GPT’s Strategic Shift to Co-Investment Model Raises Questions on Capital and Growth Risks

Strategic Pivot and Leadership Renewal

The GPT Group, a stalwart in Australian real estate investment management, has marked 2024 as a transformative year. Under the leadership of CEO Russell Proutt, who took the helm in March 2024, the Group recalibrated its strategy to focus on long-term earnings growth through a co-investment model alongside aligned capital partners. This shift moves GPT away from direct property ownership on its balance sheet, aiming to optimize capital allocation and enhance portfolio returns.

Complementing this strategic evolution, GPT restructured its organisational framework, establishing a Chief Investment Officer function and bolstering its research, funds management, and investment capabilities. Key executive appointments, including Merran Edwards as CFO and Mark Harrison as CIO, underscore the Group’s commitment to deepening expertise and operational excellence.

Robust Financial Performance Amid Market Volatility

Despite a challenging environment marked by persistent high interest rates and geopolitical uncertainties, GPT delivered solid financial outcomes for 2024. Funds From Operations (FFO) per security stood at 32.2 cents, aligning with guidance, while distributions reached 24.0 cents per security. The Group’s liquidity position remains strong with $1.1 billion available, and net gearing at a prudent 28.7%, positioning GPT well to pursue its growth ambitions.

Operationally, GPT’s diversified portfolio demonstrated resilience. Office assets achieved 94.7% occupancy with 1.9% like-for-like income growth, retail assets posted near-full occupancy at 99.8% alongside 4.9% income growth, and logistics assets maintained 99.5% occupancy with a 5.6% increase in like-for-like income. These metrics reflect the quality and management strength of GPT’s asset base.

Expanding Retail Platform and Strategic Transactions

GPT’s retail management platform saw significant expansion through strategic partnerships and asset acquisitions. The Group established a new joint venture with the Perron Group, adding approximately $964 million in retail assets in Western Australia, including Cockburn Gateway and Belmont Forum. This partnership enhances GPT’s scale and diversification in the region.

Further, GPT increased its ownership stake in Highpoint Shopping Centre, Victoria, to 25%, and divested a 50% share of Rouse Hill Town Centre to the GPT Wholesale Shopping Centre Fund (GWSCF), which itself underwent a successful modernisation of its constitution to improve commercial viability. The commencement of a $200 million redevelopment at Rouse Hill signals ongoing investment in asset enhancement.

Additionally, GPT secured property, leasing, and development management rights for Sunshine Plaza in Queensland and Macarthur Square in New South Wales, further consolidating its retail management footprint. Post-quarter, the Australian Core Retail Trust (ACRT) expanded its mandate to $3.7 billion, reflecting growing investor confidence in GPT’s retail assets.

Sustainability Leadership and Incentive Alignment

GPT has embedded sustainability as a core pillar of its strategy, achieving carbon neutral certification across all owned and managed operational assets by the end of 2024. The Group’s commitment to sustainable, low-emission developments and its top ranking in the S&P Global Corporate Sustainability Assessment 2025 reinforce its leadership in responsible property management.

To align management incentives with long-term value creation, GPT revamped its employee incentive schemes. The Short Term Incentive Compensation plan now incorporates a balanced scorecard reflecting strategic growth initiatives, while the Long Term Incentive plan introduces an AFFO CAGR growth measure. These changes aim to foster a culture focused on sustainable earnings growth and enhanced securityholder returns.

Outlook and Growth Prospects

Looking ahead, GPT targets 1-3% growth in FFO per security for 2025 and plans to maintain distributions at 24.0 cents per security. The Group’s assets under management have increased to approximately $34.7 billion as of March 2025, with third-party capital under management rising to $22.6 billion. GPT’s disciplined capital management, absence of unfunded commitments, and ample liquidity provide a solid foundation for continued expansion.

GPT’s strategy to scale its investment management platform, deepen partnerships, and selectively deploy capital across retail, office, and logistics sectors positions it well to navigate market uncertainties and deliver long-term value. The ongoing development pipeline, including a $3 billion logistics portfolio and the $200 million Rouse Hill expansion, underscores the Group’s growth ambitions.