GDI sets buyback in motion after 25% FFO growth

FFO growth funds buyback ambitions

GDI Property Group (ASX:GDI) is moving from repair work to capital allocation. Its FY26 annual report shows Funds From Operations rising 25.0% to $44.5 million, while management says available liquidity has increased to $90.0 million and an on-market buyback of up to 5% of stapled securities will commence. The full buyback, however, may require further sales of non-core assets.

FFO per security rose 24.5% to 8.24 cents, while the group maintained its 5.00 cents per security distribution for FY26. GDI is seeking to maintain the same distribution in FY27, subject to no material change in circumstances or unforeseen events, and notes that some or all of any future distribution may be paid from capital.

Leasing turns Westralia Square into a core strength

Occupancy across the portfolio improved to 90.0% at 30 June 2026, excluding 1 Mill Street, from 88.2% a year earlier. The most visible result was Westralia Square, where WS1 and WS2 are now reported as 100% occupied after a post-balance-date Heads of Agreement completed the leasing of WS2. The two assets contain 42,110 square metres of lettable area and have weighted average lease expiries of 6.0 years for WS1 and 6.6 years for WS2.

GDI leased, renewed or agreed terms over 20,937 square metres during the year. At Mill Green, occupancy increased to 92% at 197 St Georges Terrace and 93% at 5 Mill Street after a strategy of subdividing floors and investing in fitted-out suites. The next stage is more ambitious: Stage 1A of the Mill Green development, subject to approvals, funding, tenant demand and construction conditions, alongside early development options above the Murray Street and Wellington Street car parks.

Co-living contribution accelerates

The 50%-owned Co-living JV supplied another significant earnings leg. Its FFO contribution increased by more than 44% to $9.5 million, helped by the acquisition of three Moranbah properties for $18.3 million and a 140-room expansion at Norseman. The Lodge Village in Moranbah has a 144-room take-or-pay contract with Stanmore Resources until 31 March 2027, while Norseman’s expansion followed demand exceeding available capacity under its contract with Pantoro Gold.

That growth partly offset a weaker Funds Management Division, where FFO fell 39.3% to $6.2 million. Funds management revenue declined to $2.0 million from $5.8 million as assets under management reduced and the prior year included larger transactional fees. GDI says the division has sold or exchanged more than $330 million of assets since December 2024, including the Autoleague portfolio, but the recycling strategy also reduces recurring management income.

Debt falls while development competes for capital

GDI reduced drawn debt on its syndicated facility by $21.0 million to $343.3 million and ended the year with $78.2 million of undrawn capacity. The facility was increased to $426.5 million, with $215.8 million extended to February 2028 and $210.8 million to February 2029. Gearing declined to 33%, while the facility reported a loan-to-value ratio of 37.1% against a 50% covenant and an interest coverage ratio of 2.4 times against a 1.5 times covenant.

The balance sheet is not entirely insulated from property-market assumptions. The weighted average capitalisation rate moved to 6.8% from 6.7%, and GDI’s sensitivity analysis estimates that a 25-basis-point increase in capitalisation rates would reduce investment property values by about $37.9 million. Net tangible assets per security nevertheless edged up to $1.21 from $1.20.

Reported net profit attributable to stapled securityholders fell to $34.6 million from $35.6 million, despite the FFO increase, reflecting the different treatment of fair-value movements and other non-cash items. The next test is therefore less about whether GDI can produce another headline FFO increase than whether it can convert its newly improved liquidity into a buyback, Mill Green progress and sustainable cash earnings without leaning too heavily on further disposals.