Fund manager GPT Group has mothballed two major development projects in Sydney and Melbourne indefinitely as it waits out the coronavirus-caused economic slowdown.
While GPT has previously said its Rouse Hill Town Centre mixed-use project and its redevelopment above Melbourne Central had been deferred, managing director Bob Johnston said on Wednesday it was not possible to determine when they could be resumed.
“They remain great opportunities for the group but we did think it was a prudent decision to suspend the planned development for both those sites,” he told shareholders at their annual general meeting.
“It’s very premature at this stage to determine when we will actually reactivate those opportunities. At some point we would expect that they would be activated. Clearly times are a little uncertain.”
Responding to further shareholder questions, Mr Johnston acknowledged that uncertainty in the market in the wake of the pandemic has also thrown a cloud over office demand.
GPT has a major office tower under construction on George Street in Parramatta, with leasing pre-commitments accounting for about two-thirds of the space in the building. Occupancy across GPT’s overall office portfolio is about 98 per cent.
The tower will be completed by early next year but Mr Johnston would not confirm whether it would be filled by then.
“We have had had strong inquiry for our Parramatta office development but clearly decision-making has slowed a little bit in terms of businesses determining how much space they need, understanding what the current environment and current challenges will bring.
“We are expecting by the end of this year we will have a healthy level of occupancy across our portfolio. It’s a bit premature to give you any guidance on what that will be just yet.”
Meanwhile, there are signs of improvement in GPT’s portfolio of malls, which has been hit, like those of other shopping centre landlords, by declining foot traffic.
After widespread closures, more than 50 per cent of retail stores were open this week across GPT’s shopping centre portfolio, up from 35 per cent at the end of April.
GPT is also bolstering its balance sheet by cutting non-essential capital expenditure and suspending recruitment.
Incentives for its executives for 2020 have been removed, which has delivered substantial savings. The listed fund manager has withdrawn guidance for earnings and distributions for this year.
“We do believe that the significant government stimulus that is being applied, as well as the level of co-operation between all levels of government to reboot the economy, provides room for optimism for the recovery period,” Mr Johnston said.
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