), and where applicable, is paid in September following the end of the financial
year. Nick Schiffer’s FY21 STI was not subject to deferral into securities and was paid fully in cash in September 2021.
3. Non-monetary benefits include death and total permanent disability and salary continuance insurance premiums paid by Vicinity on behalf of the Executive KMP.
4. Leave entitlements reflect the long service leave and annual leave expense recognised in the financial statements for the period in accordance with AASB 119 Employee Benefits.
5. Under Australian Accounting Standards the remuneration expense for performance rights and restricted rights is based on their fair value at grant date calculated in
accordance with AASB 2 Share Based Payments. For the TSR performance rights and restricted rights, the fair value determined is progressively expensed over the
vesting period of four years, regardless of the ultimate vesting outcome. For TR performance rights, the fair value is also progressively expensed over the vesting period;
however, is reassessed and adjusted to reflect the amount ultimately expected to vest. The amount included as remuneration is not related to or indicative of the benefit
(if any) that Executive KMP may ultimately realise should the performance rights or restricted rights vest.
6. 50% of the STI is deferred into restricted securities. For Grant Kelley (CEO), the deferred securities vest 24 months following the date of deferral. For other Executive
KMP, deferred securities vest equally 12 and 24 months following the date of deferral. The value of STI deferred into securities (and as reported in this table) has been
expensed over the relevant vesting period.
7. Represents remuneration received during FY22 from 13 September 2021 – 30 June 2022.
8. The termination benefits for Nick Schiffer for FY21 included a payment in lieu of notice of $370,000 and other benefits valued at $27,000. Inclusive of the FY21 STI award
of $259,000 which is disclosed separately as ‘STI cash’ and the FY21 fair value expense of $59,087 for the restricted rights remaining on foot which is included as part of
the ‘Performance and restricted rights’ amount, the total termination benefits were $715,087.
9. Represents the sum of STI cash, performance, and restricted rights and STI deferred divided by the total remuneration, reflecting the actual percentage of remuneration
at risk for the year.
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3. COMPANY PERFORMANCE AND EXECUTIVE REMUNERATION OUTCOMES CONTINUED
3.6 Non-statutory remuneration
Table 3.8. Executive KMP actual remuneration for FY22
Table 3.8 sets out the ‘actual’ remuneration or ‘take home pay’ received by each current and former Executive KMP during the current and
prior year. Actual remuneration differs from statutory remuneration (Table 3.7), which is prepared in accordance with the requirements of the
Corporations Act 2001 (Cth) and Australian Accounting Standards, because the statutory table spreads the value of all equity grants (including
STI deferred awards) across the relevant performance/vesting periods and includes the leave entitlements expense recognised for the period.
The ‘actual’ remuneration table includes any remuneration that was previously deferred while the individual was KMP, that has become
unrestricted. These amounts therefore represent ‘actual’ remuneration for FY22, even though they were awarded in prior financial years.
Base salary and other benefits
Share based
payments
Executive KMP
Period
Base
salary 1
($)
Superannuation
contributions 1
Non -
monetary
benefits 1
STI
cash 1
($)
Grant Kelley
Peter Huddle
Adrian Chye
Total current
Executive KMP
Nick Schiffer
Total current and
former Executive KMP
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
1,476,432
1,486,367
1,126,432
1,180,025
543,747
–
3,146,611
2,666,392
–
731,892
3,146,611
3,398,284
23,568
21,694
23,568
21,694
18,945
–
66,081
43,388
–
21,694
66,081
65,082
8,220
7,179
3,892
3,641
1,170
–
13,282
10,820
–
3,415
13,282
14,235
567,056
388,125
547,223
400,175
216,745
–
1,331,024
788,300
–
259,000
1,331,024
1,047,300
Release
of STI
deferred 2
($)
–
252,723
213,440
83,585
–
–
213,440
336,308
–
–
213,440
336,308
Termin -
ation
benefits 1
($)
–
–
–
–
–
–
–
–
–
Total
($)
2,075,276
2,156,088
1,914,555
1,689,120
780,607
–
4,770,438
3,845,208
–
397,000
1,413,001
–
4,770,438
397,000
5,258,209
1. As per table 3.7.
2. Amounts for FY22 represent the release of 116,316 securities for Peter Huddle under the FY21 Deferred STI following the 12-month restriction period which ended on 30
June 2022, based on a security price of $1.835. Refer to Table 3.9 for further details. While Adrian Chye also had securities released under the FY21 Deferred STI following
the 12-month restriction period, these securities were earned prior to his appointment as CFO and are therefore not included as part of his actual remuneration for FY22.
Amounts for FY21 represent the release of 163,575 securities for Grant Kelley under the FY19 Deferred STI following the two-year restriction period which ended on 30
June 2021, based on a security price of $1.545 and the release of 52,078 securities for Peter Huddle under the FY19 Deferred STI following the 18-month restriction period
which ended on 31 December 2020, based on a security price of $1.605.
Table 3.9. Deferred STI for KMP
Table 3.9 details the number of FY21 Deferred STI restricted securities granted to Grant Kelley and Peter Huddle and the market value of 50%
of the securities which were released to Peter Huddle following the end of the 12-month restriction period on 30 June 2022. This aligns with the
value included in Table 3.8. While Adrian Chye also had deferred STI securities released following the 12-month deferral period, these securities
were earned prior to his appointment as CFO and are therefore not included as part of his actual remuneration for FY22.
Executive KMP
Date of grant
Grant Kelley
1 July 2021
Peter Huddle
1 July 2021
Deferred
STI award
FY21
FY21
Value of
deferred equity
at time of grant
($)
Number of
restricted
securities
allocated 1
Restriction
period
end date
Market value
of securities
released 2
($)
388,125
200,088
200,087
225,627
30 June 2023
–
116,316
116,316
30 June 2022
213,440
30 June 2023
–
1. The VWAP used to calculate the number of securities allocated at the time of grant was $1.7202.
2. Based on the release of 50% of the restricted securities released to Peter Huddle and a security price on 30 June 2022 of $1.835.
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REMUNERATION REPORT
4. EXECUTIVE REMUNERATION – FURTHER INFORMATION
This section contains further details of the three components of Executive KMP remuneration being:
– fixed remuneration
– STI
– LTI
4.1 Fixed remuneration
Fixed remuneration comprises base salary and leave entitlements, superannuation contributions and any salary sacrifice amounts (for example,
motor vehicle leases). Vicinity aims to provide a competitive level of fixed remuneration to attract, retain and engage key talent. External
benchmarking is undertaken that incorporates the size, scope and complexity of each role, which is overlaid with an individual’s experience,
capability and performance to determine their fixed remuneration.
4.2 STI
Refer to section 3.3 for a summary of the STI outcomes for FY22.
STI arrangements
Opportunity
FY22 STI opportunity at
a target level of performance
as % of TFR
FY22 STI maximum
opportunity as % of TFR
Maximum STI as a multiple
of the target opportunity for
exceptional individual and
Vicinity performance
Grant Kelley (CEO)
Peter Huddle (COO)
Adrian Chye (CFO)
75%
87%
65%
100%
130.5%
97.5%
1.33 times
1.5 times
1.5 times
Performance
measurement
period
The STI performance measurement period is the full financial year. Where an Executive KMP commences employment
or appointed during the year, their STI is evaluated and calculated on a pro-rata basis. Where an Executive KMP ceases
employment during the year, if the STI is not forfeited, it is evaluated and paid on a pro-rata basis. Payment is made at
the normal payment date applicable to other employees.
Grant date,
payment
and deferral
STI is provided as a combination of cash and deferred equity. 50% of the STI is deferred into equity for a period of 24
months for the CEO and into two equal amounts payable after 12 months and 24 months respectively for other Executive
KMP. Dividends are paid on the deferred equity component during the deferral period.
Performance
targets and
measurement
Outcomes are calculated following the Board’s review of Vicinity’s audited financial results and any cash component is
typically paid in September following the end of the financial year.
Section 3.3 provides a detailed summary of the performance objectives and measures and the subsequent results for
Executive KMP for FY22.
Performance objectives for FY22 were finalised by the Board in the case of the CEO, and by the CEO and the Committee
in the case of other Executive KMP. The Committee, with input from the Chairman of the Board, assesses the CEO’s
performance against his objectives and makes the recommendation to the Board for final determination.
The CEO assesses the performance of all other Executive KMP and other EC members relative to their individual
objectives and makes recommendations to the Committee for final determination.
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REMUNERATION REPORT
4. EXECUTIVE REMUNERATION – FURTHER INFORMATION CONTINUED
4.3 LTI
Refer to section 3.4 for a summary of the LTI and outcomes for FY22..
LTI arrangements
Type of equity
awarded
Performance rights
Rights to Vicinity stapled securities at a future time for nil consideration, subject to the achievement of agreed
performance hurdles at the end of the performance period (as set out below).
Until the performance rights vest, an Executive KMP has no entitlement to receive dividends or distributions from, nor
legal or beneficial interest in, and no voting rights associated with, the underlying stapled securities.
Restricted rights
As a one-off change for FY21 only, Executive KMP and other LTI participants were granted restricted rights, in lieu of
the TR performance rights that have historically been granted. The face value of the restricted rights was equal to 50%
of the face value of the TR performance rights that they replaced. The Board believes that the 50% discount to the face
value of the TR performance rights typically granted is appropriate given the more certain vesting outcome for the
restricted rights.
Executive KMP and other LTI participants who were granted restricted rights, will receive distribution equivalent
securities at the time of vesting equal to the distributions that would have been paid had they received distributions on
the restricted rights up until the vesting date. The number of distribution equivalent securities will be calculated based on
the distributions that would have been paid on the vested securities up until the vesting date, divided by the VWAP over
the five trading days commencing on the first trading day immediately following the annual results announcement for the
financial year ended prior to each respective vesting date. Stapled securities allocated on vesting of restricted rights will
carry the same dividend, distribution and voting rights as other stapled securities issued by Vicinity.
Performance
period
Performance rights: four years.
The restricted rights granted for FY21 only, have a performance period as follows:
Percentage of restricted rights vesting
Performance period
Anticipated time of release
25%
25%
50%
1 July 2020 – 30 June 2022
1 July 2020 – 30 June 2023
1 July 2020 – 30 June 2024
Early September 2022
Early September 2023
Early September 2024
Performance
hurdles
Performance rights
Allocations of performance rights are tested against two performance hurdles at the relevant vesting date:
– 50% are subject to the achievement of relative TSR 1
– 50% are tied to the achievement of TR (no TR performance rights were granted for FY21) 2
Each hurdle will be measured independently at the end of the respective performance periods.
Restricted rights
The restricted rights granted for FY21 will vest in accordance with the schedule set out above, subject to ongoing employment
and effective performance as assessed by the Board, taking into consideration the financial, strategy, portfolio, leadership,
risk, governance, and other applicable objectives over the respective performance periods. The Board retains the discretion
to amend the level of vesting of the restricted rights to ensure the award outcomes are not unreasonable and that unintended
windfall gains are avoided. In exercising its discretion, the Board will consider overall business performance and securityholder
experience over the vesting period, as well as significant risk or conduct issues since the awards were granted.
1. Relative TSR combines the security price movement and dividends (which are assumed to be reinvested) to show total return to securityholders, relative to that of other
companies in the comparator group. Prior to FY22, the Board decided that an appropriate comparator group for the relative TSR performance hurdle was the S&P/ASX
200 A-REIT Index at grant date, excluding Unibail-Rodamco-Westfield (ASX:URW). For FY22, the comparator group was amended and comprised: Scentre Group (25%
weighting); Charter Hall Retail REIT (25% weighting); Shopping Centres Australasia Property Group (25% weighting); The GPT Group (12.5% weighting) and Dexus
(12.5% weighting). Where appropriate, the Board has discretion to adjust the comparator group for events, including but not limited to takeovers, mergers or de-mergers,
that might occur with respect to the entities in the comparator group.
2. TR is calculated each year as the change in Vicinity’s NTA during the year plus distributions per security made divided by the NTA at the beginning of the year. The
annual TR result for each year during the performance period is then used to calculate the compound annual TR for the three-year performance period for awards prior
to FY20, or four-year performance period for awards from and including FY20.
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REMUNERATION REPORT
4. EXECUTIVE REMUNERATION – FURTHER INFORMATION CONTINUED
LTI arrangements
Opportunity
Vesting
schedule
The FY22 LTI opportunity was a face value of 135% of TFR for the CEO (FY21: 101.25% of TFR), 95.65% of TFR for the
COO (FY21: 71.74%% of TFR) and 80% of TFR for the CFO (FY21: not applicable). The face value of the FY21 LTI was
reduced by 25% compared to prior years as the face value of the restricted rights was equal to 50% of the face value of
the TR performance rights that they replaced.
The number of performance rights and restricted rights allocated was determined based on the 10-day VWAP of Vicinity
securities immediately following the 2021 Annual General Meeting.
The following vesting schedules apply for FY22:
TSR
Vicinity’s TSR relative to
the weighted TSR of the
Comparator Group
Exceeds the Comparator Group
by 2.7% per annum
(or 11.2% cumulatively
over four years)
TR
Percentage vesting
Compound annual
TR target per annum
100% vesting
Above 7.25%
Percentage vesting
100% vesting
Between the Comparator Group
and 2.7% per annum above the
Comparator Group
Pro-rata straight-line
vesting between
50% and 100%
Between
4.50% and 7.25%
Below the Comparator Group
Nil vesting
Below 4.50%
Pro-rata straight-line
vesting between
10% and 100%
Nil vesting
The following vesting schedules apply for FY20 and FY21 (no TR performance rights were granted for FY21):
TSR
TR
Percentile ranking
Percentage vesting
Compound annual
TR target per annum
Greater than or
equal to 75th percentile
Between
51st and 75th percentile
100% vesting
Above 9.5%
Pro-rata straight-line
vesting between
51% and 100%
Between 9.0% and 9.5%
Less than 51st percentile
Nil vesting
Below 9.0%
Percentage vesting
100% vesting
Pro-rata straight-line
vesting between
50% and 100%
Nil vesting
Following testing, any rights that do not vest, lapse.
The FY20 plan includes an absolute TSR ‘gate’ ensuring benefit will only be derived from the TSR performance rights
when positive TSR performance is delivered over the four-year performance period. The Board retains discretion to
adjust the number of TSR performance rights which vest where the TSR is negative. The absolute TSR ‘gate’ did not
apply to TSR performance rights granted in FY21 or FY22.
4.4 STI and LTI - Cessation of employment, clawback or change of control
The Board retains discretion to determine the treatment of the STI and LTI awards on the cessation of employment; however, generally:
– In the event of resignation or termination for cause, any eligibility for STI, deferred STI and LTI entitlements will be forfeited
– In the event of cessation of employment for such reasons as redundancy, death, total and permanent disablement or retirement:
■ a pro-rata amount of unvested performance rights and restricted rights which have not yet conditionally vested will remain on foot, with the
balance forfeited. Performance rights may then conditionally vest at the end of the performance period subject to meeting the performance
measures under the associated plan. Awards granted prior to the FY20 LTI are subject to a 12-month holding lock. In these circumstances,
the continuous service condition will be deemed to have been waived
■ STI for the year will be pro-rated over the employment period and paid fully in cash at the same time as all others (no amounts are deferred
into equity)
■ deferred STI will remain on foot and will vest at the normal vesting date
The Board also has the right to reduce future award payments or adjust unvested amounts to ‘clawback’ from participants if there has been
a material misstatement in Vicinity’s financial results. These provisions were strengthened for any awards to be granted from FY21 onwards
to enable ‘clawback’ where a participant has acted fraudulently or dishonestly, engaged in gross misconduct, breached his or her duties or
obligations to the Group or acted in a manner which brings the Group into disrepute.
In the event of a change in control, the Board has absolute discretion to determine the treatment for STI and LTI entitlements.
Vicinity Annual Report 2022Chairman’s LetterCEO's LetterOur PerformanceOur PeopleOur DestinationsOur Business Snapshot REMUNERATION REPORT
67
4. EXECUTIVE REMUNERATION – FURTHER INFORMATION CONTINUED
4.5 Total LTI holdings
Tables 4.1 and 4.1.1 below detail the total performance rights and restricted rights held by Executive KMP including the FY22 LTI grants detailed above.
Table 4.1. Total performance rights held by Executive KMP
Executive KMP
Grant date
End of
performance
period
Opening
performance
rights 1
Granted as
remuneration
in FY22
Performance
rights lapsed
Performance
rights vested
Closing
unvested
performance
rights
Grant Kelley
FY22
FY21
FY20
Total
Peter Huddle
FY22
FY21
FY20
Total
Adrian Chye
FY22
FY21
FY20
Total
10 Dec 2021 30 Jun 2025
11 Dec 2020
30 Jun 2024
10 Dec 2019 30 Jun 2023
–
610,013
762,941
1,165,065
–
–
1,372,954
1,165,065
10 Dec 2021 30 Jun 2025
11 Dec 2020
30 Jun 2024
10 Dec 2019 30 Jun 2023
10 Dec 2021 30 Jun 2025
11 Dec 2020
30 Jun 2024
10 Dec 2019 30 Jun 2023
–
331,365
414,437
632,875
–
–
745,802
632,875
–
49,818
62,307
112,125
322,190
–
–
322,190
Total number of performance rights
2,230,881
2,120,130
1. The opening balance for Adrian Chye represents performance rights awarded prior to his appointment as CFO.
Table 4.1.1. Total restricted rights held by Executive KMP
Grant date
End of
performance
period
11 Dec 2020
11 Dec 2020
11 Dec 2020
30 Jun 2022
30 Jun 2023
30 Jun 2024
11 Dec 2020
11 Dec 2020
11 Dec 2020
30 Jun 2022
30 Jun 2023
30 Jun 2024
11 Dec 2020
11 Dec 2020
11 Dec 2020
30 Jun 2022
30 Jun 2023
30 Jun 2024
Executive KMP
Grant Kelley
Total
Peter Huddle
Total
Adrian Chye
Total
Total number of restricted rights
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,165,065
610,013
762,941
2,538,019
632,875
331,365
414,437
1,378,677
322,190
49,818
62,307
434,315
4,351,011
Opening
restricted
rights 1
Restricted
rights
vested 2
Closing
unvested
restricted
rights
76,251
76,252
152,503
305,006
41,420
41,421
82,841
165,682
6,227
6,227
12,455
24,909
76,251
–
–
76,251
41,420
–
–
41,420
6,227
–
–
6,227
0
76,252
152,503
228,755
0
41,421
82,841
124,262
0
6,227
12,455
18,682
495,597
123,898
371,699
1. The opening balance for Adrian Chye represents restricted rights awarded prior to his appointment as CFO.
2. Represents the vesting of the first tranche of the FY21 restricted rights which will be released in September 2022. This excludes distribution equivalent securities which
will be calculated based on the distributions that would have been paid on the vested securities up until the vesting date, divided by the VWAP over the five trading days
commencing on the first trading day immediately following the FY22 annual results announcement.
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68
REMUNERATION REPORT
4. EXECUTIVE REMUNERATION – FURTHER INFORMATION CONTINUED
4.6 Service agreements
Remuneration and other terms of employment for Executive KMP are formalised in Executive Services Agreements (ESAs). The terms and
conditions of employment of the Executive KMP reflect market conditions at the time of entering into their contract.
Key features of the Executive KMP ESAs include the following:
– eligibility to participate in short and long-term incentive plans
– ongoing employment until terminated by either the Executive KMP or Vicinity
– Vicinity may make payments in lieu of all or part of the applicable notice period
Notice period provisions are detailed below.
Executive KMP
Grant Kelley
Peter Huddle
Adrian Chye
Termination by Vicinity
For cause
Other
Immediately
6 months
Immediately
6 months
Immediately
6 months
Termination by
Executive KMP
Termination
payment 1
6 months
6 months
6 months
6 months’ TFR
6 months’ TFR
6 months’ TFR
1. Paid, subject to law, if Vicinity terminated the Executive KMP’s employment agreement on notice and without cause, and makes payment in lieu of notice. Termination
payments are generally not paid on resignation or termination with cause, although the Board may determine exceptions to this. No termination payment will exceed the
limit under the Corporations Act 2001 (Cth).
5. NON-EXECUTIVE DIRECTOR REMUNERATION
5.1 Remuneration philosophy
Non-executive Director fee levels are set with regard to time commitment and workload, the risk and responsibility attached to the role and
external market benchmarking. Non-executive Director base fees were last increased effective 1 January 2018 and the current maximum fee pool
of $2.25 million was approved by Vicinity securityholders in November 2011. No element of Non-executive Director remuneration is ‘at risk’, that is,
no element is based on the performance of Vicinity.
Board and Committee fees
FY22 Board and Committee fees are outlined in the table below:
Table 5.1. FY22 Board and Committee fees
Board/Committee
Board
Audit Committee
Risk and Compliance Committee
Role
Chairman
Non-executive Director
Chairman
Member
Chairman
Member
Remuneration and Human Resources Committee
Chairman
Nominations Committee
1. Fees are inclusive of superannuation.
Member
Chairman
Member
FY22 fees
per annum 1
($)
463,500
164,800
41,200
20,600
41,200
20,600
41,200
20,600
No additional fee
No additional fee
Vicinity Annual Report 2022Chairman’s LetterCEO's LetterOur PerformanceOur PeopleOur DestinationsOur Business Snapshot
REMUNERATION REPORT
69
5. NON-EXECUTIVE DIRECTOR REMUNERATION CONTINUED
The Chairman of the Board receives no further remuneration for Committee membership, although he may attend Committee meetings.
Non-executive Directors are entitled to be reimbursed for all reasonable business-related expenses, including travel on Company business, that
may be incurred in the discharge of their duties.
5.2 Fees and benefits paid
Table 5.2. Non-executive Directors’ fees for FY22
Non-executive Director
Period
Trevor Gerber, Chair
(appointed 28 October 2015)
Clive Appleton 3
(appointed 1 September 2018)
Tim Hammon
(appointed 15 December 2011)
Peter Kahan
(appointed 11 June 2015)
Janette Kendall
(appointed 1 December 2017)
Karen Penrose
(appointed 11 June 2015)
Dr David Thurin AM
(appointed 11 June 2015)
Total
Non-executive Directors
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
Short-term benefits
Post-employment
benefits 2
Fees 1
($)
439,932
441,806
164,800
164,800
149,819
150,503
149,819
150,503
149,818
150,502
149,819
150,503
149,818
150,502
1,353,825
1,359,119
Committee
fees
($)
Superannuation
contributions
($)
–
–
–
–
56,181
56,438
56,181
56,438
37,455
37,626
56,181
56,438
–
–
205,998
206,940
23,568
21,694
–
–
20,600
19,659
20,600
19,659
18,727
17,872
20,600
19,659
14,982
14,298
119,077
112,841
Total
fees
($)
463,500
463,500
164,800
164,800
226,600
226,600
226,600
226,600
206,000
206,000
226,600
226,600
164,800
164,800
1,678,900
1,678,900
1. Unless otherwise stated, fees represent fees paid to Non-executive Directors in their capacity as Directors of Vicinity Limited (the Company) and Vicinity Centre RE Ltd
as Responsible Entity for Vicinity Centres Trust (the RE) whose Boards and Committees meet concurrently.
2. Non-executive Directors receive no post-employment benefits other than statutory superannuation.
3. Clive Appleton’s fees are paid to The Gandel Group Pty Limited and therefore no superannuation contributions were made by Vicinity on his behalf.
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70
REMUNERATION REPORT
6. OTHER REMUNERATION INFORMATION
6.1 Remuneration governance
The Board of Directors has responsibility to ensure that appropriate governance is in place in relation to all human resource matters including
remuneration. To ensure that the Board acts independently of management and is fully informed when making remuneration decisions, the Board
has established the following protocols:
– The Board has established the Remuneration and Human Resources Committee comprised of Non-executive Directors, which is responsible
for reviewing and making recommendations on remuneration policies for Vicinity, including policies governing the remuneration of Executive
KMP and other senior executives. Further information regarding the respective roles and responsibilities of the Board and the Committee are
contained in their respective charters, available at www.vicinity.com.au, and in Vicinity’s Corporate Governance Statement.
– When considering the recommendations of the Committee, the Board applies a policy of excluding any executives from being present and
participating in discussions impacting their own remuneration.
– The Committee can seek advice from both management and external advisors in developing its remuneration recommendations for the Board.
6.2 External advisors and consultants
To assist in performing its duties, and making recommendations to the Board, the Committee directly engages external advisors to provide
input to the process of reviewing Executive KMP and Non-executive Director remuneration, and to provide advice on various aspects of the
remuneration framework. This advice is sought when required and no advice was sought during FY22.
6.3 Security trading restrictions
Vicinity’s Securities Trading Policy prohibits Executive KMP and other LTI and deferred STI participants from hedging or otherwise limiting their
exposure to risk in relation to unvested Vicinity securities issued or acquired under any applicable equity arrangements.
6.4 Minimum securityholding requirement – Executive KMP
Vicinity operates a minimum securityholding requirement (MSR) for Executive KMP and other members of the EC. This requires the CEO and
members of the EC to build and retain a minimum holding of securities equal to 100% and 60% of TFR respectively within five years from the
introduction of the policy in 2016 or five years from the end of the first full financial year following an executive’s commencement date, if later.
Deferred STI restricted securities count towards the MSR. The Board will consider extending the five-year period for the CEO and other members
of the EC should the MSR be unattainable due to the lapsing of the FY18, FY19 and any subsequent LTI grants and the cancellation of the FY20
STI, which was impacted by COVID-19.
6.5 Minimum securityholding requirement – Non-executive Directors
Vicinity operates a MSR for Non-executive Directors. This encourages independent Directors to acquire a holding of securities with a minimum
cost equal in value to one year of Non-executive Director base fees (net of income tax and superannuation) within five years from the introduction
of the policy in 2016 or from the Director’s commencement date, if later.
Vicinity Annual Report 2022Chairman’s LetterCEO's LetterOur PerformanceOur PeopleOur DestinationsOur Business Snapshot REMUNERATION REPORT
71
6. OTHER REMUNERATION INFORMATION CONTINUED
6.6 KMP securityholdings
The table below shows the securities held (directly or indirectly) by KMP as at 30 June 2022 and as at the date of this report.
If, at any time during the five-year accumulation period, a KMP achieves the MSR, the KMP is deemed to have met the MSR, notwithstanding
that the holding value at the end of the five-year accumulation period or at the end of a financial year during the five-year period may be less
than the MSR. All Non-executive Directors have achieved the current MSR.
Table 6.1. KMP securityholdings
Opening
securities as at
1 July 2021
Granted as
remuneration 1
Additions
during the year
Closing
securities as at
30 June 2022
Non-executive Directors
Trevor Gerber
Clive Appleton
Tim Hammon
Peter Kahan
Janette Kendall
Karen Penrose
Dr David Thurin AM
Total
Executive KMP
Grant Kelley
Peter Huddle
Adrian Chye
Total
220,834
32,295
63,889
43,417
63,110
57,917
13,895,373
14,376,835
336,209
52,078
41,265
429,552
–
–
–
–
–
–
–
–
225,627
232,632
28,222
486,481
–
–
–
–
–
–
–
–
–
–
–
–
220,834
32,295
63,889
43,417
63,110
57,917
13,895,373
14,376,835
561,836
284,710
69,487
916,033
1. Reflects the allocation of the FY21 Deferred STI restricted securities. For Adrian Chye, this reflects the FY21 Deferred STI restricted securities awarded prior to his
appointment as CFO.
There were no other related party transactions or balances with KMP or their controlled entities, in relation to securities held.
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72
AUDITOR’S INDEPENDENCE DECLARATION
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Auditor’s Independence Declaration to the Directors of Vicinity Limited
As lead auditor for the audit of the financial report of Vicinity Limited for the financial year ended 30
June 2022, I declare to the best of my knowledge and belief, there have been:
a) No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit;
b) No contraventions of any applicable code of professional conduct in relation to the audit; and
c) No non-audit services provided that contravene any applicable code of professional conduct in
relation to the audit.
This declaration is in respect of Vicinity Limited and the entities it controlled during the financial year.
Ernst & Young
Alison Parker
Partner
17 August 2022
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Vicinity Annual Report 2022Chairman’s LetterCEO's LetterOur PerformanceOur PeopleOur DestinationsOur Business Snapshot
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2022
Revenue and income
Property ownership revenue and income
Management fee revenue from strategic partnerships
Interest and other income
Total revenue and income
Share of net profit/(loss) of equity accounted investments
Property revaluation increment/(decrement) for directly owned properties
Direct property expenses
Allowance for expected credit losses
Borrowing costs
Employee benefits expense
Net foreign exchange movement on interest bearing liabilities
Net mark-to-market movement on derivatives
Depreciation of right of use assets
Stamp duty written off on acquisition of investment property
Other expenses
Net profit/(loss) before tax for the year
Income tax benefit/(expense)
Net income/(loss) for the year
Other comprehensive income
Total comprehensive income/(loss) for the year
Total income/(loss) and total comprehensive income/(loss) for the year
attributable to stapled securityholders as:
Securityholders of Vicinity Limited
Securityholders of other stapled entities of the Group
Total comprehensive income/(loss) for the year
Earnings per security attributable to securityholders of the Group:
Basic earnings per security (cents)
Diluted earnings per security (cents)
73
Note
30 Jun 22
$m
30 Jun 21
$m
1,123.2
56.6
2.6
1,182.4
15.9
633.3
(325.4)
(13.7)
(187.6)
(105.4)
(10.3)
88.6
(5.5)
(22.6)
(42.1)
1,207.6
7.6
1,215.2
–
1,215.2
8.2
1,207.0
1,215.2
26.69
26.64
1,118.7
48.8
1.7
1,169.2
(34.2)
(642.7)
(299.0)
(88.0)
(165.6)
(97.6)
77.5
(119.9)
(6.1)
–
(40.7)
(247.1)
(10.9)
(258.0)
–
(258.0)
3.0
(261.0)
(258.0)
(5.67)
(5.67)
2(c)
5(b)
4(b)
11(b)
7(c)
15
18(a)
4(b)
3(a)
6
6
The above consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
Net ZeroOur Management of RiskGovernanceTax TransparencySustainability AssuranceSecurityholder InformationFinancial Report 74
BALANCE SHEET
AS AT 30 JUNE 2022
Current assets
Cash and cash equivalents
Trade receivables and other assets
Derivative financial instruments
Total current assets
Non-current assets
Investment properties
Equity accounted investments
Intangible assets
Plant and equipment
Derivative financial instruments
Right of use assets and net investments in leases
Deferred tax assets
Other assets
Total non-current assets
Total assets
Current liabilities
Interest bearing liabilities
Distribution payable
Payables and other financial liabilities
Lease liabilities
Provisions
Derivative financial instruments
Total current liabilities
Non-current liabilities
Interest bearing liabilities
Lease liabilities
Provisions
Derivative financial instruments
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Share based payment reserve
Retained profits
Total equity
The above consolidated Balance Sheet should be read in conjunction with the accompanying notes.
Note
30 Jun 22
$m
30 Jun 21
$m
11(a)
7(e)
4(a)
5(a)
17
7(e)
18(a)
3(c)
11(a)
7(a)
12
18(a)
13
7(e)
7(a)
18(a)
13
7(e)
9
55.6
117.1
0.3
173.0
14,366.4
513.8
164.2
3.4
228.8
27.2
69.3
6.5
15,379.6
15,552.6
40.0
–
196.9
27.7
81.1
1.0
346.7
3,712.5
361.4
4.0
242.9
4,320.8
4,667.5
10,885.1
9,102.2
6.0
1,776.9
10,885.1
47.2
109.4
–
156.6
13,294.3
479.4
164.2
2.9
110.4
26.8
61.7
1.5
14,141.2
14,297.8
–
300.4
148.2
34.1
79.8
–
562.5
3,281.9
354.4
3.9
213.8
3,854.0
4,416.5
9,881.3
9,102.2
3.5
775.6
9,881.3
Vicinity Annual Report 2022Chairman’s LetterCEO's LetterOur PerformanceOur PeopleOur DestinationsOur Business Snapshot STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2022
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Net ZeroOur Management of RiskGovernanceTax TransparencySustainability AssuranceSecurityholder InformationFinancial Report
76
CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2022
Cash flows from operating activities
Receipts in the course of operations
Payments in the course of operations
Distributions and dividends received from equity accounted and managed investments
Net operating cash flows retained by equity accounted entities
Interest and other revenue received
Interest paid
Net cash inflows from operating activities – proportionate 1
Less: net operating cash flows retained by equity accounted entities
Net cash inflows from operating activities
Cash flows from investing activities
Payments for capital expenditure on investment properties
Proceeds from disposal of investment properties
Payments for acquisition of investment property
Payment for acquisition of other investments
Stamp duty paid upon acquisition of investment property
Proceeds from disposal of other investments
Payments for plant and equipment
Net cash outflows from investing activities
Cash flows from financing activities
Proceeds from issue of shares
Transaction costs on issue of shares
Proceeds from borrowings
Repayment of borrowings
Payment of lease liabilities
Distributions paid to external securityholders
Debt establishment costs paid
Acquisition of shares on-market for settlement of share-based payments
Net cash outflows from financing activities
Net increase/(decrease) in cash and cash equivalents held
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Note
30 Jun 22
$m
30 Jun 21
$m
19
4(b)
4(b)
4(b)
1,318.2
(561.6)
14.1
9.4
0.1
(181.3)
598.9
(9.4)
589.5
(253.0)
130.4
(358.5)
(14.0)
(22.6)
7.0
(1.6)
(512.3)
–
–
1,367.0
(910.0)
(5.8)
(514.3)
(1.6)
(4.1)
(68.8)
8.4
47.2
55.6
1,286.6
(498.9)
19.4
5.4
0.5
(160.8)
652.2
(5.4)
646.8
(160.4)
37.2
(1.1)
–
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–
(1.2)
(125.5)
32.6
(0.3)
406.0
(978.0)
(5.2)
(154.8)
(1.5)
(0.3)
(701.5)
(180.2)
227.4
47.2
1. Proportionate cash flows from operating activities includes total operating cash flows from consolidated and equity accounted entities.
The above Cash Flow Statement should be read in conjunction with the accompanying notes.
Vicinity Annual Report 2022Chairman’s LetterCEO's LetterOur PerformanceOur PeopleOur DestinationsOur Business Snapshot ABOUT THIS REPORT
77
Reporting entity
The financial statements are those of the stapled Group comprising
Vicinity Limited (the Company) and Vicinity Centres Trust (the Trust)
(collectively ‘the Group’). The Stapling Deed entered into by the
Company and the Trust ensures that shares in the Company and
units in the Trust are ‘stapled’ together and are traded collectively
on the Australian Securities Exchange (ASX) under the code ‘VCX’.
For financial reporting purposes, the Company has been identified
as the parent entity of the Group.
The Company and the Trust are for-profit entities that are domiciled
and operate wholly in Australia.
Basis of preparation
This general purpose Financial Report:
– Has been prepared in accordance with the Corporations Act 2001
(Cth) and Australian Accounting Standards (AASBs) issued by
the Australian Accounting Standards Board. Compliance with
AASBs ensures compliance with International Financial Reporting
Standards (IFRS) as issued by the International Accounting
Standards Board (IASB);
– Is presented in Australian dollars ($) and rounded to the nearest
tenth of a million dollars ($m) in accordance with ASIC Legislative
Instrument 2016/191 (unless otherwise stated);
– Has been prepared in accordance with the historical cost
convention, except for certain financial assets and liabilities,
and investment properties which have been recognised at
fair value; and
– Was authorised for issue by the Board of Directors on
17 August 2022.
The presentation of certain items has been adjusted as necessary
to provide more meaningful information in the context of the Group.
Where the presentation or classification of items in the Financial
Report is amended, comparative amounts are also reclassified unless
it is impractical. The adjustments made to the presentation of items
had no impact on the net assets or net profit/loss of the Group.
Impact of new standards, interpretations and amendments
adopted by the Group
New and amended standards that became effective as of 1 July 2021
did not have a material impact on the financial statements of the
Group as they are either not relevant to the Group’s activities or
require accounting which is consistent with the Group’s accounting
policies. The Group has not adopted any standard, interpretation
or amendment that has been issued but is not yet effective.
COVID-19 pandemic
The COVID-19 pandemic (‘COVID-19’ or the ‘pandemic’) continued
to adversely impact the Group’s operations and financial results
during the year as well as certain judgements and estimates made
in the preparation of the financial statements. Where relevant,
additional disclosure has been included within the notes to the
financial statements on accounting judgements and estimates
subject to a significant level of uncertainty due to the pandemic.
These judgements and estimates are summarised in the ‘Significant
accounting judgements, estimates and assumptions’ section below.
Going concern
The Group has a net current deficiency of $173.7 million (current
liabilities exceed current assets), and has considered the following
factors at 30 June 2022 in determining that the Financial Report
of the Group should be prepared on a going concern basis:
– The Group has available liquidity including undrawn facilities of
$1,842.0 million, cash and cash equivalents of $55.6 million and
generates sufficient operating cash flows to meet its current
obligations as they fall due; and
– The Group has assessed scenarios which consider varying levels
of unfavourable impacts of the pandemic on items such as cash
flows, excess liquidity and compliance with key debt covenants,
including gearing and interest cover ratios. Based on these
scenarios, the Group is expected to be able to pay its debts as and
when they fall due for a period of 12 months from the date of these
financial statements.
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ABOUT THIS REPORT
Significant accounting judgements, estimates and assumptions
The preparation of financial statements requires the Group to make judgements in the application of accounting policies and estimates when
developing assumptions that affect the reported amounts of certain revenues, expenses, assets and liabilities. These judgements and estimates
are made considering historical experience and other reasonable and relevant factors but are inherently uncertain. Due to this inherent
uncertainty, actual results may differ from these judgements and estimates.
The COVID-19 pandemic has increased the level of judgement and estimation applied in the preparation of the financial report at 30 June 2022.
Additional disclosures including sensitivity analyses have been included within the relevant notes to the financial statements. The table below
summarises the areas of the Financial Report subject to significant judgement and estimation including the increased uncertainty due to the
impacts of COVID-19:
Item
Area of judgement or estimation
Revenue and
income and
recoverability
of tenant debtors
The Group’s revenue and income largely consists of fixed rental obligations due under lease agreements
which are paid monthly in advance. Therefore, rental income and the assessment of the recoverability of
tenant debtors have not been subject to a significant level of judgement or estimation prior to the pandemic.
Retail trade has been unfavourably impacted by COVID-19 due to the impact of snap lockdowns mandated by
state governments to contain COVID-19 outbreaks during the year, largely in the first half of FY22. In addition,
assets located in central business districts (‘CBD’) continue to experience headwinds as foot traffic has yet
to return to pre-pandemic levels, impacted by the protracted return of office workers, and domestic and
international travellers.
The Group continued to provide rental assistance in the form of rental waivers, payment deferrals and other
temporary modifications to leases to eligible SME tenants and other tenants in categories and locations that
continue to experience financial hardship and distress. These negotiations were undertaken in accordance
with the general principles of the Australian Government’s SME Commercial Code of Conduct and Leasing
Principles During COVID-19 or with the applicable regulations in Victoria and NSW (collectively referred to
as the ‘SME Codes’). Following the expiry of the SME Codes in March 2022, the Group continued to provide
rental support to tenants in locations and categories most impacted by the pandemic, notably SME and CBD
retailers. A number of these negotiations are still ongoing as at 30 June 2022.
As a result, the rental income receivable at 30 June 2022 has remained elevated compared to pre-pandemic
levels. Significant judgement and estimation has been required in determining allowance for expected credit
losses on these receivables due to the uncertain outcome of rental assistance negotiations, collection rates
and the impact of rising inflation and interest rates on retailers.
Valuation of
investment
properties
Key inputs into valuations such as capitalisation rates, discount rates, terminal yields and market rental growth
rates are not based on observable market data and require an estimate of the future impact of events, such as
the COVID-19 pandemic and rising inflation and interest rates. Specific adjustments have also been made to
the key valuation inputs of assets located in CBDs.
These are subject to a significant level of estimation and judgement.
Recognition of
deferred tax assets
The Company recognises a deferred tax asset, primarily relating to historical tax losses. The recoverability of
this deferred tax asset is dependent on the generation of sufficient future taxable income by the Company to
utilise those tax losses. Estimation is required in forecasting future taxable income and judgement is applied
in assessing an appropriate forecast period.
The pandemic has continued to cause a degree of uncertainty in determining certain key assumptions within
the assessment of future taxable income of the Company, particularly future fund, property, and development
management fee revenues, which are linked to the underlying performance and valuation of the investment
properties under management by the Company and the timing and execution of the Group’s property
development activities.
Recoverability of
intangible assets
Key assumptions and inputs into the determination of fair value of the Group’s cash generating unit, such as
forecast cash flows, discount and terminal value growth rates, are subject to significant estimation.
Valuation of
derivative financial
instruments
The fair value of derivative financial instruments is estimated using valuation techniques, including referencing to
the current fair value of other instruments that are substantially the same.
Note
2
11
4
3
17
7
Vicinity Annual Report 2022Chairman’s LetterCEO's LetterOur PerformanceOur PeopleOur DestinationsOur Business Snapshot OPERATIONS
79
1. SEGMENT INFORMATION
The Group’s operating segments identified for internal reporting purposes are:
– Property Investment: performance is assessed based on net property income which comprises revenue less expenses derived from
investment in retail property; and
– Strategic Partnerships: performance is assessed based on fee income from property management, development and leasing of third party
capital and includes fees from the management of wholesale property funds.
Information on these segments is presented on a proportionate basis. This presents net property income and investment property assets relating
to equity accounted properties as if they were consolidated investment properties within the Group’s segment results. This allows for consistent
internal reporting on all investment property assets and segment activities to the Chief Operating Decision Makers (CODM) to make strategic
decisions, regardless of ownership structure arrangements. Consistent with prior year, the CODM were the CEO and Managing Director (CEO),
Chief Operating Officer (COO) and the Chief Financial Officer (CFO).
Group performance is assessed based on funds from operations (FFO), which is calculated as statutory net profit, adjusted for fair value
movements, certain unrealised and non-cash items, amounts which are capital in nature and other items that are not considered to be in the
ordinary course of business. In addition to FFO, adjusted funds from operations (AFFO) is considered when assessing the performance of the
Group. AFFO represents the Group’s FFO adjusted for investment property maintenance capital and static tenant leasing costs and other capital
items incurred during the year. FFO and AFFO are determined with reference to guidelines published by the Property Council of Australia (PCA)
and are non-IFRS measures.
a) Segment results
The segment financial information and metrics provided to the CODM are set out below.
Financial performance
Property Investment segment
Net property income
Strategic Partnerships segment
Property management, development and leasing fees
Funds management fees
Total segment income
Corporate overheads (net of internal property management fees)
Net interest expense
Funds from operations (FFO)
Adjusted for:
Maintenance capital and static tenant leasing costs
Adjusted funds from operations (AFFO)
Key metrics
FFO per security 1 (cents per security)
AFFO per security 1 (cents per security)
Distribution per security (DPS) 2 (cents per security)
Total distributions declared 2 ($m)
AFFO payout ratio (total distributions declared $m/AFFO $m) (%)
FFO payout ratio (total distributions declared $m/FFO $m) (%)
30 Jun 22
$m
30 Jun 21
$m
802.8
49.9
2.6
855.3
(94.7)
(162.3)
598.3
(101.5)
496.8
743.4
42.5
3.2
789.1
(86.4)
(143.9)
558.8
(73.1)
485.7
30 Jun 22
30 Jun 21
13.14
10.91
10.40
473.4
95.3%
79.1%
12.28
10.67
10.00
455.2
93.7%
81.5%
1. The calculation of FFO and AFFO per security for the period uses the basic weighted average number of securities on issue as calculated in Note 6.
2. Distributions per security and the total distribution declared are calculated based on estimated number of securities outstanding at the time of the distribution record date.
Net ZeroOur Management of RiskGovernanceTax TransparencySustainability AssuranceSecurityholder InformationFinancial Report
80
OPERATIONS
1. SEGMENT INFORMATION CONTINUED
b) Reconciliation of net profit/(loss) after tax to FFO
Net profit/(loss) after tax
Property revaluation (increment)/decrement for directly owned properties1
Non-distributable loss relating to equity accounted investments1
Amortisation of incentives and leasing costs2
Straight-lining of rent adjustment3
Net mark-to-market movement on derivatives 3
Net unrealised foreign exchange movement on interest bearing liabilities3
Income tax (benefit)/expense4
Stamp duty
Preliminary development planning and marketing costs5
Other non-distributable items
Funds from operations (FFO)
30 Jun 22
$m
30 Jun 21
$m
1,215.2
(633.3)
10.8
62.5
3.9
(88.6)
10.3
(7.6)
22.6
1.0
1.5
598.3
(258.0)
642.7
56.6
58.3
(1.9)
119.9
(77.5)
10.9
–
0.4
7.4
558.8
The material adjustments to net loss after tax to arrive at FFO and reasons for their exclusion are described below:
1. FFO excludes non-distributable fair value movements relating to directly owned investment properties and equity accounted investments.
2. Lease incentives and leasing costs are capitalised to investment properties. Amortisation of these items is then recognised as an expense in accordance with Australian
Accounting Standards. In accordance with the PCA Guidelines amortisation of these items are excluded from FFO as:
a) Static (non-development) lease incentives committed during the year relating to static centres are reflected within maintenance capital and static tenant leasing costs
within the AFFO calculation at Note 1(a); and
b) Development leasing costs are included within the capital cost of the relevant development project.
3. Represent non-cash adjustments as required by Australian Accounting Standards and are excluded from FFO.
4. Income tax for the year represents the non-cash recognition of deferred tax assets and has therefore been excluded from FFO.
5. Preliminary development planning and marketing costs are one-off and discrete to the respective property.
c) Reconciliation of segment income to total revenue
Refer to Note 2(c) for a reconciliation of total segment income to total revenue and income in the Statement of Comprehensive Income.
d) Segment assets and liabilities
The property investment segment reported to the CODM includes investment properties held directly and those that are held through equity
accounted entities. A breakdown of the total investment properties in the property investment segment is shown below. All other assets and
liabilities are not allocated by segment for reporting to the CODM.
Investment properties 1
Investment properties included in equity accounted investments2
Total interests in directly owned investment properties
Assets under management on behalf of strategic partners3
Total assets under management
Note
4(a)
30 Jun 22
$m
30 Jun 21
$m
13,958.6
565.5
14,524.1
9,194.7
12,897.3
571.0
13,468.3
8,779.9
23,718.8
22,248.2
1. Total investment properties at Note 4(a) less investment property leaseholds and planning and holding costs.
2. Excludes planning and holding costs of $10.6 million (30 June 2021: $6.6 million) relating to investment properties included in equity accounted investments.
3. Represents the value of property interests managed, but not owned, consolidated or otherwise accounted for by the Group.
Vicinity Annual Report 2022Chairman’s LetterCEO's LetterOur PerformanceOur PeopleOur DestinationsOur Business Snapshot OPERATIONS
2. REVENUE AND INCOME
a) Accounting policies
Property ownership revenue and income
The Group derives revenue and income in connection with the
leasing and operation of its portfolio of investment properties.
These comprise:
– Lease rental income
The Group derives lease rental income as lessor from the leasing
of the retail space within these investment properties. Lease
rental income is recognised on a straight-line basis over the
lease term. Items included in the straight-lining calculation
are fixed rental payments, in-substance fixed payments, lease
incentives given to tenants and fixed rental increases that form
part of lease agreements. Note 2(b) includes the accounting for
lease modifications.
– Revenue from recovery of property outgoings
Under certain tenant lease agreements, the Group recovers from
tenants a portion of costs incurred by the Group in the operation and
maintenance of its shopping centres. The Group, acting as principal,
incurs these costs with third party suppliers and includes them
within direct property expenses in the Statement of Comprehensive
Income. Recovery amounts are invoiced to tenants each month
(over time) at the start of the month for the provision of that month’s
services based on an annual estimate. Accordingly, where recovery
amounts are received in advance, no adjustment is made for the
effects of a financing component. Adjustments to reflect recoveries
based on actual costs incurred are recorded within revenue in the
Statement of Comprehensive Income and billed annually.
– Other property related revenue
Other property related revenue includes fees earned from
advertising, carparking and the on selling of other services at
the Group’s shopping centres. The material components of this
revenue are recognised over time as the relevant services are
provided and relevant performance obligations satisfied.
Management fee revenue from strategic partnerships
These comprise:
– Property management fees
The Group manages retail investment properties on behalf of
its co-owners and other external parties. In connection with the
provision of these management services the Group derives fee
revenue from:
■ Ongoing retail investment property management. This is
recognised monthly (over time) as property management
services are provided. In accordance with the relevant property
management agreements, fee revenue is calculated as a
percentage of a property’s gross revenue and income. Fees
are invoiced and paid in the month the service is provided.
■ Tenant leasing management services. Fees are recognised
and invoiced at either the date of lease instruction or lease
execution (point in time) depending on the specific property
management agreement. Revenue is generally calculated as
a percentage of year one rental income achieved.
– Property development fees
The Group provides development management and development
leasing services to its co-owners and other external parties. The Group
accounts for all property development services provided
under these agreements as a single performance obligation as all
activities involved in property development management are highly
interrelated. Property development fees are therefore calculated
in accordance with the relevant development agreement and
recognised over time on a time elapsed input method over the
life of the relevant development project.
81
– Funds management fees
The Group provides fund management services to wholesale
property funds and property mandates. Services are provided
on an ongoing basis and revenue is calculated and recognised
monthly (over time) as fund management services are provided
in accordance with the relevant fund constitutions.
b) COVID-19 rental assistance
The Group continued to provide rental assistance in the form of rental
waivers, payment deferrals and other temporary modifications to
leases to eligible SME tenants and other tenants in categories and
locations that continue to experience financial hardship and distress.
These negotiations were undertaken in accordance with the general
principles of the SME Codes. Following the expiry of the SME Codes
in March 2022, the Group continued to provide rental support to
tenants in locations and categories most impacted by the pandemic,
notably SME and CBD retailers.
The impact of rental assistance agreements on the financial
statements are discussed below.
Rental assistance agreed
Rental assistance is agreed once both the Group and the tenant have
executed the legal agreement outlining the terms of the assistance.
As providing rental assistance during the pandemic was not
contemplated within the Group’s pre-existing lease arrangements,
these are treated as modifications of the pre-existing leases
(lease modifications).
Lease modifications had the following effects on the financial
statements in the current year:
– Waivers of lease receivables recognised as lease rental income
prior to the date of an amended lease agreement being executed
are written off through the Statement of Comprehensive Income,
except to the extent of a pre-existing allowance for expected
credit losses relating to outstanding lease receivables. For the
year ended 30 June 2022, $57.3 million of lease receivables were
waived (30 June 2021: $120.9 million), of which $33.0 million
related to lease receivables recognised in prior financial periods
(30 June 2021: $58.3 million).
– Lease rental income due over the remaining lease term, which
incorporates any future reductions including waivers to fixed
lease payments as compared to the original lease agreement, is
recognised on a straight-line basis over the remaining lease term.
Executed amended lease agreements in the current financial year
resulted in approximately $10.2 million of rental waivers processed
during the year (30 June 2021: $12.0 million) with a further $0.8
million to be recognised in future periods (30 June 2021: $4.2
million). Accounting adjustments required to straight-line the
impact of these reductions has reduced lease rental income
by $3.2 million for the year ended 30 June 2022 (30 June 2021:
$11.0 million increase in lease rental income).
– Rent for which payment is deferred to a later date (rent is normally
payable monthly in advance) continues to be recognised as lease
rental income with a corresponding lease receivable in the period
to which the occupancy relates. For the year ended 30 June 2022,
rental payments of $11.3 million were deferred to future reporting
periods (30 June 2021: $16.7 million) and $10.0 million of deferred
rent receivables was re-billed (30 June 2021: $7.4 million). As at
30 June 2022, rental payments of approximately $11.6 million were
deferred to future reporting periods (30 June 2021: $10.3 million).
As at 30 June 2022, approximately 9,000 agreements for rental
assistance had been executed since the commencement of COVID-19
(30 June 2021: 6,100 agreements).
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OPERATIONS
2. REVENUE AND INCOME CONTINUED
b) COVID-19 rental assistance continued
Rental assistance under negotiation
Until rental assistance is agreed, lease rental income and lease receivables continue to be recognised in accordance with the terms of the original
lease agreement. At the end of the reporting period, an estimate of the lease receivables expected to be waived once an agreement is reached is
included within the allowance for expected credit losses. The Group estimates approximately 1,300 agreements for rental assistance are still to be
completed (30 June 2021: 2,000). Some tenants may require more than one rental assistance agreement depending on the impacts of COVID-19
on their operations.
Further information on the lease receivables waived and expected credit losses recognised during the year (relating to both rental assistance
agreed and under negotiation) and as at 30 June 2022 is included in Note 11.
c) Summary of revenue and income
A summary of the Group’s total revenue and income included within the Statement of Comprehensive Income by segment and reconciliation to
total segment income is shown below.
30 Jun 22
$m
Property
Investment
segment
Strategic
Partnerships
segment
30 Jun 21
$m
Property
Investment
segment
Strategic
Partnerships
segment
211.4
91.8
–
–
303.2
820.0
2.6
822.6
1,125.8
Recovery of property outgoings 1
Other property related revenue 1
Property management and development fees 2
Funds management fees 2
Total revenue from contracts with customers
Lease rental income 1
Interest and other income
Total income
Total revenue and income
Reconciliation to segment income
Property-related expenses included in segment income
Allowance for expected credit losses
Net property income from equity accounted investments
included in segment income
Straight-lining of rent adjustment
Amortisation of static lease incentives and other project items
Interest and other revenue not included in segment income
Total segment income
181.5
88.9
–
–
270.4
848.3
1.7
850.0
1,120.4
Total
211.4
91.8
54.0
2.6
359.8
820.0
2.6
822.6
–
–
54.0
2.6
56.6
–
–
–
56.6
1,182.4
(395.2)
(13.7)
25.1
3.9
62.5
(9.7)
855.3
Total
181.5
88.9
45.6
3.2
319.2
848.3
1.7
850.0
–
–
45.6
3.2
48.8
–
–
–
48.8
1,169.2
(363.9)
(88.0)
24.2
(1.9)
58.3
(8.8)
789.1
1. Included within ‘Property ownership revenue and income’ in the Statement of Comprehensive Income.
2. Included within ‘Management fee revenue from strategic partnerships’ in the Statement of Comprehensive Income.
Vicinity Annual Report 2022Chairman’s LetterCEO's LetterOur PerformanceOur PeopleOur DestinationsOur Business Snapshot 83
OPERATIONS
3. TAXES
a) Group taxation summary
Income tax
Vicinity Centres Trust (flow through trust structure)
The Trust and its controlled trusts are not liable to pay income tax (including capital gains tax) on the basis that the taxable income
from the Trust’s property investments is taxed on a flow through basis in the hands of the Trust’s securityholders in accordance with the
Attribution Managed Investment Trust Regime. The Trust’s securityholders pay tax at their marginal tax rates, in the case of Australian resident
securityholders, or through the withholding rules that apply to non-resident securityholders investing in Managed Investment Trusts. As a
result, the Group has zero income tax expense recognised in respect of the Trust’s profit.
Vicinity Limited (corporate tax group)
The Company and its subsidiaries have formed a tax consolidated group (TCG). Under this arrangement, the Company, the head entity of the
TCG, accounts for its own current and deferred tax amounts and assumes those from subsidiaries in the TCG. Members of the TCG have entered
into a tax funding arrangement (TFA) which sets out the funding obligations of members of the TCG in respect of tax amounts. The TFA requires
payments to/from the head entity to be recognised via an inter-entity receivable/payable which is at call.
Income tax expense for the year is calculated at the Australian corporate tax rate of 30% and comprises current and deferred tax expense, any
adjustments relating to current tax of prior periods and movements in unrecognised tax losses. These amounts are recognised in the income
statement, except to the extent they relate to items recognised directly in other comprehensive income or equity. Current tax expense represents
the expense relating to the expected taxable income at the applicable rate for the current financial year.
Deferred tax assets and liabilities are measured based on the expected manner of recovery of the carrying value of an asset or liability. Deferred
tax charges represent the future tax consequences of recovering or settling the carrying amount of an asset or liability. These future tax
consequences are recorded as deferred tax assets to the extent it is probable that future taxable profits or deferred tax liabilities will be available
to utilise them. Where appropriate, deferred tax assets and liabilities are offset as permitted by Australian Accounting Standards.
A summary of the components of Vicinity Limited’s income tax expense is shown below:
Current income tax expense
Deferred income tax benefit
Adjustment for current year tax of prior periods
Increase/(Decrease) in deferred tax assets
Income tax benefit/(expense)
30 Jun 22
$m
30 Jun 21
$m
(4.9)
0.3
(0.5)
12.7
7.6
(8.8)
6.5
(0.3)
(8.3)
(10.9)
Statutory taxes and levies
The Group also incurs federal, state based and local authority taxes including land tax, council rates and levies. These are included within direct
property expenses in the Statement of Comprehensive Income. Additionally, employee benefits expense within the Statement of Comprehensive
Income includes employment-related taxes such as fringe benefits tax, payroll tax and Workcover contributions.
Goods and services tax
Revenues, expenses and assets are recognised net of the amount of Goods and Services Tax (GST) except:
– Where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is
recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
– Receivables and payables, which are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included within the Balance Sheet. Cash flows are included
in the Cash Flow Statement on a gross basis and the GST component of cash flows arising from investing and financing activities that is
recoverable from, or payable to, the taxation authority is classified as part of operating cash flows. Commitments and contingencies are disclosed
net of the amount of GST recoverable from, or payable to, the taxation authority.
Voluntary tax transparency code
The Group is a signatory to the Tax Transparency Code. Further information on the Group’s statutory taxes, levies and GST are disclosed in the
Tax Transparency section of the Annual Report.
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OPERATIONS
3. TAXES CONTINUED
b) Reconciliation between net profit and income tax benefit
Profit/(Loss) before tax for the year
Less: (Profit)/Loss attributed to the Trust and not subject to tax 1
Net profit before tax attributable to securityholders of Vicinity Limited
Prima facie income tax expense at 30%
Tax effect of amounts not taxable in calculating income tax expense:
Net adjustment relating to share based payments
Other permanent differences
Prior period adjustments
Increase/(Decrease) in unrecognised deferred tax assets (allowable deductions)
Income tax benefit/(expense)
30 Jun 22
$m
30 Jun 21
$m
1,207.6
(1,194.5)
13.1
(3.9)
0.3
(1.7)
0.2
12.7
7.6
(247.1)
252.2
5.1
(1.5)
(0.7)
(0.1)
(0.3)
(8.3)
(10.9)
1. As outlined above, taxable income from the Trust’s property investments is taxed on a flow through basis in the hands of the Trust’s securityholders. Includes adjustment
for $12.5 million income tax benefit recognised by Vicinity Limited which has been recorded against the Vicinity Group’s unrecognised deferred tax assets disclosed
below (30 June 2021: $8.8 million expense).
c) Movement in temporary differences
Significant Judgement and Estimate including the impact of the COVID-19 pandemic
The forecasts of future taxable income are based on the Group’s budgeting and planning process and adjusted for tax specific consequences for
the Company. This process requires estimates to be made in developing assumptions about income and expenses (and their tax consequences)
in future periods and significant judgement is applied in determining the length of the future time period to use in the assessment.
The pandemic has continued to cause a degree of uncertainty in determining certain key assumptions within the assessment of future taxable
income of the Company, particularly around the future fund, property, and development management fee revenues, which are linked to the
underlying performance and valuation of the investment properties under management by the Company and the timing and execution of the
Group’s property development activities. If the assumptions differ from management’s estimates, this may result in additional recognition or
reversal of deferred tax assets in future financial periods.
A summary of the movements in deferred tax balances is as follows:
At 30 June 2020
Current tax expense
Adjustment of current tax of prior periods
Deferred income tax movements
Transfers
At 30 June 2021
Current tax expense
Adjustment of current tax of prior periods
Deferred income tax movements
Transfers
At 30 June 2022
Provisions
$m
Other
$m
Tax losses
$m
11.0
–
–
8.2
–
19.2
–
–
5.2
–
24.4
6.4
–
–
(1.7)
0.4
5.1
–
–
(4.9)
0.2
0.4
55.2
(8.8)
(0.3)
(8.3)
(0.4)
37.4
(4.9)
(0.5)
12.7
(0.2)
44.5
Total
$m
72.6
(8.8)
(0.3)
(1.8)
–
61.7
(4.9)
(0.5)
13.0
–
69.3
Unrecognised deferred tax assets comprising of unused tax losses totalled $9.4 million at 30 June 2022 (30 June 2021: $21.8 million). These unrecognised
deferred tax assets do not expire.
Vicinity Annual Report 2022Chairman’s LetterCEO's LetterOur PerformanceOur PeopleOur DestinationsOur Business Snapshot OPERATIONS
85
4. INVESTMENT PROPERTIES
The Group’s investment properties represent freehold and leasehold interests in land and buildings held either to derive rental income or for
capital appreciation, or both. They are initially measured at cost, including related transaction costs. Subsequently, at each reporting period, they
are carried at their fair values based on the market value, being the price that would be received to sell an investment property in an orderly,
arm’s length transaction between market participants at the reporting date.
Fair values for investment properties are determined by independent (external) valuers or internal valuations. These valuations include the cost
of capital works in progress on development projects.
a) Portfolio summary
Shopping centre type
Super Regional
Major Regional
Central Business Districts
Regional 1
Outlet Centre
Sub Regional 1,2
Neighbourhood
Planning and holding costs 3
Total
Add: Investment property leaseholds 4
Total investment properties
30 Jun 22
30 Jun 21
Number
of properties
1
7
7
8
8
23
3
–
57
Value
$m
3,137.5
2,027.5
2,000.5
1,776.8
2,264.5
2,558.8
193.0
50.4
14,009.0
357.4
14,366.4
Weighted
average
cap rate
%
Number
of properties
3.88
5.85
4.94
6.14
5.54
6.12
5.68
n/a
5.30
1
7
7
9
7
23
3
–
57
Weighted
average
cap rate
%
3.88
5.92
4.97
6.58
5.93
6.57
6.23
n/a
5.50
Value
$m
3,016.0
2,012.0
1,965.0
1,702.6
1,744.9
2,289.3
167.5
40.6
12,937.9
356.4
13,294.3
1. Ellenbrook Central was reclassified from Sub Regional to Regional due to the increase in its gross lettable area (GLA) post completion of its redevelopment during the year.
2. Box Hill Central (North Precinct) is not included in the weighted average cap rate at 30 June 2022 given the valuation for the property was derived based on a ‘project
related site assessment’ method.
3. Planning and holding costs relating to planned major development projects are capitalised and carried within the overall investment property balance. The status of
each project is reviewed each period to determine if continued capitalisation of these costs remains appropriate.
4. Refer to Note 18(a) for further details of investment property leasehold balances.
b) Movements for the year
The following investment property transactions occurred during the year:
– Acquisition of 50% interest in Harbour Town Premium Outlets Centre on the Gold Coast for $358.0 million 1 on 30 November 2021; and
– Sale of 50% interest in Runaway Bay Centre on 9 May 2022 for $132.0 million 1.
A reconciliation of the movements in investment properties is shown in the table below.
Opening balance at 1 July
Acquisitions including associated stamp duty and transaction costs
Capital expenditure 2
Capitalised borrowing costs 3
Disposals including transaction costs
Property revaluation increment/(decrement) for directly owned properties 4
Stamp duty written off on acquisition of investment property
Amortisation of incentives and leasing costs 5
Straight-lining of rent adjustment 5
Closing balance at 30 June
30 Jun 22
$m
30 Jun 21
$m
12,937.9
381.2
275.1
1.5
(130.4)
632.7
(22.6)
(62.5)
(3.9)
13,521.9
13.0
153.2
0.4
(50.6)
(643.6)
–
(58.3)
1.9
14,009.0
12,937.9
1. Amount excludes transaction costs and stamp duty incurred on acquisition.
2. Includes development costs, maintenance capital expenditure, lease incentives, fit-out and other capital costs.
3. Borrowing costs incurred in the construction of qualifying assets have been capitalised at a weighted average rate of 4.2% (30 June 2021: 3.9%).
4. The property revaluation increment of $632.7 million is before the addition of investment property leaseholds (30 June 2021: $643.6 million revaluation decrement).
The $633.3 million revaluation increment (30 June 2021: $642.7 million revaluation decrement) presented within the Statement of Comprehensive Income includes
a $0.6 million revaluation increment (30 June 2021: $0.9 million revaluation increment) of investment property leaseholds held at fair value.
5. For leases where Vicinity is the lessor in the lease arrangement.
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OPERATIONS
4. INVESTMENT PROPERTIES CONTINUED
c) Portfolio valuation
Significant Judgement and Estimate including the impact
of the COVID-19 pandemic
The Group’s valuation process is governed by the Board and
the internal management Investment and Capital Committee.
The process is reviewed periodically to consider regulatory changes,
changes in market conditions and other requirements where
relevant including the impact of COVID-19. The determination of
an investment property valuation requires assumptions to be made
which may not be based on observable market data in all instances
(i.e. capitalisation rates) and estimating the future impact of events
such as the COVID-19 pandemic and rising inflation and interest
rates. This means the valuation of an investment property requires
significant judgement and estimation.
All of the Group’s independent valuers have removed ‘material
valuation uncertainty’ clauses from their valuation reports as part
of the 30 June 2022 valuation process (30 June 2021: majority of
the Group’s independent valuers noted the existence of material
valuation uncertainty). This is primarily due to the availability of
comparable property transaction market evidence used to determine
market-based capitalisation and discount rates, and less likelihood
that state governments will enforce extended lockdowns in
the future.
Assets located in CBDs continue to experience headwinds as foot
traffic has yet to return to pre-pandemic levels, impacted by the
protracted return of office workers, and domestic and international
travellers. These factors mean that there continues to be specific
adjustments to the key valuation inputs of these assets at
30 June 2022.
Valuation process
The valuation process requires:
– Each property to be independently valued at least once per year;
– Independent valuers (who are selected from a pre-approved
panel) that are appropriately qualified. Qualified independent
valuers must be authorised by law to carry out such valuations
and have at least five years’ valuation experience (including at
least two years in Australia), and have been rotated across all
properties at a minimum every three years. The pre-approved
panel has been updated in the current year and all properties
have now been valued under the new appointments;
– Internal valuations to be undertaken at the end of the reporting
period (half-year and year-end) if a property is not due for an
independent valuation;
– Where an internal valuation shows a variance greater than
10% from the last independent valuation, a new independent
valuation to be undertaken (even if this results in a property
being independently valued twice in one year). Consideration
is also given to key metrics such as foot traffic, sales and rental
collections relative to pre COVID-19 levels;
– Internal valuations to be reviewed by a director of an independent
valuation firm to assess the assumptions adopted and the
reasonableness of the outcomes; and
– The Group to provide information to independent valuers on the
observed impacts of COVID-19 on each investment property.
Where relevant, the Group assess the reasonableness of
COVID-19 related adjustments incorporated by independent
valuers against the observed impacts of the pandemic on each
property and expected future impacts based on the facts and
circumstances existing at 30 June 2022.
As at 30 June 2022, 30 assets were independently valued (external)
and 27 assets were valued internally (30 June 2021: 36 independent
valuations and 21 internal valuations). Each property in the portfolio
however has been independently valued at least once in the financial
year, in-line with the Group’s valuation process.
Additional considerations for New South Wales investment
properties (30 June 2021)
For the year ended 30 June 2021, the Group considered that the
significant increase in COVID-19 cases observed in New South Wales
in June 2021, and the lockdown restrictions of Greater Sydney and
other regional areas effective 26 June 2021, provided enough evidence
at 30 June 2021 that further lockdown restrictions in New South Wales
were likely to continue to be implemented after the end of the period.
The independent valuers had not specifically considered a further
lockdown in New South Wales as likely prior to providing valuations
to the Group due to the close proximity of the increase in cases and
lockdowns to 30 June 2021. Accordingly, the Group made an internal
estimate of the impact of possible further lockdown restrictions on
independently determined 30 June 2021 fair values. This identified an
additional revaluation decrement of $10.8 million to the carrying value
of directly owned investment properties and an additional $2.0 million
of share of net losses of equity accounted investments at 30 June 2021,
based on a most likely scenario of restrictions implemented for up to
an eight-week period.
Valuation methodology
To determine the fair value of investment properties as at 30 June 2022:
– Independent valuations commonly adopt a fair value within the
range calculated with reference to the ‘capitalisation of net income’
and ‘discounted cash flow’ methods;
– Internal valuations utilise the latest available property financial
information in the ‘capitalisation of net income’ method with a
crosscheck using the discounted cash flow method;
– Both independent and internal valuations employ the ‘residual
value’ method when valuing development properties; and
– Where the fair value for a site is unlikely to be determined by
the current usage at the site (i.e. not based on the cashflows
generated from the current usage such as retail), the valuer may
employ a number of different methods to derive this valuation,
including a direct comparison of land value approach or a project
related site assessment valuation (based on the highest and best
use for the site at any given time).
Vicinity Annual Report 2022Chairman’s LetterCEO's LetterOur PerformanceOur PeopleOur DestinationsOur Business Snapshot 87
OPERATIONS
4. INVESTMENT PROPERTIES CONTINUED
c) Portfolio valuation continued
The table below details each valuation methodology:
Valuation method
Description
Discounted
cash flow
Projected cash flows for a selected investment period (usually 10 years) are derived from contracted or future estimates
of market rents, operating costs, lease incentives and capital expenditure.
The cash flows assume the property is sold at the end of the investment period (10 years) for a terminal value. This
terminal value is calculated by capitalising in perpetuity assumed market rent income at the end of the investment
period by an appropriate terminal yield, except for leasehold properties where the terminal value may be calculated by
other methodology to account for the finite term remaining on the ground lease at that time.
Fair value is determined to be the present value of these projected cash flows, which is calculated by applying a
market-derived discount rate to the cash flows.
The fully leased annual net income of the property is capitalised in perpetuity from the valuation date, except for
leasehold properties where in most instances, depending on the term remaining on the ground lease, the fully leased
annual net income of the property is capitalised for the remaining ground lease term. Various adjustments are then
made to the calculated result, including estimated future incentives, capital expenditure, vacancy allowances and
reversions to market rent. The capitalisation rate reflects the nature, location and tenancy profile of the property
together with current market investment criteria, as evidenced by current market transactions.
Capitalisation
of net income
Residual value
(for properties
under development)
The value of the asset on completion is calculated using the capitalisation of net income and discounted cash flow
methods as described above, based on the forecast income profile at development completion. The estimated cost
to complete the development, including construction costs and associated expenditures, finance costs, and an
allowance for developer’s risk and profit, and post development stabilisation is deducted from the value of the asset
on completion to derive the current value.
Project related
site assessment
valuation
Where the fair (and highest) value of the asset is unlikely to be derived from the cashflows of its current usage
(e.g. retail), the valuation may have regard to a likely redevelopment of the site and the residual value a purchaser
may pay for the site today given a market accepted profit margin (determined by the level of risk associated with
developing the site).
Key assumptions and inputs
As the capitalisation of income and discounted cash flow valuation methods include key inputs that are not based on observable market data
(namely derived capitalisation and discount rates), investment property valuations are considered “Level 3” of the fair value hierarchy (refer to
Note 24 for further details on the fair value hierarchy).
Key unobservable inputs used by the Group in determining the fair value of its investment properties are summarised below.
30 Jun 22
30 Jun 21
Unobservable inputs
Capitalisation rate 1
Discount rate 2
Terminal yield 3
Expected downtime (for tenants vacating)
Range of inputs
3.88% – 8.00%
6.00% – 8.50%
4.13% – 7.75%
3 to 13 months
Weighted
average
inputs
5.30%
6.49%
5.51%
8 months
Weighted
average
Range of inputs
inputs Sensitivity
3.88% – 8.00%
6.00% – 9.00%
4.13% – 8.00%
3 to 15 months
5.50% The higher the capitalisation rate,
6.74%
discount rate, terminal yield, and
5.70%
expected downtime due to tenants
vacating, the lower the fair value.
7 months
Market rents and rental growth rate
1.94% – 3.40%
2.95%
2.13% – 3.22%
2.81%
The higher the assumed market
rent and rental growth rate, the
higher the fair value.
1. The capitalisation rate is the required annual yield of net market income used to determine the value of the property. The rate is determined with regards to comparable
market transactions.
2. The discount rate is a required annual total rate of return used to convert the forecast cash flow of an asset into present value terms. It should reflect the required rate of
return of the property given its risk profile relative to competing uses of capital. The rate is determined with regards to comparable market transactions.
3. The terminal yield is the capitalisation rate used to convert forecast annual income into a forecast asset value at the end of the holding period when carrying out a
discounted cash flow calculation. The rate is determined with regards to comparable market transactions and the expected risk inherent in the cash flows at the end
of the cash flow period. Leasehold properties with tenure less than 20 years (at the end of the 10-year investment horizon) have been excluded from this sensitivity for
comparative reasons given the terminal value calculation can differ to take into account the finite term remaining on the leasehold at that time.
Net ZeroOur Management of RiskGovernanceTax TransparencySustainability AssuranceSecurityholder InformationFinancial Report 88
OPERATIONS
4. INVESTMENT PROPERTIES CONTINUED
c) Portfolio valuation continued
Key assumptions and inputs continued
The key inputs and assumptions at 30 June 2022 have also incorporated specific unobservable adjustments relating to COVID-19. These
adjustments reduced investment property fair values and included (where appropriate):
– Allowances for rental waivers and tenant support ranging from nil-5 months on average at each property to be provided to tenants impacted
by past lockdowns instigated by state governments as a response to the COVID-19 outbreaks (30 June 2021: range from nil-7 months across
the portfolio);
– Additional capital, downtime and stabilisation allowances for the replacement of existing tenants that do not renew lease agreements or for
tenants that are expected to take longer to recover;
– Lower short to medium term market rent growth rates for CBD properties due to anticipated prolonged recovery period; and
– Higher than historical average allowance for tenant incentives to lease space at assets over the short to medium term.
All the above key assumptions have been taken from the latest external valuation reports and internal valuation assessments (where applicable).
For all investment properties except for Box Hill North, the current use is considered the highest and best use. For Box Hill North, the highest and
best use is a mixed-use development site.
Sensitivity analysis
The following sensitivities illustrate the impact of changes in key unobservable inputs (in isolation) on the fair value of the Group’s investment
properties at 30 June 2022. Specific key unobservable inputs may impact only the capitalisation of net income method, the discounted cash
flow method or both methods.
Discounted cash flow method
30 Jun 22
$m
Actual valuation 1
Impact on actual valuation
Resulting valuation
Capitalisation of net income method
30 Jun 22
$m
Actual valuation 1
Impact on actual valuation
Resulting valuation
Carrying
value
13,958.6
Carrying
value
13,958.6
Discount
rate
-0.25%
Discount
rate
+0.25%
10-year rental
growth rate
-0.25%
10-year rental
growth rate
+0.25%
+266.3
14,224.9
(260.4)
13,698.2
(211.3)
13,747.3
+214.6
14,173.2
Capitalisation
rate
-0.25%
Capitalisation
rate
+0.25%
+726.3
14,684.9
(655.1)
13,303.5
1. Excludes planning and holding costs and investment property leaseholds.
d) List of investment properties held
The tables below summarise the carrying value for each investment property.
i.
Super Regional
Chadstone
Total Super Regional
ii. Major Regional
Bankstown Central
Bayside
Galleria
Mandurah Forum
Northland
Roselands
The Glen
Total Major Regional
Carrying value
Ownership
interest %
Valuation type
30 Jun 22
30 Jun 22
$m
30 Jun 21
$m
50
Independent
3,137.5
3,137.5
3,016.0
3,016.0
Ownership
interest %
Valuation type
30 Jun 22
30 Jun 22
$m
30 Jun 21
$m
Carrying value
50
100
50
50
50
50
50
Internal
Internal
Internal
Internal
Independent
Internal
Independent
260.0
435.0
225.0
217.5
402.5
167.5
320.0
260.5
430.0
235.0
217.5
402.5
139.0
327.5
2,027.5
2,012.0
Vicinity Annual Report 2022Chairman’s LetterCEO's LetterOur PerformanceOur PeopleOur DestinationsOur Business Snapshot OPERATIONS
4. INVESTMENT PROPERTIES CONTINUED
d) List of investment properties held continued
iii. Central Business Districts
Emporium Melbourne
Myer Bourke Street
Queen Victoria Building 1
QueensPlaza
The Galeries
The Myer Centre Brisbane
The Strand Arcade
Total Central Business Districts
1. The title to this property is leasehold and expires in 2083.
iv. Regional
Broadmeadows Central
Colonnades
Cranbourne Park
Eastlands
Elizabeth City Centre
Ellenbrook Central 1
Grand Plaza
Rockingham Centre
Runaway Bay Centre 2
Total Regional
89
Ownership
interest %
Valuation type
30 Jun 22
30 Jun 22
$m
30 Jun 21
$m
Carrying value
50
33
50
100
50
25
50
Internal
Internal
Independent
Internal
Independent
Independent
Independent
522.5
135.0
279.0
695.0
153.0
105.0
111.0
520.0
135.0
270.3
665.0
146.5
118.8
109.4
2,000.5
1,965.0
Ownership
interest %
Valuation type
30 Jun 22
30 Jun 22
$m
30 Jun 21
$m
Carrying value
100
50
50
100
100
100
50
50
–
Independent
Independent
Independent
Internal
Internal
Internal
Independent
Independent
–
283.5
138.3
147.5
178.0
322.0
270.0
215.0
222.5
–
260.4
113.2
127.0
163.0
290.0
250.0
182.0
210.0
107.0
1,776.8
1,702.6
1. The classification changed from Sub Regional to Regional at 30 June 2022 due to increase in GLA post completion of its redevelopment during the year.
2. Disposed of during the year.
v. Outlet Centre
DFO Brisbane 1
DFO Essendon 2
DFO Homebush
DFO Moorabbin 3
DFO Perth 4
DFO South Wharf 5
DFO Uni Hill
Harbour Town Premium Outlets Centre 6
Total Outlet Centre
Ownership
interest %
Valuation type
30 Jun 22
30 Jun 22
$m
30 Jun 21
$m
Carrying value
100
100
100
100
50
100
50
50
Independent
Internal
Internal
Independent
Internal
Independent
Internal
Internal
72.0
176.0
675.0
102.0
122.0
665.0
75.0
377.5
67.0
165.0
626.9
104.0
110.0
610.0
62.0
–
2,264.5
1,744.9
1. The right to operate the DFO Brisbane business expires in 2046.
2. The title to this property is leasehold and expires in 2048.
3. The title to this property is leasehold with an option to extend the ground lease to 2034 at the Group’s discretion.
4. The title to this property is leasehold and expires in 2047.
5. The title to this property is leasehold and expires in 2108.
6. Acquired during the year.
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OPERATIONS
4. INVESTMENT PROPERTIES CONTINUED
d) List of investment properties held continued
vi. Sub Regional
Altona Gate Shopping Centre
Armidale Central
Box Hill Central (North Precinct)
Box Hill Central (South Precinct) 1
Buranda Village
Carlingford Court
Castle Plaza
Gympie Central
Halls Head Central
Karratha City
Kurralta Central
Lake Haven Centre
Livingston Marketplace
Maddington Central
Mornington Central
Nepean Village
Northgate
Roxburgh Village
Sunshine Marketplace
Taigum Square
Warriewood Square
Warwick Grove
Whitsunday Plaza
Total Sub Regional
Ownership
interest %
Valuation type
30 Jun 22
30 Jun 22
$m
30 Jun 21
$m
Carrying value
100
100
100
100
100
50
100
100
50
50
100
100
100
100
50
100
100
100
50
100
50
100
100
Internal
Independent
Independent
Internal
Independent
Independent
Independent
Internal
Independent
Independent
Independent
Internal
Independent
Internal
Internal
Internal
Independent
Internal
Independent
Internal
Independent
Internal
Internal
112.0
36.6
125.0
248.0
42.5
111.2
168.7
80.0
41.8
51.2
55.8
300.0
88.0
101.0
47.0
206.0
97.0
106.0
65.5
96.0
140.5
173.0
66.0
107.0
34.5
118.0
203.0
38.0
98.6
142.0
72.5
38.3
49.3
45.5
270.0
79.5
90.0
35.0
201.3
83.0
93.0
61.5
89.0
127.8
152.0
60.5
2,558.8
2,289.3
1. The title to this property is leasehold with options to extend the ground lease to 2134 at the Group’s discretion.
vii. Neighbourhood
Dianella Plaza
Oakleigh Central
Victoria Park Central
Total Neighbourhood
Ownership
interest %
Valuation type
30 Jun 22
30 Jun 22
$m
30 Jun 21
$m
Carrying value
100
100
100
Independent
Independent
Independent
76.0
90.0
27.0
193.0
63.0
80.0
24.5
167.5
e) Future undiscounted lease payments to be received from operating leases
The Group’s investment properties are leased to tenants under operating leases with rentals payable monthly. Future minimum undiscounted
lease payments to be received for the non-cancellable period of operating leases of investment properties are shown in the table below. These
include amounts to be received for recovery of property outgoings for tenants on gross leases which will be accounted for as revenue from
contracts with customers when earned 1. Rentals which may be received when tenant sales exceed set thresholds and separately invoiced
amounts for recovery of property outgoings are excluded 1.
The amounts shown in the table below have not been adjusted for the possible impacts of further rental waivers and deferrals to tenants as a
result of the pandemic as disclosed in Notes 2 and 11 which, once agreed, may reduce the future lease payments to be received disclosed below.
Not later than one year
Two years
Three years
Four years
Five years
Later than five years
30 Jun 22
$m
30 Jun 21
$m
840.9
709.4
555.1
441.2
327.0
817.9
817.8
686.7
555.2
410.9
305.2
796.3
Total undiscounted lease payments to be received from operating leases
3,691.5
3,572.1
1. Refer to Note 2 for the proportion of revenue earned relating to the recovery of property outgoings.
Vicinity Annual Report 2022Chairman’s LetterCEO's LetterOur PerformanceOur PeopleOur DestinationsOur Business Snapshot 91
OPERATIONS
5. EQUITY ACCOUNTED INVESTMENTS
Equity accounted investments primarily consists of:
– Investment property joint ventures with strategic partners where the property ownership interest is held through a jointly owned trust rather
than direct ownership into the property title. The Group has contractual arrangements that establish joint control over the economic activities
of these trusts, based on standard market terms; and
– Investment in an e-commerce business (Global Marketplace Pty Ltd), during the year where the Group has significant influence.
These investments are accounted for using the equity method.
a) Summary of equity accounted investments
Chatswood Chase Sydney (Joint Venture) 1,2
Victoria Gardens Retail Trust (Joint Venture) 2
Vicinity Asset Operations Pty Ltd (Associate)
Global Marketplace Pty Ltd (Associate)
Closing balance
Ownership
Carrying value
30 Jun 22
%
30 Jun 21
%
30 Jun 22
$m
30 Jun 21
$m
51
50
40
20
51
50
40
–
416.4
87.5
0.4
9.5
513.8
404.7
74.6
0.1
–
479.4
1. Investment in joint venture held through CC Commercial Trust. The Group and its joint venture partner each have equal voting rights over the relevant activities of the
joint venture.
2. The assets of investment property joint ventures substantially consist of investment properties held at fair value. As such the value of equity accounted investments
recognised by the Group is subject to the same significant judgement and estimate as disclosed in Note 4(c).
b) Movements for the year
Opening balance
Additional investments made during the year
Share of net gain/(loss) of equity accounted investments
Distributions of net income declared by equity accounted investments
Closing balance
30 Jun 22
$m
30 Jun 21
$m
479.4
40.8
15.9
(22.3)
513.8
527.6
6.6
(34.2)
(20.6)
479.4
c) Summarised financial information of joint ventures
Chatswood Chase Sydney
Summarised financial information represents 51% of the underlying financial information of the Chatswood Chase Sydney joint venture.
Investment properties (non-current)
Other net working capital
Net assets
Total revenue and income
Aggregate net loss after income tax
30 Jun 22
$m
30 Jun 21
$m
417.5
(1.1)
416.4
24.4
(0.3)
430.8
(26.1)
404.7
26.2
(32.5)
Victoria Gardens Retail Trust
Summarised financial information represents 50% of the underlying financial statement information of the Victoria Gardens Retail Trust joint venture.
Investment properties (non-current)
Interest bearing liabilities (non-current)
Other net working capital
Net assets
Total revenue and income
Interest expense
Aggregate net gain/(loss) after income tax
30 Jun 22
$m
30 Jun 21
$m
158.6
(68.2)
(2.9)
87.5
9.8
(0.1)
16.9
146.8
(68.6)
(3.6)
74.6
9.2
(1.9)
(1.6)
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OPERATIONS
5. EQUITY ACCOUNTED INVESTMENTS CONTINUED
d) Related party transactions with equity accounted investments during the year
Chatswood Chase Sydney
Asset management fees earned by the Group for management services provided to Chatswood Chase Sydney totalled $5,548,000
(30 June 2021: $4,164,000). At 30 June 2022, no amounts remain payable to the Group (30 June 2021: $nil). Distribution income from the Group’s
investment in Chatswood Chase Sydney was $18,256,000 (30 June 2021: $17,714,000) with $339,000 remaining receivable at 30 June 2022
(30 June 2021: $24,758,000).
Victoria Gardens Retail Trust
Asset management fees earned by the Group for management services provided to Victoria Gardens Retail Trust totalled $2,322,000
(30 June 2021: $1,706,000). At 30 June 2022, no amounts remain payable to the Group (30 June 2021: $nil). Distribution income from the Group’s
investment in Victoria Gardens Retail Trust was $3,999,000 (30 June 2021: $2,508,000) with $6,178,000 remaining receivable at 30 June 2022
(30 June 2021: $3,679,000).
Vicinity Asset Operations Pty Ltd
Rent and outgoings earned from VAO as a tenant of the Group’s centres was $4,473,000 (30 June 2021: $2,123,000). Dividends paid to the Group
were $nil (30 June 2021: $375,000). The Group has receivables from VAO of $1,383,000 at 30 June 2022 (30 June 2021: $923,000).
6. EARNINGS PER SECURITY
The basic and diluted earnings per security for the Group are calculated below in accordance with the requirements of AASB 133 Earnings per Share.
Basic earnings per security is determined by dividing the net profit or loss after income tax by the weighted average number of securities
outstanding during the year.
Diluted earnings per security adjusts the weighted average number of securities for the weighted average number of performance rights on issue.
Basic and diluted earnings per security are as follows:
Earnings per security attributable to securityholders of the Group:
Basic earnings per security (cents)
Diluted earnings per security (cents) 1
Earnings per security attributable to securityholders of the Parent:
Basic earnings per security (cents)
Diluted earnings per security (cents)
30 Jun 22
30 Jun 21
26.69
26.64
0.18
0.18
(5.67)
(5.67)
0.07
0.07
1. For the year ended 30 June 2021, this was calculated using the weighted average number of securities used as the denominator in calculating basic earnings per security
as the Group recorded a loss after tax.
The following net profit/(loss) after income tax amounts are used as the numerator in calculating earnings per stapled security of the Group and
the Parent:
Earnings used in calculating basic and diluted earnings per security of the Group
Earnings used in calculating basic and diluted earnings per security of the Parent
30 Jun 22
$m
30 Jun 21
$m
1,215.2
8.2
(258.0)
3.0
The following weighted average number of securities are used in the denominator in calculating earnings per security of the Group and the Parent:
Weighted average number of securities used as the denominator in calculating basic earnings per security
Adjustment for potential dilution from performance rights on issue
Weighted average number of securities and potential securities used as the denominator in calculating
diluted earnings per security
30 Jun 22
Number
(m)
4,552.2
9.1
30 Jun 21
Number
(m)
4,551.5
8.2
4,561.3
4,559.7
Vicinity Annual Report 2022Chairman’s LetterCEO's LetterOur PerformanceOur PeopleOur DestinationsOur Business Snapshot CAPITAL STRUCTURE AND FINANCIAL RISK MANAGEMENT
93
7. INTEREST BEARING LIABILITIES AND DERIVATIVES
Interest bearing liabilities are initially recognised at fair value, net of transaction costs incurred and subsequently measured at amortised cost
using the effective interest rate method. Foreign currency denominated notes are translated to AUD at the applicable exchange rate at year end
with the gain or loss attributable to exchange rate movements recognised in the Statement of Comprehensive Income.
During the year, the following financing activities have occurred:
– $300.0 million six-year inaugural Green Bond was issued under Vicinity’s Sustainable Finance Framework which is aligned with global
market standards for sustainable debt and the United Nations Sustainable Development Goals.
– Net drawdowns of $573.0 million of bank debt were made throughout the period to fund the acquisition of Harbour Town Premium Outlets
Centre and capital expenditure requirements, net of the sale proceeds of Runaway Bay.
– $400.0 million of bank debt limit cancellations.
a) Summary of facilities
The following table outlines the Group’s interest bearing liabilities at balance date:
Current liabilities
Unsecured
US Private Placement Notes (USPPs)
Total current liabilities
Non-current liabilities
Unsecured
Bank debt
AUD Medium Term Notes (AMTNs) 1
GBP European Medium Term Notes (GBMTNs)
HKD European Medium Term Notes (HKMTNs)
USPPs
EUR European Medium Term Notes (EUMTNs)
Deferred debt costs 2
Total non-current liabilities
Total interest bearing liabilities
30 Jun 22
$m
30 Jun 21
$m
40.0
40.0
233.0
1,158.1
615.6
118.2
842.6
755.9
(10.9)
3,712.5
3,752.5
–
–
76.0
857.4
642.9
109.9
822.8
786.7
(13.8)
3,281.9
3,281.9
1. Non-current unsecured AMTNs include $60.0 million issued under the Group’s EUMTN programme and $300.0 million Green Bond.
2. Deferred debt costs comprise the unamortised value of borrowing costs paid on establishment or refinance of debt facilities. These costs are deferred on the Balance
Sheet and amortised at the effective interest rate to borrowing costs in the Statement of Comprehensive Income.
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CAPITAL STRUCTURE AND FINANCIAL RISK MANAGEMENT
7. INTEREST BEARING LIABILITIES AND DERIVATIVES CONTINUED
b) Facility maturity and availability
The charts below outline the maturity of the Group’s total available facilities at 30 June 2022 by type, and the bank to capital markets debt ratio.
Of the $5,585.9 million total available facilities (30 June 2021: $5,686.0 million), $1,842.0 million remains undrawn at 30 June 2022 (30 June 2021:
$2,399.0 million).
AVAILABLE FACILITIES EXPIRY PROFILE ($M) 1
1,404.0
213.0
400.0
58.9
62.0
FY25
200.0
171.0
FY24
100.0
40.0
FY23
125.0
655.2
60.0
309.0
200.0
FY26
FY27
108.2
300.0
83.8
FY28
BANK TO CAPITAL MARKET
DEBT RATIO ($M,%)
3,510.9
63%
63%
812.3
114.2
169.4
FY29
FY30
FY31
Bank Debt Facility Limit
Capital Market Debt Outstanding
2,075.0
2,075.0
37%
37%
Bank debt drawn
USPP
AMTN
GBMTN
HKMTN
EUMTN
Bank debt undrawn
1. The carrying amount of the USPPs, GBMTNs, HKMTNs, EUMTNs and AMTNs in the Balance Sheet is net of adjustments for fair value items and foreign exchange
translation of -$19.4 million (30 June 2021: -$8.7 million). These adjustments are excluded from the calculation of total facilities available and amounts drawn as shown
in the charts. Additionally, deferred debt costs of $10.9 million (30 June 2021: $13.8 million) are not reflected in the amount drawn.
c) Borrowing costs
Borrowing costs consist of interest and other costs incurred in connection with borrowing funds (such as establishment fees, legal and other
fees). Borrowing costs are expensed to the Statement of Comprehensive Income using the effective interest rate method, except for borrowing
costs incurred for the development of investment properties which are capitalised to the cost of the investment property during the period of
development. Borrowing costs also include finance charges on lease liabilities.
Interest and other costs on interest bearing liabilities and derivatives
Amortisation of deferred debt costs
Amortisation of face value discounts
Amortisation of fair value adjustments relating to discontinuation of hedge accounting
Amortisation of AMTN, GBMTN and EUMTN fair value adjustment
Interest charge on lease liabilities
Capitalised borrowing costs
Total borrowing costs
30 Jun 22
$m
30 Jun 21
$m
155.6
4.5
1.7
(1.3)
–
28.6
(1.5)
187.6
136.0
4.5
1.9
(1.2)
(2.1)
26.9
(0.4)
165.6
d) Defaults and covenants
At 30 June 2022, the Group had no defaults on debt obligations or breaches of lending covenants (30 June 2021: nil).
e) Derivatives
As detailed further in Note 8, derivative instruments are held to hedge against the interest rate risk and foreign currency risk of the Group’s
borrowings. Derivatives are initially recognised at fair value and subsequently remeasured to their fair value at each reporting period. The fair
value of these derivatives is estimated using valuation techniques, including referencing to the current fair value of other instruments that are
substantially the same or calculation of discounted cash flows. These valuation techniques use observable Level 2 inputs, mainly interest rates
and interest rate curves as well as foreign currency rates and foreign currency curves.
In respect of derivative financial instruments within the Statement of Comprehensive Income:
– Movements in fair value are recognised within net mark-to-market movement on derivatives; and
– The net interest received or paid is included within borrowing costs.
Vicinity Annual Report 2022Chairman’s LetterCEO's LetterOur PerformanceOur PeopleOur DestinationsOur Business Snapshot 95
CAPITAL STRUCTURE AND FINANCIAL RISK MANAGEMENT
7. INTEREST BEARING LIABILITIES AND DERIVATIVES CONTINUED
e) Derivatives continued
The carrying amount and notional principal amounts of these instruments are shown in the table below:
Interest rate swaps (floating to fixed)
Total current assets
Cross currency swaps (pay AUD floating receive USD fixed)
Cross currency swaps (pay AUD floating receive GBP fixed)
Cross currency swaps (pay AUD floating receive HKD fixed)
Interest rate swaps (fixed to floating) 1 (30 June 2021: floating to fixed)
Total non-current assets
Interest rate swaps (fixed to floating)
Total current liabilities
Cross currency swaps (pay AUD floating receive GBP fixed)
Cross currency swaps (pay AUD floating receive USD fixed)
Cross currency swaps (pay AUD floating receive EUR fixed)
Interest rate swaps (floating to fixed) (30 June 2021: fixed to floating)
Total non-current liabilities
Total net carrying amount of derivative financial instruments
Carrying amount
Notional principal amount (AUD)
30 Jun 22
$m
30 Jun 21
$m
30 Jun 22
$m
30 Jun 21
$m
0.3
0.3
87.7
–
6.4
134.7
228.8
(1.0)
(1.0)
(8.2)
(72.1)
(152.9)
(9.7)
(242.9)
(14.8)
–
–
94.1
0.2
10.8
5.3
110.4
–
–
(0.1)
(8.0)
(30.8)
(174.9)
(213.8)
(103.4)
100.0
n/a
302.5
–
108.2
1,925.0
n/a
600.0
n/a
357.8
655.2
812.3
300.0
n/a
n/a
–
n/a
302.5
243.4
108.2
100.0
n/a
–
n/a
411.8
357.8
812.3
2,525.0
n/a
n/a
1. Notional value excludes the $300.0 million swaps with a forward start date in August 2025 (30 June 2021: $300.0 million). The fair value of this forward start contract at
30 June 2022 is included in the carrying value of $134.7 million (30 June 2021: $5.3 million).
f) Changes in interest bearing liabilities arising from financing activities
The table below details changes in the Group’s interest bearing liabilities arising from financing activities, including both cash and non-cash changes:
Opening balance
New bond issuance
Net drawdowns/(repayments) of borrowings
Foreign exchange rate adjustments recognised in profit and loss
Payment of deferred debt costs
Amortisation of face value discount
Amortisation of deferred debt costs
Maturity of AMTN
Fair value movements, non-cash
Closing balance
30 Jun 22
$m
30 Jun 21
$m
3,281.9
300.0
157.0
10.3
(1.6)
1.7
4.5
–
(1.3)
3,752.5
3,929.8
–
(422.0)
(77.5)
(1.5)
1.9
4.5
(150.0)
(3.3)
3,281.9
g) Fair value of interest bearing liabilities
As at 30 June 2022, the Group’s interest bearing liabilities had a fair value of $3,526.5 million (30 June 2021: $3,497.5 million).
The carrying amount of these interest bearing liabilities was $3,752.5 million (30 June 2021: $3,281.9 million). The difference between the carrying
amount and the fair value of interest bearing liabilities is due to:
– Deferred debt costs included in the carrying value which are not included in the fair value; and
– Movements in market discount rates on fixed rate interest bearing liabilities since initial recognition. As fair value is calculated by discounting
the contractual cash flows using prevailing market discount rates (with similar terms, maturity and credit quality) any movements in these
discount rates since initial recognition will give rise to differences between fair value and the carrying value (which is at amortised cost).
Had the fixed rate interest bearing liabilities been recognised at fair value, these would have been classified as Level 2 under the fair value hierarchy
as the market discount rates used are indirectly observable.
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CAPITAL STRUCTURE AND FINANCIAL RISK MANAGEMENT
8. CAPITAL AND FINANCIAL RISK MANAGEMENT
In the course of its operations the Group is exposed to certain financial risks that could affect the Group’s financial position and performance. This
note explains the sources of the risks below, how they are managed by the Group and exposure at reporting date:
– Interest rate risk, Note 8(a);
– Foreign exchange risk, Note 8(b);
– Liquidity risk, Note 8(c); and
– Credit risk, Note 8(d).
Information about the Group’s objectives for managing capital is contained in Note 8(e).
Risk management approach
The Group’s treasury team is responsible for the day to day management of the Group’s capital requirements and the financial risks identified
above. These activities are overseen by the internal management Capital Management Committee (CMC), operating under the CMC Charter and
the treasury policy. This policy is endorsed by the Audit Committee and approved by the Board. The overall objectives of the CMC are to:
– Ensure that the Group has funds available to meet all financial obligations, working capital and committed capital expenditure requirements;
– Monitor and ensure compliance with all relevant financial covenants and other undertakings under the Group’s debt facilities;
– Reduce the impact of adverse interest rate or foreign exchange movements on the Group’s financial performance and position using
approved financial instruments;
– Diversify banking counterparties to mitigate counterparty credit risk; and
– Ensure the Group treasury team operates in an appropriate control environment, with effective systems and procedures.
a)
Interest rate risk
Nature and sources of risk
Interest rate risk represents the potential for changes in market interest rates to impact the total interest expense on floating rate borrowings
(cash flow interest rate risk) or the fair value of derivatives (fair value interest rate risk) held by the Group.
Risk management
Interest rate swaps are used to manage cash flow interest rate risk by targeting a hedge ratio on the Group’s interest-bearing liabilities. Under the
terms of the interest rate swaps, the Group agrees to exchange, at specified intervals, amounts based on the difference between fixed interest
rates and the floating market interest rate calculated by reference to an agreed notional principal amount. None of these derivatives are currently
in designated hedge relationships. They are also not permitted to be entered into for speculative purposes and therefore the Group is not
significantly exposed to fair value interest rate risk.
Exposure
As at the balance date, the Group had the following exposure to cash flow interest rate risk:
Total interest bearing liabilities (Note 7(a))
Reconciliation to drawn debt
Deferred debt costs
Fair value and foreign exchange adjustments to GBMTNs
Fair value and foreign exchange adjustments to USPPs
Fair value adjustments to AMTNs
Foreign exchange adjustments to HKMTNs
Fair value and foreign exchange adjustments to EUMTNs
Total drawn debt
Less: Fixed rate borrowings
Variable rate borrowings exposed to cash flow interest rate risk
Less: Notional principal of outstanding interest rate swap contracts
Net variable rate borrowings exposed to cash flow interest rate risk
Hedge ratio 1
1. Calculated as net variable rate borrowings exposed to cash flow interest rate risk divided by total drawn debt less cash on term deposit.
30 Jun 22
$m
30 Jun 21
$m
3,752.5
3,281.9
10.9
39.6
(107.4)
1.9
(10.0)
56.4
3,743.9
(1,040.0)
2,703.9
13.8
12.3
(47.5)
2.6
(1.7)
25.6
3,287.0
(740.0)
2,547.0
(2,125.0)
(2,425.0)
578.9
84.5%
122.0
96.3%
Vicinity Annual Report 2022Chairman’s LetterCEO's LetterOur PerformanceOur PeopleOur DestinationsOur Business Snapshot CAPITAL STRUCTURE AND FINANCIAL RISK MANAGEMENT
97
8. CAPITAL AND FINANCIAL RISK MANAGEMENT CONTINUED
Interest rate risk continued
a)
Sensitivity
A shift in the floating interest rate of +/- 100 bps, assuming the net exposure to cash flow interest rate risk as at 30 June 2022 remains unchanged
for the next 12 months, would impact the Group’s cash interest cost for the next 12 months by $5.8 million (30 June 2021 +/- 25 bps: $0.3 million).
A shift in the forward interest rate curve of +/- 100 bps, assuming the net exposure to fair value interest rate risk as at 30 June 2022 remains
unchanged for the next 12 months, would impact net profit and equity for the next 12 months by $36.0 million (30 June 2021 +/- 25 bps: $5.6 million).
This sensitivity analysis should not be considered a projection.
b) Foreign exchange rate risk
Nature and sources of risk
Foreign exchange risk represents the potential for changes in market foreign exchange rates to impact the cash flows arising from the Group’s
foreign denominated interest bearing liabilities (cash flow foreign exchange rate risk) or the fair value of derivatives and the carrying value of
interest bearing liabilities (fair value foreign exchange rate risk) held by the Group.
Risk management
Cash flow foreign exchange rate risk is managed through the use of cross currency swaps, which swap the foreign currency interest payments
on foreign denominated interest bearing liabilities into Australian dollars and fix the exchange rate for the conversion of the principal repayment.
None of these derivatives are currently in designated hedge relationships. They are also not permitted to be entered into for speculative purposes
and therefore the Group is not significantly exposed to fair value foreign exchange risk.
Exposure
As at the balance date, the Group had entered into cross currency swaps with terms offsetting those of all foreign denominated interest bearing
liabilities and therefore had no significant net exposure to cash flow foreign exchange rate risk (30 June 2021: nil net exposure). The Group has
exposure to fair value foreign exchange risk on the valuation of the derivative financial instruments. The table below summarises the foreign
denominated interest bearing liabilities held by the Group. Details of cross currency swaps held are shown in Note 7(e).
Foreign denominated interest bearing liabilities
GBMTNs
HKMTNs
USPPs
EUMTNs
Foreign
currency
30 Jun 22
m
30 Jun 21
m
GBP £
HKD $
USD $
EUR €
350.0
640.0
523.0
500.0
350.0
640.0
523.0
500.0
Sensitivity
A shift in the forward GBP, HKD, EUR and USD exchange rate curves of +/- 5.0 cents, assuming the net exposure to fair value foreign exchange
rate risk as at 30 June 2022 remains unchanged for the next 12 months, would impact net profit and equity for the next 12 months by $1.3 million
(30 June 2021 +/- 5.0 cents: $24.8 million).
This sensitivity analysis should not be considered a projection.
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CAPITAL STRUCTURE AND FINANCIAL RISK MANAGEMENT
8. CAPITAL AND FINANCIAL RISK MANAGEMENT CONTINUED
c) Liquidity risk
Nature and sources of risk
Liquidity risk represents the risk that the Group will be unable to meet financial obligations as they fall due.
Risk management
To manage this risk, sufficient capacity under the Group’s financing facilities is maintained to meet the funding needs identified in the Group’s
latest forecasts. This is achieved through obtaining and maintaining funding from a range of sources (e.g. banks and Australian and foreign debt
capital markets), maintaining sufficient undrawn debt capacity and cash balances, and managing the amount of borrowings that mature, or
facilities that expire, in any one year.
Exposure
The contractual maturity of cash on term deposit, interest bearing liabilities and the interest payment profile on interest bearing liabilities and
derivatives are shown below. Estimated interest and principal payments are calculated based on the forward interest and foreign exchange rates
prevailing at year end and are undiscounted. Timing of payments is based on current contractual obligations. Refer to Note 12 for details on trade
payables and other financial liabilities and Note 18(b) for lease liabilities that are not included in the table below.
30 Jun 22
Bank debt
AMTNs
GBMTNs
HKMTNs
USPPs
EUMTNs
Estimated interest payments and line fees on borrowings
Estimated net interest rate swap cash (inflows)
Estimated gross cross currency swap cash outflows
Estimated gross cross currency swap cash (inflows)
Total contractual outflows
30 Jun 21
Bank debt
AMTNs
GBMTNs
HKMTNs
USPPs
EUMTNs
Estimated interest payments and line fees on borrowings
Estimated net interest rate swap cash outflow
Estimated gross cross currency swap cash outflows
Estimated gross cross currency swap cash (inflows)
Total contractual outflows
Less than
1 year
$m
–
–
–
–
40.0
–
132.8
(6.4)
80.8
(63.1)
184.1
Less than
1 year
$m
–
–
–
–
–
–
104.5
63.4
45.1
(61.3)
151.7
1 to 3
years
$m
233.0
600.0
–
–
85.0
–
233.2
(46.6)
317.8
(212.0)
Greater than
3 years
$m
–
560.0
649.5
126.0
791.3
910.4
236.1
(91.2)
2,556.1
(2,553.7)
Total
$m
233.0
1,160.0
649.5
126.0
916.3
910.4
602.1
(144.2)
2,954.7
(2,828.8)
1,210.4
3,184.5
4,579.0
1 to 3
years
$m
76.0
200.0
–
–
40.0
–
200.2
85.9
114.1
(123.0)
593.2
Greater than
3 years
$m
–
660.0
656.8
112.0
778.8
918.5
268.0
25.3
2,532.7
(2,594.2)
Total
$m
76.0
860.0
656.8
112.0
818.8
918.5
572.7
174.6
2,691.9
(2,778.5)
3,357.9
4,102.8
Vicinity Annual Report 2022Chairman’s LetterCEO's LetterOur PerformanceOur PeopleOur DestinationsOur Business Snapshot CAPITAL STRUCTURE AND FINANCIAL RISK MANAGEMENT
99
8. CAPITAL AND FINANCIAL RISK MANAGEMENT CONTINUED
d) Credit risk
Nature and sources of risk
Credit risk is the risk that a tenant or counterparty to a financial asset held by the Group fails to meet their financial obligations. The Group’s
financial assets that are subject to credit risk are bank deposits, tenant receivables and derivative financial assets.
Risk management
To mitigate credit risk in relation to derivative counterparties and bank deposits the Group has policies to limit exposure to any one financial
institution and only deal with those parties with high credit quality. To mitigate tenant credit risk, an assessment is performed taking into
consideration the financial background of the tenant and the amount of any security deposit or bank guarantee provided as collateral under the
lease, as is usual in leasing agreements. On an ongoing basis, trade receivable balances from tenants are monitored with the Group considering
receivables that have not been paid for 30 days after the invoice date as past due. The COVID-19 pandemic has increased credit risk on tenant
receivables as many of the Group’s tenants were unable or chose not to trade, or had their trade significantly impacted during the year. Note 11
further discusses the assessment of credit risk on tenant receivables at 30 June 2022.
Exposure
The maximum exposure to credit risk at the balance date is the carrying amount of the Group’s financial assets which are recognised within the
Balance Sheet net of allowance for losses. There are no significant concentrations of credit risk with any tenant or tenant group.
e) Capital management
The Group seeks to maintain a strong and conservative capital structure with appropriate liquidity, low gearing and a diversified debt profile
(by source and tenor). The Group has credit ratings of ‘A2/stable’ from Moody’s Investors Service and ‘A/stable’ from Standard & Poor’s.
Key metrics monitored are gearing ratio and interest cover ratio. These metrics are shown below.
Gearing ratio
The gearing ratio is calculated in the table below as:
– Drawn debt, net of cash; divided by
– Total tangible assets excluding cash, right of use assets, net investments in lease, investment property leaseholds and derivative financial assets.
Total drawn debt
Drawn debt net of cash
Total tangible assets excluding cash, right of use assets and net investments in leases, investment property
leaseholds and derivative financial assets
Gearing ratio (target range of 25.0% to 35.0%)
Note
8(a)
30 Jun 22
$m
30 Jun 21
$m
3,743.9
3,688.3
3,287.0
3,239.8
14,719.3
13,592.8
25.1%
23.8%
Interest cover ratio
The interest cover ratio (ICR) is calculated in accordance with the definitions within the Group’s bank debt facility agreements as follows:
– EBITDA which generally means the Group’s earnings before interest, tax, depreciation, amortisation, fair value adjustments and other items;
divided by
– Total interest expense.
The interest cover ratio was 4.7 times at 30 June 2022 (30 June 2021: 5.1 times).
Net ZeroOur Management of RiskGovernanceTax TransparencySustainability AssuranceSecurityholder InformationFinancial Report 100
CAPITAL STRUCTURE AND FINANCIAL RISK MANAGEMENT
9. CONTRIBUTED EQUITY
An ordinary stapled security comprises one share in the Company and one unit in the Trust. Ordinary stapled securities entitle the holder to
participate in distributions and the proceeds on winding up of the Group (if enacted) in proportion to the number of securities held. Ordinary
stapled securities are classified as equity. All ordinary securities are fully paid.
Incremental costs directly attributable to the issue of new stapled securities are shown in equity as a deduction, net of tax, from the proceeds.
Incremental costs directly attributable to the issue of new stapled securities for the acquisition of a business are not included in the cost of the
acquisition as part of the purchase consideration.
22.6 million Vicinity stapled securities were issued under the Security Purchase Plan in the year ended 30 June 2021.
Total stapled securities on issue at the beginning of the year
Staple securities issued (net of equity raising costs)
Total stapled securities on issue at the end of the year
10. DISTRIBUTIONS
a) Distributions for the year
Distributions in respect of the earnings:
For six-months to 30 June 2022 (30 June 2021)
For six-months to 31 December 2021 (31 December 2020)
Total distributions for the year
30 Jun 22
Number
(m)
4,552.2
–
4,552.2
30 Jun 21
Number
(m)
4,529.6
22.6
4,552.2
30 Jun 22
$m
30 Jun 21
$m
9,102.2
–
9,102.2
9,069.9
32.3
9,102.2
30 Jun 22
Cents 1
30 Jun 21
Cents 1
30 Jun 22
$m
30 Jun 21
$m
5.7
4.7
10.4
6.6
3.4
10.0
259.5
213.9
473.4
300.4
154.8
455.2
An interim distribution of 4.7 cents per VCX stapled security, which equates to $213.9 million, was paid on 8 March 2022.
On 17 August 2022, the Directors declared a distribution in respect of the Group’s earnings for the six-months to 30 June 2022 of 5.7 cents per
VCX stapled security, which equates to total final distribution of $259.5 million. The final distribution will be paid on 12 September 2022.
b) Distributions paid during the year
Distributions paid in respect of the earnings:
For six-months to 31 December 2021 (31 December 2020)
For six-months to 30 June 2021 (30 June 2020)
Total distributions paid during the year
1. Cents per VCX stapled security.
30 Jun 22
Cents 1
30 Jun 21
Cents 1
30 Jun 22
$m
30 Jun 21
$m
4.7
6.6
11.3
3.4
–
3.4
213.9
300.4
514.3
154.8
–
154.8
Vicinity Annual Report 2022Chairman’s LetterCEO's LetterOur PerformanceOur PeopleOur DestinationsOur Business Snapshot
WORKING CAPITAL
101
11. TRADE RECEIVABLES AND OTHER ASSETS
a) Summary
Trade receivables comprise amounts due from tenants of the Group’s investment properties under lease agreements and amounts receivable
from strategic partners under property management agreements. Trade receivables are initially recognised at the transaction price or fair value
and subsequently measured at amortised cost using the effective interest rate method, less an allowance for expected credit losses.
At 30 June 2022, the carrying value of trade receivables and other financial assets approximated their fair value.
Notes
30 Jun 22
$m
30 Jun 21
$m
Current trade receivables
Trade debtors
Deferred rent 1
Accrued income
Receivables from strategic partners
Less: estimated rent waivers
Less: allowance for expected credit losses
Total current trade receivables 2
Current other assets
Distributions receivable from joint ventures and associates
Prepayments
Land tax levies
Tenant security deposits held
Other
Total current other assets
Total current trade receivables and other assets
Non-current other assets
Deferred rent 1
Less: allowance for expected credit losses
Other
Total non-current other assets
11(b)
11(b)
11(b)
108.2
8.5
16.2
2.5
(20.6)
(54.8)
60.0
6.5
14.5
21.2
0.4
14.5
57.1
117.1
3.1
(1.4)
4.8
6.5
136.3
6.7
13.2
2.1
(51.0)
(77.3)
30.0
28.4
12.7
20.5
0.4
17.4
79.4
109.4
3.6
(2.6)
0.5
1.5
1. Under certain COVID-19 rent assistance agreements rents are deferred to be repaid at a later date.
2. Includes receivables relating to lease rental income, property outgoings recovery revenue and other property-related revenue. Refer to Note 2 for an analysis of the
Group’s revenue and income.
Significant Judgement and Estimate including the impact of the COVID-19 pandemic
The Group continued to negotiate with its impacted tenants as mandated by the SME Codes during the financial period, and with other impacted
tenants in accordance with the general principles of the SME Codes where applicable. Rental assistance provided to tenants has been in the
form of rent waivers, deferrals and/or other lease changes. As at 30 June 2022, negotiations for rental assistance remain in progress with certain
SME and non-SME tenants across the portfolio. The trade debtors balance remains elevated compared to pre-pandemic levels as certain tenants
continued to withhold contractual lease payments until these negotiations are finalised. Accordingly, the Group has included an estimate of the
rental waivers for agreements not yet completed (estimated rent waivers) within the allowance for ECLs (expected credit losses).
There continues to be significant estimation uncertainty in determining the allowance for ECLs at reporting date. Whilst the approach in
determining the allowance for ECLs is considered reasonable and supportable as discussed in Note 11(b), the key inputs and assumptions used
in the calculations of these amounts in the current environment is subject to significant uncertainty. This is driven by the uncertain outcome
of rental assistance negotiations, collection rates and the impact of rising inflation and interest rates on retailers. If these factors vary from
management’s estimate, this may result in a different outcome to the Group’s allowance for ECLs in future periods.
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WORKING CAPITAL
11. TRADE RECEIVABLES AND OTHER ASSETS CONTINUED
b) Allowance for expected credit losses
The allowance for ECLs represents the difference between cash flows contractually receivable by the Group and the cash flows the Group
expects to receive. For trade receivables, contract assets and lease receivables, the Group applies the simplified approach in calculating ECLs.
Therefore, the Group does not track the changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting
date. The recognition of an ECL however does not mean that the Group has ceased collection activities in relation to the amounts owed. Tenant
debt is considered to be in default and written off when contractual payments have not been made and management decides to no longer
pursue the amount.
The approach taken to determine the lifetime ECLs at 30 June 2022 is outlined below.
Approach
The Group’s ECL approach revolves around segregating the Group’s trade debtors balance into different segmentation based on the ongoing
rental assistance negotiations and the risk profile of the residual debt net of estimated rent waivers. The key inputs and assumptions used have
been refined to reflect historical outcomes and the dynamic nature of the underlying inputs as disclosed below.
The Group’s approach to and total allowance for ECLs as at 30 June 2022 contained the following components:
– Estimated rent waivers
$20.6 million (30 June 2021: $51.0 million) for estimated rent waivers from ongoing rental assistance negotiations across the portfolio.
– Allowance for estimated credit losses
$56.2 million (30 June 2021: $79.9 million) of allowance for estimated credit losses on trade debtors net of estimated rent waivers, grouped
according to the following:
■ Post 30 June 2020 trade debtors
$45.8 million (30 June 2021: $49.1 million) of allowances for the difference between cash flows contractually receivable by the Group
(after deducting estimated rent waivers and deferrals) and the cash flows the Group expects to receive, relating to billings originating after
1 July 2020. The estimate of cash flows remaining to be collected by the Group was determined by:
- Calculating the outstanding debt balance relating to vacated tenancies which have been assessed separately given the elevated credit
risk of this group of tenancies based on the Group’s historical experience on collections;
- Calculating the long-term average cash collection rates for certain segments of tenants (e.g., SMEs, Major Chains, and National Chains)
and centre types (e.g., CBD and non-CBD) observed across the portfolio (excluding vacated tenancies), adjusted for factors such
as current and planned collection activities, tenants’ financial position (if known) and other relevant information (if necessary).
The long-term average collection rates were determined across billings from the start of the pandemic, 1 April 2020 to 30 June 2021;
- Calculating the actual average cash collection rates for each centre or tenant (excluding vacated tenancies); and
- Applying these observed cash collection rates to the relevant outstanding debt balance, after deducting estimated rent waivers for
tenants where rental assistance negotiations have not commenced or finalised, vacated tenancies and deferrals, to ascertain an estimate
of the residual credit risk.
■ Pre 30 June 2020 trade debtors
An ECL of $6.6 million (30 June 2021: $14.2 million) has been recognised at 96% on average, of the debt outstanding to billings originating
from 30 June 2020 and prior (30 June 2021: 89%). Collection is viewed as highly unlikely given the outstanding debt is well overdue.
■ Deferred rent
$3.8 million allowance was recognised for ECLs on rentals deferred and expected to be deferred (30 June 2021: $16.6 million) based on the
Group’s historical experience on collections. On average this represents 30% of the total rentals for which payment is deferred and expected
to be deferred (30 June 2021: 74%).
Vicinity Annual Report 2022Chairman’s LetterCEO's LetterOur PerformanceOur PeopleOur DestinationsOur Business Snapshot WORKING CAPITAL
11. TRADE RECEIVABLES AND OTHER ASSETS CONTINUED
b) Allowance for expected credit losses continued
Movements in the allowance for ECLs
The movement in the allowance for ECLs in respect of trade receivables during the year was as follows:
Opening balance at 1 July
Amounts written off as uncollectible
Rental waivers granted
Net remeasurement of prior period allowances 1
Loss allowance on receivables originated during the current period
Closing balance at 30 June
103
30 Jun 22
$m
30 Jun 21
$m
(130.9)
10.5
57.3
60.6
(74.3)
(76.8)
(169.6)
5.8
120.9
72.4
(160.4)
(130.9)
1. The allowance for ECLs at 1 July was remeasured due to better outcomes than anticipated in the Group’s rent waiver negotiations and long-term average cash collection
rates relative to assumptions adopted previously. These outcomes have been incorporated into the key inputs used to determine the allowance for ECLs at 30 June 2022.
Sensitivities
The key inputs and assumptions in determining the allowance for ECLs were the likely outcome of rental waivers arising from rental assistance
negotiations to-date and the long-term average cash collection rates observed. The allowance for ECLs has the following sensitivity to changes
in these inputs:
– Estimated rent waivers: An increase or decrease of 5% of the average estimated rent waivers would result in a $1.0 million (30 June 2021:
$2.6 million) increase/decrease in the estimated rent waivers at 30 June 2022.
– Long-term average cash collection rates: An increase or decrease of 1% of the long-term average cash collection rates used as an input to
the calculation of ECLs for each tenant and centre type in the SME and National Chain segments would result in a $6.8 million decrease or
$4.7 million increase in the allowance for ECLs at 30 June 2022 (30 June 2021: $2.4 million decrease, $2.8 million increase).
12. PAYABLES AND OTHER FINANCIAL LIABILITIES
Payables and other financial liabilities represent liabilities for goods and services provided to the Group prior to the end of the financial year and
that are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are carried at amortised
cost and are not discounted due to their short-term nature.
At 30 June 2022, the carrying value of payables and other financial liabilities approximated their fair value.
Trade payables and accrued expenses
Lease rental income and property outgoings recovery revenue received in advance 1
Accrued interest expense
Accrued capital expenditure
Security deposits
Other
30 Jun 22
$m
30 Jun 21
$m
117.1
21.6
15.6
30.4
1.0
11.2
97.1
22.6
14.7
6.4
0.6
6.8
Total payables and other financial liabilities
196.9
148.2
1. Largely represents amounts received in advance relating to the following month’s lease rental income and property outgoings recovery revenue.
Net ZeroOur Management of RiskGovernanceTax TransparencySustainability AssuranceSecurityholder InformationFinancial Report 104
WORKING CAPITAL
13. PROVISIONS
Provisions comprise liabilities arising from employee benefits, such as annual leave and long service leave, as well as provisions for stamp duty,
land tax levies and other items for which the amount or timing of the settlement is uncertain as it is outside the control of the Group.
Where the provisions are not expected to be settled wholly within 12 months after the end of the annual reporting period in which the obligation
arises, the liability is discounted to present value based on management’s best estimate of the timing of settlement and the expenditure required
to settle the liability at the reporting date.
The discount rates used to determine the present value of employee-related provisions are determined by reference to market yields at the end
of the reporting period attaching to high quality corporate bonds with terms to maturity and currencies that match, as closely as possible, the
estimated future cash outflows of the related liability.
Current
Current employee entitlements
Other current provisions
Total current provisions
Non-current
Non-current employee entitlements
Other non-current provisions
Total non-current provisions
The movements for the year in other provisions are as follows:
Current
Stamp duty
Land tax levies
Other
Total other current provisions
Non-current
Other
Total other non-current provisions
30 Jun 22
$m
30 Jun 21
$m
59.3
21.8
81.1
3.7
0.3
4.0
52.5
27.3
79.8
3.7
0.2
3.9
30 Jun 21
$m
Arising during
the year
$m
Paid during
the year
$m
30 Jun 22
$m
6.0
20.5
0.8
27.3
0.2
0.2
–
21.2
–
21.2
0.3
0.3
(6.0)
(20.5)
(0.2)
(26.7)
(0.2)
(0.2)
–
21.2
0.6
21.8
0.3
0.3
Vicinity Annual Report 2022Chairman’s LetterCEO's LetterOur PerformanceOur PeopleOur DestinationsOur Business Snapshot REMUNERATION
105
14. KEY MANAGEMENT PERSONNEL
The remuneration of the Key Management Personnel (KMP) of the Group is disclosed in the Remuneration Report. The compensation of KMP
included in the Group’s financial statements comprises:
Short-term employee benefits – Executive KMP
Short-term employee benefits – Non-executive KMP
Termination benefits
Share based payments
Post-employment benefits
Other long-term employee benefits
Total remuneration of KMP of the Group
15. EMPLOYEE BENEFITS EXPENSE
Employee benefits expense consists of:
Salaries and wages
Share based payments expense
Other employee benefits expense
Total employee benefits expense
30 Jun 22
$’000
30 Jun 21
$’000
4,491
1,560
–
2,032
185
191
8,459
4,460
1,566
397
1,196
178
311
8,108
Note
16(a)
30 Jun 22
$m
30 Jun 21
$m
95.5
6.1
3.8
105.4
89.8
4.0
3.8
97.6
16. SHARE BASED PAYMENTS
The Group remunerates eligible employees through three equity settled compensation plans. These plans are designed to align executives’, senior
management’s and team members’ interests with those of securityholders by incentivising participants to deliver long-term shareholder returns.
A summary of each plan is described below:
Plan
Description
Long Term
Incentive (LTI)
Short Term
Incentive (STI)
Executive KMP, other members of the Executive Committee (EC) and other senior executives are granted performance
rights to acquire Vicinity securities for nil consideration, subjected to Total Shareholder Return (TSR) (50%) and Total
Return (TR) (50%) hurdles. In FY21, a one-off grant of restricted rights was made at 50% of the face value normally
attributable to TR. The performance rights vest after completion of a four-year service period and restricted rights vest
after completion of a 2 to 4 year service period and when certain hurdle requirements, which are set when the rights
are granted, are met. These hurdle requirements are set out in Note 16(c).
The STI provides the opportunity to receive an annual, performance based incentive award, when a combination of
short-term Group financial, strategy and portfolio enhancement, and individual performance objectives are achieved.
For executive KMP, other members of the EC and other senior executives, a portion of the annual STI payment is
deferred into equity for a period of 12 to 24 months. The amounts deferred will become available to the employee at
the end of the deferral period, provided they remain employed by the Group.
Tax Exempt
Restricted Securities
Plan (TERSO)
$1,000 worth of Vicinity securities are granted annually to eligible employees for nil consideration. Securities granted
under the plan are subject to a three-year trading restriction unless the employee ceases to be employed by the
Group. Participants in the LTI do not participate in the TERSO.
Further details relating to the LTI and STI plans are included in Note 16(c).
a) Share based payment expenses
The following expenses were recognised within employee benefits expense and share based payment reserves in relation to the share based
payment compensation plans:
Long Term Incentive
Short Term Incentive
Tax Exempt Restricted Securities Plan 1
Total share based payments
1. A total of 530,725 securities were granted under TERSO during the year (30 June 2021: 561,666).
30 Jun 22
$m
30 Jun 21
$m
2.9
2.3
0.9
6.1
2.0
1.1
0.9
4.0
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REMUNERATION
16. SHARE BASED PAYMENTS CONTINUED
b) Movements during the year
The movement in the number of LTI performance and restricted rights during the year was as follows:
Opening balance at the beginning of the year
Granted
Forfeited and lapsed 1
Vested 2
Outstanding at the end of the year
Exercisable at the end of the year
Weighted average remaining contractual life (years)
30 Jun 22
Number
9,070,491
5,229,765
(2,779,173)
(300,889)
30 Jun 21
Number
8,169,800
3,986,854
(3,086,163)
–
11,220,194
9,070,491
Nil
2.65
Nil
2.05
1. The performance hurdles of the FY19 LTI plan were tested during the year with no performance rights vested and 2,310,766 lapsed. An additional 468,407 rights were
forfeited under the FY20-FY22 LTI plans during the year (30 June 2021: 2,314,791 rights lapsed under the FY18 LTI plan and 771,372 rights were forfeited under the FY19-
FY21 LTI Plans).
2. The FY21 LTI Tranche 1 Restrictive Rights vested during the year.
c) Plan details
Long Term Incentive plan conditions
Features of the LTI on issue during the financial year are:
Performance Rights (PRs)
Restricted Rights (RRs)
Grant years
FY22, FY20 and FY19: PRs subject to TSR
(50% weighting) and TR (50% weighting) hurdles
FY21: PRs subject to TSR hurdles
FY21: Based on 50% of the value normally attributable to TR
Performance period
Commencing from 1 July of the grant year:
Commencing from 1 July of the grant year:
– FY22, FY21 and FY20: Four years
– Tranche 1 (25%): 1 July 2020 – 30 June 2022 (two years)
– FY19: Three years
– Tranche 2 (25%): 1 July 2020 – 30 June 2023 (three years)
– Tranche 3 (50%): 1 July 2020 – 30 June 2024 (four years)
Service period
Four years
Between two and four years
Performance hurdles 1
TSR Comparator
Group
TSR: Relative TSR combines the security price
movement and distributions (which are assumed to be
re-invested) to show the total return to securityholders,
relative to that of other companies in the TSR
Comparator Group.
TR: Calculated as the change in Vicinity’s net tangible
assets (NTA) value during the year plus total distributions
made divided by the NTA value at the beginning of
the year. The annual TR result for each year during
the performance period is then used to calculate the
compound annual TR for the performance period. 2
FY21, FY20, FY19: S&P/ASX 200 A-REIT Index at grant
date, excluding Westfield Corporation and Unibail
Rodamco Westfield. 3
FY22: Domestic REITs most closely aligned to the
Group’s business which included Scentre Group, Charter
Hall Retail REIT, Shopping Centres Australasia Property
Group, The GPT Group and Dexus Property Group.
Subject to effective performance as assessed by the
Board, taking into consideration the financial, strategy,
portfolio, leadership, risk, governance and other applicable
objectives over the respective performance periods.
Not applicable
1. For the purposes of LTI plan assessment, each performance hurdle operates independently of the other.
2. To ensure that the TR performance rights vesting reflects the value created from the efficient management of the Group’s assets and there is no undue advantage,
penalty or disincentive for undertaking certain activities, TR outcomes may be adjusted. Both upwards and downwards adjustments can be made, with reference to
principles agreed by the Remuneration and Human Resources Committee.
3. Westfield Corporation (ASX: WDC) merged with Unibail Rodamco to form Unibail Rodamco Westfield (URW) in May 2018. WDC was de-listed from the ASX and a
CHESS depository interest for URW (ASX: URW) was listed on the ASX. The TSR Comparator Group excludes WDC and URW.
Vicinity Annual Report 2022Chairman’s LetterCEO's LetterOur PerformanceOur PeopleOur DestinationsOur Business Snapshot REMUNERATION
107
16. SHARE BASED PAYMENTS CONTINUED
c) Plan details continued
Valuation of Long Term Incentive plans
The fair value of performance rights granted under the LTI is estimated at the date of grant using a Monte Carlo Simulation Model taking into
account the terms and conditions upon which the performance rights were granted. For grants with non-market vesting conditions (TR and RR),
the grant date fair value is expensed over the vesting period and adjusted to reflect the actual number of rights for which the related service and
non-market vesting conditions are expected to be met. The grant date fair value of awards with market performance conditions (TSR) reflects the
probability of these conditions being met and hence the expense recognised over the vesting period is only adjusted for changes in expectations
as to whether service criteria will be met.
A number of assumptions were used in valuing the performance rights at the grant date as shown in the table below:
Assumption
Basis
Security price at measurement date
Closing Vicinity securities price at grant date.
Distribution yield
Expected annual distribution rate over the next four years.
Risk-free interest rate
Four-year government bond yields as at grant date.
Analysis of historical total security return volatility (i.e. standard
deviation) and the implied volatilities of exchange traded options.
Performance between the start date of the testing period and the
valuation date.
Volatility correlation between Vicinity
and other comparator companies
Volatility of Vicinity securities
TSR of Vicinity securities
Fair value per performance right – TSR
Fair value per performance right – TR
Fair value per restricted right – tranche 1
Fair value per restricted right – tranche 2
Fair value per restricted right – tranche 3
FY22
Performance
Rights
FY21
Performance
and Restricted
Rights
$1.75
4.9%
1.1%
$1.67
4.4%
0.1%
75.0%
60.0%
31.0%
10.2%
$0.77
$1.44
n/a
n/a
n/a
32.0%
2.5%
$0.63
n/a
$1.55
$1.49
$1.42
Short Term Incentive plan
1,208,780 securities were issued on 22 September 2021 under the FY21 Deferred STI plan. The fair value of these securities was $1.72 per security
being the volume weighted average security price of VCX in the 10 trading days prior to the grant date.
The FY20 STI plan was suspended in response to the COVID-19 pandemic.
Net ZeroOur Management of RiskGovernanceTax TransparencySustainability AssuranceSecurityholder InformationFinancial Report 108
OTHER DISCLOSURES
17. INTANGIBLE ASSETS
Intangible asset balances at 30 June 2022 relate to the value of external management contracts. The external management contracts were
recognised upon business combinations at their fair value at both the date of Novion Property Group’s acquisition of the Commonwealth Bank
of Australia’s property management business (on 24 March 2014) and the merger of Novion Property Group and Federation Centres (on 11 June
2015). They reflect the right to provide asset management services to strategic partners who co-own investment property assets with the Group
and accordingly are allocated to the Strategic Partnerships cash-generating unit (SP CGU), which is also an operating and reportable segment.
As the management contracts do not have termination dates, they are considered to have indefinite lives and are not amortised. The Group
performs impairment testing for indefinite life intangible assets at least annually, or when there are other indicators of impairment.
The carrying value of the intangible asset is shown in the table below:
External management contracts
Carrying value
30 Jun 22
$m
30 Jun 21
$m
164.2
164.2
164.2
164.2
Impairment testing
The recoverable amount of the SP CGU is determined using a fair value less cost of disposal (fair value) approach. This is performed using a
collective discounted cash flow (DCF) valuation of the cash flows generated from external asset and funds management contracts which is
based on the following key assumptions:
Key assumption
Post-tax external management contract cash flows
Terminal value growth rate
Post-tax discount rate range
30 Jun 22
30 Jun 21
5 years
2.10%
5 years
2.10%
6.55% – 7.05% 6.69% – 7.19%
The impairment test at 30 June 2022 determined that the recoverable amount of the SP CGU exceeded its carrying value and no impairment
was required.
Sensitivity to changes in assumptions
Sensitivities to the key assumptions within the external management contracts DCF were also tested and the Group has determined that due
to the long-term nature of the asset management contracts and associated cashflows, no reasonably possible changes would give rise to
impairment at 30 June 2022. A disposal of a significant value of directly owned or equity accounted investment property assets, where the Group
also gives up any future management rights under existing finite or indefinite life contracts, may lead to the full or partial derecognition of the
intangible asset balance, as external asset management fees earned by the Group may no longer be sufficient to support the current carrying
value of these intangible assets.
Process for determination of key assumptions
The key inputs, which are considered Level 3 in the fair value hierarchy, used in determining the recoverable amounts were determined as follows:
– The discount rates were calculated based on the Group’s estimated weighted average cost of capital, with reference to the Group’s long-term
average cost of debt and estimated cost of equity which is derived with reference to external sources of information and the Group’s target
gearing ratio, adjusted for specific risk factors to the relevant CGU.
– Terminal value growth rates were estimated with reference to long-term expectations of macro-economic conditions (including consideration
of equity analyst estimates) and the Group’s expected long-term earnings growth.
– Five year forecast operating, asset and funds management cash flows based on the values determined by the Group’s budgeting and
planning process. Given the uncertainty as to the impacts of the COVID-19 pandemic over the short, medium and long-term, the Group
assessed the outcomes of a number of cash flow scenarios particularly with varying degree of reduction in property management fees over
the forecast period, when conducting impairment testing at 30 June 2022.
The determination of the key assumptions and inputs to the impairment testing process as outlined above requires a significant level of
estimation. As a result, the recoverable amount of the SP CGU (as determined by the impairment testing processes outlined above) are subject
to variability in these key assumptions or inputs. A change in one or more of the key assumptions or inputs could result in a change in assessed
recoverable amount.
Vicinity Annual Report 2022Chairman’s LetterCEO's LetterOur PerformanceOur PeopleOur DestinationsOur Business Snapshot 109
OTHER DISCLOSURES
18. LEASES
All leases (lessee accounting) are accounted for by recognising a right of use asset and a lease liability except for leases of low value assets and
short-term leases.
Lease liabilities
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term (which includes any
extension option periods assessed as reasonably certain to be exercised). The discount rate applied is determined by reference to the interest
rate implicit in the lease unless (as is typically the case) this is not readily determinable, in which case the lessee’s incremental borrowing rate
on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an
index or rate, initially measured using the index or rate as at the commencement date. In such cases, the initial measurement of the lease liability
assumes the variable element will remain unchanged throughout the lease. Other variable lease payments are expensed in the period to which
they relate.
On initial recognition, the carrying value of the lease liability also includes:
– Amounts expected to be payable under any residual value guarantee;
– The exercise price of any purchase option granted in favour of the Group if it is reasonably certain to exercise that option; and
– Any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised.
Subsequent to initial measurement, lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are
reduced for lease payments made. Lease liabilities are remeasured when there is a change in future lease payments arising from modification,
a change in an index or rate, when there is a change in the assessment of the term of any lease or a change in the assessment of purchasing the
underlying asset.
Right of use assets
Right of use assets are initially measured at the amount of the lease liability recognised, adjusted for any prepaid lease payments, initial direct
costs incurred and an estimate of costs to be incurred by the lessee in restoring the site on which it is located.
Subsequent to initial measurement, right of use assets are depreciated on a straight-line basis over the remaining term of the lease or over
the remaining economic life of the asset if this is judged to be shorter than the lease term. Right of use assets are also subject to assessment
for impairment.
Right of use assets and net investments in leases and lease liabilities are presented separately in the Balance Sheet. Right of use assets relating
to investment properties are included within the investment property balance.
a) Movements for the year
The table below show the movements in the Group’s lease related balances for the year:
30 Jun 22
30 Jun 21
Assets
Lease liabilities
Assets
Lease liabilities
Right of use
assets, net of
investments
in leases
$m
Investment
property
leaseholds
$m
Right of use
assets, net of
investments
in leases
$m
Investment
property
leaseholds
$m
Other leases
$m
Other leases
$m
26.8
0.1
(1.1)
6.9
–
(5.5)
27.2
(356.4)
(27.1)
26.5
–
(0.4)
–
(357.4) 3
(32.1)
(1.6)
8.8
(6.8)
–
–
(31.7)
32.9
0.1
(1.4)
1.3
–
(6.1)
26.8
(279.5)
(25.3)
24.4
(1.1)
(74.9)
–
(356.4) 3
(38.2)
(1.6)
9.2
(1.5)
–
–
(32.1)
Opening balance – 1 July
Interest charge on lease liabilities
Lease (receipts)/payments 1
New leases during the period
Market rent reassessment
Depreciation
Closing balance – 30 June 2
1. Lease payments (net of sub lease receipts) includes $5.6 million (30 June 2021: $5.4 million) in principal repayments and $28.6 million (30 June 2021: $26.8 million)
in interest charges on lease liabilities.
2. Total lease liabilities of $389.1 million (30 June 2021: $388.5 million) represents $27.7 million of current lease liabilities (30 June 2021: $34.1 million) and $361.4 million
of non-current lease liabilities (30 June 2021: $354.4 million).
3. A number of the Group’s investment properties are held under long-term leasehold arrangements as disclosed in Note 4(d). The lease liabilities in relation to these
investment property leaseholds meet the definition of investment property and are presented within investment property in Note 4(a).
Net ZeroOur Management of RiskGovernanceTax TransparencySustainability AssuranceSecurityholder InformationFinancial Report 110
OTHER DISCLOSURES
18. LEASES CONTINUED
b) Lease liabilities maturity profile
The table below show the undiscounted maturity profile of the Group’s lease liabilities due as follows:
Lease liabilities
Not later than one year
Later than one but not more than five years
More than five years
Total
30 Jun 22
$m
30 Jun 21
$m
33.6
121.7
820.8
976.1
34.1
119.8
847.6
1,001.5
The Group also recognised variable lease payments of $16.4 million during the year (30 June 2021: $14.5 million). These related primarily to
investment property leaseholds where a component of lease payments is based on profitability achieved by the relevant property. As these lease
payments are variable in nature, they are not included within the investment property leaseholds lease liability balance.
19. OPERATING CASH FLOW RECONCILIATION
The reconciliation of net profit/(loss) after tax for the year to net cash provided by operating activities is provided below.
Net profit/(loss) after tax for the financial year
Exclude non-cash items and cash flows under investing and financing activities:
Amortisation of incentives and leasing costs
Straight-lining of rent adjustment
Property revaluation (increment)/decrement for directly owned properties
Share of net (gain)/loss of equity accounted investments
Distributions of net (income)/loss from equity accounted investments
Amortisation of non-cash items included in interest expense
Net foreign exchange movement on interest bearing liabilities
Net mark-to-market movement on derivatives
Stamp duty paid
Depreciation of right of use asset
Income tax (benefit)/expense
Other non-cash items
Movements in working capital:
Increase in payables, provisions and other liabilities
(Increase)/Decrease in receivables and other assets
Net cash inflow from operating activities
30 Jun 22
$m
30 Jun 21
$m
1,215.1
(258.0)
62.5
3.9
(633.3)
(15.9)
(8.1)
5.0
10.3
(88.6)
22.6
5.5
(7.6)
(2.2)
35.3
(15.0)
589.5
58.3
(1.9)
642.7
34.2
14.0
3.1
(77.5)
119.9
–
6.1
10.9
6.0
58.1
30.9
646.8
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20. AUDITOR’S REMUNERATION
During the year, the following fees were paid or payable for services provided by the auditor of the Group, EY or its related practices.
Audit and review of statutory financial statements of Group and its controlled entities
Assurance services required by legislation to be provided by the auditor
Other assurance and agreed-upon procedures services under other legislation or contractual arrangements
Property related audits 1
Other assurance services and agreed upon procedures required under contract
Total other assurance services under other legislation or contractual arrangements
Other services
Taxation compliance services
Assurance and other services
Total other services
Total auditor’s remuneration
30 Jun 22
$’000
30 Jun 21
$’000
1,282
19
223
48
271
271
40
311
1,454
19
227
46
273
272
29
301
1,883
2,047
1. Comprises audits of outgoing statements, promotional funds, real estate trust account audits and joint venture audits required under legislation or contract.
21. PARENT ENTITY FINANCIAL INFORMATION
a) Summary financials
The financial information presented below represents that of the legal parent entity, and deemed parent entity of the stapled Group, Vicinity
Limited. Vicinity Limited recognises investments in subsidiary entities at cost, less any impairment since acquisition. Other accounting policies
applied by Vicinity Limited are consistent with those used for the preparation of the consolidated Financial Report.
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Share based payment reserve
Accumulated losses
Total equity
Net (loss)/profit for the financial year of Vicinity Limited as parent entity
Total comprehensive (loss)/income for the financial year of Vicinity Limited
30 Jun 22
$m
30 Jun 21
$m
140.7
775.4
50.8
576.3
199.1
515.6
(2.0)
(314.5)
199.1
(8.7)
(8.7)
2.2
633.1
14.4
428.3
204.8
515.6
(5.0)
(305.8)
204.8
6.1
6.1
Vicinity Limited has access to the Group’s cash flow from operations and undrawn bank facilities, in order to pay its current obligations as and
when they fall due.
The parent entity has no capital expenditure commitments which have been contracted but not provided for, or contingencies as at reporting
date. Guarantees provided to subsidiary entities are disclosed at Note 22(b) and predominantly relate to fulfilling capital requirements under
Australian Financial Services Licences held by these subsidiaries.
b) Stapled entity allocation of net profit
In accordance with AASB 3 Business Combinations, the Company is the parent of the Vicinity Centres stapled group for accounting purposes.
As the Company has no legal ownership over Vicinity Centres Trust and its controlled entities, the allocation of net profit and net assets is shown
separately for the Company and the Trust in the Statement of Comprehensive Income and Statement of Changes in Equity.
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OTHER DISCLOSURES
22. RELATED PARTIES
a) Background
The deemed parent entity of the Group is Vicinity Limited, which is domiciled and incorporated in Australia. All subsidiaries and sub-trusts of the
Group are wholly-owned subsidiaries of Vicinity Limited or sub-trusts of Vicinity Centres Trust as at 30 June 2022.
Information on related party transactions and balances
b)
Vicinity Funds RE Ltd, a wholly-owned subsidiary of the Group, is the Responsible Entity/Trustee of the following funds (collectively known as the
Wholesale Funds managed by the Group):
– Direct Property Investment Fund A;
– Direct Property Investment Fund B;
– Vicinity Enhanced Retail Fund; and
– Australian Investments Trust.
The transactions with the Wholesale funds, on normal commercial terms, and the balances outstanding at 30 June 2022 are outlined in the tables
below. Transactions and balances relating to equity accounted investments are disclosed in Note 5(d).
Related party balances with Wholesale funds
Funds management
fee receivable
Alignment fee payable
30 Jun 22
$’000
30 Jun 21
$’000
30 Jun 22
$’000
30 Jun 21
$’000
Wholesale funds managed by the Group
324
528
78
77
Outstanding related party trade receivables balances at year end are unsecured and settlement occurs in cash. The Group does not hold any
collateral in relation to related party receivables.
Related party transactions with Wholesale funds
Asset and funds management fee income
Reimbursement of expenses to the property manager
Distribution income
Alignment fee expense
Rent and outgoings expenses
23. COMMITMENTS AND CONTINGENCIES
a) Capital commitments
Estimated capital expenditure contracted for at reporting date, but not provided for:
Not later than one year
Later than one year and not later than five years
Total capital commitments
30 Jun 22
$’000
30 Jun 21
$’000
3,365
718
8
(307)
(104)
4,324
1,210
33
(319)
(164)
30 Jun 22
$m
30 Jun 21
$m
120.7
0.2
120.9
78.8
0.1
78.9
b) Contingent assets and liabilities
Bank guarantees totalling $40.7 million have been arranged by the Group, primarily to guarantee obligations for two of the Group’s Responsible
Entities to meet their financial obligations under their Australian Financial Services Licences and other capital requirements (30 June 2021:
$41.9 million).
As at reporting date, there were no other material contingent assets or liabilities.
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113
24. OTHER GROUP ACCOUNTING MATTERS
This section contains other accounting policies that relate to the financial statements, detail of any changes in accounting policies and the impact
of new or amended accounting standards.
Principles of consolidation
These consolidated financial statements comprise the assets and liabilities of all controlled entities at 30 June 2022 and the results of all
controlled entities for the financial year unless otherwise stated. Controlled entities are:
– All entities over which the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to
affect those returns through its power to direct the relevant activities of the entity; and
– Fully consolidated from the date on which control is transferred to the Group, and, where applicable, deconsolidated from the date on which
control ceases.
The acquisition method of accounting is used to account for the acquisition of controlled entities, and the balances and effects of transactions
between all controlled entities are eliminated in full.
Vicinity Limited is the parent of the stapled Group for accounting purposes. The results and equity attributable to Vicinity Centres Trust (that is,
the amounts shown as attributable to securityholders of other stapled entities of the Group) are shown prior to the elimination of transactions
between Vicinity Limited and Vicinity Centres Trust.
Investments in joint operations
Included in investment properties are shopping centres that are accounted for as joint operations – in the form of direct ownership of a partial
freehold or leasehold interest in a shopping centre with a strategic partner, based on standard market joint operation agreements. The Group
accounts for joint operations by recognising its share of the shopping centre, classified as investment property, and its share of other assets,
liabilities, income and expenses from the use and output of the joint operation.
Fair value measurement
The Group has classified fair value measurements into the following hierarchy as required by AASB 13 Fair Value Measurement:
– Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
– Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
– Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Future impact of Accounting Standards and Interpretations issued but not yet effective
There are no accounting standards or interpretation issued but not yet effective that are expected to have a material impact on the Group’s
financial position or performance.
Government grants
The Group was eligible for land tax relief for financial/calendar years 2020 and 2021 in accordance with the respective state government land tax
relief measures. Gross payments received for the year ended 30 June 2022 were $16.5 million (30 June 2021: $4.1 million).
Until September 2020, the Group was eligible for the initial phase of the Federal Government JobKeeper wage subsidy program. Gross payments
received for the year ended 30 June 2022 were nil (30 June 2021: $12.4 million).
25. EVENTS OCCURRING AFTER THE END OF THE REPORTING PERIOD
Capital management activities
Subsequent to 30 June 2022, the following transactions were completed:
– Extended the maturity of $475.0 million bank debt facilities by at least four years to July 2027;
– Repaid $40.0 million of US Private Placement Notes;
– Cancelled $400.0 million of bank debt limit with FY24 maturities; and
– Entered into $500.0 million of new interest rate swaps.
Other than the matters described above, no other matters have arisen since the end of the reporting period which have significantly affected, or
may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial periods.
Net ZeroOur Management of RiskGovernanceTax TransparencySustainability AssuranceSecurityholder InformationFinancial Report 114
DIRECTORS’ DECLARATION
In accordance with a resolution of the Directors of Vicinity Limited, we declare that:
a) in the opinion of the Directors, the financial statements and notes set out on pages 73 to 113 are in accordance with the Corporations Act 2001
(Cth), including:
i. giving a true and fair view of the Group and its controlled entities’ financial position as at 30 June 2022 and of the performance for the
financial year ended on that date; and
ii. complying with Australian Accounting Standards and the Corporations Regulations 2001 (Cth); and
iii. complying with International Financial Reporting Standards as issued by the International Accounting Standards Board as disclosed in the
About this Report section of the financial statements; and
b) in the opinion of the Directors, there are reasonable grounds to believe that the Group and its controlled entities will be able to pay their debts
as and when they become due and payable; and
c) the Directors have been given the Declarations required to be made to the Directors in accordance with section 295A of the Corporations Act
2001 (Cth) for the financial year ended 30 June 2022.
Signed in accordance with a resolution of the Directors of Vicinity Limited.
Trevor Gerber
Chairman
17 August 2022
Vicinity Annual Report 2022Chairman’s LetterCEO's LetterOur PerformanceOur PeopleOur DestinationsOur Business Snapshot INDEPENDENT AUDITOR’S REPORT
115
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Independent Auditor's Report
To the Members of Vicinity Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Vicinity Limited (the “Company”), and the entities it controlled
(collectively “Vicinity Centres” or the “Group”), which comprises the consolidated statement of
financial position as at 30 June 2022, the consolidated statement of comprehensive income,
consolidated statement of changes in equity and consolidated cash flow statement for the year then
ended, notes to the financial statements, including a summary of significant accounting policies, and
the Directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
a) Giving a true and fair view of the consolidated balance sheet of the Group as at 30 June 2022
and of its consolidated financial performance for the year ended on that date; and
b) Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with
the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the
financial report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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116
INDEPENDENT AUDITOR’S REPORT
1. Shopping Centre Investment Property Portfolio – Carrying Values and Revaluations
Why significant
The Group owns a portfolio of retail property assets
valued at $14,366.4 million at 30 June 2022, which
represents 92.4% of total assets of the Group. In
addition, there are retail property assets valued at
$576.1 million held through interests in Joint
Ventures.
How our audit addressed the key audit matter
Our audit procedures included the following for both
properties held directly and through interests in Joint
Ventures:
► We discussed the following matters with management:
► movements in the Group’s investment property
portfolio;
The Group’s total assets include investment properties
either held directly or through interests in Joint
Ventures. These assets are carried at fair value, which
is assessed by the directors with reference to external
and internal property valuations and are based on
market conditions existing at the reporting date.
The valuation of investment properties is inherently
subjective. A small difference in any one of the key
market input assumptions, when aggregated across all
the properties, could result in a material change to the
valuation of investment properties.
►
►
►
changes in the condition of each property, including
an understanding of key developments and changes
to development activities;
controls in place relevant to the valuation and
development processes; and
the impact that COVID-19 has had on the Group’s
investment property portfolio including rent
abatements offered to tenants and tenant
occupancy risk arising from changes in the
estimated lease renewals.
We consider this a key audit matter due to the number
of judgments required in determining fair value.
►
In conjunction with our real estate valuation specialists,
on a sample basis, we performed the following
procedures:
Note 4 of the financial report describes the key
assumptions, inputs, judgements and estimations,
including the impact of the COVID-19 pandemic, in the
determination of fair value of investment properties
and how this has been considered by the directors in
the preparation of the financial report at 30 June
2022.
► Evaluated the net income assumptions adopted
against the tenancy schedules. We tested the
effectiveness of relevant controls over the leasing
process and associated tenancy schedules which are
used as source data in the property valuations.
► Tested the mathematical accuracy of valuations.
► Evaluated the suitability of the valuation
methodology across the portfolio based on the type
of asset.
► We considered the reports of the external and
internal valuers, to gain an understanding of the
assumptions and estimates used. This included key
assumptions such as the capitalisation, discount and
growth rate and future forecast rentals.
► Where relevant we compared the valuation against
comparable transactions utilised in the valuation
process.
► Assessed the qualifications, competence and
objectivity of the valuers
► Assessed capitalised planning and holding costs
relating to planned major development projects.
► Assessed the adequacy of the Group’s disclosures in the
financial report.
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INDEPENDENT AUDITOR’S REPORT
117
2. Carrying value of trade receivables
Why significant
How our audit addressed the key audit matter
In assessing the carrying value of trade receivables, we:
► Assessed the effectiveness of relevant controls in relation
to tenant lease arrangements, including lease
modifications.
► Tested the existence of trade receivables for a sample of
tenant balances.
► Assessed receipts after year-end to determine any
material change to exposure at the date of the financial
report.
► Assessed whether the inputs into the determination of
expected credit losses were consistent with the principles
of AASB 9 and tested the mathematical accuracy of the
calculations.
► Assessed management’s application of cash collection
trends observed during the period and the adjustments
applied to cash collection rates and estimated waivers
which reflects forward-looking considerations.
► Evaluated the key assumptions applied in calculating
expected credit losses, for a sample of tenants.
► Assessed the adequacy of the Group’s disclosures in
relation to the valuation uncertainty of trade receivables
included in the financial report, including the
assumptions, estimations and judgements made in
calculating the allowance for expected credit losses.
As at 30 June 2022, the Group held $61.7 million in
trade receivables, net of $76.8 million allowance for
expected credit losses.
Trade receivables primarily comprise amounts due
from tenants of the Group’s investment properties
under lease agreements, less an allowance for
expected credit losses.
The Group applies Australian Accounting Standard -
AASB 9 Financial Instruments in calculating the
allowance for expected credit losses, applying a
forward-looking expected loss impairment model. This
involves significant judgement as the expected credit
losses must reflect information about past events,
current conditions and forecasts of future conditions.
The recoverability of trade receivables is considered a
key audit matter due to the value of uncollected rental
income at 30 June 2022 and the significant
judgement required in determining the allowance for
expected credit losses.
The continued uncertain trading and economic
environment and the uncertain outcome of rental
assistance negotiations with tenants have all
contributed to significant estimation uncertainty in
determining the allowance for expected credit losses
at 30 June 2022.
Note 11 of the financial report describes the
estimation uncertainty, in the determination of the
allowance for expected credit losses and how this has
been considered by the directors in the preparation of
the financial report at 30 June 2022. We note in the
event the impact of key assumptions and judgements
varies from conditions anticipated at balance date,
this may result in a change in the expected credit loss
provision in future periods.
Information Other than the Financial Report and Auditor’s Report Thereon
The directors are responsible for the other information. The other information comprises the
information included in Vicinity Centres’ 2022 Annual Report, but does not include the financial report
and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon, with the exception of the Remuneration Report
and our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
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INDEPENDENT AUDITOR’S REPORT
Responsibilities of the Directors for the Financial Report
The directors of the Group are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and
for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
►
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
► Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
► Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
► Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the financial report or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Group to
cease to continue as a going concern.
► Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
► Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
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INDEPENDENT AUDITOR’S REPORT
119
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, actions
taken to eliminate threats or safeguards applied.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on the Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the Directors' report for the year ended
30 June 2022.
In our opinion, the Remuneration Report of Vicinity Limited for the year ended 30 June 2022,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors are responsible for the preparation and presentation of the Remuneration Report in
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian
Auditing Standards.
Ernst & Young
Alison Parker
Partner
Melbourne
17 August 2022
Michael Collins
Partner
Melbourne
17 August 2022
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SUMMARY OF SECURITYHOLDERS
AS AT 29 JULY 2022
SPREAD OF SECURITYHOLDERS
Range
100,001 and over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Number of
securityholders
Number
of securities
% of issued
securities
266
6,188
4,972
8,458
6,530
4,345,069,756
144,072,284
36,637,304
23,492,017
3,003,997
95.45
3.16
0.80
0.52
0.07
26,414
4,552,275,358
100.00
The number of securityholders holding less than a marketable parcel of 242 securities (based on a security price of $2.07 on 29 July 2022) is 1,572
and they hold 127,892 securities.
ON-MARKET PURCHASE OF SECURITIES
During FY22, 2,410,777 Vicinity securities were purchased on-market at an average price per security of $1.6831 by the trustee to satisfy entitlements
under the Vicinity Equity Incentive Plan.
SUBSTANTIAL SECURITYHOLDERS 1
Company name
Date last notice received
Number of securities 2
The Gandel Group Pty Limited and its associates
The Vanguard Group, Inc. and its controlled entities
BNP Paribas Nominees Pty Limited as custodian for UniSuper Limited
State Street Corporation and subsidiaries
BlackRock Inc. and its subsidiaries
9 June 2020
29 June 2021
11 October 2021
27 June 2022
22 May 2020
1. As notified to Vicinity in accordance with section 671B of the Corporations Act 2001 (Cth).
2. As disclosed in the last notice lodged by the substantial securityholder with the ASX.
TOP 20 LARGEST SECURITYHOLDERS
Rank Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
14
14
14
15
16
17
18
19
20
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
Netwealth Investments Limited
BNP Paribas Nominees Pty Ltd
BNP Paribas Noms Pty Ltd
National Nominees Limited
Rosslynbridge Pty Ltd
Allowater Pty Ltd
Citicorp Nominees Pty Limited
Ledburn Proprietary Limited
Broadgan Proprietary Limited
Cenarth Pty Ltd
Applebrook Pty Ltd
Jadecliff Pty Ltd
Moondale Pty Ltd
Rosecreek Pty Ltd
Ledburn Proprietary Limited
BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd
Artmax Investments Limited
HSBC Custody Nominees (Australia) Limited
Pacific Custodians Pty Limited
BNP Paribas Noms Pty Ltd
Top 20 largest securityholders
Balance of register
Total issued capital
691,238,665
389,569,636
368,551,567
327,034,964
294,348,228
Number of
securities held
% of issued
securities
1,324,872,647
990,893,441
456,778,809
400,411,521
374,210,767
170,081,306
123,577,467
92,069,814
63,624,571
44,160,880
37,195,552
36,474,902
31,605,848
13,219,491
13,219,491
13,219,491
13,219,491
10,206,076
9,287,479
7,988,838
7,405,221
6,180,897
5,354,731
4,245,258,731
307,016,627
4,552,275,358
29.10
21.77
10.03
8.80
8.22
3.74
2.71
2.02
1.40
0.97
0.82
0.80
0.69
0.29
0.29
0.29
0.29
0.22
0.20
0.18
0.16
0.14
0.12
93.26
6.74
100.00
Vicinity Annual Report 2022Chairman’s LetterCEO's LetterOur PerformanceOur PeopleOur DestinationsOur Business Snapshot
CORPORATE DIRECTORY
121
Vicinity Centres
comprising:
Vicinity Limited
ABN 90 114 757 783
and
Vicinity Centres Trust
ARSN 104 931 928
ASX listing
Vicinity Centres is listed on the
ASX under the listing code VCX
Board of Directors
Trevor Gerber (Chairman)
Grant Kelley (CEO)
Clive Appleton
Tim Hammon
Peter Kahan
Janette Kendall
Karen Penrose
David Thurin
Company Secretaries
Carolyn Reynolds
Rohan Abeyewardene
Registered office
Chadstone Tower One
Level 4, 1341 Dandenong Road
Chadstone VIC 3148 Australia
Telephone: +61 3 7001 4000
Facsimile: +61 3 7001 4001
Website: vicinity.com.au
Auditors
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
Security Registrar
If you have queries relating to your
securityholding or wish to update your
personal or payment details, please
contact the Security Registrar.
Link Market Services Limited
Tower 4, 727 Collins Street,
Melbourne VIC 3008 Australia
General securityholder enquiries:
Toll Free: +61 1300 887 890
Facsimile: +61 2 9287 0303
Facsimile: +61 2 9287 0309
(for proxy voting)
Email: vicinity@linkmarketservices.com.au
Post: Locked Bag A14
Sydney South NSW 1235 Australia
Access your securityholding online
You can update your personal details and
access information about your securityholding
online by clicking ‘Securityholder login’
on our home page at vicinity.com.au,
or via the ‘Investor Services’ section
of the Security Registrar’s website at
linkmarketservices.com.au, or scan the
QR Code (below) to take you to the
investor centre.
Contact Vicinity Centres
We are committed to delivering a high
level of service to all securityholders.
Should there be some way you feel that
we can improve our service, we would
like to know. Whether you are making a
suggestion or a complaint, your feedback
is always appreciated.
Investor relations
Email: investor.relations@vicinity.com.au
The Responsible Entity is a member
(member no. 28912) of the Australian
Financial Complaints Authority (AFCA),
an external dispute resolution scheme to
handle complaints from consumers in the
financial system. If you are not satisfied
with the resolution of your complaint by
the Responsible Entity, you may refer
your complaint to AFCA:
Telephone: 1800 931 678
Email: info@afca.org.au
Website: afca.org.au
Post: GPO Box 3
Melbourne VIC 3001 Australia
Securityholders can use the online system to:
– view your holding balances, distribution
payments and transaction history
– change your securityholder
communications preferences
– confirm whether you have lodged your
Tax File Number (TFN) or Australian
Business Number (ABN)
– update your contact details
– update your bank account details
– check Vicinity Centres’ security price
– download various securityholder
instruction forms.
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