Property Research And Marketing: A Case Study Of GPT Group
The GPT (General Property Trust)
Real estate investment is well known than any other time as a result of the ongoing boom in the Australian property market. There exist indirect and direct approaches to invest into the Australian property market. This portfolio has basically focused on two investment vehicles, one being A-REITs (Australian Real Estate Investment Trusts) and the other an unlisted property Fund. As per the ASX (Australian Securities Exchange), A-REITs are reserves given to financial specialists to get to resources. The underlying advantage of A-REIT is that they offer access to assets that singular investors will be unable to get. A-REITs help create wealth by giving exposure to the estimation of asset values and the related capital development as well as rental income. The property market has faced phenomenal difficulties over the previous years. For the past months, the house cost has been falling and housing finance of new home deals have turned out to be weaker than a year before (AFP 2016, p.32). As a result of property listings, the fall of sales volume is believed to move higher making the normal property longer to sell. This is making sellers to pull back on the grounds that the market has turned out to be more slender.
The GPT group has played a vital role in addressing some of the key factors affecting the Australian property market. The group has a strong capital position that enables it to fund some future commitments. Similarly, the group has helped investors in the property market to benefit from the price of securities trading (ABS 2015, p. 12 and Schlesinger 2015, p. 24). As a result, the group has enabled investors to sell their existing GPT securities, re-invest at a lower cost by taking advantage of the group offer (Soos 2012, p. 47). The GPT group has also eliminated the hedging positions that have been complicating its financial structure and limiting transparency to the market through developing of the simple balance sheet and establishing a clear financial position.
In this paper, The GPT Group (General Property Trust) will be our concentration as the A-REIT Fund contextual analysis and the investigation will be grounded on their ongoing and past financial reports. Unlisted resources are investments that do not exist on the stock trade and can incorporate assets such as infrastructure and private value. The advantage of unlisted property reserves is that it gives expansion, relative stable return, and better risk-balanced return and has a long-term concentration. The GPT Wholesale Office Fund (GWOF) will be the chosen unlisted reserve for this report and the investigation will be fixed on the financial related information.
The GPT influence has been immense in the Australian Property Market. The GPT approach for development reflects an active ownership model that drives maximum performance from every asset and enhances the general quality of the platform. It also has a pipeline of 2.4 billion dollars for future opportunities in assets (Bodman and Crosby 2003b, p.34). In the property market, the GPT strength has driven the portfolio quality, scale, business diversity and the heritage and culture embraced by various individuals. The group has made the property valuation to stabilize across most parts of Australia especially in Sydney. As indicated by (AFP 2014, p.101and Teddlie and Yu 2007, p. 59), the major drivers of GPT growth in property market growth in Australia are the development pipeline, strong investment capacity, clear strategy in the ownership of the Australian Real Estate and structured rent increases (UNCTAD 2013, p.57 and Hawthorne 2010, p.107).
Property listings new and total
The GPT is an Australian property group established by Dick Dusseldorp in 1971(Willig 2013, p.51 and Williams and Hall 2002, p. 41). The GPT was propelled and overseen by Lend Lease and it is the principal property trust managed by the Lend Lease Group. The GPT was created with the end goal to give retail investors a chance to put resources into an arrangement of commercial property resources (Hendershott 2016a, p.43). In 1971 when The GPT was recorded on the Australian Securities Exchange (ASX) it was enlisted as the first ever Australia property trust. Being among the best 50 ASX recorded organization; The General Property Trust Group is one of the biggest broadened property group in Australia. The Group has a critical investor base in excess of 35,000 investors and manages a 20 billion dollars arrangement of logistics, offices, business parks and major shopping centres in Australia(Costello, Fraser and Groenewold 2011, p. 82).
In 2005, GPT’s investors agreed to a demand manage the GPT on their own. Along these lines going parted ways with Lend Lease to end up an autonomous organization, today is known as General Property Trust and GPT Management Holdings. The GPT has 62 noteworthy properties built in 4 categories; logistics, retail, development and office. (Stapledon 2012, p.21). According to (Phillips, Shi and Yu 2015, p.11 and Hoesli, Lekander and Witkiewicz 2004), the March quarter of GPT Group has reported a total growth of 2.1 per cent with an estimate of 34,100 square meters of the leasing space. The key area of performance for GPT group is the Total Return. The focus on Total Return is in connection with long-term aspirations of the security holders. A 15.2 per cent of Total Return was achieved by GPT in 2017.
The GPT has a vision of being one of the most regarded property organization in Australia according to their people, communities, investors and customer with the aim of establishing value by conveying superior returns to the stakeholders and providing an environment that empower their People to exceed expectations and their Customers and Communities to flourish (Bodman and Crosby 2003b, p.97 and Savills 2014, p. 20). The Australian property market increased from 1.4 per cent with an annual growth of approximately 10.9 per cent since 2015 indicating the fastest pace (Yin 2013, p. 23 and ABS 2015, p. 14). The house prices in Sydney are at record level and media have alleged that house prices in Australia have gone beyond the reach of the local buyers particularly in desirable conditions (Birrell 2013, p. 35and Westpac Economics, p.61). There are notable market demands that are driving the Australian market.
The GPT has a strong fund management which has encountered critical improvement over the previous years. The fund’ supervisory team has proceeded and still keeps on dealing with the current portfolios, improvements and divestments depending on meeting the pertinent investment goals of the individual funds. (Phillips and Yu 2011, p.8 and Stock and Watson1993, p. 20). As a result of the GPT Group, Sydney office markets have continued to convey exceptional development in the asset valuations and net effective rents. The market of Sydney office is relied upon to appreciate ideal leasing conditions as supply stays restricted.
The GPT group enables developers and investors to benefit from commercial activities that complement commercial real estate ownership. The commercial activities include management of fund, development of property, management of development, management of property and responsible entity services (Allen 2015, p. 89 and AOFM 2015, p. 47). Bourassa and Hendershott (2015b, p.78) further acknowledge the integrity of risks to the tax base of Australia are caused by the contrived as well as abusive recharacterization portfolio. Currently, the GPT is expected to convey an estimation of 3 per cent in ordinary security distribution (Tashakkori and Teddlie 2010, p.64 and Rodríguez and Bustillo 2010, p.39). The GPT group has influenced the Australian property market by being accountable for corporate administration and appropriately managing the risk. It decides the risk craving and directs the profile of the hazard to guarantee that the exercises consent with the values and strategy of GPT (Rose 2015, p.19).
Besides, the GPT has designed policies and procedures to ensure that operations are conducted in line with the Australian law, for instance in property development and management. The obligations are identified and addressed accordingly (Higgins and Reddy 2010, p. 26 and Birrell 2013, p.31and Goldberg and Johnson 2010, p. 49). This is done by ensuring that the operations comply with the regulations of the relevant authorities as well as obtaining the necessary licences. On the other hand, it reports the requirement of the National Greenhouse. It reports the annual greenhouse gas emissions as well as the use of energy.
This chapter outlines the methods used in the study to achieve the research objectives. In this study, the collection of data majorly relied on secondary information. The use of literature review from the government and other organizations was extremely helpful for this study. Desk studies were conducted which included discussion of authority articles, reports, case studies and other authoritative records. The information obtained from such sources covered an extensive variety of issues on the influence of the GPT group on the Australian property market. The articles, reports and authoritative records are conceivably used to obtain both qualitative and quantitative information (Bodman and Crosby 2003a, p.97). The secondary information from various sources has been utilized to enhance understanding of the problem and the influence of GPT on the Australian property market.
The retail portfolio of GPT is well located with a 99.6 per cent (Abelson et al 2005, p.77 and Glynn 2017, p. 37). The portfolio achieved the same income expansion of 3.8 per cent for 12 months.
Additionally, the logistic portfolio gives a total return of approximately 10.8 per cent with an occupancy level of 95.3 per cent and 7.9 years average lease.
With the property enhancement, GPT has resources spread across various areas in the country. In the retail segment 8 percent of the assets are in Sydney, 41 percent in VIC, 44 percent in NSW and 7 percent in NT. In the workplace part 54 percent of investment lies in Sydney, 33 percent in Melbourne and the other 13 percent in Brisbane. Concerning logistic sector, 65 percent is in NSW, 24 percent in VIC and 11 percent in QLD. This guarantees negligible effect on the venture portfolio from the area impact.
GPT has broadened its origin of obligation empowering the group to expand the accessibility and progression of its wellsprings of fund, support their liquidity position and toughen the organization asset report.
As it appears in the Pie Chart above, larger part of debt is with the Domestic MTN’s at 32 percent. There are additionally other monetary sources that the GPT utilize like the Foreign Bank 14 percent, Domestic Bank 21 percent, Foreign MTN’s 6 percent, 20 percent from USPP, the Secured Bank 4 percent and the last 3 percent from CPI Bonds.
In risk management, the GPT have adopted a broad enterprise management system. In this system, the board has the mandate to set the directions and objective of the group. Afterwards, workers are required to implement and administer the risk. The Audit nd Risk management committee supports the board in managing as well as reviewing the framework effectiveness.
Re-financing as well as liquidity risks are risks that constrain the capability of overcoming debts, limits future development, affect distribution and constrains the capability of establishing strategies. To prevent this kind of risks, GPT have diversified fund resources and has widened the debt for a long period of time. The GPT has also maintained a lower liquidity in form of cash and other devoted credit services.
On the other hand, interest rates are unfavorable impacts to the outcome of any investment. Along this line, the GPT sources its debt from international and domestic investors which makes the interest rates to be actively hedged. Besides, volatility and market speed changes condition puts the investment at risk. To deal with this kind of risk, GPT will implement a holistic capital administration, form bigger multi-set portfolio and regular monitoring of its assets.
Non-Financial risk can cause delay in assets’ lease. This can cause investment to convey a less investment performance as it had been targeted. GPT has avoided this through expanding the tenant base, good merit property portfolio, and knowledgeable leasing team as well as developing programs that can help in the development of asset returns. People are one of the financial hurdles. The failure to hold, draw and advance talented individual can put a restriction on the ability to achieve the objective of the business.
To maintain low risk, the GPT offers competitive payment for its employees as well as proper Health and safety. It is worth noting that hazardous events can not only have financial impact on the company but they can lower the company long build reputation. The group has prevented this by establishing a formalized health and safety management system as well as effective procedures and instructions for teaching contractors and employees.
In 2016 financial year, the GPT delivered funds that amount to approximately 537 million dollars from operation which was an increase of 7 percent from 2015. This has translated to about 29.88 per cent per FFO per security. The outcome has been driven by the contribution from office, retail and logistic properties as well as the increased funds management fee. The statutory net profit after tax of GPT amount to 1,152.7 million dollars which is an increase of 32.8 per cent as compared to the previous year. It is also driven by 611.6 million in property valuation increases and a lower negative mark to market.
The GPT Wholesale Office Fund (GWOF) is a wholesale office under GPT that exposes quality office assets to stakeholders. It is a registered managed investment scheme in Australia. The funds of GWOF have created more than 6.6 billion dollars which is an increase of 0.8 billion dollars in the 2015 outcome. The management fee of GWOF also increased as a result of increased performance, management fee structure change and advanced base.
According to the GWOF fund report, the funds tactic to renew the GWOF and GWSCF fund management terms is focused on performance as well as trade non-core assets.
The office portfolio of GPT reveals 4.3 billion dollars investment across 23 quality office assets which are held on the Group balance sheet.
Investors should be aware of a range of economic and financial risks that relate with assets investment as some may have greater risk than others.
In financial risk management, the GPT’s treasury is supported by the board in risk administering policy. The help by outlining risk management which is important for capital structure, describing the role of GPT’s treasury, borrowing, credit risk and observing and reporting cash requirements.
This is the kind of risk that considers s future cash flows of a financial instrument to vary as a result of market interest rates changes. The interest rates of GPT arise from borrowings.
This is a type of risk that may force the GPT to sell its financial assets at a lower value to settle a financial asset as a result of its operations.
The performance and outlook of the GWOF performance can be observed through its share price, its recent achievements as well as its rate of return (Benson and O’reilly 2009, p.68). GWOF has been ranked position six globally for its performance and was the leader of the Dow Jones Sustainability index in the Global Real Estate Industry (Wong 2017, p. 14 and Guest and Rohde 2015). The GPT Share Price can be observed below
Share Price for GPT on the 18th of August 2017 is $4.99 (dropped 0.4 percent). The Fund delivered a strong Total Return of 14.5 percent for the year
Ass mush as the GPT is well positioned at 23.7 per cent with high level of occupancy and quality assets, it remains below the target of the group that ranges between 25 percent to 35 percent (Benson and O’reilly 2009, p.68)
Property implication
The group have leveraged its wide real estate experience in the Australian property market delivering strong returns through asset development and investment. Bodman and Crosby (2003a, p.97) also posit that the development capacity of GPT has created value for security holders through main investment portfolio improvement and development of new assets. The group has also enabled investors to benefit from commercial activities that complement real estate ownership. Therefore, it is imperative to note that the existence of GPT group in the property market will change the oversupply of units in Sydney Australia. Regarding the Australian property market, the group have devised procedures to ensure that proceedings are conducted in accordance to Australian law.
Conclusion
The GPT Group has played a greater role in bringing to shape the already declining prices of units. The GPT Group has leveraged its wider real estate experience that has brought strong returns through its asset management and development as well as disciplined investment. It also acts as a fund manager by having a strong capital position. In addition to providing funds, the GPT Group is responsible for determining the extent of the risk and further supervises the risk profile to ensure compliance with its value and strategy. However, policies and procedures need to be initiated to ensure that the operation of falling units is in line with the law of Australia.
List of References
Abelson, P., Joyeux, R., Milunovich, G., Chung, D., 2005. Explaining House Prices in Australia: 1970–2003*. Economic Record 81, S96-S103
ABS 2015. 6416.0-Residential Property Price Indexes: Eight Capital Cities, Sep 2015.
Australian Bureau of Statistics, Canberra. Retrieved from https://www.abs.gov.au/ausstats/[email protected]/mf/6416.0 on November 2018
AFP. 2014. Chinese To Splurge $39bn on Australian homes: study. Agence France-Presse. Retrieved from https://sg.news.yahoo.com/chinese-splurge-39-bn-Australian-homes-study-075405722–finance.html on 18 November 2018
Allen, L. 2015. Chinese Precise On Where to Buy. The Australian Financial Review. Retrieved from https://www.theaustralian.com.au/subscribe/news/1/index.html?sourceCode=TAWEB_WRE170_a&mode=premium&dest=https://www.theaustralian.com.au/business/busineSs-spectator/australia-is-still-hot-property-for-foreign-investors on 18 November 2018
AOFM 2015. Non-resident Holdings of Australian Government Securities (Treasury Bonds, Treasury Indexed Bonds, Treasury Notes). In: MANAGEMENT, A. O. O. F. (ed.). Canberra: Australian Bureau of Statistics
Benson, M. & O’reilly, K. 2009. Migration and the search for a better way of life: a Critical exploration of lifestyle migration. The Sociological Review, 57, 608-625
Birrell, B. 2013. Melbourne’s High Rise Apartment Boom. CPUR Research Report
Bodman, P., Crosby, M., 2003a. How far to fall? Bubbles in major city house prices in Australia. Australian Property Journal 38, 1-16
Bodman, P.M., Crosby, M., 2003b. Bubbles in major city house prices in Australia. Australian Property Journal 38, 1-15
Bourassa, S.C., Hendershott, P.H., 2015a. Australian capital city real house prices, 2002- 2015. Australian Economic Review 28, 16-26
Bourassa, S.C., Hendershott, P.H., 2015b. Australian Capital City Real House Prices, 2002– 2015. Australian Economic Review 28, 16-26
Costello, G., Fraser, P., Groenewold, N., 2011. House prices, non-fundamental components and interstate spillovers: The Australian experience. Journal of Banking & Finance 35, 653-669
ECONOMICS, H. S. C. O. 2014, Inquiry into foreign investment in residential real estate. Committee activities (inquiries and reports), House Standing Committee on Economics. Retrieved from https://www.aph.gov.au/Parliamentary_Business/Committees/House_of_Representatives_Committees?url=economics/foreigninvestment/index.htm on 18 November 2018
Glynn, J. 2017, ‘ National house price growth at 10.9pc in 2016: CoreLogic’, The Australian. Retrieved fromhttps://www.theaustralian.com.au/business/property/national-house-price-growth-at-109pc-in-2016-corelogic/news-story/0181a6fa323f09b3aff8cf27d492aa2c on November 2018
Goldberg, L. G. & Johnson, D. 2010. The determinants of US bank activity abroad. Journal of International Money and Finance, 9, 123-137.
Guest, R., Rohde, N. 2015. Was the housing boom in Sydney and Melbourne driven by foreign buyers?, the Conversation. Retrieved from https://theconversation.com/was-the-housing-boom-in-sydney-and-melbourne-driven-by-foreign-buyers-51389 on November 2018.
Hawthorne, L. 2010. “Two-Step Migration”? Labor Market Outcomes for International Student Migrants to Australia. Asian and Pacific Migration Journal, 19, 5.
Higgins, D. 2010. The Impact of the Political Cycle on House Prices: The Australian Experience. Asian Real Estate Society Conference.
Higgins, D. & Reddy, W. 2010. The impact of political risk on Australian house prices. Australian and New Zealand Property Journal, 2, 413-422.
Hoesli, M., Lekander, J. & Witkiewicz, W. 2004. International evidence on real estate as a portfolio diversifier. Journal of Real Estate Research, 26, 161-206.
Phillips, P.C.B., Shi, S., Yu, J., 2015. Testing for multiple bubbles: Historical episodes of exuberance and collapse in the S&P 500. International Economic Review 56, 1043- 1078
Phillips, P.C.B., Yu, J., 2011. Dating the timeline of financial bubbles during the subprime crisis. Quantitative Economics 2, 455-491
Rodríguez, C. & Bustillo, R. 2010. Modelling foreign real estate investment: The Spanish case. The Journal of Real Estate Finance and Economics, 41, 354-367.
Rose, S. 2015, ‘Illegal Foreign Property Buying Inevitable, says FIRB’, The Age. Retrieved from https://www.smh.com.au/business/the-economy/illegal-Foreign-property-buying-inevitable-says-firb-20150324-1m6bel.html on 18 November 2018.
Savills 2014, Around The World In Dollars and Cents – How Private Money Moves Around The Real Estate World, Savills World Research 2014. Retrieved fromhttps://www.savills.co.uk/research_articles/188297/171998-0 on 18 November 2018
Schlesinger, L. 2015, ‘Chinese property buyer myths busted’, Financial Review. Retrieved from https://www.afr.com/real-estate/residential/chinese-Property-buyer-myths-busted-20150227-13r0n4 on 18 November 2018
Soos, P. 2012. Don’t blame foreign investment for rising house prices, the Conversation, 1 August. Retrieved from https://theconversation.com/dont-blame-foreign-Investment-for-rising-house-prices-8340 on 18 November 2018.
Stapledon, N., 2009. Housing and the Global Financial Crisis: US versus Australia. The Economic and Labour Relations Review 19, 1-16
Stapledon, N., 2012. Trends and Cycles in Sydney and Melbourne House Prices from 1880 to 2011. Australian Economic History Review 52, 293-317
Stock, J.H., Watson, M.W., 1993. A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems. Econometrica 61, 783-820
Tashakkori, Abbas.& Teddlie, Charles 2010. Sage handbook of mixed methods in social & behavioral research (2nd ed.). SAGE Publications, Los Angeles
Teddlie, C. & Tashakkori, A. 2009. Foundations of mixed methods research: Integrating quantitative and qualitative approaches in the social and behavioral Sciences, Sage Publications Inc.
Teddlie, C. & Yu, F. 2007. Mixed methods sampling a typology with examples. Journal of Mixed methods research, 1, 77-100.
UNCTAD 2013. World Investment Report 2013 – Global Value Chains: Investment And Trade For Development. United Nations Conference on Trade and Development. Retrieved fromhttps://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=588on 18 November 2018.
Williams, A. & Hall, C. M. 2002. Tourism, migration, circulation and mobility. In: HALL, C. M. & WILLIAMS, A. (eds.) Tourism and Migration. Springer Netherlands.
Willig, C. 2013. Introducing qualitative research in psychology, McGraw-Hill Education (UK).
Wilson, D. 2008. The Expanding Middle: The Exploding World Middle Class and Falling Global Inequality. Goldman Sachs Global Economy Paper, 170.
Wong, P. 2017. ‘Foreign Real Estate Investment and the Australian Residential Property : A Study on Chinese Investors’, World Academy of Science, Engineering and Technology, International Science Index, Economics and Management Engineering, 4(6), 3444.
Wong, P., Higgins, D. & Wakefield, R. 2017. Foreign Real Estate Investment, Residential Tourism and The Australian Residential Property Market, International Journal of Housing Markets and Analysis (to be published)
Yin, R. K. 2013. Case study research: Design and methods, Sage publications.