GPT’s retail portfolio delivers growth

Highpoint shopping centreProperty firm GPT Group reported a 10 per cent earnings rise for 2017 boosted by strong property values for office towers and malls.

The owner of landmark malls, including the Highpoint Shopping Centre in Melbourne, has posted a 2017 full year net profit increase of 10.1 per cent to $1.27 billion. Funds from operations rose by 3.2 per cent to $554.2 million driven by strong contributions from its Australian investment property portfolio.

The property company’s assets under management, on its balance sheet and in its funds, increased by 12 per cent to $21.5 billion in total.

GPT announced it is expecting to lift funds from operations per security by around 3 per cent in 2018, and raise its annual distribution to security holders also by about 3 per cent.

Bob Johnston, GPT’s CEO, said all business segments made a strong contribution to the overall result, with the group delivering like-for-like income growth of 4.4 per cent and a total return of 15.2 per cent for the year.

GPT recorded $717.7 million in valuation increases across its investment portfolio, which was the result of a combination of income growth and firmer valuation metrics.

“GPT saw strong valuation gains across the portfolio during the year, which was supported by solid fundamentals and continued investment demand for high quality assets,” said Johnston.

Johnston said the office portfolio continues to benefit from its high exposure to the Sydney and Melbourne markets, which saw strong valuation gains and effective rent growth during the year.

The performance of the retail portfolio is also pleasing, Johnston said, and demonstrates both the quality of the portfolio and the successful outcomes achieved by the group in continuing to evolve its retail offer in response to changing trends.

The group continued to make progress on its development pipeline, which includes the proposed Parramatta office development in Sydney, the expansion of Sunshine Plaza, and new logistics opportunities in western Sydney.

During the 12 months GPT further strengthened its financial position, lengthening its debt maturity profile to 7.1 years and further diversifying its sources of debt. In November 2017, Moody’s upgraded GPT’s long-term credit rating to A2, reflecting GPT’s disciplined approach to capital management and its diversified portfolio of high quality assets. The Group had net gearing of 24.4 per cent at the end of the period.

The retail portfolio delivered like-for-like income growth of 3.8 per cent for the 12 months to 31 December, driven by high occupancy levels and fixed specialty rent increases.

Specialty sales productivity across the portfolio increased by 2.2 per cent to $11,185 per square metre.

Property net income for the year rose 5.9 per cent to $261.3 million, with the portfolio benefiting from the strong performance of Melbourne Central and Rouse Hill Town Centre, and the full year contribution from developments at Charlestown Square and Casuarina Square.

The retail portfolio maintained occupancy at 99.6 per cent and recorded a valuation gain of $281.4 million. The portfolio’s weighted average capitalisation rate firmed to 5.1 per cent.

GPT continued to make progress on the $420 million redevelopment of Sunshine Plaza, which has secured two international mini-majors and leading domestic retail brands. The 35,000sqm expansion is due for completion in late 2018.

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