GPT Group shopping malls set to rebound once Covid vaccination rates rise

Increased vaccination over the second half of the year is expected to be a linchpin to relieve pressure off GPT Group’s harried malls portfolio.

GPT Group chief Bob Johnston has flagged a likely bounceback in its retail portfolio once restrictions lift. Picture: James Croucher

Increased vaccination over the second half of the year is expected to be a linchpin in relieving pressure off diversified property business GPT Group’s harried malls portfolio.

The trust managed to deliver a steady result reflecting the recovery in the first half before lockdowns were imposed and the capacity of malls to bounce-back once reopened.

While GPT’s chief executive Bob Johnston acknowledged the necessity of the short, sharp and now extended lockdowns currently in place around the country, he said the key to reviving the struggling retail sector is sustained confidence achieved through vaccines.

“We do need to get vaccination rates up so that we can open up this economy again on a more sustained basis,” Mr Johnston said.

“We will be providing support for our retailers to make sure that they are there and viable when we do open up because I am confident that there will be a very strong rebound.”

The company reported steady results for the first half of the year with a $760.5m profit. Easing of restrictions in Victoria over the past three months boosted occupancy in the retail portfolio to 98.9 per cent, but full recovery may be slow due to the reliance on foot traffic. Retail rent collections increased 104 per cent on net billings though the first half of the financial year.

Moelis Australia analysts also flagged some uncertainty about the weighting of GPT’s portfolio within the Sydney and Melbourne markets (around 88 per cent), both of which are under likely lengthy lockdown orders. Covid-19 support policies, such as the reintroduction of a Code of Conduct for landlords in the two cities, will also impact second half performance, said ratings agency Moody’s.

GPT is now looking to further expand its assets in the logistics and office space, which Mr Johnston expects would fare far better through the next six months. Exclusive due diligence is underway to purchase Ascot Capital’s $825m portfolio of logistics and office property assets, which would mark GPT’s largest acquisition in years if the deal proceeds.

Valuation of GPT’s logistics portfolio increased 10.6 per cent to $3.4bn in the past six months, while the company’s office portfolio increased $121.2m in value. Occupancy within GPT’s $5.8bn prime grade stock at 88.9 per cent despite the trying conditions. The outlook was positive over the first half of the year, with tenant confidence and inquiry on the rise.

Mr Johnston said the company doing its bit to encourage vaccination with a range of staff incentives but ruled out the possibility of mandatory vaccination.

GPT reported an interim distribution per security of 13.3c, an increase of 43 per net on the same time last year, representing a payout of 99.9 per cent free cash flow.

GPT withdrew guidance in late July due to uncertainty around lockdowns, given around its portfolio weighting to Sydney and Melbourne.