Rising Distributions and Capital Raises: What Risks Lie Ahead for 360 Capital Mortgage REIT?
360 Capital Mortgage REIT (ASX – TCF) reported a robust FY25 with a 38.4% increase in distributions and a 74.6% rise in operating profit, underpinned by a high-quality fixed-rate loan portfolio and successful capital raisings.
- 38.4% increase in distributions to 62.3 cents per unit
- 70.3% revenue growth to $3.8 million driven by expanded loan investments
- Loan portfolio 96.4% senior fixed-rate loans with 11.8% weighted average interest rate
- Raised $13.6 million in FY25 plus $8.1 million post-period, boosting market cap and liquidity
- TCF trades at 1% premium to NAV with a 10.4% FY25 distribution yield
Strong Financial Performance and Distribution Growth
360 Capital Mortgage REIT (TCF) has reported a standout FY25, marked by a 38.4% increase in distributions to 62.3 cents per unit and a 74.6% jump in operating profit to $3.2 million. Revenue rose 70.3% to $3.8 million, reflecting the Trust’s expanded loan portfolio and capital deployment. These results underscore the REIT’s ability to generate consistent income while preserving capital, a key attraction for investors seeking yield in a low-interest-rate environment.
Robust Loan Portfolio Anchored by Senior Fixed-Rate Loans
The Trust’s portfolio remains conservatively structured, with 96.4% of loans classified as senior and all loans fixed rate, carrying a weighted average interest rate of 11.8%. This fixed-rate exposure provides a buffer against interest rate volatility, while the senior loan status offers significant capital protection. The portfolio’s weighted average loan-to-value ratio stands at a prudent 69.2%, with the underlying real estate needing to depreciate by more than 30% before investor capital is at risk.
Capital Raising and Market Position
During FY25, TCF successfully raised $13.6 million, with an additional $8.1 million raised post-period, increasing its market capitalization by over 100% to $37.4 million. This capital injection has supported loan diversification and improved liquidity, evidenced by a 163.8% increase in average daily turnover. The Trust now trades at a 1% premium to its net asset value, reflecting growing investor confidence and the effectiveness of its liquidity mechanism, which includes off-market buybacks at NAV.
Experienced Management and Strategic Outlook
360 Capital Group, the largest unitholder with a 13.5% stake, brings an 18-year track record in real estate credit, having executed $440 million in private credit transactions without capital loss. The management team’s disciplined approach has driven a 126.5% increase in distributions since taking over in 2020. Looking ahead, TCF aims to expand its loan portfolio to 10-20 investments, further diversify by geography and asset class, and maintain its target return of the Reserve Bank cash rate plus 4.0%, all while preserving capital and enhancing liquidity.
Market Differentiation and Investor Appeal
As one of only two ASX-listed mortgage REITs focused exclusively on Australian real estate loans, TCF offers a unique proposition. Its conservative capital structure, absence of leverage, and fixed-rate loans differentiate it from peers with overseas exposure or higher risk profiles. The Trust’s monthly distribution payments and recent marketing initiatives have improved its trading performance, delivering a total unitholder return of 21.5% in FY25.
Bottom Line?
With strong FY25 momentum and strategic capital management, 360 Capital Mortgage REIT is poised to deepen its market relevance and deliver sustained income growth.
Questions in the middle?
- How will TCF manage loan portfolio diversification amid evolving real estate market conditions?
- What impact could interest rate fluctuations have on future fixed-rate loan returns?
- Will further capital raisings dilute existing unitholders or enhance liquidity and scale?