GPT warns on Melbourne lockdown lag as it sinks to $213m loss

GPT worries about states’ uneven recovery from the pandemic, but overall optimism and a buyback helped push shares higher.

Shoppers at the Melbourne Central mall, which has been hard hit by Victoria’s repeated hard COVID-19 lockdowns. Picture: NCA NewsWire / David Geraghty

Diversified property trust GPT plunged to a $213.1m loss last year after taking heavy writedowns on its malls.

GPT has a heavy exposure to the Victorian capital, which saw it suffer during lockdowns last year. It sounded a warning about possible new disruptions which have hurt assets like Melbourne Central.

But investors drove the company’s shares up by 6.8 per cent to $4.41 in early trade as it unveiled a buyback of up to 5 per cent of its stock and an $800m logistics partnership.

GPT chief executive Bob Johnston acknowledged the high level of uncertainty in the operating environment but said the company was optimistic about the outlook for 2021.

The company is pushing deeper into logistics but is weighed down by worries about its shopping centres and, increasingly, offices, as some tenants consider slashing space.

GPT turned in a net loss of $213.1m for 2020, a hefty reversal on its $880m profit in 2019, as it was hit by property writedowns of $712.5m. It launched the $800m logistics partnership with Quadreal but this was overshadowed by the hefty writedowns that drove the $1bn slump in its results.

The group’s income was also off and it suffered a 12.9 per cent fall in funds from operations to $554.7m, while funds from operations per security fell to 28.48c.

GPT blamed the impacts of COVID-19 rent relief provided to tenants, as rent waivers and provisions for uncollected rent for 2020 totalled $95.3m. It also cut back the valuation of its mall portfolio.

The company made a full year distribution of 22.5c per security, including a final distribution of 13.2c per security, but did not provide earnings or distribution guidance for 2021 due to the uncertain operating conditions.

GPT chief executive Bob Johnston. Picture: John Feder

On the office front, despite varying government restrictions and tough leasing conditions, GPT struck 99,600sq m of leases across the portfolio in 2020, with an additional 26,500sq m agreed.

Vacancy rates in major office markets jumped in 2020, which Mr Johnston warned would result in a decline in effective rents for new leasing deals during 2021. The company took a 1.2 per cent valuation hit and is still pressing ahead with major developments with $3.5bn of office projects in the wings.

The logistics portfolio was the star, increasing by $542.5m to $3bn, including the 165,100sq m of space added via developments and acquisitions. Mr Johnston said GPT had the opportunity to deliver more than 600,000sq m of prime logistics facilities with a $1bn end value.