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 2015.
Continuing development progress and positive leasing outcomes, together with sale profits and fair value gains across the investment portfolio have been the main driversof the Trust’s record profit.
The year’s financial and operational highlights include:
+ A 16.4% increase in profit before tax to $170.9 million, compared to a profit of $146.8 million in the previous corresponding period.
+ Distributable earnings1 before tax of $112.3 million or 9.16 cents per unit on a weighted average issued unit basis.
+ Tax-paid cash distributions of 6.45 cents per unit, representing 80.7% of after tax distributable earnings.
+ New development projects totalling $112.1 million.
+ Introduction of GIC as a joint investment partner in Auckland’s rapidly developing Viaduct Quarter.
+ Fair value gains of $75.3 million as a result of the portfolio revaluation, including $20.5 million attributable to GMT’s development activity.
+ An active sales programme with disposals of $148.82 million generating profits of $4.5 million.
+ An 8.0% increase in net tangible assets to 108.4 cents per unit at 31 March 2015.
A property strategy tailored to today’s positive operating environment and the implementation of new strategic initiatives have contributed to the Trust’s strong financial result while positioning the business for longer term growth.
Keith Smith, Chairman and Independent Director of Goodman (NZ) Limited said, “The last financial year was a defining 12 months for GMT and the Board is extremely pleased with the advances that have been made and the impressive results that have been achieved.”
With active management maximising the performance of the investment portfolio, a deliberate acceleration in GMT’s development programme is converting the Trust’s strategic land holdings into high quality income producing assets.
John Dakin, Chief Executive Officer of Goodman (NZ) Limited said, “Recycling capital into our development projects is a key component of an organic growth strategy that is enhancing the portfolio and growing GMT’s underlying cash earnings.”
Distributable earnings before tax have increased to $112.3 million. On a weighted average issued unit basis, this equates to 9.16 cents per unit, ahead of earlier guidance of around 9.1 cents per unit.
The increase reflects greater revenue but also lower cash expenses following changes to the Trust’s fee structure including the requirement for the Manager to use its base fee to subscribe for new Units in GMT3. Adjusting for this change GMT’s distributable earnings were 8.65 cents per unit, a 3.5% increase on the 8.36 cents per unit achieved last year.
The fee changes enhance an already competitive structure, with the Trust maintaining one of the lowest management expense ratios in the listed property sector at 0.52%.
The reconciliation between profit and distributable earnings is provided in the appendix of this announcement. Further information is contained in the financial statements presented within the 2015 Annual Report.
Sustained economic growth and strong property fundamentals are supporting greater levels of customer demand. It’s a market dynamic that is being reflected in the performance of the Trust’s property portfolio.
+ New development projects adding 50,000 sqm of rentable area and 600 covered car parks to the portfolio. These projects are expected to generate $8.7 million of annual rental income once completed.
+ Leasing transactions securing 100,000 sqm of office and industrial space on new or revised terms.
+ Average portfolio occupancy of 97% during the year and a weighted average lease term of 5.1 years at 31 March 2015.
+ A 0.4% firming in the portfolio capitalisation rate to 7.5% following the annual revaluation.
Robust property fundamentals and continuing low interest rates are also contributing to a buoyant investment market. With a fair value gain of $75.3 million, GMT’s property portfolio has recorded its strongest ever valuation uplift.
The positive result is largely attributable to the firming in the capitalisation rate across the investment portfolio and the contribution from recently completed development projects.
These new facilities have recorded fair value gains of 12.6%, contributing $20.5 million to GMT’s annual profit.
John Dakin, said “Financing new development and investment activity through asset disposals is facilitating the Trust’s growth and we’ve taken advantage of the buoyant investment market to sell eight assets during the period for $148.8 million.”
The focus on organic growth has removed the requirement for the additional equity provided through the distribution reinvestment plan which remains suspended. It has also been the catalyst for a more expansive strategy in the Viaduct.
Keith Smith, said “Securing GIC as a joint investment partner has enabled GMT to extend its Viaduct portfolio without committing additional capital, preserving balance sheet capacity for its value adding development programme.”
GMT’s strong balance sheet position is reflected in its conservative level of debt with a look through loan to value ratio of 34.2%4 at 31 March 2015.
Following the Trust’s year end, further capital management initiatives have been announced. These include:
+ a USPP offer in April 2015 securing US$120 million of debt funding on 10, 12, and 15 year terms; and
+ an extension to the Goodman+Bond programme with the announcement of an intention to issue a new seven year retail bond in June 2015, targeting $75 million of new debt funding with up to $25 million of over subscriptions.
Outlook and guidance
A growing economy is continuing to generate strong customer demand for high quality, well located business space.
Keith Smith said, “We have refined our business strategy, adopting a more active operational approach that is focused on delivering strong profits and sustainable longterm earnings growth.”
Advancing GMT’s development programme and realising the value in the Trust’s strategic land holdings is a key component of this strategy. It reflects a wider philosophy that is focused on building excellence across all GMT’s business activities.
With a stable economic outlook and a property strategy tailored to today’s positive operating environment the Board expects distributable earnings for the 2016 financial year to be around 9.4 cents per unit before tax. A corresponding increase in tax paid cash distributions to around 6.65 cents per unit is also expected.
Both measures reflect an increase of around 3% from the 2015 financial year result.
Attachments provided to NZX:
1. NZX Appendix 1
2. Investor Presentation
3. Goodman Property Trust and GMT Bond Issuer Limited Annual Report 2015
About Goodman Property Trust:
GMT is an externally managed unit trust, listed on the NZX. It has a market capitalisation of around $1.4 billion, ranking it in the top 15 of all listed investment vehicles. The Manager of the Trust is a subsidiary of the ASX listed Goodman Group, Goodman Group are also the Trust’s largest investor with a cornerstone unitholding of 17.8%.
GMT is New Zealand’s leading industrial and business space provider. It has a substantial property portfolio with a value of $2.1 billion that accommodates around 250 customers. The Trust holds an investment grade credit rating of BBB from Standard & Poor’s.
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 Sale proceeds of $148.8 million includes a 49% interest in Air New Zealand House as a result of the expanded Viaduct joint venture.
3For a period of five years from 1 April 2014.
4 On a proportionately consolidated basis including the Trust’s interests in the Viaduct joint venture.