Region Group (RGN): This morning, Australia’s largest convenience mall landlord, RGN, released their full-year results for 2025; the company’s results were largely in line with expectations. The HNW Income Portfolio has a 2.5% weight to RGN.

Key Points:

  • Profits Up: Regions Funds From Operations (FFO) was up 1% on last year to $180 million, with increases in property rents being largely offset by higher property and corporate expenses.
  • Distributions Flat: Distributions were in line with last year at 13.7 cents per share
  • Operational Performance: RGN continues to manage its Portfolio well, with occupancy at 98% and a strong average lease term of 4.9 years. Tenant sales in the centres remained strong, with sales increasing by 3.1%, led by Communications (+7.3%), Pharmacy & Healthcare (+5.4%), Medical & Beauty (+5.2%) and Food & Liquor (+2.9%), with discount department stores benefiting the most. Currently, 54 or 44% of supermarket anchors are paying turnover rent in addition to base rent, consistent with last year.
  • CEO Retirement: Long-time CEO, Anthony Mellowes, has announced that he will be retiring in March next year after 15+ years in the top job. Anthony will continue as CEO for the next 9 months as the Region board begins their CEO succession plan.
  • Balance Sheet: Gearing is currently at 33%, at the low end of the target range of 30-40%. RGN currently has an average debt cost of 4.3% and an average debt maturity of 4.3 years, with no major debt expiring until 2028. This was achieved as over 97% of its debt was hedged or at a fixed rate.
  • Valuation: NTA increased by 5 cents per share to $2.47, driven by increased acquisitions and compression in cap rates.
  • Outlook: RGN management provided guidance for 2026 of Funds from Operations of 15.9 cps per share, bolstered by the resilient nature of non-discretionary spending and rent growth.

Portfolio Strategy: RGN offers portfolio exposure to non-discretionary retailing through a diversified portfolio of neighbourhood shopping centres, typically anchored by a Woolworths or Coles supermarket, with an accompanying Dan Murphy’s or BWS. Unlike better-known retail landlords such as Scentre or Stockland, RGN’s tenants are not particularly exposed to the impact of online sales, as consumer staples and alcohol, as well as medical and personal services like haircuts, are not easily delivered online.

Long leases to quality tenants, such as Woolworths, Coles, and Aldi, give a high degree of confidence that RGN can maintain and grow its distributions over time.

RGN finished up 0.5% to $2.39.