GDI Property Group Ltd (ASX: GDI) was in the news yesterday after announcing a significant increase in the valuation ascribed to one of its key assets.
GDI is an owner, manager and developer of real estate assets in Australia. Specialising in office real estate, its 2 largest assets are located in Perth but it also has buildings on the Gold Coast and further north in Townsville.
What Happened?
Yesterday, in an announcement to the market, the company said that a recent independent valuation had resulted in the value of one of its 2 major Perth assets increasing from $255 million to $285 million. This represents an increase of 11.8% and provides support to recent claims that the Perth commercial property market is beginning to gain some traction after several years of under performance.
The company said that the increase was largely due to an improvement in both rental and capital markets and the forecast rental uplift following some capital improvements made to the building over the past 12 months.
Market Conditions Improving
The commercial property market has been a tough space to be in ever since the end of the mining boom in 2013/14. However, with a recent uptick of resource projects and a number of key Perth infrastructure initiatives in the pipeline, activity is coming back to the Western Australia economy. There is an expectation of a steady improvement in leasing conditions within the Perth CBD with office vacancy rates tipped to decline further in the coming 12 months.
The Case For Buying?
GDI recently announced a distribution of 3.875 cents per stapled security bringing total dividends paid for the most recent 12 months to 7.75 cents. This constitutes a trailing dividend yield of 5.64% based on yesterday’s closing price of $1.375.
With a concentrated portfolio of high quality real estate assets, GDI is set to benefit from the improving conditions in the Perth market. Given record low interest rates, GDI provides investors with an attractive alternative to cash in the bank.
[ls_content_block id=”14947″ para=”paragraphs”]
Disclosure: At the time of publishing, Luke has no financial interest in any companies mentioned.
