Transcription of Finance News Network Interview with GPT Metro Office Fund Manager, Chris BlackmoreJohn Treadgold: Hello I’m John Treadgold for the Finance News Network and joining me from GPT Metro Office Fund is Fund Manager, Chris Blackmore. Chris welcome back to FNN.
Chris Blackmore: Thanks John, it’s good to be with you.
John Treadgold: GMF has given its first ever operational update since listing last November. What were the highlights and how has the Fund performed against forecast from the Prospectus?
Chris Blackmore: The listing was the largest AREIT IPO (Initial Public Offering) in 2014; we’ve now been trading for almost four months. The establishment cost for the Fund came in under budget. We’ve leased our only office vacancy and the construction of 3 Murray Rose is coming in slightly ahead of schedule, for mid-March. So we were able to reaffirm our forecast from the PDS at this morning’s operational update.
John Treadgold: Can you give us an overview of the key assets the Fund holds and what is driving growth in the Fund price?
Chris Blackmore: The Fund’s got six assets spread across Sydney, Melbourne and Brisbane. If you include 3 Murray Rose, it’s worth $376 million and the weighted average lease expiry is 6.4 years. 70 per cent of the income comes from long dated leases to household names, such Lyon, Samsung and Optus. So we feel that we’ve positioned the Fund well to provide stability of earnings and a high yield. And we feel that investors have responded well to that, hence the trading price that we see today.
John Treadgold: What tenancy levels have you achieved and what is the Fund doing to increase yields?
Chris Blackmore: The office space is fully leased, which is fantastic news. We’ve got some small suites coming up for expiry this year at the Quad Business Park, so we’re looking to push our rents at that point. But also importantly, 89 per cent of the Fund’s income is subject to fixed increases, averaging 3.6 per cent. So with these two factors combined, we feel we’re helping to push our earnings yields going forwards.
John Treadgold: Gearing levels are always important for REITs. What is the gearing level and do you intend to increase this given the low interest rate environment?
Chris Blackmore: So the Fund’s gearing is currently sitting at just under 27 per cent. It will have a drift up towards 35 per cent as we get to completion of 3 Murray Rose. We do take a conservative approach to capital management of the Fund. We’ve got a target gearing range of between 25 to 40 per cent. So we’re more than comfortable with where those metrics sit within our target range.
John Treadgold: How do you see metropolitan office markets performing and how will this impact on GMF?
Chris Blackmore: So national demand increased last year, supply was modest and vacancy rates for metro markets nationally came in. Rents have been rising which is good for earnings, cap rates have been coming in which is good for property values. So we feel that the Fund is well positioned to capitalise from these improvements.
John Treadgold: Your investors have clearly warmed to the Fund. What should they focus on for the rest of the year?
Chris Blackmore: Increased demand in the metro markets and the completion of 3 Murray Rose for the Fund, puts us in an excellent position to make sure we hit those PDS targets.
John Treadgold: Chris Blackmore, thank you for the update.
Chris Blackmore: Thank you John.
Ends
