GPT Group (ASX: GPT) shares are frozen in an ASX trading halt after the property company announced an $800 million capital raising to fund acquisition and growth opportunities. Here’s what you need to know.
About GPT
GPT Group is one of Australia’s largest diversified property groups. It owns and manages a $24 billion portfolio of offices, business parks and prime shopping centres across Australia. It has been listed on the ASX since 1971.
Capital Raising
GPT has announced a capital raising in the form of a fully underwritten $800 million Institutional Placement and a non-underwritten Security Purchase Plan (SPP) to raise up to $50 million (click here to read more about capital raisings).
New securities under the placement will be issued at $6.07 per security, a 4.1% discount to yesterday’s closing price, while the SPP will be offered at $5.94 per security. New securities under the SPP will not be eligible for the distribution for the six months ending 30th June 2019.
Acquisitions
With the capital in-hand, GPT has proposed to acquire a 25% interest in the Darling Park 1&2 office complex and Cockle Bay Wharf for a total of $531 million.
The GPT Wholesale Office Fund (GWOF) already holds an interest in the office complex, so GPT and GWOF combined would hold a 75% interest in the complex post-acquisition.
The initial yield is 5.3%, and the weighted average lease expiry (WALE) is 5.2 years.
GPT CEO Bob Johnston said, “The Group is excited by this compelling Sydney office investment opportunity. Darling Park provides the Group with an enhanced exposure to the strong Sydney office market via modern, high-quality assets and access to future growth through the Cockle Bay Park development.”
FY19 Guidance
GPT also issued updated guidance to investors, estimating funds from operations per security growth of 2.5% on FY18. This has been downgraded from a previous estimate of 4% growth.
Distribution per security growth is expected to be 4%, which is in line with previous forecasts.
Around 71% of the portfolio by value is being revalued in the six months to 30th June 2019, which is expected to result in a net revaluation gain of $102 million.
Summary
The revaluation stands out as a positive figure, given the fall in residential property prices over the last six months. However, the downgrade in FY19 guidance is disappointing, especially because the report fails to mention the reason why the forecasts were downgraded.
If you’re looking for dividend income, the ASX companies in the free report below might be a good place to start looking.
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Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.
