Key Highlights

  • REP's $218.6 million sale of five retail Assets is now unconditional, with settlement expected in Q2 FY27 and post-completion gearing reducing to 16.8%.
  • Like-for-like recurring property income increased 4.4% to $37.9 million from $36.3 million, reflecting positive leasing spreads and stable portfolio occupancy.
  • Funds From Operations for the period fell to $14.7 million from $24.5 million in FY25, reflecting asset disposals, one-off income recognised in FY25, Transaction Costs and other non-recurring items.
  • The Fund reported Net Tangible Assets of $0.71 per security as at 30 June 2026 and is forecasting FY27 distributions per unit of between 3.6 and 3.8 cents, representing a Yield of 8.5% to 9% at the current share price.

The RAM Essential Services Property Fund (ASX:REP) has released its financial results for the full year ending 30 June 2026. Like-for-like recurring property income increased 4.4% to $37.9 million from $36.3 million, reflecting positive leasing spreads and stable portfolio occupancy. However, after adjustments, Funds From Operations for the period fell to $14.7 million from $24.5 million in FY25, as a result of asset disposals, one-off income opportunities recognised in FY25, transaction costs and other non-recurring items during the period.

Distributions for the period totalled 4.55 cents per unit, as previously announced. The Fund reported Net Tangible Assets of $0.71 per security as at 30 June 2026.

Retail Asset Sale and Healthcare Pivot

REP has progressed its strategic pivot to a healthcare focus with the recently announced transaction to divest five retail assets, Coomera Square, Springfield Fair, Coles Rutherford, Keppel Bay Plaza and Mowbray Marketplace, for $218.6 million. The sale is now unconditional, with settlement expected in the second quarter of FY27.

Post completion of the transaction, REP's gearing will reduce to 16.8%, calculated on the basis of the disposal of the five retail assets, together with Rosebery and Mildura, and assuming 100% of net proceeds are used to pay back debt. The Fund will continue to retain a 10% interest in the acquiring fund, providing ongoing exposure to retail assets.

Leasing and Portfolio Metrics

The Fund reported leasing outcomes with positive spreads of plus 4% across 21 leasing deals during the period, contributing to the 4.4% increase in like-for-like property income. Portfolio occupancy remained stable at 97.3% by income, including signed Heads of Agreement, excluding areas withheld for development, with a Weighted Average Lease Expiry of 6.8 years, which the Fund expects to increase to over 8 years following completion of the retail asset sale.

The portfolio carries a blended Weighted Average Rent Review of 3.5%, with 84% of leases subject to fixed or CPI-linked reviews. Following completion of the transaction, the Fund's portfolio is expected to have a longer WALE, a higher portion of healthcare income, increased exposure to CPI and fixed rent reviews, and a higher portion of net leases.

Management Commentary and Capital Management

RAM Group CEO Scott Kelly said the unconditional exchange for the five retail assets represents a significant step in repositioning REP into a healthcare-focused fund, a direction the company announced 24 months ago. He said the company is focused on restoring value for securityholders, closing the gap to NTA and providing stable, repeatable returns moving forward.

RAM Executive Director and Head of Real Estate George Websdale said REP will benefit immediately from the transaction, with post-transaction gearing of 16.8% providing the opportunity to consider accretive capital management strategies, including using sale proceeds to pay down Debt and potentially other capital management pathways. Websdale noted that the Fund continues to trade at a discount to NTA, and that without significant security price growth the Fund is unable to take advantage of attractive opportunities to acquire quality health assets in the market, adding that management is considering all pathways to determine the best way to improve value for securityholders.

FY27 Distribution Guidance

The Manager is forecasting distributions per unit of between 3.6 and 3.8 cents for FY27, which represents a yield of 8.5% to 9% at the current share price. The Fund noted that healthcare investments continue to provide risk-adjusted returns driven by a growing aged population, government-backed spending, private Health Insurance demand, and increased exposure to inflation-related rent growth.

Conclusion

REP's FY26 result reflects a transitional period for the Fund as it executes its strategic pivot toward healthcare real estate, with Funds From Operations declining from the prior year due to asset disposals and non-recurring items, while like-for-like property income continued to grow. The unconditional $218.6 million sale of five retail assets is set to materially reduce gearing upon settlement, which management has identified as providing flexibility to pursue capital management initiatives aimed at closing the Fund's trading discount to net tangible assets.