Retail landlord CFS Retail Fund has reported a 27.9 per cent fall in net profit to $295 million, reflecting the tough market conditions and one-off property revaluations.
In doing so, the trust revealed it had trimmed the size of its proposed expansion at Chadstone Shopping Centre by about 5000 square metres to 20,000 square metres to "de-risk" the project in the weaker market for apparel and discretionary items.
Before the one-off items there was a 3.5 per cent increase in distributable income to $384.6 million, which was in line with the measure used by analysts.
The trust, which is the subject of internalisation from its manager, the Commonwealth Bank, reported a full-year distribution of 13.6¢ per security, up 3.8 per cent, and forecast a payout of 13.3¢-13.7¢ for the coming year, depending on assets sales of up to $500 million.
These assets include four centres in Victoria that were to be sold to the proposed Pacific Retail REIT, which has been put on hold until conditions improve.
During the year, like-for-like net property income from tenants increased 2 per cent, reflecting modest rental growth, while total net property income decreased 2 per cent to $537.2 million due to the sale of a 50 per cent interest in the Myer Centre Brisbane in March, 2012. For new leases, the rents were down about 7.5 per cent, but were steady for lease renewals, leading to a negative 1.1 per cent releasing spread, with the same expected this year.
Chief executive of the fund Michael Gorman said the Emporium project in Melbourne was 90 per cent leased and on track to open by the end of March 2014.
He declined to comment on the CBA internalisation, which analysts said could prompt the trust's largest shareholder, John Gandel - who owns half of Chadstone - to make an offer. "It's not appropriate for me to make any comments on the internalisation, except that it's business as usual for us.
"Specialty sales growth was slightly below our forecast of 3 per cent, but we're pleased with the steady improvement this year in what continues to a very challenging retail environment."
Mr Gorman said there had been a remixing of tenants in the portfolio, with fashion making way for technology and retail services.
"If anything, the sentiment among our retailers is slightly better than it was 12 months ago."