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Moelis GDF Research Report

GDF delivered FFO of $13.2m, or 8.66cpu, ~2% below Moelis estimates. GDF’s DPU of 9c for FY19 reflects a payout ratio of 104%, essentially reflecting the impact of higher gearing as GDF has funded the development of Botanicca 9.

As income from this asset begins to come through, we see the payout ratio returning to < 100%. Key highlights from the result include:

  • NTA +6.2% on Jun’18, to $1.37, largely driven by valuation uplift and development profit, as well the $8m received in litigation proceeds.
  • Completion of development at Botanicca 9 generated an ~$8.5m profit uplift (5c per unit). The asset is a ~7,000sqm office building located in the metro office market of Richmond, in Melbourne. The key focus for GDF remains securing a tenant/tenants for this building – given time required to complete a fit out, we have pushed our income commencement out 3 months to Mar’20.
  • On a fully let basis, Botanicca 9 should contribute ~$4m net property income.
  • GDF’s development pipeline is well positioned for FY20 and FY21, with projects at Berrinba (Qld) and Wacol (Qld) expected to require ~$21m of capex in FY20. Further development opportunities also exist with the recent acquisitions at Acacia Ridge, which are subject to a rent guarantee (equating to ~18 months).
  • GDF has successfully executed leases on ~11k sqm in FY19, maintaining occupancy at ~98% (ex Botanicca 9).
  • Following completion of construction at Botanicca 9 ($34m spend in FY19), GDF’s LVR is ~38.5%. Having secured a $50.1m security from St George in FY19, the Fund has ~$22.6m of headroom, sufficient to undertake the Berrinba development ($6.5m) and the majority of the Wacol development ($22m).
  • GDF may look to a further asset sale early FY21 to fund the balance, noting the asset at Varsity Lakes could be a candidate for sale following some leasing needing to be done in 1H20.

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