The Goodman Property Trust’s manager, Goodman (NZ) Ltd, said in its release of the trust’s annual result this week that its decision to focus exclusively on the Auckland industrial market was producing record returns for investors and quality property solutions for its customers.
Management company chair Keith Smith said: “Focusing our investment in the Auckland industrial market recognises the emerging trends & 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 & operationally efficient warehouse space across the city.”
Chief executive John Dakin said: “The Goodman trust’s substantial $2.6 billion portfolio is now 100% Auckland industrial. 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 the trust’s impressive financial results and improving an already high quality portfolio.”
Goodman completed 6 projects totalling over 50,000m² during the year, and has leased 96% of it. Mr Dakin said the development activity contributed $26.2 million of the $201.9 million valuation gain for the year.
To reach this position, Goodman has spent 5 years refining its portfolio, selling $1.2 billion of assets and developing $675 million of new projects, while also deleveraging its balance sheet.
As outlined in the trust’s annual result, it’s continuing that development momentum, starting 11 new projects costing a total $160.5 million.
The trust ended the year with a loan:value ratio of 19.7% and committed gearing of just 23.7%.
Structural change occurring globally
Over in Sydney, Goodman Group chief executive Greg Goodman commented in his third-quarter release: “The structural trends of urbanisation, rising consumerism & the ever-increasing need for convenience continue unabated – driving demand for industrial property in key urban centres. “Customer demand is outstripping supply for urban logistics globally as our customers continue to invest in improving the efficiency of their supply chains. This is leading to consistently high occupancy, steady growth in rents and an increase in development work in progress.
“The scale of these projects is growing over time, given the high value nature of urban sites, and we are continuing to expand our landbank to secure quality locations for our customers for the long term.”
Goodman Group has $A3.7 billion of development work in progress plus $A2.4 billion of development commencements. The group is undertaking 83% of its worldwide development programme through partnerships.
At the 9-month mark (31 March, which for the New Zealand trust is the end of the full year), Mr Goodman reaffirmed the group forecast that operating earnings/security will be 9.5% ahead of 2018 at A51.1c/security.
Goodman Group owns the New Zealand trust’s manager and 21% of the listed trust’s securities.
In Auckland, John Dakin said: “Our preference for high quality Auckland industrial property reflects the positive investment attributes of this asset class & 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.”
The trust has already confirmed development commitments totalling 10,000m² (total project cost $28.3 million) at Highbrook Business Park for existing customers OfficeMax & Panasonic.
“Other customers from within the portfolio are also signalling future expansion requirements. The additional space this represents is expected to underpin our development workbook for the next 2-3 years.”
Mr Dakin said the low vacancy rates & sustained economic growth driving customer demand for new facilities was also 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.”
The acquisition of the Foodstuffs Distribution Centre in Mt Roskill and the conditional purchase of 3 adjoining properties on Favona Rd, Mangere, are examples of Goodman’s strategy of maintaining a forward book of development sites, either for intensification or redevelopment: “With easy connectivity to the cbd, port & airport, both locations are ideal future sites for fulfilment & logistics companies.”
15 May 2019: Goodman profit soars on valuation gains
Attribution: Company releases, results.