One year on from its listing on the ASX, the GPT Metro Office Fund (GMF) has reaffirmed that its business case remains as sound as ever at its inaugural annual general meeting.
“We believe the benefits for investing in metropolitan office property remain compelling,’’ GMF fund manager Chris Blackmore told the GMF’s shareholders at the meeting held in at GPT’s Sydney headquarters on Monday.
“With historically favourable returns, we see metro investments showing a relatively high income return with less reliance on capital growth, and at pricing levels that show higher yields than office investments in core CBD markets,’’ he said.
GMF’s annual general meeting was held after the GPT-managed fund reported a full year net profit of $35.7 million, which compared to its prospectus forecast of $13.7 million. The profit was helped by an uplift in the value of the fund’s portfolio, which includes six A-grade office properties in Sydney Olympic Park, Brisbane’s Fortitude Valley and the Melbourne suburb of Hawthorn. The strong result was also helped rent increases, with 81 per cent of the fund’s income subject to fixed rent reviews with an average increase of 3.6 per cent a year.
“Demand for metropolitan office space has moderated from 2014, but shown improvement since the second quarter of 2015 and continues to be offset by limited supply with vacancy now steady over the past three years,’’ said Mr Blackmore, as GMF reaffirmed that it was on track to beat the guidance in its prospectus for the period up to December 31.
Mr Blackmore said the supply of new metro office buildings “remained modest” with much existing stock and future development sites being rezoned into residential. He added developers were continuing to seek substantial pre-commitments before starting construction.
“The relatively small movements in supply and demand, coupled with positive rental growth, indicate a stable outlook for Australian metropolitan office markets, which is a positive for GMF,’’ he said.
The fund, which was included into the S&P/ASX 300 Index in March, renewed or re-leased several tenancies during the year. These included six of eight tenancies that were to expire within two years of its 2014 IPO at Quads 2 and 3 at Sydney Olympic Park. It also renewed the lease of two floors at its Vantage office building in Hawthorn for another seven years to the engineering firm McConnell Dowell.
The fund, whose portfolio enjoys a NABERS 5 Star Energy Rating and 5.6 Star Water rating, was also given Green Star status when included in the Global Real Estate Sustainability Benchmark (GRESB) this year. “We see sustainability as core to our vision and values,” GMF chairman John Atkin told the meeting.
You can watch a replay webcast of the meeting on the GMF website.