ASX Code: GMF
Share price: $2.09
Industry: Real Estate
Forecast FY2016 Distribution: 15.35c
GPT Metro Office Fund (ASX code: GMF) is a relatively new entrant to the REIT space, listing in late 2014 at $2.00 per share, equating to a market cap of just over $255m. Since then, it has traded in a relatively tight range of $1.90 to $2.28.
As an asset class, property has considerably outperformed the broader Australian equity market in recent years. Over a 5 year period, the ASX 300 A-REIT index has delivered an annualized return of 8.07% compared to the ASX 300’s paltry -0.45%. Whilst historical returns are no guarantee of future performance, the macro-economic catalysts which have pushed this asset class higher such as low inflation and interest rates as well as the persisting hunt for yield and safe assets continue to play out.
As its name suggests, GMF’s primary business is in leasing metropolitan and business park office properties in Sydney, Melbourne and Brisbane. Sydney is GMF’s largest exposure, with 4 offices located in Sydney Olympic Park, representing 55% of the asset value of the portfolio. Their single largest asset, however, is in Brisbane – the Optus Centre at Fortitude Valley. It is located a few kilometres north of the CBD, near the Brisbane River and represents 29% of the fund’s asset value. The fund’s single Victorian asset is the Vantage at Hawthorn, a five-story suburban office building located 6 kilometres east of Melbourne’s CBD. The Vantage represents 16% of the portfolios asset value.
GMF recently reported healthy first half 2016 results, with the net profit of 7.97cps nudging out most estimates by at least a few percent. It was revealed that its Sydney offices remain fully occupied, although some leasing slack was revealed in its Melbourne property. In a shareholder friendly move, management also announced that they planned to move to quarterly distributions beginning in March 2016, music to the ears of any income seeking investor.
A promising feature of GMFs profile is its concentration of large multinationals and government body tenants. These clients are considered high quality and are more likely to provide sticky revenues to GMF. Some of their top tenants include Lion Co, Samsung, Queensland Urban Utilities and Optus.
GMF is currently trading below its net tangible asset (NTA) backing of $2.15 and on any material weakness it may present a solid opportunity for the longer term income investor. At current prices, GMF offers a potential investor with a lucrative 7.3% yield with the prospect of future growth through its structured rental growth contracts, A-grade assets and quality tenants.
Written by Gareth Abernethy, Associate Analyst