GMF - GPT Metro Office Fund

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GPT Metro Office Fund - GMF

On 11 September 2014 The GPT Group (GPT) announced that it had begun "engaging with investors" on the creation of a new listed real estate investment trust, the GPT Metro Office Fund.

Initially the fund, to be listed on the ASX under the code GMF would have the following A-grade metropolitan and business park office properties independently valued at approximately $376 million:

Optus Centre, 15 Green Square Close, Fortitude Valley, Qld;
Vantage, 109 Burwood Road, Hawthorn, Vic;
Quad 2, Quad Business Park, Sydney Olympic Park, NSW;
Quad 3, Quad Business Park, Sydney Olympic Park, NSW;
5 Murray Rose, Sydney Olympic Park, NSW; and
3 Murray Rose, Sydney Olympic Park, NSW.

The GPT Metro Office fund is expected to commence with the following characteristics:

6.3 year weighted average lease expiry;
7.7 per cent capitalisation rate;
100 per cent occupancy;
Average building age of 3.5 years;
Gearing of 35 per cent; and
Expected distribution yield, for the period from allotment to 30 June 2015, of approximately 7.40 per cent per annum.

Shares are expected to be issued at $2.00 each (with an NTA backing of $1.91). It is indicated that shares will only be available through:

Institutional Offer;
Broker Firm Offer; and
GPT Security Holder Offer.

I understand that the institutional offer is now fully underwritten. The Broker Firm Offer and the GPT Securityholder Offer opens on Friday 10 October 2014 at 9:00am(Sydney time). The Broker Firm Offer and the GPT Securityholder Offer closes on Wednesday, 22 October 2014 at 5:00pm(Sydney time).

If the offer is oversubscribed, it is likely that participants will receive a scaled back allotment. Also the offer could close early.

Shares are expected to commence trading on a conditional and deferred settlement basis on the ASX on Friday 24 October 2014 (this must be the institutional allocation as "Allotment of shares" does not occur until Wednesday 29 October 2014). Trading on a normal settlement basis commences on Friday 31 October 2014.

For further information and pre-registrion the following is a link to the GPT site:

http://www.gpt.com.au/

I couldn't get the pre registration to work however my GPT shares are in CHESS holding accounts and that could have something to do with it.

This is not an opinion on the merits of participating in the public offering or investing in The GPT Metro Office Fund. As always do your own research and good luck.

 

[nulla nulla]

Hi Nulla

Do you have any views on the new GPT Metro Office Fund vehicle? Looks like a healthy yield and secure income stream with growth but not sure about the suburban office markets long term. I know you trade on shorter term horizons but interested to hear if you have any fundamental views on the vehicle?

G'day Coolcup

It looks like one of those A-REIT companies that has been designed to appeal to those investors wanting to invest for good yields and possibly low risk. The pdf in respect of the proposed structure is over 170 pages including a detailed section on the risks.

It won't be a big company (initially at least) so this may deter some of the really big investors in A-REIT's but I suspect it may appeal to investors that support the likes of Cromwell and possibly Investa Office looking for a good annual return for a low entry price.

I saw an article in one of the papers that suggested the fund had opportunity for growth however I suspect growth would depend on what additional properties GPT elected to sell into the fund. In order to keep their gearing at the desired 25-35% levels I suspect that any additional acquisitions would likely involve further share issues.

The A-REIT's sector at the moment is trading at a price average close to 16 times earnings. If GMF at 7.5% yield on $2.00 issue price was to return $0.15c per annum, then the share price at 16 times earnings could reach $2.40. If the 7.5% yield is only the typical 80% of earnings, then the share price could trade higher.

With the Aud$ down at the moment, GMF could be attractive to overseas investors chasing good yields on Australian commercial properties. One of the risks has to be that at the first hint of interest rate rises in the US those same international investors will dump the share like a hot potato. Also increases in interest rates would have a significant hit on returns given that 35% gearing is indicative of GMF having borrowings around $121 million.

Fundamentally I think GMF looks like a reliable investment, particularly if our economy continues the slow recovery from the GFC. For short term trading I would have to wait and see. As always do your own research and good luck.

 

[nulla nulla]

....The A-REIT's sector at the moment is trading at a price average close to 16 times earnings.....

Unfortunately this isn't correct. The A-REIT sector was trading at an average price/earnings multiple of around 16 times BEFORE the recent drop. At present the average price/earnings is closer to 12 times. In the above assessment this would mean with a distribution of $0.15pa at p/e of 12 the price action would be around $1.80.

If $0.15pa distribution represents 80% of earnings, then earnings per share is around $0.1875, extended at a p/e multiple of 12 arrives at a possible share price of $2.25.

If the institutional investors get their shares at a discount to the suggested $2.00 then in the current gloom it is possible that they could sell off when trading opens and push the share price down below $2.00 (remember Myer).

I have registered for the share application form but at this stage I'm not sure whether to buy through the offer or try to pick them at market price (remember Scentre). Hard call, as always do your own research and good luck .

 

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Or if you use method "B", the present average price/earnings ratio for the REIT sector is 14.1 which suggests a potential share price of $2.11 on distribution of $0.15c pa per share or $2.64 on earnings of $0.1875c per share.

It is getting so that you need a ready reckoner of potential p/e ratio outcomes to guesstimate potential share price ranges. On one hand $2.00 looks low ball, on another it looks potentially at a premium and the reality is it is likely somewhere in between. I need a panadol.

 

[nulla nulla]

If you are planning to lodge an application for shares on-line using B-Pay, today and tomorrow are pretty much the last chances you have to participate for your funds to be received prior to the close of the offer.

 

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On November 1st, 2016, GPT Metro Office Fund (GMF) was removed from the ASX's official list in accordance with Listing Rule 17.14, following compulsory acquisition by Growthpoint Properties Australia Limited as responsible entity for Growthpoint Properties Australia Trust.