This article is from the Australian Property Journal archive
Abacus Group is seeing green shoots in the office sector, including improved leasing demand and higher face rents, despite office property devaluations taking it to a first-half loss.
The ASX-listed group posted a $5.7 million interim statutory net loss, while funds from operations lifted 3.2% on the prior corresponding period (pcp) to $40.2 million, or 4.50c per security.
Distributions were flat at 4.25c per security.
Abacus has a $1.5 billion portfolio of 14 office assets, 78% being A-grade. Its office portfolio returned operating earnings of $44.0 million in the first half, up 12.0%, driven by increased average physical occupancy, strong leasing spreads and early surrender fees – the latter of which accounted for around half the earnings growth. The portfolio has a weighted average lease expiry of 3.7 years, a tick down on the pcp.
Like-for-like rent growth was 6.3%, while the group leased around 30,000 sqm1 of space across 46 deals had an average leasing spread of 7.5%.
“We are encouraged by both recent capital transactions and improved leasing demand, particularly in Sydney and Brisbane A-grade office markets,” it said.
“Face rents in our portfolio are rising, and while incentives remain elevated, we expect a gradual decline in the near- to medium-term, supporting effective rental growth. The group’s portfolio remains well positioned to attract customers seeking premium locations with contemporary amenities, at competitive rents.
“With our office valuations down circa 27% since pre-COVID, we expect office valuations are approaching the bottom of the cycle. We also expect incentives to continue to moderate from current levels, which will support effective rental growth.”
The half’s revaluation process resulted in an expansion in cap rates of 16 basis points to a weighted average capitalisation of 6.66%, and a decrease in investment property values of 1.9%.
Its two-asset retail portfolio is worth $400 million and recorded operating earnings growth of 15.4%, supported by rent reviews of 4.0%, higher average physical occupancy in the period and higher moving annual turnover at Oasis, which resulted in an increase in turnover rent in the period.
Abacus Group’s 19.8% strategic stake in Abacus Storage King (ASK) delivered investment earnings of $8.6 million, up 16.2% on, driven by ASK’s strong HY25 result, with established portfolio revPAM growth of 5.4%. Average rents were up 4.4% and occupancy lifted to 91.0%.
Abacus also earned $8.7 million in fees from its management of ASK, split across $6.3 million from investment management fees and $2.4 million from development fees.
“Abacus continues to view the self-storage sector favourably and is well positioned to benefit from ASK’s multi-pronged growth initiatives,” it said.
Balance date gearing was 34.0%, within the target range of up to 40%.
“The group is committed to identifying investment management opportunities moving forward, such as joint ventures and capital partnerships, utilising our platform of assets to drive higher returns,” said Abacus managing director, Steven Sewell.
“Abacus constantly reviews the income and capital returns from all assets within the portfolio as part of our active asset management strategy, with the aim of continuing our non-core divestment program and directing capital towards assets that provide strong and growing income streams over the medium to long term.”
Abacus Group affirmed its FY25 distribution guidance of 8.5c per security.
