Abacus (ASX.ABG) agreed to sell its 20% interest in Storage King for $285 million via two block trades: 9% to an undisclosed party at $1.00 per Storage King security, and the rest to Ki Corporation at $1.20 per security. On average, the sale price is $1.11.

Why it matters: After handing back Storage King’s management rights earlier this year, we anticipated Abacus would sell the ownership stake. But the price is underwhelming, a whopping 37% discount on average to Storage King’s net tangible asset of $1.77 per security.

  • Abacus appears to be under pressure to sell, but the 37% discount to NTA is worse than the 25% we had assumed. High debt, soft office demand in some of its markets, and elevated leasing incentives are the primary stressors.
  • The proceeds will be used to repay debt. We estimate gearing (liabilities over tangible assets) would fall to 34%, from 41% as of June 30, 2026, against the covenant of 50%. The interest expense savings should broadly offset the loss of distribution income from Storage King in fiscal 2027.

The bottom line: Ki is the largest shareholder of Abacus, and a portion of the block trade (5.9% of the 10.4% interest to be sold to Ki) counts as disposing of a substantial asset to a related party, which requires Abacus’ securityholder approval.

  • The portion of interest that doesn’t require securityholder votes will be settled by the end of September. We will more closely evaluate the 5.9% interest and release a corporate action note closer to the annual general meeting in late November 2026, where securityholder approval will be sought.
  • We cut our fair value estimate for no-moat Abacus by 8% to $1.10 on the lower-than-expected sale price of the Storage King stake, assuming the entire 20% stake is sold. While the deal doesn’t look great for Abacus securityholders, we acknowledge the company is under financial pressure.

Abacus Group to sell its 20% interest in Storage King

Abacus Group owns and manages a property portfolio of mostly offices and two retail assets. The group also has exposure to the self-storage sector through Storage King, a REIT that was destapled from Abacus Group in 2023. Since the destapling and up until June 2026, Abacus was the manager of the self-storage REIT. Following an internalization agreement, Storage King moved management in-house from fiscal 2027. In September 2026, Abacus agreed to sell its 20% interest in Storage King for $285 million (though a portion of the trade is subject to securityholder approval at Abacus’ annual general meeting in November 2026).

The share of equity profits and management fees associated with Storage King—which made up roughly a fourth of Abacus’ earnings—has been a key growth driver for the group. The loss of Storage King leaves Abacus with no funds management business. We now expect slower growth, as the departing funds management segment had stronger growth prospects than the rest of Abacus’ business.

While most of its office portfolio is A-grade buildings, Abacus owns no high-end trophy towers, unlike major office landlords such as Dexus and GPT. The group has a track record of acquiring older buildings and refurbishing them with modern amenities and fit-outs, with the intention of achieving higher occupancies and rent increases. As of June 2026, the office occupancy was 89%. We think it is likely to remain in the low 90s through the cycle, similar to its prepandemic average. However, maintenance capital expenditure and lease incentives are likely to stay elevated, as Abacus focuses on fortifying occupancy and managing expiring leases.

Abacus has refrained from undertaking significant developments in recent years. With a capital-partnering strategy, the group is likely to join a third party in acquiring established assets or properties with small redevelopment opportunities. For fiscal 2027, Abacus has identified several noncore assets that could be divested. If executed, we expect the money to be used to pay down debt.

Bulls Say

  • Some of Abacus’ assets are in city fringe locations that could see solid population growth. These sites have the potential to be redeveloped for higher- and better-use purposes, increasing asset values.
  • Storage King, in which Abacus Group has a 20% interest, benefits from tailwinds such as population growth, urbanization, and densification, as well as dwelling downsizing.
  • Abacus’ office portfolio has held up reasonably well postpandemic. It has maintained office occupancy above the national average.

Bears Say

  • If asset values decline further, this could further strain Abacus’ balance metrics, which are already stretched.
  • Abacus’ office portfolio is mostly in secondary locations, which bear the brunt of structural changes in the office market.
  • Storage King’s new acquisitions and developments will yield diminishing returns, as suitable sites become scarcer and rivals add new supply.

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