Growthpoint Properties Australia (ASX:GOZ) talks company overview, financials, portfolio updates and impact of Amazon Australia.
Jessica Amir: Hi I’m Jessica Amir for the Finance News Network. Joining me from real estate investment trust Growthpoint Properties Australia (ASX:GOZ) is Chief Operating Officer, Aaron Hockly. Hi Aaron, welcome.
Aaron Hockly: Hi Jessica.
Jessica Amir: First up for those new to the company, can you give us a quick introduction?
Aaron Hockly: Growthpoint Properties Australia is an ASX listed landlord. We have a portfolio of $3.2 billion of office and industrial properties, spread right around Australia. We have a market capitalisation of approximately $2.4 billion, making us one of Australia’s largest listed landlords. We’ve returned to investors 22.4 per cent per annum over the last five years, which is about four per cent above the property sector average.
Jessica Amir: Just tell us how you differentiate from your competitors?
Aaron Hockly: Firstly we focus solely on income. So we’re trying to return an income stream to our investors, growing at approximately three to four per cent per annum. Secondly, we invest solely in the office and industrial sectors in established properties. We have a high security of income as a result. And finally our major investor, Growthpoint Properties Limited (JSE:GRT) is South Africa’s largest listed property group, with assets of $AUD12 billion. And that access to capital enables us to pursue transactions that many of our peers can’t.
Jessica Amir: Now to your FY17 results Aaron. What were some of the highlights?
Aaron Hockly: We had an excellent year in FY17; we acquired over $470 million of assets, of an average yield of over seven per cent. And we divested around $260 million of assets, well above book value to enable us to de-risk future cash flows. We also leased over 100,000 square metres of office and industrial space, allowing us to retain occupancy at 99 per cent.
We also have had a focus on sustainability over the last few years and two key measures on that front. We increased our average neighbours rating across our office portfolio, from 4.2 stars to 4.5 stars. And we increased female participation, or female workforce participation, from 34 per cent to 45 per cent. Most importantly, we increased our earnings by 12 per cent per security and our distributions by 4.9 per cent, per security.
Jessica Amir: Can you give us a little more detail about your property portfolio?
Aaron Hockly: Our office portfolio, which makes up about two thirds of the total, is worth around $2.1 billion and is primarily A-grade office properties in core CBD, and inner city locations. Our industrial portfolio primarily comprises logistics; so large warehouses are leased to the likes of Linfox. Over 81 per cent of our portfolio is located across Australia’s eastern seaboard and 90 per cent of our income, comes from government or listed tenants.
Jessica Amir: This financial year, how are you shaping up?
Aaron Hockly: Great. We’ve acquired an industrial property for $46 million and we’ve acquired an 18.2 per cent stake in the ASX listed Industrial REIT, both of which were accretive to earnings. We’ve also divested a $90 million industrial property, 40 per cent above its previous book value. And that’s enabled us to de-risk future cash flows and to reduce balance sheet gearing. We’ve undertaken around 21,000 square metres of new leasing and we’re now looking to commence building a new 20,000 square metre office property, in Richmond Victoria.
Jessica Amir: With the arrival of Amazon in Australia, is that affecting the business?
Aaron Hockly: As the owner of a large logistics portfolio and not having any retail properties in the portfolio, we actually think Amazon will be good for our business. More tenant demand for space and more purchaser demand for properties, will increase both our rental and also increase our underlying property values.
Jessica Amir: Just wrapping up Aaron. What’s your guidance for FY18?
Aaron Hockly: Our FFO guidance, or earnings guidance is 24.3 cents per security. And our distribution guidance is 22.2 cents per security, and that’s an unleased number. Those figures provide an EPS yield of about 6.8 per cent and a distribution yield of 6.2 per cent, so well above the sector. An investment in Growthpoint Properties Australia is an investment in a stable growing income stream, quality properties spread right throughout Australia.
Jessica Amir: Aaron Hockly, thank you so much for the introduction and good luck with the rest of the financial year.
Aaron Hockly: Thanks Jessica.