How Is Abacus Group Navigating Growth and Sustainability in FY25?

Solid Financial Performance Amid Market Recovery

At its 2025 Annual General Meeting, Abacus Group (ASX, ABG) presented a steady financial performance for the fiscal year ended June 2025. The diversified commercial real estate investment trust reported Funds From Operations (FFO) of $82.7 million, marking a 1.7% increase over the previous year. This growth was supported by strong leasing activity across its office and retail portfolios, which together comprise 16 assets valued at approximately $1.9 billion.

The Group maintained its distribution at 8.50 cents per security, with half of this fully franked, reflecting a cautious but confident approach to rewarding investors. Statutory profit rebounded significantly to $26.9 million, driven by improved joint venture returns and a reduction in fair value losses compared to FY24.

Portfolio Strength and Leasing Momentum

Abacus Group’s office portfolio, valued at $1.5 billion, achieved a year-end occupancy rate of 91.1% and like-for-like rent growth of 4.3%. The Group completed 89 leasing deals covering over 44,000 square metres, with average leasing spreads of 5.8%. The retail portfolio also performed well, with occupancy rising to 95.5% and rent growth of 3.5%, supported by marquee assets such as the Myer store in Melbourne and Oasis Broadbeach on the Gold Coast.

Despite some tenant-driven space surrenders totaling around 5,300 square metres, management views these as opportunities to implement proactive leasing strategies. The weighted average lease expiry (WALE) remains healthy at 3.6 years for office and 5.2 years for retail, supporting income stability.

Robust Capital Management and Growth Capacity

The Group’s capital position remains solid with gearing at 34.5%, comfortably within its target ceiling of 40%. Abacus holds over $230 million in acquisition capacity, positioning it well to selectively expand its portfolio. The average cost of debt was 5.1% in FY25, with guidance for a reduction to 4.5% in FY26, assuming prevailing interest rates.

Abacus continues to transition towards an annuity-style model, focusing on income-producing assets and divesting non-core holdings to strengthen the balance sheet. The Group reaffirmed its FY26 distribution guidance of 8.50 cents per security, targeting a payout ratio between 85% and 95% of FFO.

Sustainability and ESG Progress

Environmental, social, and governance (ESG) initiatives remain a key strategic pillar. The Group reported a 61% reduction in Scope 1 and 2 greenhouse gas emissions intensity since FY19 and achieved an average NABERS Energy rating of 4.7 stars. Waste diversion from landfill improved by 39%, while employee engagement scored an impressive 83% with full participation in development programs.

Abacus is preparing for the upcoming Australian Sustainability Reporting Standards effective July 2027, underscoring its commitment to transparency and continuous improvement in sustainability practices.

Positive Early Signs in FY26 Trading

In the first quarter of FY26, leasing activity showed encouraging signs with office leasing spreads increasing to 7.7% and retail spreads surging to 8.1%. Occupancy levels remained robust, with retail occupancy rising to 98.2%, while office occupancy was slightly impacted by surrendered space but stable when adjusted. The Group’s gearing edged up slightly to 35.6% but remains well managed.

Management expressed confidence in maintaining distribution guidance, contingent on stable market conditions, and highlighted ongoing efforts to drive portfolio performance and long-term value creation.