Growthpoint delays projects, offers rent relief for small tenants

Developer and landlord Growthpoint Properties has delayed some projects and will offer rent relief for its smaller tenants as it works through the longer-term impact of the coronavirus.

In its quarterly update, which is the first cab off the rank for the real estate investment trusts, it says the balance sheet is robust but there are tenants that have been significantly impacted by the COVID-19 pandemic.

Growthpoint is the owner and developer of a number of major office, industrial and retail assets across the country, including the $450 million, 1 Charles Street, Parramatta, Sydney, and the $218 million, 75 Dorcas Street, South Melbourne, office towers, with tenants including large companies and government bodies.

Growthpoint's 20,000 square metre office at Botanicca Corporate Park, Melbourne.

It has complied with the directions from the national cabinet to offer rental reductions and deferments, where applicable. Growthpoint joined its REIT peers in late March withdrawing its full-year guidance.

A Moelis Australia analyst said at the time that the group was "well positioned despite challenging market conditions".

"Assessing the small/mid capital industrial REIT stocks under our coverage, Growthpoint screens as having one of the more defensive tenant exposures,"Moelis Australia's analyst said.

"Though there will likely be downwards pressure on net tangible assets, both for Growthpoint and the sector, quality assets will continue attracting quality tenants, and we’d argue Growthpoint has both of these."

Growthpoint chief executive Tim Collyer said the business is working with tenants on a case-by-case basis to alleviate the pressure during and after the virus.

But he said the non-essential capital projects have been delayed and there has been pressure on signing new rental deals.

"This includes the development of 120 Northcorp Boulevard, Broadmeadows, Victoria. The group is reviewing this project and will decide how to proceed when the longer-term impacts of the COVID-19 pandemic become clearer," Mr Collyer said.

On the leasing front, during the third quarter Growthpoint achieved practical completion on the vacant Botanicca 3, an A-grade office building in Richmond, Melbourne.

But Mr Collyer said the pandemic has made leasing new property more challenging, as businesses’ decision-making appears to have become more prolonged. The group now expects to lease Botanicca 3 progressively by the end of calendar 2021.

Industrial property has maintained its high performance as consumers spend more money shopping online, while the retail bricks and mortar stores are in mostly self-imposed shutdown.

Growthpoint committed $5 million to complete one development project, the expansion of a Woolworths distribution facility in Gepps Cross, South Australia.

Mr Collyer said the project is ahead of schedule, and practical completion is expected before the end of the financial year. Once complete, the total project will be rented, with a new 15-year lease over the property.

Amid the swath of capital raisings by other REITs, Growthpoint's balance sheet is supported by liquidity from undrawn debt lines of $235 million and $41 million of cash on its balance sheet. The group has no debt maturing until the 2022 financial year.