How the property boom is affecting the Garda (ASX:GDF) share price

The Garda (ASX: GDF) share price is rising today after the company released its third-quarter FY21 market update.

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The Garda Diversified Property Fund (ASX: GDF) share price is rising today after the company released its third-quarter FY21 market update.

The Garda share price is up 1.35% to $1.13 per share at the time of writing.

Garda is a property group headquartered in Brisbane that invests in, owns, manages and develops commercial and industrial real estate. 

What Garda’s update said

The Garda share price is responding positively to news that it sold 3 assets, all above book value, for a total of $30.6 million.

It provided 2 construction updates on tenant-committed properties in Brisbane, one in Wacol that is due for completion in May and another in Acacia Ridge that has just commenced construction.

Its property group at Berrinba is now 100% committed, while further leasing at property Botanicca 9 has increased the gross avenue of the Botannica property to 47%. Approximately two-thirds of Garda’s portfolio is now to be independently valued.

Across its property portfolio, Garda’s occupancy rates are now 89%.

Garda has benefited immensely from the nationwide property price boom due in part to record-low interest rates. It’s selling a further 3 high-value properties and has now set its prices unconditionally.

Its Archerfield property is now unconditional for $7.0 million, representing a 12.9% premium to its independent valuation. It is due to settle in mid-April. 

Lytton is under contract for $11.0 million, representing a 26.1% premium to its independent valuation and is subject to Garda completing certain works. Lytton is expected to settle at the end of May.

Finally, Varsity Lakes is now also unconditional for $12.6 million, representing a 5% premium to its independent valuation. Settlement is expected to occur not later than 11 May 2021.

Where Garda’s boom prices will be reinvested

Investors looking for increases in Garda share price will be hoping that the company reinvests its current earnings in an enhanced construction pipeline.

Garda admitted that it would direct most of the current cash flow towards decreasing debt. However, it has its eyes on ultimate industrial development.

The company says eventually, some funding will be directed to completing the pre-mentioned property assets at Wacol and Acacia Ridge.

Garda share price snapshot

The Garda share price rose from 89 cents to $1.27 between April and November 2020 and has remained within a five-cent window for most of 2021. It’s down in 2021 by 8.8% so far. 

It’s managed a 12-month return of 32%, which has beaten the real estate sector by 1% but lost to the S&P/ASX 200 Index (ASX: XJO) by 1.66%. 

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Motley Fool contributor Lucas Radbourne-Pugh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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