Low Valuations Weigh On GPT Bottom Line

GPT is the latest listed property fund to report subdued earnings due to market headwinds, with lower revaluation gains causing a 51.6 per cent decline in net profit.

In its interim results delivered Monday, the diversified property group reported a net profit of $352.6 million down from $728.5 million a year earlier.

GPT reaffirmed its guidance of 2.5 per cent growth in funds from operations and a 4 per cent increase in its full-year distribution. Funds from operations — the preferred method for measuring REIT earnings — increased 2 per cent to 16.36 cents a share.

Continued strength in commercial markets buffered losses in retail, with GPT’s office assets delivering $114.8 million in value uplift and occupancy of 97.1 per cent over its $5.9 billion office portfolio.

GPT chief executive Bob Johnston said that office market fundamentals in the group’s core markets remain positive.

Johnston said Melbourne Central tower, 181 William and 550 Bourke Streets in Melbourne and Australia Square in Sydney were the key contributors to the value uplift.

GPT is jointly undertaking the $1 billion Cockle Bay Wharf redevelopment with Canada’s Brookfield and AMP, with plans for a 73,000sq m office tower. The group secured a further 25 per cent interest in Darling Park 1 & 2 office complex for $531 million in June.

The Cockle Bay redevelopment and Darling Park acquisitions are funded in part by fresh equity raising by GPT, which tapped the market for more than $850 million in June.

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GPT is among a spate of listed REITs taking advantage of increasing access to capital and low interest rates to pad out their development pipelines.

The group said the funds will also strengthen the group’s logistics portfolio to offset its exposure to retail property.

In May, GPT acquired five fully-leased logistics assets in Sydney to adjoin the group’s existing Erskine Park precinct for $212 million.

Johnston said the acquisitions were consistent with the group’s strategy to grow its logistics portfolio, with $200 million of logistics development currently under way.

GPT has decreased its retail portfolio weighting by 16 per cent since 2010, while its retail assets declined in value by $35.4 million over the reporting period.

Johnston said the group was progressing development proposals for both Melbourne Central and Rouse Hill town centre, “to ensure that they are well-positioned to grow market share and respond to changing market conditions”.

GPT expects to commence both redevelopment projects in the first half of 2020.