Transcription of Finance News Network with GPT Metro Office Fund (ASX:GMF) Fund Manager, Chris Blackmore Lelde Smits: GPT Metro Office Fund
(ASX:GMF) is a real estate investment trust that listed on the ASX in October last year. The Fund owns six quality A-grade metropolitan and business park office assets in Sydney, Melbourne and Brisbane, which have been independently valued at about $376 million. I’m Lelde Smits and joining me at ASX Investor Series Sydney is Fund Manager, Chris Blackmore. Chris, welcome.
Chris Blackmore: Thanks Lelde, it’s a pleasure to be here.
Lelde Smits: Could you start by giving us an update on GPT Metro Office Fund, how long has it been operating for and what’s its size?
Chris Blackmore: Yes GMF or the GPT Metro Office Fund is an Australian real estate investment trust. We specialise in owning metropolitan and business park office properties, throughout Australia. We listed in October last year, so we’ve been trading for almost eight months now. And we own six properties in Melbourne, Brisbane and Sydney, valued at around $376 million.
Lelde Smits: Who’s responsible for managing the Fund?
Chris Blackmore: So the responsibility primarily sits on my shoulders as Fund Manager. But of course being part of The GPT Group, the GMF Office Fund gets the benefit of the GPT platform of services, to ensure success. So these services will be covering finance, tax, legal, asset management, leasing development, capital transactions etc. etc. GPT itself is also listed, it’s been listed since 1971, it’s one of the oldest and more established property groups in Australia, with assets under management of just over $18 billion.
Lelde Smits: What do you believe makes GPT Metro Office Fund an attractive investment?
Chris Blackmore: Yes it’s really all about the quality real estate that we own. It’s the attractive returns that we offer investors and it’s being able to leverage that GPT platform, for success in the future. So we own high quality buildings leased to reputable tenants, long leases, fixed increases in rent over time. So that’s providing us a good solid base for our income going forwards.
We take a conservative approach to capital management. And we’re forecasting an attractive distribution yield for the period ending 30 June, with an increase in that distribution for the following period, ending 31 December as well.
Lelde Smits: Could you explain a little more about the rationale behind investing in metropolitan markets?
Chris Blackmore: Sure, so research shows that the volatility returns from metropolitan markets are lower. So this is primarily coming from the fact that the majority of that return comes from income. So there’s less reliance on capital growth going forwards. We see that pricing is attractive, so cap rates have been compressing over the past couple of years. We’ve seen capital values improving. And that pricing differential between metro and CBD markets, is still sitting around that long-term average. So through the business cycle, we’d expect that to compress a little bit further going forwards, so there maybe further capital value improvements to come, going forwards as well.
We also think it’s an excellent time to invest in the market. So since 2014, we’ve seen demand increasing, we’ve seen supply at the national level coming off since about 2012. So at that national level, we’ve got rising demand, forwarding supply. We’ve seen vacancy rates moderate and settle. And we’ve seen rental growth really come through in the last couple of quarters, so at the end of 2014, the first quarter of 2015 as well.
Lelde Smits: Final question Chris. How important are the relationships with your tenants in your metro properties?
Chris Blackmore: We’re a service provider. So the relationship we have with our customers is the key to our success. We’re very fortunate to have the likes of Samsung Australia (KRX:005930), Lion Group
(ASX:LSX) and those people like OptusPty Limited as our key tenants. But we work hard at maintaining those relationships and work hard at improving them as well.
Lelde Smits:Chris Blackmore, thank you for the update from GPT Metro Office Fund.
Chris Blackmore: Thanks Lelde, it’s a pleasure to be here.
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