Region Group (ASX:RGN) reported first-half FY26 results highlighted by higher earnings, resilient operating metrics across its convenience-based retail portfolio, and an upgraded full-year outlook. Chief Executive Officer Anthony Mellowes said the result was underpinned by strong operational performance and a “fully hedged” interest position, while Chief Financial Officer David Salmon pointed to comparable income growth and expansion in funds under management.
Key first-half results
For the half, Region delivered funds from operations (FFO) of AUD 0.079 per security, up 3.9% from December 2024. Adjusted funds from operations (AFFO) were AUD 0.069 per security, up 3% from December 2024, and matched the distribution per security of AUD 0.069, representing a 100% AFFO payout ratio in line with guidance.
Assets under management rose to AUD 5.4 billion, up 3.9% from 30 June 2025, supported by valuation growth and an increase in funds under management. Net tangible assets (NTA) increased 3.6% to AUD 2.56 per security, driven by the fair value uplift.
Portfolio operations and leasing trends
Region’s portfolio occupancy improved to 97.7% as of December 2025, up 20 basis points. Specialty vacancy improved to 4.5% from 5.4% at June 2025. The portfolio weighted average lease expiry (WALE) edged down by 0.1 years to 4.8 years.
Management emphasized the nondiscretionary mix of the portfolio, noting that over 88% of gross rent is generated from nondiscretionary tenants. Anchors account for 45% of gross rent, with specialties and mini-majors contributing the remaining 55% and focused on categories including food, liquor, retail services, farms, and healthcare. The group has 87 centers owned 100% by Region and geographically diversified across Australia.
On trading, Region reported 3.1% comparable moving annual turnover (MAT) growth, with growth by category cited as:
- Supermarkets: 3.1%
- Discount department stores: 3.7%
- Mini-majors: 1.7%
- Nondiscretionary specialties: 3.73%
- Discretionary specialty tenants: 3.6% (improved)
Specialty sales productivity was reported at AUD 10,265 per square meter. Management said tobacco sales were excluded, consistent with the June 2025 results.
Leasing activity included 177 specialty leasing deals at an average leasing spread of 3.4%. New leases recorded an average spread of 7%, while renewals were “relatively flat,” with management noting that a small number of deals can skew half-year outcomes. Mellowes attributed weaker renewal spreads to three deals—two banks and one pharmacy—that were completed on less favorable terms to retain those tenants.
Region also reported average annual fixed rent reviews of 4.3% per annum, applied across 96% of specialty and kiosk tenants. The average specialty rent increased to AUD 930 per square meter, representing annualized growth of 5% since December 2022. Tenant retention for expiring leases was 79%.
Capital management, valuations, and funding
Region’s weighted average capitalization rate firmed by 10 basis points to 5.87% since June 2025, on top of a 10 basis point firming in the second half of FY25. The property valuation movement for the period included a AUD 129 million increase, comprising a AUD 92 million fair value increase and AUD 37 million in capital expenditure. Management described fair value increases of roughly 3% since June 2025, with about 1.7% attributed to cap rate compression and the remainder to valuation NOI growth over the period.
The balance sheet was described as healthy, with gearing of 32.7%, at the lower end of the target range. The group continued an on-market buyback, purchasing 6.7 million securities during the half at an average price of AUD 2.39 for around AUD 16 million. Since the buyback announcement in April 2025, Region has bought back 8.9 million securities at an average price of AUD 2.37 for a total consideration of AUD 21 million. Salmon said FY26 guidance does not assume any further buyback activity.
On funding, Region issued a six-year AUD 300 million medium-term note in November 2025, which management said was 3.6x oversubscribed and priced at a borrowing margin of 1.22%. Proceeds were used to repay bank debt. Region reported total debt facilities of AUD 1.9 billion with approximately AUD 355 million of capacity available and no debt expiries until FY28.
The weighted average cost of debt increased from 4.3% to 4.6% during the half, and management said it expects this to decrease slightly to 4.5% for the full year. Region reported that 100% of debt is hedged or fixed in FY26 at an average rate of 2.89%, with hedging of 87% in FY27 and 70% in FY28.
Transactions, reinvestment, and funds management
In January 2026, Region settled the acquisition of Treendale Home and Lifestyle Centre for AUD 53 million at a 6.4% initial yield. Management said the large-format center is directly opposite Region’s existing Treendale Shopping Centre, creating management efficiencies, and noted the site’s zoning provides potential for additional retail (including supermarkets) over time. In Q&A, Salmon said the guidance upgrade reflected earnings accretion from Treendale versus funding costs, and from funds management expansion.
Region also increased its capital deployment forecast. It spent AUD 32 million in the first half and expects around AUD 65 million for FY26, up about AUD 15 million, mainly due to development projects related to center expansions at North Orange (NSW), Newcastle MarketTown (Newcastle), and Greenbank (southwest Brisbane). Management indicated it generally targets 6%+ yield on capital deployment.
Within funds management, the Metro Fund acquired Dalyellup Shopping Centre in Western Australia for AUD 36 million in November 2025, increasing funds under management to AUD 752 million (up 5.7% from June 2025). The Metro Fund also exchanged on the acquisition of three additional strata properties at West Village in Brisbane valued at AUD 89 million, with two settled in January 2026 and the remainder expected to settle by June 2026.
Guidance upgrade and leadership transition
Assuming no significant change in market conditions, Region upgraded its FY26 guidance to:
- FFO of AUD 0.16 per security (up from AUD 0.159), representing 3.2% growth on FY25
- AFFO of AUD 0.141 per security (up from AUD 0.14), representing 2.9% growth on FY25
Management said the upgrade was largely driven by transactional activity, including Treendale and funds management initiatives, and reiterated that no additional transactions or capital initiatives are assumed beyond those already announced.
Mellowes said the results presentation would be his final one after 14 years leading the group, adding that Greg Chubb will become CEO and Managing Director effective 9 March.
About Region Group (ASX:RGN)
Region Group (RGN) includes two internally managed real estate investment trusts owning a portfolio of convenience-based retail properties located across Australia. Region invests in retail properties predominantly anchored by non-discretionary retailers, with long leases to tenants such as Woolworths Limited, Coles Limited and companies in the Wesfarmers Limited group. Region Group comprises two registered managed investment schemes, Region Management Trust (ARSN 160 612 626) and Region Retail Trust (ARSN 160 612 788).
