Growthpoint Faces Valuation Headwinds Despite Strong Leasing and Sustainability Gains

Strong Financial Foundations Amid Market Challenges

Growthpoint Properties Australia has delivered its FY25 financial results, showcasing resilience in a complex real estate environment. The company reported funds from operations (FFO) of $176 million, translating to 23.3 cents per security, aligning with its earnings guidance. Despite a statutory net loss of $124.6 million, primarily driven by investment property devaluations, this represents an improvement from the previous year's loss of $298.2 million.

Occupancy across Growthpoint’s directly owned portfolio remained robust at 94%, supported by a weighted average lease expiry (WALE) of 5.6 years, underscoring the stability of income streams. The company also reduced gearing slightly to 39.7%, reflecting prudent capital recycling efforts.

Funds Management Expansion and Strategic Partnerships

A key highlight was Growthpoint’s momentum in its funds management business, launching two new funds under its banner and generating $328 million in new assets under management (AUM). This growth was bolstered by a 20% increase in funds management revenue and $169.9 million raised in equity for unlisted funds.

Strategic partnerships played a pivotal role, including the establishment of the $198 million Growthpoint Australia Logistics Partnership (GALP) with TPG Angelo Gordon, and the Growthpoint Canberra Office Trust (GCOT), which acquired a $90.1 million A-grade office building in Canberra’s CBD. These initiatives diversify Growthpoint’s portfolio and deepen its market footprint.

Operational Highlights and Portfolio Management

Growthpoint’s direct office portfolio saw a 2% like-for-like FFO growth, driven by active leasing and repositioning efforts across key assets in Sydney, Melbourne, and Brisbane. Although the office portfolio’s valuation declined by 7.4%, conditions are improving with vacancy rates easing and rental growth emerging in metropolitan markets.

The industrial portfolio delivered a 6% like-for-like FFO increase, supported by strong leasing activity and a significant lease extension with Woolworths at the Perth Regional Distribution Centre. Industrial valuations rose 4%, reflecting sustained demand despite market normalization.

Sustainability Milestone and Future Focus

Growthpoint proudly achieved its Net Zero Target on 1 July 2025, offsetting all scope 1 and 2 emissions from its directly managed office assets and corporate activities. The company enhanced its sustainability credentials with a GRESB score of 85, surpassing peer averages, and improved NABERS ratings across energy, water, and indoor environment metrics.

Looking ahead, Growthpoint plans to focus on continuous NABERS improvements, mandatory climate reporting preparations, and advancing post-Net Zero initiatives. The company also aims to leverage its funds management platform for growth while actively managing leasing to address vacancies and expiries.

Outlook and Guidance for FY26

With inflation returning to the Reserve Bank of Australia’s target range and three rate cuts already implemented in 2025, Growthpoint anticipates a more supportive operating environment. The company’s FY26 guidance projects FFO between 22.8 and 23.6 cents per security and distributions of 18.4 cents per security, assuming no acquisitions or disposals of direct properties.

Growthpoint’s leadership expresses optimism about stabilizing valuations and positive momentum in office and industrial markets, underpinning a strategy focused on income-driven returns and funds management growth.