Growthpoint has held firm its soft outlook for FY21 despite making good progress in the leasing of Botanicca 3 building and collecting 99% of current rent billings.
The Group expect that the pandemic will have a broad and significant impact across Australia and that the true bearing on the economy will not be known for a period of time.
Timothy Collyer, Managing Director of Growthpoint, said, “The COVID-19 pandemic continues to have a significant impact on individuals and businesses across Australia. Against this challenging backdrop, I’m pleased with the way the Group is performing. We continue to achieve leasing success, most notably signing a 10 year and seven-month lease with Bunnings at Botanicca 3 for circa 14,000 square metres. This is one of the largest new office lease agreements in Australia since the outbreak of the COVID-19 virus.
“We are pleased to see our tenants increasingly returning to their offices, outside of Victoria. Working from home exclusively is not something that most employees or employers view as optimal. There is shared recognition of the many benefits of working in an office, such as fostering company culture and mentoring junior employees. We will continue to work with our tenants to ensure our offices enable employees to operate effectively in a COVID-safe environment.
“The vast majority of our industrial assets have continued to operate with minimal disruption, since the onset of the pandemic. Our assets are primarily used for warehousing and logistics and are critical components of our tenants’ supply chains, enabling them to meet the surge in demand for online shopping and groceries. Reflecting the strength of our portfolio and tenant base, less than 12% of rent relief granted during the COVID-19 pandemic has been for industrial tenants.”
COVID-19
Growthpoint have remained in close contact with their tenants throughout the COVID-19 pandemic and provided rent relief to those who have been severely impacted by the crisis.
During 1Q21, the Group agreed rent relief requests, totaling $0.3 million, 89% less than in 4Q20. There are a small number of rent relief requests, which are yet to be finalised in accordance with the relevant state and territory legislation or regulation. The Group expect approximately $0.2 million of additional support may be required.
To date, Growthpoint have collected approximately 99% of 1Q21 total billings.
Property portfolio
During 1Q21, Growthpoint negotiated nine leases, representing 5% of portfolio income. This included securing Bunnings as a key tenant for approximately 71% of the recently completed A-grade office building, Botanicca 3. The Group also renewed Monash University’s office leases at Building B, 211 Wellington Road, Mulgrave, Victoria, for five years and signed a new five year lease with Volo Modular for 13 Business Street, Yatala, Queensland, a modern industrial warehouse. The Group has less than 3% of lease expiries remaining in FY21.
Growthpoint’s WALE increased to 6.4 years and its portfolio occupancy increased to 96%. The Group’s office portfolio’s WALE is now 7.1 years.
After reviewing all options for 120 Northcorp Boulevard, Broadmeadows, Victoria, the Group has decided to divest the asset as opposed to pursuing a lengthy development project in the current operating environment. Growthpoint received numerous enquiries and finalised a sale at $50.2 million. Settlement occurred on 4 September 2020 and the proceeds were used to repay debt.
Capital management
Growthpoint remains well within its debt covenant limits with a gearing of 32.2% at 30 September 2020. In the period ahead, the Group is focused on extending its weighted average debt maturity whilst taking advantage of historically low interest rates to reduce the overall cost.
Outlook
Growthpoint expect that the pandemic will have a broad and significant impact across Australia and that the true bearing on the economy will not be known for a period of time.
While the leasing success at Botanicca 3 is ahead of expectations, and will positively impact the Group’s FY21 FFO, Growthpoint have decided to maintain a conservative approach and reaffirm the FY21 distribution per security guidance of 20.0 cents per security. This represents a current distribution yield of 5.9%.
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