'Hub and spoke' office model will help Growthpoint

Defensive property assets are proving resilient in the face of the turmoil created by the pandemic with city-fringe office specialist Growthpoint Properties Australia reporting no material impact on its earnings.

The funds manager reported funds from operations, the earnings measure preferred in the property sector because it excludes fluctuations in portfolio values, of $197 million, a figure up 10.8 per cent on the previous year.

The fund manager is led by Tim Collyer.Credit:

The ASX-listed $2.4 billion platform - which counts the similarly named heavyweight South African-listed Growthpoint REIT as its main security holder - controls a portfolio of east coast metropolitan office towers and warehouses that are primarily leased to logistics firms.

Aware of the need for workers to be nearer to their offices, many businesses are considering downsizing headquarters and providing more space in smaller suburban buildings. Growthpoint is banking on businesses embracing this ‘hub and spoke’ model as a compromise between working from home and moving back to the office, to maintain its high office occupancy rates, now around 93 per cent, in its suburban buildings.

Office occupancy fell from 98 per cent at the end of last financial year when the company completed its Botanicca 3 tower in Melbourne’s Richmond without tenants, leaving the building vacant on completion.

Excluding Botanicca 3, the portfolio occupancy was 97 per cent, it said.

The group’s statutory profit after tax fell to $272.1 million, down from $375.3 million last year, primarily because of lower gains in the fair value of investments.

Strong gains in property values in the first half year and no change in the second half saw its portfolio’s value rise 5 per cent to $4.2 billion.

Despite its defensive attributes, Growthpoint wasn’t immune from the suffering inflicted by COVID-19.

It gave tenants $800,000 in rental abatements and deferred $2 million in rental payments, but overall rent collections were strong at 97 per cent between April and June.

The Melbourne based fund manager, led by Timothy Collyer, will pay out a distribution per security of 21.8¢, about 5.2 per cent lower than forecast to keep some capital in the bank to deal with the virus’ uncertainty.

“It is difficult to look beyond the last four months of the financial year, when we, like individuals and organisations around the world, were forced to face a dramatically different operating environment,” Mr Collyer said.

The company will not provide forward guidance, but did give distribution guidance for 2021 of 20¢ per security, to be paid in equal half-yearly instalments.

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