CORONAVIRUS COVID-19 PANDEMICREAL ESTATE INVESTMENT TRUSTS & FUNDS

Office and industrial demand to strengthen as lockdowns end

Photo: Note Viriyarat (Australian Property Journal)
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ASX-listed Growthpoint Properties has maintained high rates of portfolio occupancy and a stable WALE over the first quarter of FY22, with GOZ relatively unscathed by the ongoing impacts of lockdowns across the country.

Growthpoint has reported stable group portfolio occupancy at 97% and WALE at 6.2, as of 30 September 2021. While its office WALE remains at 7.0% and industrial declined marginally from 4.7 years at 30 June to 4.5 years, at the close of the quarter.

The group’s occupancy for the remainder of FY22 depends Woolworths exercising a five-year option on a large distribution centre which represents 5.4% of total portfolio income and is currently set to expire in February 2022.

“The group has had a strong start to the financial year. We continued to see sustained tenant demand for our high-quality metropolitan office portfolio, as highlighted by our leasing success in Brisbane, Sydney and Melbourne, during the quarter,” said Timothy Collyer, managing director of Growthpoint.

Growthpoint signed off on 11 office leases, or 5.5% of its office portfolio income and 3.7% of its total group portfolio income. The lease terms of these tenancies have a WALE of 5.0 years, with an WARR of 3.0%.

Though these were no new industrial leases for the quarter, the group’s portfolio in this sector is nearing total occupancy, with only a small asset at the Brisbane Airport not occupied.

Bunnings also agreed to an additional lease with Growthpoint across 2,068sqm of the final floor at Botanicca 3, a newly completed A-grade office asset in Richmond, Victoria.

“We are particularly pleased that Bunnings has leased an additional floor at Botanicca 3. Despite the challenges presented by COVID-19 lockdowns, this building is now 93% occupied, reinforcing our view that it is one of the highest-quality metropolitan offices in Australia,” said Collyer.

Growthpoint anticipates Bontanicca 3 will reach total occupancy by the end of the calendar year, having been held back by stunted leasing throughout Melbourne’s extended lockdown.

The group’s pro forma gearing at 30 September 2021 was 230bps up on the previous quarter at 30.2%. A result of its 2021 H2 distributions and debt being used to fund new stapled securities in ADI for $50.9 million, as well as an Olympic Park asset for $52.0 million.

Growthpoint announced it would purchase the 14.74 million new stapled securities in APN Industria REIT, at an issue price of $3.45 per security, to maintain its 14.5% holding in the ASX-listed warehouse landlord.

Following the group’s full-year results which included a 10.2% valuation increase to its $4.5 billion portfolio and its statutory profit more than doubling over to $553.2 million.

Gearing still sits within the group’s target range of 35% to 45% however, while its weighted average cost of debt declined by 25bps to 3.05% per annum.

“With Australia beginning to open up, as we meet the necessary vaccine targets, we expect to see a significant improvement in the economic environment and associated business confidence. This is likely to support increased tenant demand for our office and industrial assets,” said Collyer.

Growthpoint has reaffirmed its FFO guidance of at least 26.3 cps and its distribution guidance of 20.6 cps.

“With high occupancy, a long WALE and strong tenant base, we have been protected from the short-term economic challenges presented by the COVID-19 pandemic and are well positioned to benefit as conditions improve,” concluded Collyer.