Region Group Sees Recovery in Shopping Centre Portfolio
Region Group, a major owner of shopping centres across Australia, has seen a positive shift in its portfolio as it works to recover from the collapse of Mosaic Brands. This retail giant, which operated well-known brands such as Noni B, Rivers, and Katies, shut down 700 stores in late 2024 and early 2025, leaving many shops vacant.
The company, which manages 87 neighbourhood and sub-regional shopping centres, is gradually filling these empty spaces. According to David Salmon, the chief financial officer, approximately 85% of the available spaces are either leased or being used on a casual basis, generating some form of income.
Despite this progress, there remains a challenge in fully leasing all the available space, which impacts the net operating income (NOI). “We’re looking to fully lease everything, but there is a little bit of a drag in terms of dollars on the NOI line,” Salmon said during a conference call with analysts.
Region Group’s portfolio occupancy rate improved slightly to 97.7% as of December 31, up from 97.5% at June 2025. When excluding anchor tenants like Coles and Woolworth supermarkets, the vacancy rate dropped to 4.5%, a significant improvement from 5.4% six months earlier.
To fill these vacancies, Region Group has had to offer more leasing incentives. However, unlike previous years, the company is not concerned about the financial health of its tenants. CEO Anthony Mellowes highlighted that some of the new tenants, such as The Reject Shop, which was acquired by Canada’s Dollarama, are performing well and looking to expand.
Chemist Warehouse is also doing well, according to Mellowes. “So we don’t have any portfolio of tenants that we’re sitting there going ‘we’ve got a big watch on them’, like we had in the past,” he said. While some smaller tenants may face challenges, Mellowes noted that there are no current concerns about the stability of the company’s tenant base.
Mellowes, who is retiring in March after 14 years with the company, believes that recent interest rate increases will not significantly impact retail sales for its tenants. This confidence stems from Region Group’s focus on non-discretionary sectors, which tend to be more resilient.
For the half-year ending December 31, Region Group reported a statutory net profit of $180 million, a 120% increase compared to the previous year. Much of this growth was attributed to an increase in the fair value of its investment properties.
Adjusted funds from operations (AFFO), a key metric for evaluating property groups, rose by 3.0% to 6.9 cents per security. In response to this performance, Region Group upgraded its full-year earnings guidance to 14.1 cents per security, up from 14 cents.
By lunchtime, Region Group’s stapled securities were trading at a three-week high of $2.40, reflecting a 3.5% increase. This positive movement highlights investor confidence in the company’s recovery and future prospects.
