By Jenny Ruth
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Wednesday 13th April 2011 |
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Goodman Property Trust's decision to go ahead with its $91.7 million retail and commercial development at its Highbrook Business Park is reasonable, given about 4,000 employees are now based at Highbrook which is expected to rise to between 12,000 and 15,000 people, says Buffy Gill, an analyst at Goldman Sachs & Partners.
Goodman is also likely to be taking advantage of current fairly attractive construction costs, Gill says.
The metrics of the development, including a projected 8.45% yield on cost, are in line with those already assumed in Gill's forecast profile, she says.
"At current levels (92 cents) Goodman still offers the second highest yield in the sector at 8.4% for full-year 2011 versus the sector average of 6.7%.
Gill expects distributions will decline to a low of 6.8 cents per unit, reflecting a 7.4% yield. "This is ahead of the sector average," she says. "Given Goodman's above-average rental quality, we believe a fair yield for Goodman on a fully developed basis is 6.7%."
Goodman offers the lowest risk exposure in the large-cap property sector, she says.
"In the short to medium term, we believe Goodman should also benefit from increased demand in Christchurch for non-CBD low-rise, high earthquake standard built developments."
Recommendation: Buy.
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