This article first appeared on GuruFocus .
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Funds From Operations (FFO):$187.1 million, or $0.09 per unit, a 2% increase on FY25 and in line with guidance.
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Distributions:$0.086 per unit for FY26, in line with guidance.
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Property Net Operating Income (NOI):Increased 3.6% to $298.7 million, underpinned by comparable NOI growth of 4%.
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Leasing Spreads:Positive at 5.9% for FY26, with incentives of 4.9%.
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Portfolio Value:Increased to $5.2 billion, reflecting income growth and moderate cap rate compression, with a weighted average cap rate of 5.53%.
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Net Tangible Assets (NTA):Increased to $1.56 per unit, up from $1.47 in June 2025, a 6.1% increase.
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Occupancy and Rent Collection:Both maintained above 99%.
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Comparable Tenant Sales Growth:1.7% MAT increase, while comparable portfolio sales grew 6% year on year to more than $2.6 billion.
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Weighted Average Rent Review:3.6%, with 72% of rent subject to fixed escalations and a further 17% linked to CPI.
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Net Interest Expense:Increased by $1.8 million, consistent with the higher interest rate environment.
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Gearing:35.7%, around the midpoint of the 30% to 40% target range.
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Weighted Average Cost of Debt:5% as at June 2026, up from 4.8% in June 2025.
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FY27 Guidance:FFO of $0.088 per unit and distributions of $0.086 per unit.
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Release Date: August 13, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Delivered FY26 FFO and distributions in line with guidance, with FFO per unit up 2% to $0.09 and distribution of $0.086 per unit.
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Strong operational metrics: occupancy and rent collection above 99%, comparable NOI growth of 4%, and positive leasing spreads of 5.9%.
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Portfolio value grew over 10% to $5.2 billion, driven by income-driven valuation gains and moderate cap rate tightening, supporting NTA increase to $1.56 per unit.
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Strengthened balance sheet with a new $2.15 billion unsecured facility, extended debt tenor to 3.1 years, and inaugural BBB+ credit rating from S&P.
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Robust development pipeline of $650 million with a track record of delivering 8.5% returns on invested capital, and a proven ability to create value through asset repositioning (e.g., Lutwyche).
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Consumer spending trends are positive, with retail sales up 6% year-on-year and a noticeable uptick in July and August, supported by strong visitation of 126 million.
Negative Points
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FY27 guidance indicates a step back in earnings per unit to $0.088 and distributions to $0.086, reflecting higher interest costs and drawn debt.
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Net interest expense increased by $1.8 million due to the higher interest rate environment, with weighted average cost of debt rising to 5%.
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Gearing at 35.7% is above the preferred level, and management aims to reduce it towards 30%, which may limit near-term growth initiatives.
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Development pipeline is paused due to a choppy interest rate environment and construction cost challenges, particularly in Queensland and Victoria.
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The company faces a persistent discount to NTA in the listed market, despite strong direct market valuations, creating uncertainty for investors.
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No divestments or acquisitions are included in FY27 guidance, indicating a conservative approach that may limit earnings growth.
Q & A Highlights
Q: You've mentioned selective asset sales to reduce gearing. Is there a particular quantum you're targeting? A: Sid Sharma (CEO): We sold about $170 million of assets in FY26 and have been net sellers over the last few years. We currently have between $400 million and $500 million of unsolicited offers for our portfolio, all at or above book value. We are considering these options but are not pinning ourselves to a specific number at this stage.
Q: Just on your comments around the difference between consumer sentiment and sales still holding up. What's your sense on if this can continue for an extended period? A: Sid Sharma (CEO): Data points suggest the consumer is adapting. July mortgage applications are up, residential listings hit a record month in July, and car sales had a record July. Sales across our network through July and August are in excess of Q4 last year. I expect we will be surprised on the upside on retail spending over the next six months.
Q: Just around your opening remarks that July and August spending was where you saw a bit of an uptick. Can you call out any anecdotes or remarks you've heard from retailers in terms of store rollout programs? A: Sid Sharma (CEO): Most retailers said May/June were soft, but the bounce back in July has been material and noticeable across both discretionary and non-discretionary sectors. We've seen upticks in supermarkets, daily spend, electrical, household goods, and furniture. Household goods spending is more a function of housing churn than housing prices, and the record residential listings point to increased churn.
Q: Just on interest costs in FY27, it looks like about a $0.06 per share headwind. Could you talk to the strategy around managing the hedge book and the outlook? A: Sid Sharma (CEO): The story for '27 is simple: strong earnings growth from property NOI is offset by a material step up in interest expense, driven by a weighted average cost of debt landing around 50 bps higher and drawn debt about $100 million more from the development pipeline. By resetting our balance sheet now, we position ourselves to focus on how we recover and build from here. Selective asset sales below the weighted average cost of debt would be earnings neutral to accretive.
Q: Just picking up on your comments around the narrowing spread between development returns and the marginal cost of debt. How are you thinking about that next line of projects and if the spread is wide enough to greenlight new projects in FY28? A: Sid Sharma (CEO): We've historically delivered closer to 8.5% cash-on-cash yield on developments versus our 7% target. With current supply constraints, yield on cost probably needs to be a little higher before pulling the trigger. We're going to pause for a moment. Medium term, 7% is the right number, but short term it probably needs to be higher. We'll assess each project on its merits.
Q: In relation to guidance, are you assuming any FY27 divestments in that guidance number? A: Sid Sharma (CEO): No, there are no divestments included in that guidance number and no acquisitions either.
Q: You've spoken about capital allocation to help close that discount to NTA. How are you weighing up all those different capital initiatives right now? A: Sid Sharma (CEO): We've proven NTA every year for the last four years by selling assets at a premium to book value. The $3 billion of asset sales in the last 12 months at tighter cap rates has proved that. There's a disconnect between listed market valuations and the direct market, which continues to persist. We have to weigh that up and think about whether that disconnect is something HDN should take advantage of.
Q: In terms of the $400 million to $500 million of unsolicited offers, what assets are most likely to be recycled? A: Sid Sharma (CEO): I'm not going to get into that. Every year we have a similar number of unsolicited offers sitting on our desk. This asset class is very highly sought after by high net worths and institutional capital. We're going to consider those and make the right decision at the right time.
Q: On your strategic investments across HUG, HARP, how should investors think about the long-term role of those vehicles, and how much has been deployed in HUG? A: Sid Sharma (CEO): It's still pretty small figures deployed to date. Each of those funds are sitting on double-digit returns for us since inception. HUG is the Unlisted Grocery Fund, a partnership with Institutional Capital and one of our key anchor tenants to roll out greenfield neighborhood centers. We are thinking through how that vehicle relates to HDN, but we're yet to make a call. Ultimately, it'll go down to the economic return weighed up against all options.
Q: Just wanted to ask around the potential for buybacks. Do you think gearing levels right now are prohibitive for you to actually undertake one? A: Sid Sharma (CEO): It's not on the top of our list, but it's under consideration. While we are an externally managed REIT, we have done it before in one of our other REITs. Preferably, we will deploy into accretive opportunities within our cohort. Historically, our investors have said we should reinvest back in our assets because we get a meaningful spread on our yield on cost to any share buyback.
Q: On the development book and saying you potentially need higher yields on costs, what are the range of feasibilities for yield on costs you've got on the $650 million pipeline? A: Sid Sharma (CEO): The range would be between 6% and 11%.
Q: If you do have projects at 11%, that's pretty attractive. What's stopping you from hitting the button on something like that? A: Sid Sharma (CEO): Nothing. We have to take advantage of the fact there's no new retail supply coming on stream, pick the right projects that enhance existing assets, and make sure rental rates are at the level we believe those projects should earn. There's nothing stopping us.
Q: When you've been talking about a pause, should we think there's no new development starts for FY27, or is
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
