This article originally appeared in Australian Property Journal.
REAL Asset Management Group’s listed healthcare trust posted solid growth in its first full-year results, reflecting the defensive nature of its portfolio.
The RAM Essential Services Property Fund (REP) reported $30.6 million in funds from operations, or 5.9c per security, above the $21.7 million and 4.2c in its slightly-shortened first financial year on the ASX.
Distributions per unit of 5.7 cents at a payout ratio of 97%, in line with guidance.
Like-for-like NOI growth of 4.5% was driven by strong underlying rental growth across its $786.5 million portfolio. Positive leasing spreads of 5% averaged over the year due to inflation-exposed rental escalations, helping to offset rising interest costs.
It said around 90% of lease renewals for the next financial year being already in advanced stages of negotiation. Occupancy slipped to 98% while the weighted average lease expiry came down from 7.0 years to 6.47 years.
“Our efforts to secure better leasing results, to prepare for near-term healthcare developments and to position well in an improving capital markets environment has been accomplished,” RAM’s executive director and head of real estate, Matthew Strotton said.
Strotton described RAM’s management of REP as “active but conservative”.
“RAM’s election to secure core asset exposures in healthcare and essential services retail has been underscored with these results. We have had our first financial year in challenging conditions. We will continue to make proactive and prudent capital management decisions to deliver reliable income for investors, particularly as we embark on capital recycling initiatives including the sale of some of our portfolio assets.”
Just over 80% of the portfolio assets were externally valued in the year, with the weighted average capitalisation rate lifting from 5.45% to 5.68%.
“The assets were well-bought and are still defensive in this environment. Our quality tenants provide non-discretionary goods and services and remain resilient against an uncertain economic backdrop. Embedded growth drivers within the portfolio are having an impact and will help to offset any rising interest costs in FY24, allowing the fund to continue generating stable income for unitholders,” Strotton said.
Pro-forma gearing of 35% was in mid-target range.