GMT on track to deliver 3 percent increase in cash distributions | New Zealand
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GMT on track to deliver 3 percent increase in cash distributions

Wednesday, 11 November 2015

Goodman (NZ) Limited, the manager of Goodman Property Trust (“GMT” or “Trust”) is pleased to announce the Trust’s interim result for the six months ended 30 September 2015.

GMT has continued its focus on improving portfolio quality with asset recycling funding the Trust’s value adding development programme. Through this disciplined approach GMT is building one of the best portfolios in New Zealand, with high quality assets predominantly located in Auckland.

John Dakin, Chief Executive Officer of Goodman (NZ) Limited said, “GMT has achieved another impressive interim result, generating pre-tax distributable earnings of $57.1 million. The Trust is on target to deliver a strong full year profit with asset management initiatives, development completions and robust investment markets expected to contribute to a positive revaluation gain.”

Financial highlights for the first six months include:

+ Distributable earnings of $57.1 million before tax or 4.64 cents per unit on a weighted average issued unit basis, compared to 4.53 cents per unit in the previous period.

+ Profit before tax of $53.1 million, compared to $65.3 million previously. The variance is largely attributable to the recognition of $13.7 million in fair value gains on certain investment properties last year.

+ Completion of new treasury initiatives significantly improving the diversity and tenor of the Trust’s debt facilities.

+ Commencement of new development projects totalling $72.6 million.

+ An active sales programme with $72.1 million of assets contracted for sale following the Trust’s interim balance date.

+ Net tangible assets of 109.1 cents per unit compared to 108.4 cents per unit at 31 March 2015.

Keith Smith, Chairman and Independent Director of Goodman (NZ) Limited said, “The continuation of a development led growth strategy, active management and stable operating conditions have all contributed to the Trust’s strong financial result.”

Greater levels of development activity, together with lower financing and corporate costs have underpinned the growth in distributable earnings, which increased 2.4% to 4.64 cents per unit , before tax. The result is consistent with the full year guidance, which was reaffirmed today, at around 9.4 cents per unit.

John Dakin said, “We are executing a strategic plan that is focused on building a high quality real estate business with a secure and diverse capital structure. An accelerated development programme, funded through asset recycling, is an important component of an overall strategy that is positioning GMT for sustainable long-term growth.”

Further information on the financial result, including the reconciliation between profit and distributable earnings, is provided in the appendix of this announcement and in the Trust’s interim report.

The report was released today and is available on the Trust’s website at:

Property Portfolio

John Dakin said, “Steady economic growth and historically low interest rates are providing a stable operating environment for business. Customer demand remains sound and over 50,000 sqm of leasing transactions were completed during the period.”

This leasing success has maintained occupancy at 96% and the weighted average lease term, across the portfolio, at more than five years.

Robust property fundamentals, characterised by low vacancy rates and modest rental growth, are also supporting the Trust’s development programme.

Five new projects, totalling $72.6 million were announced in the first half of the year.

Encompassing over 34,000 sqm of rentable area, these new developments are expected to generate $5.7 million of annual rental income and deliver valuation gains of between 10% and 15% once completed.

John Dakin said, “Progressing the development programme and realising the value in GMT’s strategic land holdings remains a key priority.”

Capital Management

GMT’s strong balance sheet position is being maintained through asset recycling, with new development activity being funded directly through asset sales.

At 30 September 2015, GMT’s loan to value ratio was 36.1%, at the lower end of the 35% to 40% target band that the Board believes is optimal for the Trust and significantly below the 50% threshold permitted under its debt and trust deed covenants.

Keith Smith said, “While a more active property strategy is refining and improving the quality of the portfolio, new treasury initiatives have significantly enhanced GMT’s capital structure with improvements to the diversity and tenor of the Trust’s debt facilities.”

These initiatives include:

+ a private placement to US investors in April 2015 securing NZ$156 million of debt funding on 10,12 and 15 year terms;

+ an extension to the Goodman+Bond programme with the issue of a $100 million, seven year retail bond in June 2015;

+ refinancing of the GMT main bank facility on competitive new terms; and

+ renewing and extending the bank facilities of Wynyard Precinct Holdings Limited, the Trust’s Viaduct Joint Venture, following the interim balance date.

With a combination of bank debt, wholesale bonds, retail bonds and USPP issuance, GMT has a very diverse debt book with bank borrowings making up less than 50% of drawn debt. It is also long dated with these facilities having a weighted average term to expiry of 5.2 years, at 30 September 2015.

Outlook and Guidance

A more active operational strategy, implemented to take advantage of strong customer demand and robust property fundamentals, is improving an already high quality portfolio and delivering consistent financial results for GMT.

A stable economic environment will support a continuation of the current development programme. With $72.6 million of projects already confirmed, more than $100 million of new developments are expected to commence this financial year.

Funded through asset sales it is a value adding activity that is enhancing the portfolio, while improving the quality of GMT’s cash earnings.

The Board and Management Team are encouraged by the business outlook and believe the current strategy is the right approach for long term growth.

Distributable earnings guidance for the year has been reaffirmed at around 9.4 cents per unit, before tax. A corresponding increase in the level of cash distributions paid to Unitholders is also forecast and these are expected to total 6.65 cents per unit, 3.1% higher than the 6.45 cents per unit paid last year.

Attachments provided to NZX:

  • NZX Appendix 1
  • Investor Presentation
  • GMT and GMT Bond Issuer Interim Report 2015

1 Distributable earnings is an alternative performance measure used to assist investors in assessing the Trust’s underlying operating performance. Refer to the appendix of this announcement for details on how this measure is calculated.

2 $33.2 million of the contracted sales are unconditional.

3 On a weighted average issued unit basis.

3 On a look through basis including GMT’s proportionate interest in Wynyard Precinct Holdings Limited.