GPT boss optimistic after strong results

GPT Group chief executive Bob Johnston expects Sydney’s buoyant office market to remain strong.

GPT chief executive Bob Johnston. Picture: James Croucher

GPT Group chief executive Bob Johnston expects Sydney’s buoyant office market to remain strong, but doubts it will maintain a trend that has seen demand at least double over the past few years.

The diversified property trust yesterday booked an interim net profit of $586.4 million, up 39 per cent on the same time last year, and declared a distribution of 11.5c per security, up 4.5 per cent.

The profit growth was driven higher by $380m worth of revaluations and 3.8 per cent income growth across its office, retail and funds management portfolio.

GPT’s funds management business was the best performing sector with an 18.6 per cent return over the past year, which meant a $14.4m performance fee was paid to the parent company.

The office and leasing division portfolio value grew by $287.3m after some of its key properties, including MLC Centre, 2 Park Street and 1 Farrer Place in Sydney, were positively revalued.

Mr Johnston said the Sydney office market was the best performing in the country, with demand for space doubling in the past few years.

The move by some developers to convert St Leonards and North Sydney buildings to apartments and the upcoming resumption of four buildings to make way for the Metro construction would dramatically squeeze available space across the city precinct. The Wanda Group also plans to convert the Goldfields House office building, at Circular Quay, into luxury apartment and hotel towers.

“There has been a lot of take up from technical and IT companies, plus smaller space users have been coming to the market,” Mr Johnston said.

“In terms of the demand, it’s hard to say whether the levels we are seeing are sustainable. I wouldn’t expect it to keep going at this rate.

“I would think it would come back to its long-term average, but there’s very few options for where people can go.”

GPT also hinted that it could press ahead with a new residential development in its Rouse Hill Town Centre project, after approval was given for a Metro station to be built at the site in 2019. The development features a major retail component but there is space for up to 1000 apartments in the area.

Mr Johnston said he believed business confidence across the country was starting to return after it fell on the back of the July 4 federal election results confusion.

“In Sydney there is a lot of infrastructure investment and public spending occurring and optimism is high in both Sydney and Melbourne.”

Folkestone Maxim Asset Management’s Winston Sammut said the GPT result was solid but he questioned whether the 2017 profits would be as strong because of the performance fees paid in the past half. “I think that begs the question what kind of numbers we will see next year. The company has not given any dollar figure forecasts,” he said.

“It’s not a huge issue but I think it’s something to keep watch on.”

GPT shares rose 6c, or 1.09 per cent, to $5.55 yesterday.