Garda Property Group has delivered a strong FY26 with funds from operations up 54%, distributions lifted 18%, and gearing reduced to 29.8%, driven by capital redeployment from asset sales into commercial lending and debt reduction.
- 54% increase in funds from operations to 11.1 cents per security
- 18% rise in distributions to 8.5 cents per security
- Gearing lowered from 42.7% to 29.8%
- Commercial loans nearly tripled to $134 million
- Industrial property portfolio valuation up 3% to $340.6 million
Strong Profit Turnaround and Capital Reallocation
Garda Property Group (ASX:GDF) has posted a striking turnaround in FY26, swinging to a $23.8 million profit after tax from a $6.1 million loss a year earlier. The key driver was a 54% leap in funds from operations (FFO) to 11.1 cents per security, comfortably beating initial guidance by 24%. This operational strength enabled an 18% increase in distributions to 8.5 cents per security, paid at a more conservative 77% payout ratio versus 85% guidance, reflecting prudent capital management.
Underpinning these gains was a strategic redeployment of approximately $190 million of capital from the disposal of the North Lakes industrial development and Cairns Corporate Tower, both settled in 1H26. The proceeds were swiftly channelled into reducing variable-rate debt and expanding higher-return commercial lending activities, which now account for 27% of Group assets but generate 49% of revenue, matching the contribution from the property portfolio.
Commercial Lending Nearly Triples and Drives Revenue Growth
Garda’s lending book surged to $134 million at year-end, up from $44 million in FY25, marking a 204% increase in deployed loans. Lending revenue nearly tripled to $19.3 million, including interest and fair value gains, now representing almost half of total Group revenue. The loan portfolio is concentrated in Southeast Queensland residential and industrial developments, with about 68% in senior debt positions capped at 70% loan-to-value ratios and the remainder in higher-leverage, early-stage loans that command higher returns.
This expansion in lending reflects Garda’s core competency as a real estate capital allocator, leveraging in-house expertise to originate, underwrite, and actively manage loans. The company’s ability to identify and intervene in troubled projects provides a competitive edge in mitigating credit risk, although the lending book’s concentration and cyclical nature remain key risks.
Industrial Portfolio Valuation Up 3% on Rental Growth
The Group’s industrial property portfolio, focused solely on Brisbane, increased in valuation by $9.9 million to $340.6 million, a 3% uplift driven by rental growth averaging 5%, notably a 14% increase at the flagship Morningside site. The portfolio comprises nine assets with a weighted average capitalisation rate of 5.88% and a weighted average lease expiry of 4.1 years. Occupancy stood at 77.4%, with recent leasing successes including a 10-year lease at Acacia Ridge’s 38-56 Peterkin Street, adding $1.4 million in net property income from FY27.
Garda has commenced a substantial $14 million redevelopment at Morningside, extending and refurbishing the existing building to double the rental income to $4.2 million per annum by December 2026. Meanwhile, the Pinkenba property’s tenant entered liquidation post-year-end, but Garda holds an $2.3 million bank guarantee covering 11 months’ rent, and a re-leasing campaign is underway.
Balance Sheet Strength and Market Discount Persist
Gearing was reduced significantly to 29.8% from 42.7% in FY25, aided by debt repayments funded from asset sales. The Group’s net tangible assets (NTA) per security rose modestly to $1.64, yet the security price languished at $1.03, representing a 37% discount to NTA and implying an 8.7% capitalisation rate on the portfolio; well above private market yields below 5.5%. Garda acknowledges this disconnect but emphasises its focus on growing earnings and distributions to close the gap over time.
The Group’s $166 million syndicated debt facility, with $4 million headroom, was extended to September 2029 and recently amended to increase the loan-to-value ratio covenant to 55%, providing additional borrowing capacity. Interest rate hedges covering $130 million of debt remain in place, including a restructured swap delivering a monthly cash flow benefit of approximately $100,000 starting September 2026.
Outlook Anchored on Lending Growth and Property Leasing
Looking ahead to FY27, Garda forecasts FFO per security of 10.5 cents and distributions of 9 cents per security, maintaining a conservative payout ratio of around 85%. The company expects loan run-off to free up to $90 million in capital for redeployment during the year, primarily into new lending opportunities, while the industrial property portfolio’s earnings are set to benefit from the completion of the Morningside expansion and further leasing at Acacia Ridge.
Garda’s Executive Chairman Matthew Madsen highlighted the Group’s dual strategy of owning high-quality industrial assets in Brisbane and growing a higher-return lending business focused on Southeast Queensland’s buoyant development market. The company remains cautious on develop-to-own projects given current cost-of-capital pressures but is well positioned to capitalise on lending demand that outstrips its balance sheet capacity, with potential for external capital partnerships to scale the lending platform.
Despite the persistent discount in the listed price, Garda’s combination of a strengthening property portfolio, rapidly growing lending income, and disciplined capital management presents a compelling risk-adjusted return profile. The market will be watching how effectively Garda can execute on its growth plans and whether that translates into a narrowing of the valuation gap.
Bottom Line?
Garda’s FY26 results showcase a successful pivot towards lending and disciplined capital allocation, but the persistent market discount underscores the challenge of translating strong fundamentals into share price appreciation.
Questions in the middle?
- How will Garda manage credit risk as its lending book expands further into higher-leverage loans?
- What impact will the completion and leasing of Morningside’s expansion have on overall portfolio income and valuation?
- Could external capital partnerships materially accelerate Garda’s lending growth beyond balance sheet constraints?