This article is from the Australian Property Journal archive
General Property Trust has reported a half year profit of $589 million following its divorce from Lend Lease and the marriage to Babcock & Brown.
For the six months to December 31, 2005, GPT’s operating earnings was 11% higher at $492.3 million.
While the results did not show a comparative result for 2004, GPT said in a statement the benefit of the internalisation of management and investment in the joint venture with Babcock & Brown only impacted financial performance in the second half.
““As GPT is now an independent stapled entity reporting under A-IFRS, our financial performance is presented in a format that is different from previous years. This result delivers on our earnings and distribution growth forecasts and demonstrates the initial benefits of GPT’s new structure and expanded operations,” GPT’s chief executive officer Nic Lyons said.
“The JV remains on track to be fully invested by the end of 2006, having already completed $2.4 billion in acquisitions at December 31, 2005, with another $1.1 billion in acquisitions completed or under contract since,” he added.
The JV agreement has so far resulted the acquisition of assets worth $2.4 billion across a portfolio of German offices, German residential, European retail, European light industrial and US retail assets.
A further $1.1 billion of acquisitions are currently progressed, GPT’s current investment in the JV represents just over 8% of the group’s total property investments.
“GPT’s $9.3 billion core Australian portfolio has benefited from focused active management and development in this period, illustrated by an increase in income. These results reflected not only the quality of existing assets but the benefit of recent developments and acquisitions,” he said.
On July 1, 2005, GPT announced implementation of the Penrith and Woden Plaza transactions outlined in the EM. Westfield has replaced Lend Lease as manager of these assets and GPT continues as a 50% owner in each of these centres. The option agreement with Westfield in respect of Sunshine Plaza has now lapsed and GPT retains its 50% interest in the Centre#.
“We continue to be impressed with the quality of the opportunities available to the JV and are confident in the ability of the JV to deliver long-term value to GPT investors. We have an excellent working relationship with Babcock & Brown and now have our own dedicated team in place, with staff in Europe and the US as well as in Australia.
“We remain confident of having the JV fully invested in line with our target of December 2006, and our current level of assets acquired and under contract represents 64% of this target,” he added.
“In addition to performance from GPT’s quality core portfolio, we have a number of developments due to commence over the year which will further enhance long-term performance from the investment portfolio. A full year of fee savings as a result of the internalisation and the benefit of the JV investment will assist in driving returns to investors in 2006. Investors will also benefit in the medium term from the opportunity to recycle capital and the broader range of opportunities available to GPT as a stapled entity.
“With the JV and internalisation now established, we are beginning to focus on the next opportunities for GPT to enhance returns, including the establishment of the JV’s funds management business,” Lyons said.
As outlined in the EM, cost savings have been achieved as a result of the internalisation and GPT’s management expense ratio, previously a range of 45-60 basis points under Lend Lease’s management, has now been reduced to approximately 26 basis points.
Before the split up with Lend Lease, GPT paid $16.5 million to Lend Lease for the right to manage its own assets, less than the $45 million forecast.
Net income was boosted by $341.7 million in unrealized gains from property valuations, while property sales contributed a further $10 million.
Earnings in Australia increase, as a result of rising rents. Income from the company’s shopping malls and homemaker centers increased 6% to $304.5 million.
Last week, GPT put a $500 million to buy a 50% interest in Melbourne’s Highpoint Shopping Center, Australia’s third largest shopping centre.
While the deal is conditional on whether Coles Myers not exercising its right of first refusal over the stake, GPT is expected to snap up the 50% interest.
A payment to securityholders of 6.6 cents per security for the December quarter was announced, taking the distribution for the 2005 calendar year to 24.4 cps, up from 22.0 cps in 2004. This represents an increase of 10.9%, in line with the forecast for the period.
Lyons said GPT is expected to deliver on the forecast for a distribution of 27.5 cps for the year ending 31 December 2006, as outlined in GPT’s EM.
By Adam Parsons
