VICINITY CENTRES TRUST — Investor Presentation 2017

Jun 6, 2017

Halls Head Central, WA

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Perth Investor day and asset tours
7-8 June 2017
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Welcome and
overview
Angus McNaughton
CEO and Managing Director
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Galleria, WA

Perth Investor day and asset tours

Agenda

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WEDNESDAY 7 JUNE

• 12.15 Welcome and overview

Angus McNaughton CEO and Managing Director

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WA economy

Stephen Koukoulas Managing Director, Market Economics

WA portfolio

Michael O’Brien Chief Investment Officer

Leasing

Stuart Macrae EGM Leasing

Development update Carolyn Viney EGM Development

WA developments

Mandurah Forum James Fudge Project Director, WA Galleria Andrew Weston RGM Development, WA DFO Perth Stephen Beer Development Director, WA/SA 16.30 Presentations conclude Angus McNaughton CEO and Managing Director

17.30 Dinner

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THURSDAY 8 JUNE

• 8.00 Depart Crown Metropol

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Asset tour – Mandurah Forum

James Fudge Project Director, WA Richard Terhorst RGM Shopping Centres, WA Jacqueline McKenzie Centre Manager

Asset tour – Halls Head Central Stephen Beer Development Director, WA/SA Richard Terhorst RGM Shopping Centres, WA

Asset tour – Galleria

Andrew Weston RGM Development, WA Richard Terhorst RGM Shopping Centres, WA Mike Barrington Centre Manager Asset tour – Ellenbrook Central Stephen Beer Development Director, WA/SA Richard Terhorst RGM Shopping Centres, WA Graham Hahn Regional Manager, WA 15.00 Asset tour – DFO Perth Stephen Beer Development Director, WA/SA Sally Ockenden Development Manager, WA

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Vicinity Centres | Perth Investor day and asset tours | 7-8 June 2017

Our Strategy: simple and transparent business model with a single sector focus

Creating value and sustainable growth by owning, managing and developing quality Australian retail assets

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Group investment principles

Simple and transparent business model, with a single sector focus

Invest in quality Australian assets across the retail spectrum

85 centres under management

$24.5b assets under management

Focus on long-term value creation and sustainable earnings growth Strong balance sheet with access to diverse capital sources

Efficient cost structure and low management expense ratio

~8,700

tenants

~3,200 retailer relationships

Key financial objectives (‘through cycle’ basis)

Group level Target

Total return >9.0% p.a. Underlying EPS growth >3.0% p.a.

$17.8b 2.8m sqm moving annual turnover gross lettable area

Note: Data as at 31 December 2016.

Portfolio level Target Property level returns >8.5% p.a.

Development returns Initial yield 6% to 8+% Incremental IRR 10% to 15+%

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Active repositioning reflected in improved key metrics

Delivering on strategy since Vicinity’s formation in June 2015 has driven strong results

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	Delivered merger synergies and refinancing savings Improved portfolio quality Sold interests in 18 assets for $1.7b Acquired interests in five assets for ~$540m Completed six developments totalling ~$1b (Vicinity’s share is ~$500m with average initial yield of >7% and IRR of >11%) Strengthened balance sheet Standard and Poor’s increased credit rating to A/stable from A-/stable and Moody’s initiated at A2/stable Launched inaugural EMTN program with £350m issuance Extended debt duration from 3 years to ~5 years Since merger: 28% Average asset value 11% Net tangible assets per security 9% Specialty MAT/sqm	Dec-16 Jun-15
		Total asset value ($b) 14.9 14.3
		Number of assets 75 88
		Average asset value (100%) ($m) 306 239
		Total MAT ($b) 16.1 16.9
		Specialty MAT/sqm ($) 9,200 8,412
		Occupancy rate (%) 99.4 98.9
		Specialty occupancy cost (%) 14.6 15.4
		WACR (%) 5.75 6.30
		NTA ($) 2.73 2.45
		Gearing (%) 24.0 28.0
		Debt duration (years) 4.8 3.0
		Credit rating - Standard and Poor’s - Moody’s A A2 A- not rated

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Retail trends

Structural changes providing opportunities for Vicinity

Technology is changing the shopping centre landscape

Merging physical and digital consumer experiences

Increasing application of operational technology in-centre

Operating, leasing and development decisions to be enhanced by data insights

Consumer demand for better experiences

Consumer demand for lifestyle, services and food driving sales growth in these categories

Opportunities exist to enhance consumers’ shopping centre experience

Portfolio-wide connectivity will enable closer relationships with consumers

Divergence in retailer performance

Retailers with well-considered omni-channel strategies to benefit most Recent retailer administrations providing remixing opportunities

Continued strong demand from international retailers

New international flagships driving strong foot traffic and sales

Some impact on retailers who have not adapted to increased competition

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Chadstone, VIC
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2017 achievements

A productive calendar year to date

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Strong balance sheet

S&P have upgraded credit rating to A/stable

Issued $400m of AMTNs and repaid FY18 expiries

Improving portfolio quality

Acquired the remaining 25% interest in DFO South Wharf and new multi-deck car park completed

Development pipeline continues to enhance portfolio

Construction completed at Chadstone, with majority of backfill tenancies to be opened by the end of this month

Mandurah Forum redevelopment on track, first stage of retail to open end of July 2017

Commenced The Glen redevelopment, first stage due to open in late 2017

DFO South Wharf, VIC

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WA portfolio

Michael O’Brien Chief Investment Officer

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Ellenbrook Central, WA

WA portfolio overview

Deep and experienced local capability

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Long established presence in WA

The largest retail team in WA

Deep and experienced team of ~150 on the ground

Scale benefits with 12 leasing and 11 development executives, and dedicated marketing and tenancy design executives

Broad portfolio

16 assets across the retail spectrum in direct portfolio valued at $2.1b[1 ] DFO Perth retail construction commencing mid year

One Regional centre (Midland Gate) owned jointly by a Vicinity wholesale fund and mandate client

Three centres with leasing mandate for a third party

1. Excluding DFO Perth.

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Vicinity Centres | Perth Investor day and asset tours | 7-8 June 2017

WA Regional shopping centre landscape

Planning changes have facilitated development opportunities to service under-supplied retail market

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Perth market is under serviced by Regional centres 33% less Regional centre space compared to national average[1 ]

Retail cap was lifted in 2010 and Sunday trading commenced in 2012

A number of projects have been mooted for development Current Regional centre offer is out dated Most centres have high levels of sales productivity All mooted projects may not be completed in this cycle

Vicinity’s assets are uniquely placed Distinct trade areas Opportunity to capture greater market share

1. Source: Urbis, 2016.

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Ellenbrook Central

Ellenbrook Central acquisition

Significant value created through intensive asset management and development

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Acquired in December 2015 from ICWA for $220m[1] at 5.75% capitalisation rate, currently[2] valued at $236m

One of the fastest growing catchments in Australia

• Population growth forecast at 4.7% p.a. over next 10 years

Specialty[2] MAT/sqm of $8,929 and occupancy cost of 9.5% provide scope for further rental uplift

Intensive asset management has driven strong short term gains

• Average leasing spread of 6.1% since acquisition

• Strong growth in ancillary income

• Improved tenancy mix and lease terms

• Completed development of Aldi and five Bulky Goods stores for $15.2m with an initial yield of 7.9%

As anticipated, short term sales impact from opening of Woolworths at Aveley

1. Excluding acquisition costs.

2. At 31 December 2016.

3. Source: MacroPlan Dimasi, 2015.

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Ellenbrook Central

Opportunities exist for further value creation

Future development potential to broaden centre’s offer

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Well positioned to take advantage of market opportunity

Further opportunities to improve tenant mix to align to market demand

Future development potential

Five hectares of adjacent vacant land Expanded offer could include:

• Discount department store

• Mini majors

• Indoor/outdoor food and café offers

• • Cinema and entertainment precinct

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Leasing
Stuart Macrae
EGM Leasing
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QueensPlaza, QLD

Leasing trends

Greater focus on leisure, dining and experience

International retailers continue to expand

New international flagships driving strong foot traffic and sales

Uniqlo, H&M, Zara and Sephora

Some impact on retailers who have not adapted to increased competition

Re-weighting of mid-tier apparel to food, health and wellbeing, general merchandise and services

Cosmetics and beauty continues to experience strong sales growth

Customers demand for better experiences

Consumer demand for lifestyle, services and food driving sales growth in these categories

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Emporium Melbourne, VIC
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Tenant administrations

Remixing opportunities created through retailer administrations

Some retailers more impacted than others in current sales environment

Performance varies across retail categories

Varying retailer performance within categories

Making good progress on sites handed back

Pumpkin Patch stores were being progressively changed over prior to going into administration

All Dick Smith stores have been re-leased

Strong re-leasing outcomes at DFO Outlet Centres and Emporium Melbourne Limited store impacts from administrations announced in the past three months

Administrations providing leasing opportunities

At >99% occupancy, tenant administrations allow for introduction of more productive retailers

Topshop has prime location at Emporium Melbourne

Close monitoring of underperforming tenants allows for early identification and proactive remixing

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DFO Homebush, NSW
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Development
update
Carolyn Viney
EGM Development
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Mandurah Forum, WA

Development achievements

Actively improving portfolio quality through development

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Chadstone, VIC
6 projects ~$1 billion [1 ] >7% initial yield >11% IRR
Halls Head Central, WA
Warriewood Square, NSW DFO South Wharf, VIC Colonnades, SA Cranbourne Park, VIC
1. 100% interest (Vicinity’s share: ~$500m). Includes the $666m (Vicinity’s share: $333m) Chadstone project.
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Rigorous controls govern the development planning process

A structured process and consistent approach ensures efficient and successful project delivery

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Vicinity Board/
Co-owner approval
Iterative process
Scope opportunity Concept planning Project validation Mobilisation Delivery
Ongoing 6-24+ months 6-15 months 6-36 months
Master planning Concept development Feasibility analysis Finalise design Control group oversees
•
Local authority support Structure planning Finalise retail plan Construction tenders Safety, time, cost
and quality
Anchor tenant demand Preliminary feasibility Development Approval Satisfaction of all conditions
• Leasing
process precedent
Market research • Construction
Agree terms with anchors
Land availability
Project costing
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Board and senior management oversight and progressive approvals throughout process Board and senior management oversight and progressive approvals throughout process Board deep dives monthly External advice and consultancy External risk sign-offs

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Demonstrated development capability

Structured to support strategy execution

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Carolyn Viney
EGM Development
Jon Savell Stephen Beer Mark Kelley Josef Seidler
Development Development Regional General Manager Regional General Manager
Director Director Development Development
NSW/VIC WA/SA QLD Chadstone
Nicole Imberger
Jo Turner
Randy Galang General Manager
General Manager
National Design Director Product Development and
Majors Leasing
Development Strategy
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• 37 development executives

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Investing to create long-term value

Extensive $2.8b development pipeline (Vicinity share: $1.3b) provides significant opportunities

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$m
Vicinity share Partner share Total
333 666
Chadstone Retail and Office, VIC
175 350
Mandurah Forum, WA
230 460
Current The Glen, VIC
75 150
DFO Perth, WA
100
Midland Gate, WA
0
Roselands, NSW 1 TBA
Estimated FY18
60 120
commencements Chadstone Hotel, VIC
2 350 700
Galleria, WA
Estimated FY19 75 300
The Myer Centre Brisbane, QLD
commencements
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Note: Timing and costs of identified projects are indicative only and may change as projects advance.

1. Master planning continues.

2. Progressing through project validation phase, with total project cost expected to be <$700m.

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The Glen

The Glen redevelopment underway

Major redevelopment to capitalise on high income trade area and capture escape expenditure

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Key metrics Cost1 $460m Initial yield >6% Expected IRR >10% 2020 target completion +18,900 sqm GLA	Key metrics Cost1 $460m Initial yield >6% Expected IRR >10% 2020 target completion +18,900 sqm GLA
Expected IRR	>10%

$460m[1] major redevelopment

First stage fully leased and due to open in late 2017

• Introduction of Aldi and relocated Woolworths to anchor fresh food market hall with Coles and over 60 specialty stores

Latest format David Jones and new contemporary food gallery with casual dining hub and an outdoor dining precinct

Artist’s impression

Complete refurbishment of existing centre

Strong trade area

Above average incomes, low levels of household debt and above average apparel expenditure

Residential developer appointed

Contract for sale of residential air rights entered into, redevelopment costs[ 1 ] reduced from $490m to $460m

Over 500 apartments across three towers, construction expected to commence in early to mid-2019 and complete within 24 months

Artist’s impression

1. 100% interest. Vicinity’s share is 50%.

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The Glen

Lower ground level precinct plan

Introduction of Aldi and relocated Woolworths to anchor fresh food market hall with Coles and a number of specialty stores

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The Glen

Ground level precinct plan

New format David Jones, contemporary food gallery, lifestyle and fashion

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Chadstone

Chadstone retail and office development

Delivering a world-class retail, dining and entertainment experience

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LEGOLAND® Discovery Centre
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Australia’s leading retail offer strongly embraced by consumers Largest luxury precinct in Australia

Leading international flagship stores – H&M, Sephora, Uniqlo and Zara Victoria’s number one performing HOYTS

Annual visitations up 17%[1 ]

MAT up 14%[1]

Maintained highest MAT for an Australian shopping centre for 16 consecutive years

Annual sales >$1.6b[1 ] with only partial year sales for the expanded centre

LEGOLAND® Discovery Centre opened in April 2017

Flagship attraction

Attracts high traffic volumes especially on weekends

Majority of backfill tenancies to be opened this month

Further opportunities to create value through master planning

1. For the 12 months to 30 April 2017.

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Chadstone

Chadstone – the evolution continues

High quality hotel offer to service business and tourist markets

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Estimated development cost $120m (Vicinity share: $60m)

Targeting 4 to 4.5 stars with full service amenity

and conference facilities

Proposal for 250 rooms over 13 levels

Focused on business and tourist markets

Discussions underway with hotel operators

Target commencement in FY18

Artist’s impression

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Chadstone

Chadstone – the evolution continues – proposed hotel

Prime location at Chadstone Shopping Centre, close to Melbourne’s business, education and health science precincts

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Artist’s impression
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Artist’s impression

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Mandurah
Forum
James Fudge
Project Director, WA
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Mandurah Forum

Mandurah Forum

Well located centre in one of Australia’s fastest growing catchments

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Source: Nearmap

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Mandurah Forum

The opportunity

Transform Mandurah Forum into one of WA’s leading Major Regional shopping centres

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Dominant ~40,000 sqm Regional centre in a captive market being expanded to 64,500 sqm Major Regional centre

Mandurah’s total trade area population growth remains high at 2.6%, compared to WA average of 1.0% and national average of 1.4%[1]

Located in one of the fastest growing catchments in Australia

No.1 for total MAT in ‘Little Guns’ survey since 2003[2]

Last redeveloped in 1995

Existing centre traded strongly , 36% above comparable centres[3 ]

Sales leakage due to limited retail offer and out-dated presentation

Redevelopment to capture growth opportunity and sales leakage through introduction of department store and improved retail offer

1. 12 months to 30 June 2016.

2. Up to development commencement at 31 December 2015.

3. Specialty sales per sqm, compared to Urbis comparable centre average.

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Perth
72km
North
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Mandurah Forum

The market

Strong population and retail spending growth

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Leading market position

19.1% market share of trade area[1 ]

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Strong population growth

~95,800 people in trade area, forecast to grow at 2.8% p.a. through to 2028[1]

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Excellent transport infrastructure Serviced by Kwinana freeway and suburban rail line from Perth

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Sizeable tourist market Over 1.4m visitor nights and 1.9m day trippers annually[1]

Strong trade area retail spending growth Forecast to grow at ~6% p.a. through to 2028[1]

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1. Source: Urbis, 2014. Trade area refers to Main Trade Area.

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Artist’s impression

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Mandurah Forum

The project

Development positioned to capture additional segments of the trade area

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Key metrics Cost1 $350m Initial yield >6% Expected IRR >10% Mid-2018 project completion +26,000 sqm GLA	Key metrics Cost1 $350m Initial yield >6% Expected IRR >10% Mid-2018 project completion +26,000 sqm GLA
Expected IRR	>10%

New 850 space multi-deck car park opened in December 2016

• Centre to have >3,000 spaces on completion

First retail stage to open end of July 2017, on track to be fully leased Completion remains on schedule for mid-2018

Construction on program

Complete centre transformation

• GLA increases to 64,500 sqm

• Expanding from a Sub Regional to Regional shopping centre

• Brand new David Jones and Target

• Upgraded Coles and Kmart

• Total stores to increase by 80 to over 220 on completion

• New food court with adjoining play area, fresh food market hall and alfresco dining precinct

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1. 100% interest. Vicinity’s share is 50%.

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Mandurah Forum

Floor plan and construction staging

Desirable ‘race track’ configuration to improve customer experience and navigation

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Stage 5 under construction Stage 4 under construction
Stage 1 complete
December 2016
Stage 3 under construction
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Stage 2 opening
end of July 2017
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Mandurah Forum

Precinct plan

Well precincted layout to enhance the customer experience

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Galleria
Andrew Weston
RGM Development, WA
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Artist’s impression

Galleria

The dominant Major Regional centre of north east Perth

Strongly trading, well-located centre in growing catchment

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Trade area is large and growing (22% of Perth’s population) Total trade area forecast to increase 2.0% p.a. from 453,000 (2016) to 553,000 (2026)[1 ]

Strong trading performance of existing centre[2] Specialty MAT/sqm of $10,996

Limited retail competition from Perth CBD

Strong long-term fundamentals

Well-defined catchment with limited competition

Closest Regional centre to affluent inner north eastern suburbs

Centre profile

• 80,800 sqm Major Regional centre

• 8km north east of Perth

• Myer, Kmart, Target, Coles, Woolworths and Greater Union, and over 170 specialty stores

• Last redeveloped in 2008

• Source: Urbis, 2016. 2. At 31 December 2016.

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Source: Urbis
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Galleria

The opportunity

Galleria has a large, diverse trade area with strong demand from families

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Opportunity to increase market share with expanded and more modern offer

Council supportive of increasing the residential density in the immediate surrounds of the centre

Sufficient land to expand centre

Customers view the Perth retail offer as generic

Current DA approval allows significant expansion over time

Source: Nearmap

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Galleria

Progressing through project validation phase

Transform Galleria to become one of the leading retail destinations in Perth

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$700m DA approval FY18 redevelopment[1 ] obtained target commencement

Agreement reached to relocate stormwater basin

Unlocks more desirable layout and design options to expand and improve the development footprint

Proposed major redevelopment to reinforce Galleria as the leading retail destination in north east Perth

DA approval obtained

Progressing through project validation phase

Source: Nearmap

1. Progressing through project validation phase, with overall project cost expected to be <$700m (100% interest, Vicinity’s share is 50%).

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DFO Perth
Stephen Beer
Development Director, WA/SA
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Artist’s impression

DFO Perth

The opportunity

Introduce proven DFO Outlet Centre format to under supplied market

Building on Vicinity’s DFO expertise and strong tenant relationships

Perth has the lowest Outlet Centre floorspace per capita[1,2]

Trade area[3] includes ~80% of Perth’s population and average income per capita[1] is 10.7% above Australian average

1.6m 17,000+ 13.8m Total trade area Airport workers Passengers[4]

2.0% 3.1% Population growth[1,5 ] Spending growth[1,5]

1. Source: Urbis, 2016. 2. Compared to other Australian capital cities. 3. Total trade area.

2. Source: Perth Airport Pty Ltd for 2015/2016. 5. 10-year annual forecast for main trade area.

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Source: Urbis
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DFO Perth

The project

Retail construction to commence in the coming weeks

Key metrics Cost1 $150m Initial yield >10% Expected IRR >15% 2018 target completion 24,000 sqm GLA	Key metrics Cost1 $150m Initial yield >10% Expected IRR >15% 2018 target completion 24,000 sqm GLA
Expected IRR	>15%

Joint venture to develop the first DFO in Perth

• 120 specialty stores

• Over 1,500 car spaces

Reinforces Vicinity’s market leadership position in Outlet Centres

Centrally located adjacent to Perth Airport and near major arterial roads Greenfield development enables optimisation of design and construction

Site works due to complete mid June 2017

Leasing demand strong, leveraging extensive retailer relationships

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low res diagram
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Artist’s impression
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1. Total cost including a lump sum rental payment. Vicinity’s share is approximately $75m.

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DFO Perth

Prime location

Excellent exposure adjacent to main north/south highway and airport entry

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TONKIN HIGHWAY
FUTURE
PUBLIC TRANSPORT
MAIN AIRPORT ENTRY AUTHORITY CAR PARKING
FUTURE
CONVENIENCE RETAIL
FUTURE FAST FOOD /
SERVICE STATION SITE FUTURE OFFICE PRECINCT
Artist’s impression
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DFO Perth

Optimal centre design supports strong precinct layout

Well-known brands offering quality stock at discounted prices and a significant food offer

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DFO Perth

Vibrant and engaging mall design

Inspired by location and surrounding natural environment

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Artist’s impression

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DFO Perth

Significant food offer

Contemporary food and dining options for DFO customers and Airport passengers and workers

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Artist’s impression

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Vicinity Centres | Perth Investor day and asset tours | 7-8 June 2017

Contact details and disclaimer

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For further information please contact:

Penny Berger Head of Investor Relations T +61 2 8229 7760 E penny.berger@vicinity.com.au

Disclaimer

This document is a presentation of general background information about the activities of Vicinity Centres (ASX:VCX) current at the date of this presentation unless otherwise noted. It is information in a summary form and does not purport to be complete. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. These should be considered, with or without professional advice, when deciding if an investment objective is appropriate.

This presentation contains certain forecast financial information along with forward-looking statements in relation to the financial performance and strategy of Vicinity Centres. The words ‘anticipate’, ‘believe’, ‘expect’, ‘project’, ‘forecast’, ‘estimate’, ‘outlook’, ‘upside’, ‘likely’, ‘intend’, ‘should’, ‘could’, ‘may’, ‘target’, ‘plan’ and other similar expressions are intended to identify forward-looking statements. Indications of, and guidance on, future earnings, financial position, performance and distributions are also forward-looking statements. The forward-looking statements included in this presentation are based on information available to Vicinity Centres as at the date of this presentation. Such forward-looking statements are not representations, assurances, predictions or guarantees of future results, performance or achievements expressed or implied by the forwardlooking 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 the anticipated results, performance or achievements expressed, projected 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), Vicinity Centres disclaims any obligation to update these forward-looking statements.

Copyright and confidentiality

The copyright of this document and the Information contained therein is vested in the Vicinity Centres group of companies. This document should not be copied, reproduced or redistributed without prior consent.

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Vicinity Centres | Perth Investor day and asset tours | 7-8 June 2017