Key Highlights

  • Funds from operations (FFO) fell 20.3% to $28.2 million, or 6.9 cents per security, while the Fund recorded a statutory net loss of $18.4 million.
  • $105.4 million of net proceeds from contracted asset sales were secured, representing approximately 28% of the portfolio by value.
  • Gearing was 42.6% at 30 June 2026, expected to reduce to 29.3% pro forma on settlement of contracted asset sales.
  • FY27 guidance includes AFFO of 1.5 cents per security, with distributions deferred and targeted to recommence at 0.75 cents per security in each of the March and June 2027 quarters.

LDR Capital Property Fund (ASX:LED) share price was trading at $0.46, down 9.80% or $0.050 on the day, as at 27 August 2026, 12:11pm AEST, as the Fund announced results for the financial year ended 30 June 2026, marking the first full reporting period under LDR Capital Pty Ltd as Investment Manager since its appointment in February 2026. Funds from operations was $28.2 million, or 6.9 cents per security, down 20.3% on FY25, primarily reflecting negative Lease reversions at WorkZone West, partly offset by lower investment management fees and higher income from Harris Street capital notes.

Adjusted funds from operations was $7.3 million, or 1.8 cents per security, reflecting elevated Capital Expenditure and leasing incentives during the year. The Fund recorded a statutory net loss of $18.4 million, driven by a $28.7 million Fair Value decline on investment properties and $9.7 million of one-off transaction costs. Distributions of 6.5 cents per security were paid, in line with FY26 guidance.

Portfolio Simplification Through Asset Sales

Since LDR Capital's appointment, the Fund has focused on repositioning by reducing costs, recycling secondary Assets and lowering gearing. During FY26, the Fund exchanged contracts on four secondary assets for combined net proceeds of $105.4 million, representing approximately 28% of the portfolio by value: Cannon Hill, Mt Gravatt, Limestone Centre and O G Road. Cannon Hill settled prior to 30 June 2026, with the remaining three assets due to settle by the end of September 2026.

Following these sales, the Fund retains a more focused portfolio of three assets, valued at $255.5 million at 30 June 2026, comprising 50 Cavill Avenue in Surfers Paradise, WorkZone West in Perth, and Garema Court in Canberra. The retained portfolio recorded a decline of $6.5 million, or 2.5%, over the half, primarily reflecting a substantial increase in forecast capital expenditure, with ten-year nominal capex allowances rising $26.5 million, or 73%, to $63.0 million.

Gearing Reduction and Balance Sheet Repositioning

Gearing was 42.6% at 30 June 2026, expected to reduce to 29.3% pro forma following settlement of the contracted asset sales, below the Fund's long-term target range of 35-40%. Drawn Debt is expected to reduce from $190.9 million to $109.3 million on settlement. The Fund achieved $1.9 million, or a 37% reduction, in annualised management fee cost savings following the transition to LDR Capital.

The Fund's Interest Rate hedging expired in August 2026, and given the active asset recycling program, drawn debt will temporarily be unhedged. LDR Capital intends to refinance the Fund's existing debt facilities, including entering new hedging arrangements, by December 2026.

Leasing Progress Across the Retained Portfolio

Since LDR Capital's appointment, the Fund has made progress on leasing across the retained portfolio, with new leases and heads of agreement completed over approximately 14,000 square metres, representing 32% of the retained portfolio. Key activity included a lease executed over approximately 660 square metres at WorkZone West together with heads of agreement over Level 4, an extension of the Australian Government lease at Garema Court to May 2030, and an option exercised on Level 17 at 50 Cavill Avenue.

Portfolio occupancy was 93.2% following the divestment program to date, with a weighted average lease expiry of 3.4 years across the retained portfolio, and an average portfolio NABERS Energy rating of 5.4 stars.

FY27 Guidance and Deferred Distributions

The Fund issued FY27 guidance of AFFO of 1.5 cents per security and distribution per unit guidance of 1.5 cents per security, with distributions deferred to the second half of FY27, targeting 0.75 cents per security in each of the March and June 2027 quarters. LDR Capital will waive all investment management fees in the first half of FY27, during the period in which investors are not receiving a distribution.

Chairman Paul Lederer said the decision to prioritise immediate capex and incentive obligations, and ultimately the repositioning of the Fund, was made to preserve and grow net tangible assets per security and ensure gearing remains around 30%, describing the deferral as intended to be a short-term measure to support growth beyond FY27. Fund Manager Ryan Pittman said the vision is to transition LED from a suburban office REIT with a material B and C grade weighting to a portfolio of essential properties delivering enduring cashflows, with the Fund intending to adopt a distribution policy targeting a payout of 100% of AFFO going forward.

Conclusion

LDR Capital Property Fund's FY26 results reflect a year of deliberate portfolio reset under its new Investment Manager, with FFO declining and a statutory net loss recorded as the Fund pursued asset sales, gearing reduction and cost cuts across its operating base. With gearing set to fall to 29.3% pro forma on settlement of contracted sales and distributions deferred to the second half of FY27 to fund capital expenditure and leasing incentives, the Fund's success in transitioning toward a smaller portfolio of essential, income-generating properties will be the central determinant of whether growth in distributions and net tangible assets can be re-established from FY27 onward.