GPT Trades through Difficult COVID Impacts

5 November 2021

GPT’s deep exposure to large scale retail and CBD office markets continues to expose the group to the ongoing affects from COVID, while the move into Logistics can’t come soon enough.

Low rental collections, increasing vacancy rates and negative leasing spreads are each impacting earnings and valuations across the portfolio.

GPT’s Chief Executive Officer, Bob Johnston, said: “In the September quarter, extensive retail trading restrictions were experienced and this had a considerable impact on cash collections. On average 27% of stores were open in NSW and Victoria during the quarter, with predominantly only essential retail allowed to trade. The recent easing of COVID-19 restrictions and re-opening of non-essential retail in NSW and Victoria is welcomed, and early indications suggest we will see customer visitations at our shopping centres return to levels experienced prior to the lockdowns. However, the recovery of GPT’s Melbourne Central shopping centre is likely to be more protracted given its reliance on the return of office workers, students and visitors to the Melbourne CBD.

“Vacancy rates in the Office sector remain elevated but are stabilising and we continue to make progress with leasing despite the extended lockdowns. Occupancy for GPT’s stabilised assets increased and we also finalised a number of leasing transactions at our recently completed developments at 32 Smith Street and the GPT Wholesale Office Fund’s Queen & Collins.

“In line with our strategic focus, GPT has increased its investment in the Logistics sector to $4.1 billion through recent acquisitions and the completion of two development projects. We continue to see strong tailwinds for the sector, with solid tenant demand and low vacancy in each of our core markets.”


Retail sales in the September quarter were impacted by extensive trading restrictions which allowed only essential retail categories to remain open in NSW and Victoria. Total Centre sales across the GPT portfolio were down -45.7% and Total Specialties sales were down -54.2%, compared to the same quarter in 2019.

The restrictions in NSW and Victoria also impacted cash collections, with 63% of gross billings collected in the September quarter. The NSW and Victorian Governments reintroduced tenancy relief schemes effective July 2021 through to January 2022. Rental assistance arrangements are yet to be finalised for the majority of GPT’s small and medium enterprise (SME) and non-SME tenants impacted by the trading restrictions.

Following on from the significant leasing activity in the first half, 105 new and renewed leases were completed during the quarter resulting in portfolio occupancy of 98.5% (June 2021: 98.9%). Leasing spreads achieved on Specialties leases remains in line with the first half averaging -9.5%, with average tenure of 4.5 years. Leasing deals continue to have fixed base rents with annual increases.

GWSCF exchanged contracts on the divestment of Wollongong Central for $402 million, with settlement expected in December 2021. The sale of the asset is consistent with GWSCF’s strategic focus on near- term asset enhancements and longer-term value creation, with mixed-use masterplans progressing for a number of assets within its portfolio.

GPT and GWSCF have agreed terms with Sentinel Property Group for the sale of Casuarina Shopping Centre. The sale remains conditional and there is no certainty that a transaction will be completed.


Year to date signed Office leasing volume has reached 79,700 square metres (sqm), with an additional 57,400sqm at Heads of Agreement (HoA), following the completion of a number of key leasing deals. Office portfolio occupancy at 30 September 2021 increased to 94.3% (June 2021: 92.0%) for stabilised assets. Leasing achieved includes a 12,300sqm lease signed with the Victorian State Government at 181 William Street in Melbourne. Including development completions occupancy was 92.0%

(June 2021: 88.9%), with 32 Smith, Parramatta now 81% committed including HoA and Queen & Collins, Melbourne reaching 45% commitment including HoA.

The development of GWOF’s 51 Flinders Lane will commence in December 2021. The development has an estimated end value of approximately $535 million and will provide 28,000sqm of high quality office space targeting boutique occupiers in Melbourne CBD’s popular east end precinct.

As part of the Ascot Capital portfolio transaction, GPT acquired a Canberra CBD asset for $85 million. The 6-level 10,200sqm office asset is leased to the Australian Government and has a weighted average lease expiry (WALE) of 4.7 years at 30 September 2021.


The Group continues to grow the Logistics portfolio, with acquisitions of $798 million secured since July, including 23 Logistics assets acquired from Ascot Capital for $597 million. The Logistics assets acquired from Ascot Capital total 161,700sqm of gross lettable area and are fully leased with a WALE of

9.8 years at 30 September 2021. The Group also secured a fully leased facility at 235-239 Boundary Road, Laverton North in Melbourne for $72.5 million.

The Group completed two developments in the period totalling $90 million. This includes a 16,300sqm facility at Wembley Business Park in Brisbane which has been leased to Mainfreight and Nature’s Best, with a WALE of 5.8 years. In Melbourne, a 29,800sqm facility at the Gateway Logistics Hub, Truganina reached practical completion in September, and is leased to The Hut Group for 5 years.

Two developments are underway in Melbourne and Brisbane. The 24,000sqm Melbourne facility at the Gateway Logistics Hub, Truganina has a lease in place with Glen Cameron Group for a 5 year term from completion later this year. The 17,100sqm Brisbane development at Wacol within the GPT QuadReal Logistics Trust (GPTQRLT) is set to complete in two stages in December 2021 and March 2022.

GPT’s Logistics development pipeline has expanded, with an estimated end value on completion of approximately $1.6 billion. In October, the GPTQRLT secured land at Kemps Creek, Sydney and Bundamba, Brisbane, adding to land acquired at Crestmead, Brisbane in August. A fund-through acquisition adjacent to the Bundamba land has also been secured for $41 million within the GPTQRLT. The 12,300sqm facility is leased to Saab for 6 years from expected completion in the first half of 2022.

Logistics portfolio occupancy has increased to 98.0% at 30 September 2021 (June 2021: 96.8%), with lease up of vacancy at Somerton along with the addition of completed developments and acquisitions. Year to date signed leasing volume has reached 100,800sqm, with an additional 16,000sqm at HoA.

Capital Management

The debt funded acquisition of the Ascot Capital portfolio resulted in Standard & Poor’s (S&P) placing GPT’s ‘A’ stable rating on negative outlook. The rating will remain within GPT’s target A-rating band.

The Group has furthered its commitment to a more sustainable future, with the recent issue of GWOF’s inaugural Green Bond for $250 million and a tenor of 10 years. The bond is certified by globally recognised Climate Bonds Initiative (CBI) in line with leading market standards. Proceeds from the bond will be used to refinance existing GWOF assets that meet CBI’s Low Carbon Building Criteria, which require the assets to perform in the top 15% in their relative city in terms of carbon intensity.

Summary and Outlook

Mr Johnston said: “The Group continues to execute on its strategy to increase capital allocation to the Logistics sector through acquisitions and development completions. Following an active quarter, Logistics now represents approximately 26% of GPT’s property investment portfolio and we have a healthy development pipeline providing further opportunities for growth in the sector. Asset valuations for the Logistics sector continue to be supported by very strong investment and tenant demand.

“Office leasing enquiry is anticipated to improve in our key markets of Sydney and Melbourne as businesses begin to return to the workplace following the easing of restrictions. The most active enquiry is from small to medium size tenants looking to take advantage of the opportunity to move into vibrant workspaces that provide flexible growth options, and we expect GPT’s high quality assets and flexible workspace offerings will be a beneficiary of this trend. Leasing of current vacancy and forward solving upcoming lease expiry remains a key focus for the Group. Recent office transactions indicate that valuations continue to be well supported by both domestic and offshore investors.

“After a challenging period for the Retail sector, we expect that there will be a recovery in customer visitations and sales across our retail assets albeit the recovery of Melbourne Central is likely to take longer given its CBD location. This should support stronger rental collections for the remainder of the year. SME tenants eligible for rental relief under the Government mandated schemes in NSW and Victoria represent approximately 37% of retail rental income in those states. The Group is also working through commercial arrangements to agree appropriate relief for non-SME tenants on a case by case basis for the period of the lockdown. While COVID-19 has disrupted the retail trading environment, there have been several retail asset transactions completed recently providing evidence and support for valuation metrics.

“With the increased levels of vaccination rates and the expectation of fewer COVID-19 restrictions being required in the future, we are optimistic that we will see a return to more favourable economic conditions.”

FFO and distribution guidance for 2021 remains withdrawn given COVID-19 restrictions have only recently eased and uncertainty remains in terms of retail trading conditions and rental collections for the balance of the year.

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