GDI announced their half year financial results for the period ended 31 December 2019 reporting a slight gain in Funds from Operations per security of 1%.
GDO continue to hold a WA centric portfolio and are hoping that recent improvements in the Perth market will extend into the years to come. Vacancy rates fell to 17.6% as at 31 January 2020, down from 18.5% at the same time last year following over 32,738sqm of positive net absorption during that period. With no new major developments expected to be delivered until 2023 at the earliest, with an already reduced number of +1,000sqm contiguous floors available for lease and with expected growing demand, GDI anticipate that the strong effective rental growth achieved during CY19 will continue for several years.
GDI reported favourable outcomes in leasing at Westralia Square with the Minister of Works executing two new leases for 14,522sqm at Westralia Square, the Western Australia Police Force (WAPOL) leasing 12,689sqm over levels 1-5, 8 and 9 for a period of five years, and Births Deaths and Marriages (BDM) entering a new six-year lease for 1,833sqm over level 10. GDI anticipate releasing the upper levels vacated by WAPOL into the improving Perth market once they become available during 2020.
GDI are advancing plans for a 2nd building on the site accommodating 9,130sqm over 11 floors. GDO are dealing with the adjoining owners in the precinct to obtain their consent to lodge the development application.
The property at 1 Mill Street continues to be an opportunistic play. GDI are not pursuing any short term leases for the asset, instead seaking to work with Lend Lease, in accordance with the Memorandum of Understanding between the parties, on a number of potential single user and major occupiers.
GDI also noted that the Funds Management division had securing a $98.0 million portfolio of 174 metropolitan Perth properties occupied by high profile car dealerships and service centres located on major arterial roads. The Portfolio is fully leased for a term of approximately 11 years, with the tenant having 5 x 5-year options. The leases have annual CPI + 1% rental increases, with market reviews in 2023 and 2028.
The acquisition was funded through the establishment of a new unlisted unregistered managed investment scheme, GDI No. 46 Property Trust (the Trust). The Trust is forecast to have a commencing distribution yield of 7.75%7 p.a., with conservative gearing of 31%. GDI holds approximately 48% of the 75.7 million units on issue.
Key highlights
• Net Tangible Asset (NTA) per security of $1.32, up $0.06 per security from the NTA at 30 June 2019
• Funds From Operations (FFO) per security of 4.397 cents
• Distribution per security for the period of 3.875 cents, in line with guidance
NTA per security
The wholly owned portfolio is now independently valued at $759.0 million, with Mill Green (+$13.0 million to $343.0 million) and Westralia Square (+$31.0 million to $316.0 million) revalued at 31 December 2019.
Following the revaluations, our NTA per security has increased $0.06 since 30 June 2019 to $1.32. With only $71.0 million of drawn debt as at 31 December 2020, GDI's balance sheet remains in a strong position.
Guidance for remainder of FY20
GDI confirmed, subject to no material change in circumstances, a forecast distribution of 7.75 cents per security for FY20, noting that 3.875 cents per security has been declared for the first half of FY20.
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