Garda Property Group Reports 42.7% to 14.7% Gearing Drop, 11% Distribution Rise

Strategic Asset Sales Sharpen Focus on Industrial Core

Garda Property Group’s FY25 financial results highlight a decisive shift in portfolio strategy, concentrating property ownership in Brisbane’s industrial sector. The group is poised to complete the sale of its North Lakes industrial land and Cairns office building by September 2025, transactions that will generate approximately $191 million in proceeds. These sales will enable Garda to reduce its drawn debt substantially from $270 million to around $79 million, slashing gearing from 42.7% to a conservative 14.7%.

This move not only strengthens the balance sheet but also aligns with Garda’s proven “develop to own” industrial focus, which now represents 85% of the property portfolio by value. The divestments mark a clear exit from office assets, with the Cairns sale consolidating the group’s industrial footprint in South-East Queensland.

Robust Industrial Portfolio and Lending Growth

Garda’s industrial property portfolio stands at $522 million with a weighted average capitalisation rate of 5.86%, reflecting a high-quality asset base with an average age of five years. Despite a softening in capitalisation rates over the past cycle, rental growth has offset valuation pressures, resulting in a modest increase in portfolio value.

Complementing its property holdings, Garda has significantly expanded its real estate lending business, deploying $44 million across 14 active loans. This lending arm, focused on residential and industrial development projects, contributed 23% of FY25 group revenue and offers attractive double-digit returns. The group’s in-house development expertise provides a competitive advantage in managing and underwriting these loans, which typically have shorter durations than equity investments.

Leasing Momentum and Earnings Upside

FY25 saw active leasing with 15,287 square metres of net lettable area renewed or newly leased, including key tenant renewals at Berrinba and new leases at Acacia Ridge and Cairns. The weighted average lease expiry (WALE) stands at 4.2 years, providing income stability. Notably, the recently completed 38-56 Peterkin Street industrial facility in Acacia Ridge presents approximately $3 million in annualised earnings upside from currently vacant space, offering further growth potential in FY26.

Capital Management and Distribution Outlook

Garda’s capital management strategy is underscored by disciplined debt reduction and hedging adjustments. The syndicated debt facility, drawn to $269.9 million at June 2025, will be reduced following asset sales, with the facility limit expected to drop to about $170 million. Interest cover ratios are forecast to improve materially, rising to above 4 times post-sales, well above covenant requirements.

Reflecting these improvements, Garda has guided an 11% increase in FY26 distributions to 8.0 cents per security, translating to a compelling 6.3% yield based on the current ASX price. The payout ratio is expected to normalize around 90%, supported by forecast funds from operations growth and earnings upside from leasing and lending activities.

Market Valuation and Investor Considerations

Despite the strong fundamentals, Garda’s securities trade at a 21% discount to net tangible assets (NTA) with an implied cap rate of 7.4%, suggesting a disconnect between market pricing and underlying asset values. This gap may present an opportunity for investors seeking exposure to a well-managed industrial property group with a growing lending platform and a clear strategy to enhance shareholder returns.