How Did 360 Capital REIT Flip $21.9M Loss into $1.3M Profit in FY25?
360 Capital REIT has reported a significant turnaround with a $1.3 million statutory profit for FY25, alongside reduced distributions and a new long-term investment management agreement. The fund’s portfolio remains stable, supported by improved leasing and ESG upgrades.
- Statutory profit of $1.3 million, reversing prior year loss
- Operating profit up 24.8% to $5.2 million
- Distributions cut to 3.0 cents per security from 5.25 cents
- New 10-year investment management agreement reduces fees
- Portfolio occupancy improves to 93.4% with key leases secured
Financial Turnaround and Operating Performance
360 Capital REIT (ASX, TOT) has posted a statutory profit of $1.3 million for the year ended 30 June 2025, marking a dramatic reversal from a $21.9 million loss in the previous financial year. This improvement was driven by a 24.8% increase in operating profit to $5.2 million, underpinned by lower finance costs following debt repayments and enhanced leasing activity across its portfolio.
Despite a slight 4.3% decline in revenue to $14.6 million, the fund’s core earnings strengthened, reflecting disciplined cost management and a more favourable interest rate environment. Earnings per security rebounded to 0.6 cents, compared to a negative 13.3 cents last year.
Distribution Reset and Capital Management
In line with the fund’s entitlement offer last year, distributions were rebased to 3.0 cents per security, down from 5.25 cents in FY24. The quarterly payout was maintained at 0.75 cents per security, fully franked, signaling a more sustainable payout aligned with earnings. The distribution reinvestment plan (DRP) was active for the June and September 2024 quarters, supporting capital stability.
Capital management initiatives included refinancing the existing debt facility with a reduced margin and a lowered facility limit of $80 million. The fund’s gearing ratio stood at a moderate 35.5%, with borrowings drawn to $72 million. The weighted average interest rate decreased to 5.89%, easing the cost of debt servicing.
Portfolio Stability and Leasing Success
The investment property portfolio remains steady at $201 million, comprising three modern assets in Canberra, Melbourne, and Brisbane. Occupancy improved slightly to 93.4%, with the full leasing of vacancies at 38 Sydney Avenue, Forrest ACT, including long-term leases to CropLife Australia and the Australian Centre for International Agricultural Research.
The only remaining vacancy is Level 2 at 510 Church Street, Cremorne VIC, where a tenant, Dentsu, has exercised a lease break effective August 2026, though remains liable for associated payments. The portfolio’s weighted average lease expiry (WALE) is a healthy 6.4 years, supporting stable cash flows.
ESG and Management Changes
Environmental credentials were bolstered with a NABERS Energy rating upgrade to 5.0 stars at 510 Church Street, Cremorne VIC, while other properties maintained strong NABERS Water ratings. These improvements align with growing investor focus on sustainability in commercial real estate.
Significantly, the fund appointed 360 Capital REIT IM Pty Limited as its new investment manager under a 10-year agreement commencing February 2025. This change eliminated the annual performance fee and reduced management fees by 0.05% per annum, reflecting a strategic cost-saving measure approved by securityholders.
Outlook
Looking ahead, 360 Capital REIT remains focused on leasing the remaining vacancy and capitalising on expected improvements in the Australian commercial real estate market, particularly as interest rates are anticipated to ease. The fund’s strong cash flow profile and prudent capital management position it well to rebuild distributions and net tangible asset value, aiming to enhance securityholder value over the medium term.
Bottom Line?
With a leaner cost structure and improved leasing momentum, 360 Capital REIT is poised to navigate the late stages of the commercial property cycle, but investors will watch closely for sustained distribution growth.
Questions in the middle?
- How will the lease break by Dentsu at Cremorne impact future cash flows and valuations?
- What opportunities might arise from the new investment management agreement to enhance returns?
- How sensitive is the fund’s portfolio to further interest rate fluctuations given its floating rate debt?