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GMT Annual Result Announcement

Wednesday, 15 May 2019

Goodman (NZ) Limited, the manager of Goodman Property Trust ("GMT" or "Trust") is pleased to announce the Trust’s financial results for the year ended 31 March 2019.

An investment strategy focused exclusively on the Auckland industrial market is providing high-quality property solutions for customers and record financial returns for investors.

Highlights for the 12 months include:

+ A statutory profit of $334.8 million before tax (including valuation gains of $201.9 million), compared to $207.2 million (including valuation gains of $83.8 million) previously.

+ A 13% increase in net tangible assets, from 138.9 cents per unit, to 157.0 cents per unit at 31 March 2019.

+ Adjusted operating earnings1 of $117.0 million before tax or 9.04 cents per unit.

+ Cash distributions of 6.65 cents per unit, representing around 95% of GMT’s cash earnings2 of 6.98 cents per unit.

+ Asset sales totalling $370.5 million, including GMT’s 51% share in the joint venture that owned the VXV office portfolio.

+ Greater balance sheet capacity with a loan to value ratio3 of 19.7% and committed gearing of just 23.7%.

+ Continued development momentum with the commencement of 11 new projects, total project cost $160.5 million.

+ Strong operating results with portfolio occupancy of 98% and a weighted average lease term of 5.2 years4.

Focused strategy

Keith Smith, Chairman of Goodman (NZ) Limited said, "Focusing our investment in the Auckland industrial market recognises the emerging trends and unique drivers that have helped make this New Zealand’s strongest performing real estate sector."

Demographic changes, economic growth, and the rapid expansion of online retailing are creating an unprecedented level of demand for well-located and operationally efficient warehouse space across the city.

Chief Executive Officer, John Dakin said, "GMT’s substantial $2.6 billion portfolio is now 100% Auckland industrial4. It’s a supply constrained market with very limited vacancy in the prime locations where we invest. We’re undertaking a record volume of

development to accommodate current demand. It’s contributing to GMT’s impressive financial results and improving an already high-quality portfolio."

Six projects totaling over 50,000 sqm were completed during the year with 96% of this space now leased. The Trust’s development activity is creating value too, contributing $26.2 million of the $201.9 million valuation gain this year.

Keith Smith said, "The Board is extremely pleased with the results being achieved and is confident that the current strategy of development-led growth, funded from the Trust’s substantial reserves, will support strong operating performances into the future."

The strategic approach has been well supported by the investment community and GMT has recorded a Total Unitholder Return5 of 36.1% over the year to 31 March 2019, outperforming all the NZX listed property stocks and the wider NZX50.

With a market capitalisation of around $2.2 billion the Trust is also now the largest listed property entity on the NZX.

Further information is provided in the Trust’s 2019 Annual Report which was released today. A copy of the report has been provided to the NZX and an online version will be available later this morning at www.goodmanreport.co.nz.

Portfolio repositioning

The last five years have been a period of business refinement as $1.2 billion of asset sales and $675 million of new development projects have repositioned the portfolio and deleveraged the balance sheet.

John Dakin said, "Our preference for high-quality Auckland industrial property reflects the positive investment attributes of this asset-class and the superior growth profile it offers. It’s the focus of our development programme and we expect to undertake a similar level of development activity this financial year."

Development commitments totalling 10,000 sqm (total project cost of $28.3 million) have already been confirmed for existing customers OfficeMax and Panasonic, at Highbrook Business Park. The two warehouse expansions add to the large volume of work in progress, the combined cost of these 14 projects is $195.7 million.

John Dakin said, "Other customers from within the portfolio are also signalling future expansion requirments. The additional space this represents is expected to underpin our development workbook for the next two to three years."

The low vacancy rates and sustained economic growth that is driving customer demand for new facilities is contributing to positive leasing results elsewhere in the portfolio. New rental benchmarks are being set and annualised average increases of 6.3% were achieved on lease reversion events during the year.

At 31 March 2019 the portfolio had an occupancy rate of 98% and a weighted average lease term of more than five years4.

Balance sheet strength

The execution of the sales programme over the last five years has provided GMT with substantial balance sheet capacity. At 31 March 2019 the Trust had a loan to value ratio of just 19.7% and committed gearing of 23.7%.

Following its year-end balance date the Trust’s remaining Christchurch assets were also conditionally sold.

John Dakin said, "The sales programme has been highly successful and these disposals complete the repositioning of GMT. The investment focus is now exclusively on Auckland industrial property."

Keith Smith said, "GMT has a strong balance sheet and almost $300 million in undrawn bank facilities. It is a very resilient business and the Board will continue to ensure its managed prudently."

The rapid progress in the development programme means the focus is also on securing strategic sites that offer future opportunity, either through intensification of use or redevelopment.

John Dakin said, "Retaining a development capability is critical to servicing the needs of our customers and we’re continuing to invest in key locations that position these businesses close to consumers."

The acquisition of the Foodstuffs Distribution Centre in Mt Roskill, and the conditional purchase of three adjoining properties on Favona Road in Mangere during the year are examples of this strategy. With easy connectivity to the CBD, port and airport both locations are ideal future sites for fulfilment and logistics companies.

Future focus

GMT has been repositioned as an industrial property specialist to meet the growing demand for warehouse and distribution space across Auckland. This investment strategy has enhanced the portfolio, generated strong profits and reduced gearing.

Keith Smith said, "Making investment decisions focused on long-term growth is also improving the alignment between the cash earning of the Trust and the distributions paid to investors."

Distributions for the 2020 financial year are expected to be held at 6.65 cents per unit, a level that helps absorb the short-term impact of balance sheet deleveraging.

John Dakin said, "The balance sheet capacity provided by the sales programme will be invested into new development and acquisition opportunities over time. It’s a sustainable growth strategy that will drive GMT’s future performance."

[1] Adjusted operating earnings is a non-GAAP financial measure included to provide an assessment of the performance of GMT’s principal operating activities. Refer to note 4.2 of GMT’s financial statements for further information.

[2] A non-GAAP measure of free cash flow. The calculation is set out on page 39 of the Annual Report. 

[3] Refer to note 3.5 of GMT’s financial statements for further information.

[4] After all contracted sales, including post balance date transactions.

[5] GMT’s stock market performance including unit price appreciation and distributions paid.

For additional information please contact:

John Dakin

Chief Executive Officer

Goodman (NZ) Limited

(09) 375 6063

(021) 321 541

 

Andy Eakin

Chief Financial Officer

Goodman (NZ) Limited

(09) 375 6077

(021) 305 316

 

James Spence                                   

Director Investment Management     

Goodman (NZ) Limited                      

(09) 903 3269                                    

(021) 538 934

Attachments provided to NZX:
1. Goodman Property Trust and GMT Bond Issuer Limited Annual Report 2019
2. GMT Annual Result Presentation
3. NZX Result Announcement
4. Media Release