Shopping centre woes weigh on GPT’s earnings
Landlord GPT has lost almost $100 million by providing rent relief to COVID-hit tenants, cutting into the group’s earnings in a “challenging year”.
The property manager, which controls $14.1 billion in office, retail and industrial assets, reported a 9.6 per cent fall in funds from operations – an industry metric that removes lumpy changes to property values – to $554.7 million for the full year to December.
Rent waivers for tenants, mainly in the group’s retail properties, and provisions for uncollected rent over the year totalled $95.3 million.
“We commenced 2020 with strong momentum and the expectation of delivering earnings and distribution growth. However, the onset of COVID-19 rapidly changed the operating landscape,” GPT boss Bob Johnston said.
“The effects of COVID-19 resulted in a challenging year for the group.”
The real estate trust is not the only group to succumb to turbulence from the pandemic which has chipped into office and retail earnings across the country.
Those difficulties showed up in GPT’s net lower operating earnings and a significant reduction in the value of its extensive property portfolio.
GPT reported a net statutory loss after tax of $213.1 million compared to a net profit of $880 million in 2019, predominantly the result of a 4.8 per cent, or $712.5 million, fall in property values.
Like other retail landlords, GPT’s malls struggled with onerous social distancing measures to control the virus.
Earnings from the group’s shopping centres fell 30.8 per cent to $225.7 million. GPT’s flagship Melbourne Central shopping mall is still reeling from the repercussions of Victoria’s long lockdown.
“The recovery of Melbourne Central is likely to lag the group’s other retail assets given that the return of office workers to the CBD has only just commenced,” GPT said.
Despite the government restrictions and subdued leasing conditions, the group’s premium office towers delivered earnings growth of 2 per cent on the back of 99,600 square metres of leasing deals over the year.
“The group’s office portfolio has remained resilient, with strong net billings and collection outcomes reflecting the quality of our assets and the diversification of our tenant base,” Mr Johnston said.
Industrial property, underpinned by the logistics and warehousing growth needed to drive rocketing e-commerce spending online, is the one property class that has outshone others, particularly benefiting industry heavyweights like Goodman and Charter Hall.
Not to be outdone, earnings from GPT’s logistics portfolio jumped 15.2 per cent. Occupancy across its assets sat at 99.8 per cent with a weighted average lease expiry of 6.7 years, and a 9.3 per cent lift in valuations across the segment.
On Sunday, GPT revealed its ambitions to significantly expand its industrial holdings.
It sealed an $800 million 50:50 joint venture with Vancouver-based real estate investor QuadReal Property Group, with the new fund announcing a $175 million purchase of two industrial properties on Australia’s eastern seaboard.
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Simon Johanson is a business journalist at The Age and The Sydney Morning Herald.
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Source: Thanks smh.com