Archive | Goodman Property Trust

Goodman gives steer on development direction after solid year

The Goodman Property Trust’s net annual earnings dropped both before & after tax in the year to March, the result of a smaller fair-value gain on its portfolio.

[In my story on Friday, after a cursory look at the results, I wrote that pretax returns were “steady”. This article gives you a better look at performance.]

The trust’s investment portfolio made a $145.8 million fair-value gain last year, but that input dropped 21.3% to $114.7 million this year.

The 6.7% valuation gain in 2016 was a record, and the 2017 gain was 5.4%, lifting the investment portfolio 1.3% to $2.326 billion ($2.297 billion).

Pretax net profit fell 11.1% to $220.5 million ($247.9 million in 2016) and, after tax, it fell 8.3% to $213.8 million ($233.1 million).

Operating earnings rose 4% pretax to $121.7 million ($117 million) and, after tax, rose 8.1% to $106 million ($98.1 million).

Operating earnings/unit rose 1.1% to 9.51c (9.41c) pretax and 5.1% after tax to 8.28c (7.88c).

Net tangible assets rose 8.3% to 130.4c/unit (120.4c), the loan:value ratio was reduced by 10.6% to 29.3% (32.8%) and the look-through loan:value ratio was reduced to 30.6% (33.9%). The management expense ratio was trimmed by 6.4% to 0.44% (0.47%).

Management company Goodman (NZ) Ltd’s chair, Keith Smith, said on Thursday the most important features of the 2017 operating performance were the refinements to the portfolio and realisation of longer-term strategic objectives.

“The progression of the development programme, significant asset sales & selective acquisitions are all having a positive impact on the trust, lifting the quality of the portfolio and adding to its financial strength.”

Chief executive John Dakin said: “With more than $535 million of new projects since 2012, the trust’s development programme is transforming the portfolio. Funded through asset sales, it is a sustainable business activity that is investing in the latest building technologies in some of Auckland’s best locations.

“The increasing capital allocation to the Auckland industrial sector is a deliberate strategy that reflects the strong growth profile of the city and the positive investment characteristics of industrial property. It also positions the trust to benefit from the increasing demand for logistics space as a result of e-commerce.

“Online shopping is increasing the requirement for distribution warehousing in many global markets. It’s an emerging trend that is also adding to the attractiveness of industrial property as an investment class.”

Refining the portfolio

The trust managers secured 154,000m² of new customer lease commitments, representing 16% of the total rentable area, in the last 12 months, increasing the occupancy rate from 97% to 98% and extending the weighted average lease term from 5.7 to 5.8 years.

Mr Dakin said sustained customer demand was also facilitating an intensification of the trust’s development programme: “The trust has been able to accelerate the build-out of its land bank in recent years. With Highbrook Business Park now more than 75% complete, we have made substantial progress in the trust’s development programme.”

Completion of current projects will increase the trust’s investment in the preferred Auckland industrial & business park sector to 77% of total property assets and reduce its land weighting to just 7%.

Mr Smith said: “These favourable operating conditions are expected to continue over the short to medium term and the board believes the existing strategy, with its focus on portfolio quality & development-led growth, remains appropriate.”

Goodman is forecasting 9.0c/unit pretax operating earnings for the 2018 financial year. The reduction from this year’s 9.51c reflected the impact of asset sales & balance sheet deleveraging. Mr Smith said the trust should maintain cash distributions at 6.65c/unit.

Link: Goodman Property Trust annual report

Earlier story:
19 May 2017: Goodman profit steady

Attribution: Trust annual report, release.

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Goodman opens 75+25 bond issue

Goodman Property Trust opened a $75 million bond issue on Thursday, with the ability to accept up to $25 million in oversubscriptions.

The 7-year fixed-rate senior secured Goodman+Bonds will have a maturity date of 31 May 2024 and are expected to have an investment grade issue credit rating of BBB+ from Standard & Poor’s. The Goodman trust’s current corporate credit rating is BBB.

The indicative issue margin range is 1.55-1.70%/year. The issue margin & interest rate will be set following a bookbuild process on Friday 26 May. The bonds are expected to be issued on 31 May.

Attribution: Trust release.

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Goodman profit steady

Goodman Property Trust reported pretax profit of $220.5 million for the March year, down on last year when revaluations are included, up by a small margin when they’re excluded.

Management company Goodman (NZ) Ltd chair Keith Smith said: “The progression of the development programme, significant asset sales & selective acquisitions are all having a positive impact on the trust, lifting the quality of the portfolio and adding to its financial strength.”

Chief executive John Dakin said: “With more than $535 million of new projects completed since 2012, the trust’s development programme is transforming the portfolio and delivering essential business infrastructure into a growing city.”

Highlights included:

    • Pretax operating earnings of $121.7 million, 9.51c/unit, consistent with earlier guidance and 1.1% higher than a year ago
    • A 15.9% increase in cash earnings to 7.08c/unit and full-year cash distributions of 6.65c/unit
    • $220.5 million pretax profit (including revaluations of $114.7 million), compared to $247.9 million (including revaluations of $145.8 million) in 2016
    • $278.8 million of assets sold
    • 8 new development projects started, with a total project cost of $97 million and yield on additional spend of 8.7%
    • Greater balance sheet capacity, with a look-through loan:value ratio of 30.6% (33.9% last year)
    • An 8.3% increase in net tangible assets to 130.4c/unit (120.4c/unit).

I’ll return to this result later today, after having no time to analyse it yesterday.

Attribution: Company release.

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Goodman-GIC joint venture adds Bayleys House to portfolio

The joint venture between the NZX-listed Goodman Property Trust & Singapore sovereign wealth fund GIC Pte Ltd has added Bayleys House in the Wynyard Quarter to its portfolio.

That acquisition for $62.3 million, and the $86.2 million purchase of the neighbouring Datacom Building, which settled on Friday, take joint venture company Wynyard Precinct Holdings Ltd’s portfolio to 7 buildings worth over $470 million.

The recently completed 6-storey 8106m² Bayleys House backs on to the Fonterra Centre, also in the portfolio. Fonterra at 109 Fanshawe St, and Bayleys at 30 Gaunt St, also front Halsey St in the VXV Precinct which has been developed by ASX-listed Goodman Group on leasehold land owned by Viaduct Harbour Holdings Ltd.

The 7-storey 16,735m² Datacom building is across VXV Plaza from Bayleys, on the corner of Gaunt & Daldy Sts.

John Dakin, chief executive of the Goodman trust’s manager, Goodman (NZ) Ltd, said the partnership strategy provided scale for the trust and gave it greater exposure to Auckland’s fastest-growing commercial precinct.

“Featuring large flexible floorplates and incorporating sustainable architectural elements & energy-efficient building systems, the lowrise office property is designed to a 5 green star rating. It is also expected to achieve a 5-star NabersNZ base building rating when assessed in 12 months’ time.”

Predominantly leased to real estate specialist Bayleys, technology provider IBM & law firm Mayne Wetherell, Bayleys House’s leases incorporate fixed review structures and have a weighted average term of 9 years. The ground-lease obligations are structured for a period of 15 years.

Goodman Group undertook the development on a build-to-lease basis. The purchase price reflects an initial yield of 7.6% on contract rentals, and additional fitout rent increases the passing yield to 8.8%.

The acquisition, which remains conditional on the approval of the landowner, is expected to settle in June.

On settlement, the joint venture’s portfolio will contain 88,000m² of office space for about 20 tenants. When future lease commitments are incorporated, the portfolio will have an occupancy rate of 96% and a weighted average lease term of over 9 years.

Earlier stories:
27 March 2015: Fletcher & Goodman sign up for new Wynyard Quarter building
7 November 2014: Goodman Group buys another Wynyard development block

Attribution: Company release.

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Goodman plans new retail bond issue

Goodman Property Trust is considering another issue of Goodman+bonds to institutional & New Zealand retail investors.

Goodman has made 3 Goodman+Bond issues, the first maturing in 2015. The others mature in December 2020 & June 2022. Goodman has also has $45 million of bonds issued to the wholesale market.

Trust manager Goodman (NZ) Ltd’s chief executive, John Dakin, said yesterday trust subsidiary GMT Bond Issuer Ltd was considering an offer of 7-year, fixed rate, senior secured retail bonds which would be direct, secured, senior debt obligations guaranteed by the NZX-listed Goodman trust.
Mr Dakin said full details of the offer would be released later in May, when the offer is expected to open.

Goodman has appointed the Bank of NZ and Westpac Banking Corp (through its New Zealand branch) as joint lead managers and Deutsche Craigs Ltd, First NZ Capital Securities Ltd & Forsyth Barr Ltd as co-managers for the proposed offer.

Attribution: Company release.

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5% revaluation gain for Goodman

The Goodman Property Trust’s manager said yesterday year-end revaluations would lift net tangible asset backing by 7.5c/unit, but the announcement did nothing for the unit price.

The units closed on the NZX at $1.20 on Friday, gained 2c yesterday to $1.22 – the asset backing/unit last September – but dropped back to $1.205 today.

Goodman (NZ) Ltd chief executive John Dakin said draft valuation reports from independent valuers indicated that the property portfolio would record a full-year gain of about $115 million, or about 5%, taking the current value over $2.4 billion.

He said the valuation result reflected the continuing demand for high quality industrial property. The revaluation remains subject to finalisation & independent audit. The trust will provide more details when it releases its annual result on 18 May.

Attribution: Company release.

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5 new Highbrook developments include more Quest units & parking building

Goodman Property Trust’s manager announced 5 new developments for the Highbrook Business Park yesterday, worth a total $44 million.

Goodman (NZ) Ltd chief executive John Dakin said they were expected to generate around $3.7 million/year in rent, an 8.4% return on investment.

The 5 new Highbrook projects, their size, cost & expected completion date:

Quest serviced apartment expansion: 60 new apartments, $11.7 million, July 2018
The Crossing office building 6: 3006m², $4.9 million, June 2018
Multi-storey carpark building: 324 new parking spaces, $5.7 million December 2017
Warehouse on Pukekiwiriki Place: 2929m², $13.9 million, November 2017
Showroom & warehouse units on Highbrook Drive: 1730m², $7.9 million, December 2017.

Mr Dakin said: “Completing the development programme at Highbrook is a key priority, and these new projects are timed to take advantage of the positive customer demand & strong market conditions that currently exist.”

Highbrook’s current value exceeds $1 billion, making it Goodman’s largest investment asset. The 110ha estate is about 70% of the way through its planned development and contains over 40 buildings, providing over 380,000m² of warehouse & office space.

The Crossing – the commercial heart – provides accommodation, business support services, food & hospitality options and other amenity & recreational opportunities.

Mr Dakin said: “High occupancy levels at the Quest and a shortage of visitor accommodation in Auckland are the catalysts for a substantial new expansion project that will double the number of serviced apartments at The Crossing. Following the success of the recently completed Building 5, we are also commencing another new office facility and developing an adjoining multi-storey carpark.”

The trust’s industrial portfolio has a 100% occupancy rate, and the 2 new warehouse developments are aimed at continuing Goodman’s highly successful build-to-lease programme: “With most projects leasing well before completion, it’s been an effective strategy that is growing cash earnings and improving an already high quality property portfolio,” Mr Dakin said.

Attribution: Company release.

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Goodman takes syndicate units to facilitate Millennium Centre sale

The Goodman Property Trust’s manager said yesterday the trust had taken $12 million of units in the property syndicate that has bought the Millennium Centre at Greenlane (pictured) from it.

Goodman sold the 3 office properties at 600-604 Great South Rd, Greenlane, to syndicator Oyster Management Ltd for $210 million last year and settled yesterday.

Goodman (NZ) Ltd chief executive John Dakin said the trust had taken units in the syndicate to facilitate the transaction, would hold the investment for a maximum 2 years and expected to receive an annual return of 8%.

Mr Dakin said Goodman had also sold the commercial buildings & associated development land at 1 Show Place in Addington, Christchurch, for $14 million as part of its asset recycling programme. The unconditional sale to a local investor is expected to settle before the end of this month.

“An active sales programme is reducing debt and providing funding capacity for the trust’s development activity. It’s a strategy that is improving the quality of the portfolio and increasing investment in the favoured Auckland industrial market, a sector we expect to deliver superior growth,” he said.

The 2 transactions take Goodman’s total value of sales this financial year to almost $280 million.

Earlier stories:
5 October 2016: New leases lift price on Greenlane sale
14 July 2016: Goodman to sell Millennium & Yellow buildings to Oyster
1 July 2010: Goodman buys partner out of Show Place
30 May 2007: Macquarie Goodman buys 50% stake in Addington office park company

Attribution: Company release.

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New income offsets asset sales for Goodman trust

The Goodman Property Trust announced $265 million of asset sales in the first half of its financial year, but said yesterday income from new acquisitions & developments had more than offset the impact of disposals.

Trust management company chief executive John Dakin said rental growth in the underlying portfolio was modest.

For management company chair Keith Smith, the trust had achieved a strong result while it also made progress towards longer-term strategic objectives.

Highlights included:

  • Net property income $67.5 million ($67.1 million)
  • Pretax operating earnings $59.9 million ($57.1 million) or 4.7c/unit (4.64c/unit) on a weighted average issued unit basis
  • Cash distributions of 3.325c/unit, relating to the first 6 months
  • Pretax profit $73.1 million ($53.1 million), the 37.7% increase largely attributable to $19.8 million of fair value gains on certain investment properties (nothing in the first half last year)
  • After-tax profit $67.6 million ($48.4 million)
  • $264.8 million of asset disposals announced, including sales contracted but not yet settled
  • Greater balance sheet capacity with a look-through loan:value ratio of 28.8% (33.9% in March), including sales contracted but not yet settled
  • 3 development projects started, with a total project cost of $44.2 million
  • Total assets $2.544 billion ($2.476 billion)
  • Net tangible assets 122.4c/unit (120.4c/unit at 31 March)
  • Basic earnings/unit after tax 5.3c (3.93c)
  • Diluted earnings/unit after tax 5.28c (3.8c).

Mr Smith said the positive operating environment continued to facilitate a more active investment approach. The trust was able to deliver strong gains while refining its portfolio through transactions: “It is also building resilience, with a lower level of gearing. This balance sheet capacity provides Goodman with the means to progress its development programme and also secure complementary investment opportunities, should they arise.”

Mr Dakin said: “With strong property market fundamentals & low interest rates stimulating business growth, the outlook remains positive. A continuation of these conditions means Goodman is expected to deliver full-year operating earnings of around 9.5c/unit before tax, consistent with earlier guidance.”

The trust also expects to pay distributions of 6.65c/unit, representing about 100% of cash earnings (an internal measure of free cashflow that adjusts operating earnings after tax for interest costs capitalised to development land and maintenance-related capex).

Mr Dakin said steady occupier demand had continued to support positive leasing results, with 61,363m² of office & industrial space (6% of the portfolio) secured on new or revised terms in the first 6 months of the year.

Occupancy was maintained at an average 96% and extended the weighted average lease term out beyond 5½ years.

Mr Dakin said converting the trust’s landholdings into high quality income-producing assets remained a key focus and it expected to start about $100 million of new developments this financial year, including both build-to-suit & build-to-lease projects.

The trust had also made a strategic acquisition with the conditional purchase of the former Alloy Yachts premises & an adjoining industrial property in Henderson for $18.9 million. Goodman will amalgamate the properties into one estate and progressively redevelop it.

Full interim results

Attribution: Trust release.

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Goodman sells Christchurch transport property

The Goodman Property Trust has sold its Palmerston Transport property in Christchurch to a private local investor for $7.7 million.

Trust manager Goodman (NZ) Ltd’s chief executive, John Dakin, said yesterday the sale included the remaining investment asset at Glassworks Industry Park in Hornby. The price reflected a passing yield of 6.5% and was expected to settle in May 2017, once title subdivision & certain capital works are completed.

“The trust’s successful asset sales programme is reducing debt and providing the balance sheet capacity for new investment & development initiatives. It’s part of an organic growth strategy that is refining & rebalancing the portfolio, with greater investment in the Auckland industrial sector.”

It’s the third asset sale Goodman has announced since March, for a combined $265 million. Another sale, announced in March, was completed yesterday. It’s the disposal of Connect Business Park in Penrose for $40.9 million. It had been conditional on a new title being issued following a minor boundary adjustment.

Attribution: Company release.

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