GPT signals funds, distribution growth despite fall in net profit

GPT signals improvements in funds from operations and shareholder distributions, despite a 39pc fall in net profit.

GPT chief executive Bob Johnston. Picture: James Croucher

GPT is tilting its portfolio towards logistics property as its shopping centres are hit by weak consumer spending, with the company turning in a full-year profit of $880m.

The company generated a 6.8 per cent lift in funds from operations to $613.7m that, accounting for a mid-year raising, resulted in an FFO per security growth of 2.6 per cent.

GPT chief executive Bob Johnston said the company was headed to having 20 per cent of it assets in logistics, while exposure to retail would decline.

He added that consumer sentiment had been soft, partly due to low wages growth and last year’s house price correction weighing on spending, though this could now be reversed.

“With the house price recovery, that should hopefully help,” Mr Johnston said.

GPT delivered FFO in line with guidance, and like-for-like income growth across the portfolio of 3.5 per cent was underpinned by the office and logistics portfolio.

GPT completed an $867m capital raising in June to fund the acquisition of a 25 per cent interest in Darling Park 1 & 2 and ­Cockle Bay Wharf in Sydney, as well as other projects. The company is bulking up in logistics and added three new development sites in Sydney and Melbourne. All up, GPT can now ­develop more than 550,000sq m of prime logistics facilities worth $1bn.

GPT gave above-expected guidance of 3.5 per cent growth for FFO and distribution per security for the 2020 fiscal year, but analysts queried the retail portfolio’s sluggish net income growth.

GPT said its high-quality portfolio was expected to maintain high occupancy, but analysts said it would face vacancies as some retail chains collapsed.

The group had like-for-like income growth of just 1.2 per cent, reflecting the softer retail environment, which GPT said prompted reduced turnover rent and leasing deals taking longer to conclude.

The valuation of the retail portfolio fell by $46.1m, which was less than 1 per cent of its overall value.

GPT said specialty sales were up 1.9 per cent on last year to $11,667 a square metre, and it also completed a development of Sunshine Plaza and is advancing projects at Melbourne Central and Rouse Hill Town Centre.

The company had office ­occupancy running at 98.3 per cent and struck leases over 147,600sq m of space, with deals over a further 29,400sq m. Overall, the office area delivered like-for-like income growth of 6.2 per cent.

The company sold a half stake in Sydney’s MLC Centre for $800m and then bought the Darling Park interests. It also has a stake in a planned $2bn tower at Cockle Bay Wharf for which an architect will be chosen shortly.

GPT’s logistics portfolio delivered like-for-like income growth of 3.3 per cent and — with a mix of acquisitions, new projects and valuation lifts — has taken these holding to $2.4bn.

The company has also bought sites in major cities, buying 33ha of land in Sydney’s Kemps Creek and 33ha of land in Melbourne’s Truganina.