About: GPT Group is an active owner and manager of a diversified portfolio of Australian retail, office and industrial property assets. The business also has a funds management business. GPT’s property portfolio include assets such as the MLC Centre, Australia Square, Rouse Hill Town Centre, Charlestown Square and Melbourne Central. GPT is Australia's first ever property trust which listed in 1971. The approximate property split is around 48% retail, 39% office and 13% industrial.

Why it is in the portfolio: GPT provides investors with exposure to some of Australia's premium real estate assets across retail, office and industrial properties. GPT has a conservative management approach which is evident with the below-average gearing of the trust.

Fundamentals: GPT trades on a price-to-earnings ratio of 15-17 times forward years earnings. GPT trades on a price-to-book ratio of around 1.05 which means the market is not overly overpricing the stock relative to the value of the underlying property assets. GPT offers a dividend yield of around a 4.8-5%. GPT’s debt level is reasonably low when compared to the peer group with a debt-to-asset ratio of around 25.5% and an interest-coverage ratio of around 4.3x.

What could go wrong: AGPT group manages a portfolio of retail, office and industrial property assets therefore the underlying performance of those assets is correlated with that of the broader economy. If an economic downturn were to occur then this may impact tenant demand for GPT’s properties. While vacancy rates remain relative low across most real estate sectors this could change if there is an influx of over-supply or if tenant demand falls off. Therefore, investors should be wary of any over-construction in the areas that GPT operates. Real-estate-investment-trusts (REITs) may be susceptible to changes in interest rates for two reasons: firstly, investor demand for yield generating assets means that REITs can trade as ‘bond proxies’ and secondly the cost-of-capital linked to the underlying debt of the business maybe susceptible to changes in interest rates. Therefore, any upward change in interest rates may impact REITs negatively.