Abacus Group (ASX:ABG) reported its half-year 2026 results with management emphasizing operational discipline, portfolio simplification, and efforts to narrow the gap between the company’s security price and net tangible assets (NTA). The group said its diversified commercial REIT portfolio—office and retail assets alongside a 19.7% stake in Abacus Storage King (ASK)—was valued at AUD 2.6 billion as of 31 December 2025, with a weighted average capitalization rate of 6.81%.
Portfolio performance and earnings mix
Management said office remained the largest contributor to operating earnings, accounting for more than half of the total, with the remainder coming from retail, self-storage investment returns, and investment management fees.
On an underlying basis, the group highlighted:
- Office operating earnings up 5.8% year-on-year when excluding surrender fees; reported office earnings rose 0.6%.
- Retail like-for-like growth of 4.5% when excluding surrender fees, supported by leasing fundamentals and performance at Oasis Shopping Centre in Broadbeach.
- Administrative and other expenses down 8.1% to AUD 15.8 million, which management linked to reduced headcount, streamlined systems, and improved operating efficiency.
Leasing and operating metrics
General Manager, Commercial and Fund Manager Kevin George said the office portfolio remained “resilient,” citing SME demand, a “flight to value” theme, and demand for flexible fitted space. The office portfolio delivered 2.3% like-for-like rent growth at the half, driven by 7.2% leasing spreads and 3.6% average rent reviews, partially offset by lower physical occupancy.
Office occupancy was 89.5%, slightly down from FY25 due to surrendered space at 99 Walker Street (850 square meters) and 324 Queen Street (3,500 square meters). George said around 80% of the surrendered space at 324 Queen Street was re-leased during the half. At 99 Walker Street, the surrendered floor was subdivided into three suites, with work completed in December; marketing is underway and three of the four suites were said to be at heads of agreement.
Abacus completed 28 leasing deals covering 15,000 square meters in the half (excluding Virginia Park), with an average deal size of 520 square meters in the investment portfolio. Weighted average lease expiry was 3.4 years, which management said aligns with the portfolio’s approximately 60% SME customer base.
Incentives on new deals remained elevated, particularly for larger spaces. New deal incentives averaged 37% versus 14% for renewals; excluding a retail renewal at 324 Queen Street, renewal incentives were 26%, down from 31% in HY25. George said Abacus expects incentives to moderate in Sydney and Brisbane as prime CBD vacancy tightens and new supply remains limited.
One-third of total vacancy was linked to 710 Collins Street in Melbourne following the departure of two Victorian government departments (6,400 and 3,900 square meters). George said a leasing campaign is progressing and further fit-out enhancements are scheduled to commence. Entering the second half, management said approximately 25%–30% of current vacancy was at heads of agreement or in advanced negotiations, and that 83% of vacant spaces were spec fitted or fitted with recycled fit-outs, which could help minimize downtime.
Retail, self-storage contribution, and ASK discussions
Retail represented 16% of the balance sheet at 31 December, with Abacus pointing to two “high quality” assets—Myer Melbourne and Oasis on the Gold Coast—showing average occupancy of 97.1%.
At Oasis, management cited strong tourism and event activity across Broadbeach and the wider Gold Coast as supportive of demand and noted a 25 basis point cap rate tightening in HY26. At Myer Melbourne, Abacus said it benefits from fixed 4% annual rent reviews, 100% occupancy, and a six-year WALE, and reiterated a favorable view of the asset’s triple net lease.
Self-storage earnings from the 19.7% stake in ASK were AUD 8 million, down 7% on HY25. Goodridge said ASK has increased investment in stabilizing and development assets, weighing on current period returns while supporting medium-term growth. Investment management and other income totaled AUD 13.1 million, with “the vast majority” of fees derived from ASK management. Abacus said it was forecasting higher development management fees in the second half of approximately AUD 3 million as several larger self-storage projects are anticipated to reach completion.
Management also addressed its 4 February announcement that Abacus has commenced discussions with ASK regarding a potential internalization of ASK’s management functions. The company said discussions remain at an early stage with “no certainty” a transaction will occur. In Q&A, management added that the two independent boards were scheduled to meet within the next week to 10 days, but provided no further details.
Capital management, asset sales, and valuation backdrop
Abacus declared a distribution of AUD 0.0425 per security for the half, in line with HY25. Funds from operations were AUD 0.0449 per security, with the distribution 50% fully franked. Management said it was at the top end of its 85%–95% FFO payout range for HY26 and was forecasting a similar payout ratio for FY26, subject to leasing progress and no material deterioration in business conditions (including ASK management).
Gearing was 34.5%, which management said is within its target range and below a 40% ceiling. Goodridge said the group had acquisition capacity of over AUD 200 million, hedge cover of 81%, and no near-term refinancing requirements. The average cost of debt for HY26 was 4.5%, down from 5.1% in HY25, and the company forecast an all-in cost of debt over the next 12 months of 4.5%.
On portfolio curation, Abacus said it continued to progress non-core asset sales, exchanging contracts during the period for 241 Adelaide Street in Brisbane and the Camellia site in Parramatta for total consideration of approximately AUD 75 million. Abacus said 241 Adelaide settled after the balance date, while Camellia is expected to settle in the third quarter of the calendar year; once settled, management said the transactions should reduce gearing by almost 2% assuming proceeds go to debt reduction. In Q&A, management said 241 Adelaide was sold at book value versus its 30 June valuation, while Camellia was sold below its prior carrying value (reduced from about AUD 60 million to AUD 55 million).
Valuations were described as broadly flat for the half, with a 4 basis point expansion in cap rates partially offset by solid income growth. Management noted that since pre-COVID, office values have reduced by around 30%, while adding that leasing activity has improved and indicators suggest stabilization.
In response to an analyst question about reinvestment opportunities, management said it would be more inclined to invest in Queensland and New South Wales, citing medium- to long-term growth prospects and leasing demand, and said it would not be an active investor in Victoria at present. On transaction conditions, management said it was seeing signs of increased interest in office assets—particularly in Queensland and New South Wales—at current cap rate levels, with interest from institutional capital, syndicates, and private capital players.
Guidance reaffirmed
Chief Executive Officer Steven (Stephen) said Abacus was “pleased to affirm” FY26 distribution guidance of AUD 0.085 per security. Management said this guidance assumes no material decline in current business conditions and continued progress on re-leasing across the portfolio.
About Abacus Group (ASX:ABG)
Abacus Property Group (ASX:ABP), is a diversified Australian REIT with an investment portfolio concentrated in the Commercial property and Self Storage sectors. We invest capital in real estate opportunities to deliver superior long term returns and maximise securityholder value. Abacus is a strong asset backed, annuity style business model where capital is directed towards assets that provide potential for enhanced income growth and ultimately create value. Our people, market insight and repositioning capability together with strategic partnering are the key enablers of our strategy.
