Vicinity Centres: In Shape to Weather Retail Slowdown as We Transfer Coverage to a New Analyst

We maintain our fair value estimate of AUD 2.15 per security for no-moat-rated Vicinity Centres following the transition of coverage to a new analyst. We think the REIT is in good shape to withstand a potential retail slowdown. Portfolio occupancy remains high at 99.1%. Admittedly, its average lease is only 3.6 years, compared with 6.8 years at no-moat Scentre Group—specialty tenants only—and 5.3 years at Region Group, though the latter is more convenience-focused than Vicinity. However, we’re not overly concerned because the shorter lease length is partly a function of development projects and some shorter leases signed during the pandemic. New leases signed during the first half of fiscal 2024 averaged a slightly longer 4.5 years, while Vicinity has achieved 2.6% increases on new leases so far this financial year.