By David Winning
SYDNEY--Property owner and funds manager GPT Group said lower property valuation gains resulted in its half-year profit falling by 52%, although it continued to benefit from a strategy of prioritizing investments in Sydney's office market where supply is tight.
GPT reported a net profit of 352.6 million Australian dollars (US$239.1 million) for the six months through June, down from A$728.5 million a year earlier, and inclusive of a A$130.8 million increase in the valuation of its property portfolio. Funds from operations rose by 2.0% to 16.36 cents per security, driven by strong operating income from its Australian office and logistics properties.
"Office market fundamentals in our core markets of Sydney and Melbourne remain positive," said Chief Executive Bob Johnston.
GPT owns and manages real-estate assets including Australia Square in Sydney, Melbourne Central and Highpoint Shopping Centre in Melbourne and One One One Eagle Street in Brisbane. Management has aggressively overhauled its property portfolio in recent months to lay the groundwork for the next wave of growth.
GPT bought a A$212 million portfolio of logistics assets in Sydney in May, and followed that with a deal in mid-June to acquire 25% stake in the Darling Park 1 and 2 office complex and Cockle Bay Wharf retail hub in Sydney for a combined A$531 million. Those transactions came not long after GPT agreed to sell its 50% stake in Sydney's MLC Centre to Dexus and Dexus Wholesale Property Fund for A$800 million.
GPT's recent raising of more than A$850 million in new capital not only helped to fund the Darling Park and Cockle Bay Wharf transactions but has also provided additional firepower to support its pipeline of developments.
On Monday, GPT said its office portfolio is 97.1% occupied, and delivered comparable income growth of 6.5% in the six-month period. GPT has been investing heavily in Sydney's office market where property values have been boosted by a drop in supply as work accelerates to build new metro train stations in Australia's biggest city.
Solid demand for offices has helped to offset headwinds in retail. Consumers are buying more online, while spending overall has been sluggish during a period of low wages growth and a rising cost of living.
Still, GPT said its retail outlets were performing well with improved comparable income in the first half. Sales in the specialty segment rose by 1.0% on year. Interest-rate cuts in June and July have fueled hopes among investors that consumer spending will improve even if wages growth stays sluggish.
The company reaffirmed an expectation for 2.5% annual growth in funds from operations per security and a 4% increase in its full-year distribution.
-Write to David Winning at email@example.com