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GMT Annual Result Announcement

Wednesday, 14 May 2014
Goodman (NZ) Limited, the manager of Goodman Property Trust (“GMT” or “Trust”) is pleased to announce GMT’s financial result for the year ended 31 March 2014, together with a package of new business initiatives that will enhance the investment performance of the Trust.

An expanded and enhanced property portfolio, as a result of earlier acquisitions and ongoing development success, together with fair value gains from the Trust’s property assets and derivative financial instruments have all contributed to GMT’s record profit result.

Financial highlights include:

  +  A 61.5% increase in profit before tax to $146.8 million, compared to a profit of $90.9 million in the previous corresponding period.

  +  A corresponding $56.2 million or 72.1% increase in after tax profit, to $134.1 million.

  +  Distributable earnings1 before tax of $101.1 million or 8.36 cents per unit on a weighted average issued unit basis. This compares to $87.7 million or 8.21 cents per unit in the previous corresponding period.
  +  Full year cash distributions totalling 6.25 cents per unit.

  +  Fair value gains of $23.8 million as a result of the portfolio revaluation.

  +  Net tangible assets of 100.4 cents per unit, compared to 95.6 cents per unit at 31 March 2013.

  +  A management expense ratio of 0.54%, one of the most cost effective in the listed property sector.

Keith Smith, Chairman and Independent Director of Goodman (NZ) Limited said, “It is extremely pleasing to be reporting strong profitability and a distributable earnings result at the upper end of our guidance range. A strengthening economy and rising business confidence are contributing to increased activity levels right across our business.”

Property strategy

John Dakin, Chief Executive Officer of Goodman (NZ) Limited said, “Accelerating GMT’s development programme and realising the value in its strategic land holdings remains a key business focus.”

With increasing levels of economic activity driving customer demand, 15 new projects have been announced since March 2013, the greatest volume of development work in more than five years.

The new facilities, which have a combined total project cost of $165.7 million, will provide:

  +  Almost 95,000 sqm of industrial and office space, predominantly pre- committed to high quality customers on long-term leases.

  +  Annual revenue of around $13.6 million once fully leased and income producing.

  +  Forecast valuation gains on completion of between 10% and 15%.

John Dakin said “Our development programme is a good barometer of business confidence and we are excited by the strong progress that has been achieved recently. Sustaining this level of activity, as the economy grows over the next 2-3 years, will enhance the portfolio while improving the quality and profile of the Trust’s earnings.”

Improving property market fundamentals and an ongoing focus on customer relationships are contributing to the strong performance of the investment portfolio.

Highlights include:

  +  An increase in portfolio occupancy to 97% and a weighted average lease term of 5.5 years at 31 March 2014.

  +  Strengthening investment returns with the portfolio revaluation gain of $23.8 million reflecting a 20bps firming in the market cap rate to 7.9%.

  +  Contracting to acquire the new Fonterra head office ahead of its completion in 2016. The new facility is being developed by Goodman Group and adjoins the Trust’s other Viaduct assets.

Capital management

On-going capital management initiatives during the year have facilitated the Trust’s business growth. These initiatives included:

  +  An extension to the retail bond programme with a new $100 million issue of senior, secured, seven year Goodman+Bonds.

  +  Refinancing of GMT’s main bank facility, lengthening the term of the $600 million loan out to three and a half years.

  +  Active capital management with the sale of Gateside Industry Park for $37.2 million, realising a gain on sale of $2.3 million.

  +  The unconditional sale of SMEC House in Newmarket for $26.2 million, following the Trust’s 31 March 2014 balance date.

John Dakin said, “Prudent capital management policies have enabled the Trust to retain a strong balance sheet position while accelerating its development programme to meet customer demand. Further bond issuance and refinancing activity has allowed us to take advantage of the competitive margins that exist at present while improving the expiry profile across all GMT’s debt facilities.”

At 31 March 2014, the Trust’s debt facilities had a weighted average term to expiry of 3.5 years while net borrowings represented 36.0% of property assets.

New business initiatives

Keith Smith said, “The benefits of strategic decisions made over the last 18-24 months are reflected in this year’s impressive financial result. To ensure that GMT retains its position as a leading investment entity we have consulted with our stakeholders and will be implementing a package of new business initiatives that includes enhancements to the management and governance structures of the Trust.”

An increasingly active investment market means that asset sales are now a more cost effective source of development funding than equity issuance through the Distribution Reinvestment Plan (“DRP”). With further disposals planned, it is anticipated that the Board will suspend the DRP later this year, an initiative that is expected to enhance the investment returns generated by the Trust.

Refinements to the governance and management structures of the Trust are also proposed. They include:

  1.  Unitholder nomination and voting for Independent Directors, aligning the Trust’s governance practices more closely with that of a listed company
  2.  An amended fund fee structure that features:
         o  a rebate equivalent to the fee incurred on development land
         o  The issue of GMT units in consideration for the payment of the fund fee2

Keith Smith, said, “Goodman Group, the Trust’s manager and largest investor with a 17.6% cornerstone unitholding, has demonstrated its commitment to GMT with refinements to an already competitive fee structure. The Board believe that the fee rebate and payment of units instead of cash will enhance GMT’s operational and financial performance while increasing the already strong alignment between Goodman Group and other Unitholders.”

The governance and management fee initiatives are subject to Unitholder approval which will be sought at the Annual Meeting on 5 August 2014. Further details will be provided in the Notice of Meeting and Explanatory Memorandum, to be issued in July 2014.

Outlook and guidance

A strengthening economy and rising business confidence is having a positive impact on customer demand with strong leasing results and new development commitments lifting the Trust’s operating performance.

Keith Smith, “There is an increasing momentum across all GMT’s business activities and we are optimistic about our future growth prospects. Refinements to the management and governance structures together with a more active capital management strategy are positive new initiatives that will enhance the Trust’s investment performance.”

The Board expects distributable earnings, for the 2015 financial year, to be around 9.1 cents per unit before tax.

Cash distributions are expected to total around 6.45 cents per unit, a 3% increase on the 2014 financial year.