RAM Essential Services Property Fund Sells Five Retail Assets and Retains Equity Stake

Strategic Retail Asset Divestment and Equity Stake Retention

RAM Essential Services Property Fund (REP) has taken a decisive step in its healthcare transition by exchanging contracts to sell five retail assets; Coomera Square, Springfield Fair, Coles Rutherford, Keppel Bay Plaza, and Mowbray Marketplace; to a fund backed by a leading institutional investor. REP will retain a 10% interest in the new fund, effectively maintaining some exposure to these properties while realising net proceeds of $218.6 million through a combination of cash and equity.

Non-Core Medical Assets Sale and Portfolio Valuation Update

Alongside the retail divestments, REP’s manager has contracted to sell $17.1 million of non-core medical assets, including Rosebery Convenience & Medical Centre and Casuarina Medical Precinct. Draft valuations for the remaining portfolio show a $14.53 million decrease from December 2025 book values, driven by a 20 basis point softening in capitalisation rates and market rent assumptions reflecting current economic conditions. This valuation adjustment contributes to an expected 11% decline in net tangible assets (NTA) to approximately 703 cents per security as at 30 June 2026.

Gearing Reduction and Financial Flexibility Gains

Completion of these portfolio transactions is expected to reduce REP’s pro-forma gearing from a high 41.73% to a more conservative 16%, well below its target range of 30% to 40%. The proceeds, estimated at $224.9 million in cash, will be directed towards debt reduction and the orderly close-out of existing interest rate hedges. This deleveraging strengthens REP’s balance sheet and enhances financial flexibility, positioning the fund to pursue further healthcare acquisitions or potentially restart its security buy-back program.

Portfolio Composition Shifts Sharply Toward Healthcare

Post-sale, REP’s portfolio will be weighted approximately 74% to healthcare assets and 26% to retail, marking a significant re-weighting consistent with its strategic focus on specialised healthcare properties with long weighted average lease expiries (WALEs) and high barriers to entry. Executive Director George Websdale highlighted that the sale of smaller non-core medical assets is part of refining the healthcare portfolio toward assets with substantial operational investment and quality tenants.

Distribution Policy and Market Positioning

REP declared a fourth-quarter distribution of 0.8 cents per security, bringing full-year FY26 distributions to 4.55 cents per security. The fund aims to maintain a distribution payout ratio between 90% and 100% of funds from operations (FFO), a more sustainable level following a period of elevated payouts. Non-Executive Board Chair Kieran Pryke described the retail asset sales as a milestone that enhances REP’s capacity to pursue attractive healthcare opportunities while supporting long-term securityholder value.