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Abacus to reduce retail exposure but increase office, self storage investments

August 20, 2018

This year Abacus disposed of non-core assets such as the Bacchus Marsh shopping centre in regional Victoria. Photo: Supplied

ASX-listed investor, developer and fund manager Abacus has confirmed a new strategy focusing on investments in offices and self storage real estate but reducing its exposure to retail assets as it announced its full-year results on Friday.

The company finished the year with a 2 per cent rise in full-year revenue to $474 million but a 15 per cent fall in net profit to $247 million.

Stripping out revaluations of assets held, the group’s full-year funds from operations were better by 9 per cent at $169.8 million.

The group, whose revered leader, property veteran and former managing director Dr Frank Wolf passed away in April, is positioning its balance sheet at 18 per cent gearing from 23 per cent.

The year closed with $277 million in office acquisitions countered by $278 million in disposals of non-core assets such as the Bacchus Marsh shopping centre in regional Victoria.

“We’ve had an active end to the year with a high level of acquisitions within the investment portfolio and the disposal of several non-core assets. This has improved the overall quality of the portfolio and sets us up well to drive higher levels of recurring earnings and deliver growth in distributions to security holders,” new managing director Steven Sewell said.

“Our balance sheet continues to maintain good levels of liquidity and gearing, with capacity to add to our office and self storage portfolios in line with our stated strategy for growing our recurring earnings base to fund distribution growth to our security holders,” chief financial officer Rob Baulderstone said.

The company has made a point of reducing its retail investments “at this time of the cycle”, and in its office strategy, the company will look at longer dated core assets.

It will also seek out partnerships with third party “long-term institutional capital”.

In total, the group has 35 commercial properties valued at $1464 million with a portfolio capitalisation rate of 6.16 per cent and a occupation rate of 91.3 per cent. It also has 62 self storage assets valued at $666 million, 89.4 per cent occupied achieving a portfolio capitalisation rate of 7.5 per cent.

Four of its residential projects – some shared – in Carlton in Melbourne, South Brisbane, Ashfield and Erskineville in Sydney completed in the year.

The company will pay a final distribution of 9¢ per security, raising total distribution for the year to 18¢ a security, 3 per cent higher than last year’s distribution.

Looking ahead, the group is aiming for higher levels of stable and predictable earnings and has committed to a 2 to 3 per cent growth on distribution a year.

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