With units changing hands near $0.64—roughly 47 per cent below stated net tangible assets—the Perth-focused office landlord pairs a headline distribution yield close to 7.8 per cent with rising occupancy. But a heavy tilt to one city keeps the risks real.

A contrarian's office trade

Australian office property has spent three years out of favour, and few names capture the market's ambivalence like GDI Property Group (ASX: GDI). The internally managed real estate investment trust (A-REIT) and funds manager owns a concentrated portfolio of Perth-centric office towers, yet its securities trade at a steep discount to the value of those buildings on its own books. That gap—between a market price near $0.64 and net tangible assets (NTA) of $1.20 per security—is the crux of the deep-value argument. The question for income-focused investors is whether the discount reflects fair caution about Perth office concentration, or an over-correction.

What GDI actually is

GDI is an integrated, internally managed property group that owns, refurbishes, leases and syndicates office assets, and runs a funds management arm alongside its own balance-sheet portfolio. Its investment property portfolio comprised ten assets worth roughly $1,068 million at 31 December 2025, weighted heavily towards the Perth central business district. Cornerstone holdings include Westralia Square (valued at about $400 million), the adjoining WS2 tower (about $105 million) and 197 St Georges Terrace (about $226 million). The group also holds a growing co-living joint venture spanning more than 915 rooms across four facilities, and continues to manage third-party capital through its funds management division.

The latest catalyst

The group declared a distribution of 2.50 cents per security for the half, paid on 27 February 2026. It reaffirmed guidance to pay a full-year FY2026 cash distribution of 5.00 cents per security, subject to no material change in circumstances—and noted, as it has previously, that distributions may be funded wholly or partly from capital rather than entirely from earnings.

Outlook

Guidance for FY2026 is for a 5.0-cent distribution, and management points to continued leasing traction, its co-living joint venture and a development pipeline—including a Mill Green master-plan development application targeted for calendar 2026 and a Newcastle site at Broadmeadow—as sources of medium-term value. These are company forecasts and strategic intentions, not assured outcomes.

The bull case

The optimistic reading rests on three planks. First, valuation: at roughly 47 per cent below NTA, buyers are effectively acquiring Perth office towers well under their appraised worth, offering a margin of safety if values hold. Second, operating momentum: occupancy and FFO are rising, not falling, and a 4.5-year WALE provides reasonable income visibility. Third, the yield: close to 7.8 per cent is well above cash and most benchmark equity income, with gearing kept conservative and asset sales crystallising premiums that validate carrying values.

The risks

The counter-arguments are equally concrete. GDI's fortunes are tightly bound to a single office market—Perth—so any softening in Western Australian white-collar demand, or in resource-sector sentiment, would hit rents and valuations disproportionately. The persistent NTA discount signals that the market doubts those book values; if cap rates rise further, valuations and NTA could fall. Distributions partly funded from capital can flatter the yield relative to underlying earnings. And overall occupancy near 88.6 per cent, while improving, still leaves vacancy to fill in a competitive leasing market.

Conclusion

GDI presents a genuine contrarian proposition: a conservatively geared, Perth-weighted office REIT trading far below the value of its own buildings, offering an indicative trailing yield close to 7.8 per cent while occupancy and FFO head the right way. Whether that becomes the ASX's next contrarian trade depends on Perth's office market holding firm and on distributions proving durable rather than capital-assisted. This article is general information only, not personal financial advice, and past performance and distributions are not reliable indicators of future results.