Garda Upgrades FY25 Payout to 95%, Secures $114M Contract for North Lakes Industrial Land
Garda Property Group has reaffirmed its FY25 income return at 7.2 cents per security and upgraded its distribution payout ratio to 95% of FFO. The group plans to sell its North Lakes industrial site for $114 million and is marketing its Cairns Corporate Tower, aiming to reduce gearing and reposition as a focused industrial REIT.
- FY25 income return reaffirmed at 7.2 cents per security
- North Lakes industrial land sale contracted for $114 million, settlement expected July 2025
- Cairns Corporate Tower marketed for sale, valued at $79.4 million
- Pro-forma gearing to reduce from 40% to approximately 26% post North Lakes sale
- Distribution payout ratio upgraded to approximately 95% of Funds from Operations
Strong Income Return and Distribution Guidance
Garda Property Group (ASX: GDF) has reaffirmed its FY25 income return guidance at 7.2 cents per security, comprising a 6.3 cents per security distribution from the fund and a 0.9 cents per security fully franked corporate dividend. The group also upgraded its forecast distribution payout ratio to approximately 95% of Funds from Operations (FFO), signaling confidence in its underlying earnings and cash flow stability.
This guidance reflects Garda's active management approach and its focus on delivering consistent income to investors amid evolving market conditions.
Strategic Asset Sales to Reset Balance Sheet
A key highlight of Garda's interim results is the contracted sale of its North Lakes industrial land for $114 million to an ESR-managed fund, with settlement anticipated in July 2025 following completion of civil works and titling. This transaction is expected to crystallize a substantial capital gain and provide net proceeds that will be used to repay all existing variable rate debt.
Post-settlement, Garda aims to reduce its gearing from 40% as of December 2024 to approximately 26%, significantly lowering its funding requirements and financial risk. This deleveraging move positions Garda to operate with a more streamlined and resilient balance sheet.
Marketing Cairns Corporate Tower for Sale
In addition to North Lakes, Garda has launched an on-market sales campaign for its Cairns Corporate Tower, the group's last remaining office asset and a legacy holding from its 2015 IPO. The property has undergone a $20 million refurbishment, boosting its valuation to $79.4 million and increasing average passing rents to $530 per square metre, with recent leases achieving $600 per square metre.
A successful sale of Cairns Corporate Tower would further reposition Garda as a lowly geared, pure-play industrial REIT, aligning with its strategic focus on industrial property in south-east Queensland.
Development and Lending Activities Support Growth
Garda's industrial development pipeline remains active, with the recently completed 14,777 square metre Acacia Ridge facility expected to generate an additional $3 million in net annual income once fully leased. The group is also exploring a 3,000 square metre expansion at 69 Peterkin Street, Acacia Ridge, which promises a substantial rental reversion.
Complementing its property portfolio, Garda continues to grow its lending business, providing construction finance and other loans with attractive double-digit returns. Lending revenue is forecast to contribute 21% of FY25 group revenue, reflecting a strategic diversification of income streams.
Financial Position and Market Valuations
As at 31 December 2024, Garda reported total assets of $567 million and net tangible assets (NTA) per security of $1.62, down from $1.71 at June 2024, partly due to valuation adjustments. The portfolio cap rate stands at 6.21%, reflecting some softening in industrial and office market yields.
Despite a 31% discount of the share price to NTA, Garda's strategic moves to reduce debt and focus on high-quality industrial assets could help narrow this gap over time.
Bottom Line?
Garda’s upcoming asset sales and balance sheet reset mark a pivotal step toward a leaner, industrial-focused future, but execution risks remain.
Questions in the middle?
- Will the Cairns Corporate Tower sale achieve Garda’s valuation expectations amid market conditions?
- How will the redeployment of capital from North Lakes proceeds impact Garda’s lending and development pipeline?
- What are the risks to Garda’s income return guidance if leasing activity at Acacia Ridge slows?