Investment Matters

Property sub-portfolio

GDI Property Group FY-20 result (Positive)

REIT and fund management business with a portfolio of properties that are predominantly in Perth.

As a reminder, GDI Property Group has a capital gain focus – in contrast to several other REITS which are more of the buy and hold vein.

Its strategy focuses on buying cheap/under leased properties, making necessary improvements (or value additive developments), releasing and reselling at more favourable prices.

The company has been this active this year in pursuing minor developments (along with one major development) and opportunistic property acquisitions.

It has very low levels of debt (~16% LVR), leaving it positioned to take advantage of any opportunities that appear in the near term. Collections were also strong with only 1% of rent waived, and approximately 3% deferred.

The company will be paying a distribution 7.75 cents which represents a distribution yield of 7% at its current share price which is significantly higher than the broader property sector.

Stockland Group FY-20 Result (Positive)

Stockland is a diversified property group, with a mix of assets (small suburban shopping centres, office and industrial property, retirement villages) and one of Australia’s largest residential property developers.

Stockland’s result was better than expected with residential sales tracking well ahead of expectations. Sales have been supported by government support measures (HomeBuilder) and low-interest rates – which are key considerations in our investment thesis. Shares in the company finished the week more than 15% higher.

The company’s office and industrial properties remained resilient, with collections remaining strong and property values firming. However, the company’s retail town centres (suburban shopping centres) were challenged during the period, with values declining and rental collections weak during the period as smaller tenants were disproportionately impacted by lockdown measures. We had factored this weakness in our valuation.

The company continues to focus on repositioning portfolio towards office and industrial through the development and sale of several shopping centres.

It will pay a total distribution of $0.24 – a 6.2% yield on the current share price and approximate 10% yield on clients’ average cost price.