Real Estate Market Updates Amid COVID-19 - SCG, SCP, GPT

  • Apr 08, 2020 AEST
  • Team Kalkine
Real Estate Market Updates Amid COVID-19 - SCG, SCP, GPT

Given the Covid-19 impacts on individuals, businesses and economy, the Government is taking various measures to deal with the situation, such as a stimulus package of $17.6 billion to keep Australian citizens in job, keep companies operational and assist households as well as the Australian economy with the significant challenges posed by the virus spread.

On 03 April 2020, ACCC, in a media release, highlighted to have granted interim authorisation to the owners of shopping centres and managers for the discussion and implementation of relief measures for small to medium shopping centre tenants facing difficulties due to the COVID-19 pandemic. This follows an application by Scentre Group and the Shopping Centre Council of Australia Limited (SCCA), which represents major shopping centre owners, developers and managers in the country.  

ACCC has permitted the owners of shopping centres as well as managers to jointly design a plan to assist small business tenants along with franchisees & licensees with a turnover of up to $50 million per annum. The plan could also include an offer to postpone or reduce rents and other payments, waive interest payments and extend leases.

In this article, we are discussing few real estate sector players listed on ASX. Let us gauge through their recent market updates amid Covid-19 situation.  

Scentre Group (ASX: SCG)

Scentre Group (ASX: SCG), founded in June 2014, owns and operates a portfolio of living centres in ANZ (Australia and New Zealand), with retail real estate assets under management (AUM) worth $56 billion and shopping centre ownership interests of $38.2 billion. SCG, which works with leading retail and luxury brands in the world, manages every facet of its portfolio, ranging from designing, construction and development to asset management, marketing, renting and retail solutions.

Acknowledging the statements made by Australian Prime Minister, Hon Scott Morrison MP, that shopping centres as essential activities need to remain open for normal trade, the Company, on 18 March 2020, announced that its Westfield centres, including supermarkets, grocery stores, food markets and retail stores remain open for trade.

On 1 April 2020, the Company updated on its liquidity position, confirming to have secured additional unsecured bank facilities improving its available liquidity position to $3.1 billion. SCG also updated on additional facilities that have a two-year duration. This fund provides further funding flexibility over the upcoming period.

On 3 April 2020, after the National Cabinet meeting, CEO Peter Allen stated that small and medium sized retailers need to be helped during this period. On this note, the Company is working actively with industry bodies & governments to develop an SME Retail Leasing Code of Conduct to apply during the coronavirus duration. He also emphasised on sharing the financial risk and cash flow impacts at the time of the COVID-19 crisis in a proportionate and measured manner.

The Company on 8 April 2020 addressed its securityholders during the annual general meeting held by way of webcast, highlighting that in light of the COVID-19 pandemic and continued volatility in markets globally, SCG suspended the previously announced outlook for 2020.Also, ~ 39% of stores under the Australian portfolio are open and only designated essential retailers are open in New Zealand.

SCG was trading at $1.805 on 8 April 2020 (AEST 12:31 PM), inching upward by 3.143%, with a market cap of $9.08 billion.

SCA Property Group(ASX: SCP)

SCA Property Group (ASX: SCP) is a REIT with assets mostly secured by non-discretionary retailers across Australia.

 

Image Source: SCP's report

 

On 25 March 2020, the Company, considering Government announcements and uncertainty surrounding the effect and duration of COVID-19 pandemic, announced to have withdrawn its FY2020 earnings and distribution guidance.

With the ongoing COVID-19 pandemic, its centres play an important role in the supply chain for food, pharmaceutical, medical and other vital items for Australians in the present scenario. The Company expects that the stimulus packages offered by the Government would support small business tenants of SCP and their customers.

On 7 April 2020, the Company announced to have commenced a fully underwritten institutional placement to generate $250 million and another $50 million via a non-underwritten Unit Purchase Plan to eligible unitholders in Australia as well as New Zealand. Of these, SCP raised $250 million through the issue of 115,740,741 new fully paid ordinary units with the successful completion of the fully underwritten institutional placement, according to a Company announcement dated 8 April 2020.

The proceeds raised would be used to strengthen the balance sheet as well as support with funding flexibility to deliver on the strategy of making an investment in convenience-based supermarket-anchored centres as possibilities occur.

On the positive side, the Company is hopeful that the present COVID-19 situation will bring an exceptional opportunity to obtain quality assets at viable prices over the next 6 to 12 months. After the equity raising, it would have access to $550 million in cash and undrawn facilities, thereby enabling the Company to grab opportunities quickly that are earnings accretive in nature.

SCP was trading at $2.200 on 8 April 2020 (AEST 12:32 PM), down 6.78% from its previous close, with a market cap of $2.22 billion.

GPT Group (ASX: GPT)

GPT Group (ASX: GPT) is one of the largest diversified property groups in Australia. It is amongst the leading 50 ASX listed organisations by market cap. GPT Group possesses as well as handles a $25.3 billion portfolio of retail, office & logistics properties across the country. On 8 April 2020, the Company announced that it acknowledges a new commercial tenancy Code of Conduct, legislated and regulated by the Australian States and Territories.

Given the uncertainty surrounding the duration and impact of the pandemic on the Company’s business, GPT took a call to withdraw its FY2020 FFO and distribution guidance. During FY2019 result update, the Company had announced growth of 3.5% in both FFO per security and distribution per security for the year ended 31 December 2020.The Company has a high-quality portfolio and strong financial position, which includes $1.3 billion cash and undrawn bank facility.

Apart from this, the Company on 7 April 2020 announced that all its properties in the GPT Wholesale Office Fund and the GPT Wholesale Shopping Centre Fund were re-evaluated separately as at 31 March 2020. The results confirmed that they are in line with the quarterly valuation process. 

GPT Wholesale Office Fund: A negative reassessment of circa $183 million was noted. It represents a drop of 2% in book value. The reduction reflecting COVID-19 effects was majorly due to lower near-term rental growth beliefs.

GPT Wholesale Shopping Centre Fund: A negative reassessment of circa $511 million was noted. It represents a drop of 11% in the book value. The reduction reflecting COVID-19 effects was majorly owing to a softening in the notions for market rental growth, regulated trading environments and vacancy downtime.

 

 

GPT was trading at $3.910 on 8 April 2020 (AEST 12:45 PM), up 2.089% from its previous close, with a market cap of $7.46 billion.


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