Abacus Group Ltd. unveiled a reset of its payout policy as part of a broader growth strategy, reducing its FY27 distribution by 21.2% to 6.70 cents per security while maintaining FY26’s 8.50 cents payout.
The Australian real estate investment trust reported FY26 funds from operations (FFO) of $81.2 million, or 9.08 cents per security, a 1.9% decline from the prior year. Total assets fell 5.1% to $2.5 billion, with net tangible assets (NTA) declining 7.6% to $1.59 per security, trading at a 43% discount to book value.
Managing Director Steven Sewell characterized the lower payout ratio as a strategic shift to fund growth. "This is a material change for the better," he said, adding that the move establishes a sustainable foundation for future distributions and investment. The FY27 payout is guided to an 80–90% FFO ratio, with 67% expected to be fully franked.
The REIT’s gearing increased 170 basis points to 36.2%, leaving over $150 million in acquisition capacity despite a statutory loss of $74.5 million. Total drawn debt stood at $925 million against $1.14 billion in facilities, with a weighted average cost of debt at 4.5% in FY26, projected to rise to 5.25% in FY27.
Portfolio valuations edged higher, with investment property values increasing to $1.83 billion and a weighted average cap rate tightening to 6.70%. Office assets, comprising 59% of the portfolio, remain concentrated on Australia’s eastern seaboard, with 76% classified as A-grade properties.
Operational metrics showed mixed performance. Office operating earnings declined 3.2% to $89.6 million, though excluding one-time surrender fees, earnings grew 5.3%. Retail like-for-like earnings rose 4.5% to $30.0 million, while Storage King’s equity return contributed $16.1 million, down 4.2%. Administrative expenses fell 5.0% to $32.0 million, with a further 25% reduction targeted for FY27.
Leasing activity strengthened, with 71 office transactions covering 46,628 square meters, up 5% year-over-year. Net face leasing spreads averaged 5.5%, while retail leasing spreads improved to 8.4% and occupancy reached 97.4%. The REIT reported a 79% reduction in scope 1 and 2 greenhouse gas emissions since FY19 and average NABERS ratings of 4.6 stars for energy and 4.2 stars for water.
Sewell emphasized the resilience of Australia’s office market, citing stable valuations, constrained new supply, and early signs of recovery. He described moderating incentives as an indicator of improving conditions, while noting efficiency initiatives as an ongoing priority.
