360 Capital REIT (ASX:TOT) is drawing attention from income investors with a trailing distribution Yield of 7.5% and a distribution reinvestment plan (DRP) that is operating for its latest payout. The stapled property group has declared a 0.9 cent distribution for the latest quarter, up from 0.75 cents in each of the previous four quarters.

TOT securities finished at $0.40, down 8.05% over the past year. Distributions of 3.0 cents with ex-dates in the past 12 months give the 7.5% trailing yield, a historical figure rather than a forecast.

Latest developments

TOT reported its FY26 results, with statutory profit rising to $6.3 million from $1.3 million, while operating profit increased 33.3% to $6.9 million. Operating Earnings per security climbed to 3.2 cents from 2.4 cents, and distributions totalled 3.0 cents per security, all tax deferred.

The group reported 100% occupancy across its direct property portfolio after securing tenants including Siemens Energy and Stack Infrastructure at its Cremorne property in Melbourne. It also extended its Debt Facility to 2031 at a reduced margin.

TOT has declared a 0.9 cent distribution for the latest quarter, unfranked and paid entirely from 360 Capital Passive REIT, with no distribution from the Active REIT.

Key numbers

TOT securities finished at $0.40, compared with $0.435 a year earlier, a fall of 8.05%. Its four quarterly distributions of 0.75 cents with ex-dates in the past 12 months total 3.0 cents per security, giving a trailing yield of 7.5%.

The distributions are unfranked, so the grossed-up yield is also 7.5%. Grossed-up yields generally assume a 30% company tax rate and depend on each investor's tax position; in this case there are no franking credits to add.

The latest 0.9 cent distribution is scheduled for payment according to the company's distribution timetable. Reported Net Tangible Assets (NTA) were $0.58 per security, and gearing was 38.9%. At the relevant closing price of $0.40, the securities traded below the reported NTA figure.

About the company

360 Capital REIT is a stapled real estate Investment trust managed by 360 Capital Group. It owns leased, income-producing commercial property, with a portfolio spanning office, industrial and healthcare assets. The portfolio was fully occupied, with a weighted average Lease expiry of about six years and no lease expiries until FY29 based on the company's reported portfolio profile.

The group has also invested approximately $10.9 million in structured preference Equity associated with Sydney residential apartments. The investment carries a 16% per annum preference return and is expected to self-liquidate as the apartments are sold.

How the DRP works

TOT's DRP is operating for the latest quarterly distribution. Under the plan rules, the DRP price is based on the average of the daily volume-weighted average price (VWAP) over a pricing period of 10 trading days following the relevant record date. Securities are newly issued rather than purchased on market.

The rules allow a discount of up to 10% at the responsible entity's discretion, with any applicable discount announced before the record date. Participants do not pay brokerage or stamp duty on securities issued under the plan, and elections are made through the share registry.

Why it matters for income investors

The main draw is visibility. TOT's FY27 guidance points to operating earnings of 3.8 cents per security, up 18.8%, and distributions of 3.6 cents, a 20% increase on FY26 and forecast to be fully tax deferred. The latest quarterly distribution of 0.9 cents is consistent with that annual target.

FY26 distributions of 3.0 cents represented about 94% of operating earnings of 3.2 cents per security, providing coverage from operating earnings, although the difference between the two measures remains relatively limited.

If the guided 3.6 cents is paid, it would represent a distribution yield of about 9% based on the relevant closing price, although that is a projection based on company guidance rather than a trailing yield. The DRP also allows holders to receive additional securities without brokerage while enabling the group to retain some capital for its investment activities.

What comes next

Investors will watch whether TOT delivers against its FY27 guidance, how quickly the apartment investment returns capital, and how management deploys capital into further opportunities.

The company's next half-year results are expected around the usual reporting period, subject to its reporting calendar. Leasing updates and changes in debt costs will also influence whether earnings keep pace with the higher distribution target.

Risks and context

A trailing yield is not a forecast, and TOT's guidance could change if tenants leave, interest costs rise or the structured equity investment performs differently from expectations. With gearing at 38.9%, higher borrowing costs or changes in property valuations could affect earnings and NTA. The security price has also remained below reported NTA, and such discounts can persist.

The structured equity investment depends on apartment sales proceeding as expected, while a relatively concentrated property portfolio can increase exposure to individual tenant or asset developments.

Because DRP securities are newly issued, holders who take cash may experience some dilution. Reinvested distributions remain subject to applicable tax treatment, and each DRP parcel establishes a new cost base for capital gains tax. Tax-deferred components can reduce the cost base, making appropriate record-keeping important.

Conclusion

360 Capital REIT (ASX:TOT) combines a 7.5% trailing yield with an active DRP and a higher quarterly distribution. FY27 guidance points to further growth in earnings and distributions, while gearing, property concentration, structured equity exposure and potential dilution from newly issued DRP securities remain relevant considerations.