GDI Property Group (ASX:GDI) executives pointed to strong growth in funds from operations (FFO), steady net tangible assets (NTA), and improving office leasing conditions in Perth as key themes in the company’s latest investor call. Managing Director and CEO Stephen Burns and CFO David Williams also discussed recent asset sales, liquidity and gearing metrics, and progress in the group’s co-living joint venture.
FFO growth and stable NTA
Burns said the group “continue[s] to drive the FFO growth,” reporting FFO up 29.1% for the half. He highlighted co-living contribution growth of about 37%, while property FFO increased nearly 14%.
On balance sheet metrics, Williams said gearing was 35%, while the syndicated facility’s loan-to-value ratio (LVR) was 41% (unchanged from June). Interest cover ratio (ICR) was 2.3x versus a covenant of 1.5x. He added that net interest expense was lower, in part because an “expensive swap” expired in December.
Distribution and cash flow comments
Williams said the company declared a first-half distribution of AUD 0.025 and reaffirmed its intention to pay a full-year cash distribution of AUD 0.05. He emphasized that the tax components of the distribution were “again, out of capital” for tax purposes, citing depreciation benefits associated with WS2 and spec fit-out strategies. He also said that, from an operating perspective, distribution coverage from operating earnings was “getting very close.”
In Q&A, Williams said management was “very comfortable to talk around AUD 0.05” when comparing FFO to the distribution, and pointed analysts to the cash flow statement showing operations are nearing distribution coverage after a period of building and leasing up WS2.
Leasing momentum and Perth office market outlook
Burns and Williams described a strengthening leasing environment in Perth. Burns said the group achieved more than 13,000 square meters of office leasing over the period, and emphasized that the broader market saw a heavy concentration of leasing in the December quarter, which he said accounted for roughly 49% of the year’s leasing activity. He added that momentum was “carrying through to the first quarter of 2026.”
Management repeatedly pointed to what they described as a “five-year supply gap” in office buildings. Burns said tenants with expiries around three years out were increasingly looking to bring negotiations forward to avoid what he expects could be a significant jump in rents. He also cited market trends including expanding tenants and a continued shift into the CBD.
Williams discussed Western Australia’s macro backdrop, citing private mining capital expenditure rising from AUD 17.1 billion in 2019 to AUD 35.5 billion, and also referred to strong domestic economic growth, wages growth, population growth, and retail spending as supportive of office demand.
On transactions, management said the CBD office sales market remains difficult. Williams noted five sale campaigns concluded without a transaction, but said bids were relatively solid and dominated by syndicators and high net worth buyers. Burns said transactions are the “missing piece” to the strengthening office market story, particularly given what management sees as a structural upswing in rents.
Burns also introduced the concept of potential “withdrawals” in Perth—buildings removed from office supply due to conversion or redevelopment—citing St. Martin’s Centre (40-50 St Georges Terrace) as a possible example that could result in about 27,000 square meters of net withdrawal, and another asset at 81 St Georges Terrace that may be converted to residential use.
Asset sales, liquidity, and portfolio positioning
Burns said the group has completed more than AUD 250 million of asset sales across the business, including car yard sales of AUD 74 million that he said were achieved at 50% over the acquisition price and settled on Friday. He added the company remains focused on around AUD 100 million of non-core disposal targets and continues to see interest in selected asset sales.
Williams said the company extended its facility by AUD 25 million and had over AUD 52 million of undrawn liquidity.
Burns noted the non-office component of the portfolio was about 18%, and said it would fall to around 12% after settlement of the car yard sales.
Co-living JV performance and growth
Management provided additional detail on the co-living joint venture. Williams said the initial objective was a 20% return on invested capital (AUD 33 million), implying around AUD 6.6 million per year of FFO contribution. He said the platform has grown, with head office staffing of six plus outsourced accounting and over 100 staff overall including site workers. He also emphasized operational benefits from having four facilities, including staff mobility and development pathways.
On individual sites, management said performance improved year-over-year. Williams said the team’s work in South Hedland—including capital expenditure and business development—helped shift the asset to “preferred supplier status” for a number of users, providing comfort around occupancy for the next 12 to 18 months. In Norseman, the company added 76 rooms on a mine site for Pantoro Gold and said another 64 rooms would be delivered shortly, with demand tied to Pantoro’s expansion. Williams also discussed Newman, saying earnings doubled in the 12 months to December 2025 compared with the first six months to December 2024 after operational changes such as rebranding and service delivery focus.
Management also discussed the Moranbah acquisition, settled in October, consisting of 245 rooms. Williams said 144 rooms are supported by a take-or-pay contract with Stanmore Coal, while the remaining rooms include brick motel-style assets where management sees work to do to lift occupancy and performance.
During Q&A, executives also addressed incentive levels in the Perth market, noting incentives vary by space type and strategy. Burns said incentives for refurbished space could range roughly from 38% to 50%, while spec fit-outs—an area of focus for GDI—could range from 5% to 25%, and in some cases the company has done deals without incentives. He added that the market appears to be at an inflection point where “a bit of a handover of power to the landlord” is occurring as conditions tighten.
The call concluded with management reiterating their focus on leasing execution, FFO growth, capital recycling, and positioning assets to benefit from what they see as a tightening Perth office market heading into FY26.
About GDI Property Group (ASX:GDI)
GDI is an integrated, internally managed commercial property investor with capabilities in the identification and execution of acquisition opportunities, and then the ownership, management, development, refurbishment, leasing, and syndication of assets. GDI is structured as a stapled security to enable it to participate in both the ownership of properties either directly (wholly owned) or indirectly (asset partnerships or co-investment stakes) via the Trust, and to receive earnings from fund management fees, car park operations, the provision of co-living accommodation, and development, via the Company.
