Losses mount across property sector
Three of Australia’s largest property groups have reported falling profits in June as problems in both the retail and residential sectors played havoc with their bottom lines.
GPT, reporting for the half-year, saw its profit tumble 51.6 per cent to $352.6 million, compared with the $728.5 million earned in the prior corresponding period, while the value of its retail portfolio fell 0.6 per cent.
Profit was hit by more modest valuation gains compared with prior periods, as well as losses across its hedge book due to the significant reduction of interest rates. Like-for-like income growth for the retail portfolio increased 1.4 per cent.
GPT’s head of retail, Chris Barnett, said the results reflected a reduction in turnover rent, particularly from the cinemas category, which has had one of the slowest starts to the year seen in a decade.
“The team remains focused on remixing our centres towards higher-performing retailers to drive growth in specialty sales productivity, which has now increased to $11,512 per square metre across our portfolio,” he said.
GPT has seen specialty categories booming – particularly food, technology, leisure, beauty and lifestyle, Barnett said.
Retailers Harris Farm Markets, Breadtop, Craig Cook Butchers, Apple and JB Hi-Fi were named as some of the most successful in GPT’s portfolio.
Shopping malls a weak spot
Retail landlord Vicinity Centres posted a 72 per cent slump in full-year profit to $346.1 million as the shopping mall owner warned that the outlook for retailers appeared weak.
The company said total revenue for the 12 months to June 30 dipped 3.6 per cent to $1.28 billion and it lowered its final payout from 8.2¢ to 7.95¢, unfranked.
“The retail environment is expected to remain challenging in FY20, although economic stimulus including lower interest rates and income tax cuts may benefit retail spending,” the company said in a statement.
The retail property trust sold 12 shopping centres – including Belmont Village in Victoria and Flinders Square in Western Australia – for a total of $670 million during the financial year.
Vicinity Centres, which owns 62 shopping centres, said it was putting on hold a plan to sell more of its properties, including part of the Vicinity Keppel Australia Retail Fund (VKF).
“The recent softening in investor demand for retail property funds globally, compounded by a crowded divestment market, is impacting retail property pricing in Australia,” chief executive Grant Kelley said.
Office portfolio lifts results
Mirvac has reported a 6 per cent fall in full-year profit to $1 billion as the property group says trust in its brand is helping sustain it as the residential building industry goes through a rough patch.
Revenue for the 12 months to June 30 was down 1 per cent on the previous year to $2.78 billion and Mirvac will pay an unfranked final distribution of 6.3¢, up from 5.5¢ in the previous corresponding period.
Challenges to the residential property market included an insecure outlook for jobs which is creating a fear of taking on financial obligations; the difficulty of getting finance; and nervousness about building quality, especially in NSW, after a series of mishaps.
The group’s office portfolio, however, showed strong profits and upward revaluations of nearly $400 million, the Australian Financial Review reports.Mirvac is now Australia’s second-largest office manager with $15 billion in assets under management.
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