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Goodman Property profit jumps 64.7% on valuation and development gains

Wednesday 15th May 2019

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Goodman Property Trust lifted annual statutory net profit 64.7 percent, boosted by big valuation gains and as its manager sold assets and developed new ones to create a pure Auckland industrial property portfolio.

Net profit attributable to unitholders rose to $319.5 million in the 12 months ended March from $194 million in the previous year.

The result included a record $201.9 million increase in the value of its properties to $2.6 billion, up from an $83.8 million increase the previous year. Goodman completed six projects with more than 50,000 square metres of space in the year just gone and have leased 96 percent of this space.

Net property income actually eased 2.5 percent to $126.8 million as the company sold property and developed new ones, while occupancy remained at 98 percent with a weighted-average lease term of 5.2 years after all contracted sales including post-balance date transactions.

The manager achieved annualised average rental increases of 6.3 percent on “lease reversion events” during the year.

The manager, Goodman NZ, says developments contributed $26.2 million of the revaluation gain. The manager has sold $1.2 billion of property, including office buildings, and spent $675 million on new development projects in the last five years.

In the year just gone, it sold $370.5 million of property including its majority stake in the VXV office portfolio.

“Our preference for high-quality Auckland industrial property reflects the positive investment attributes of this asset class and the superior growth profit it offers,” says the manager’s chief executive John Dakin.

“It’s the focus of our development programme and we expect to undertake a similar level of development activity this financial year,” Dakin says.

Goodman has begun 11 new projects costing $160.5 million.

The trust still has plenty of development capacity with its loan-to-valuation ratio at just 19.7 percent at March 31 and committed gearing at 23.7 percent.

Post balance date, the manager has conditionally sold the trust’s remaining Christchurch assets. The trust also has nearly $300 million in undrawn bank facilities.

“Our 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 two to three years,” Dakin says.

Chair Keith Smith says the board is “extremely pleased with the results being achieved and is confident that the current strategy of development-led growth, funded from the trust’s substantial reserves, will support strong operating performances into the future.”

Demographic changes, economic growth and the rapid expansion of online retailing are creating unprecedented demand for well-located and operationally efficient warehouse space across Auckland, Smith says.

The Goodman trust paid per-unit cash distributions of 6.65 cents during the year just gone, about 95 percent of cash earnings, and the manager says it aims to keep this year’s distributions steady, “a level that helps absorb the short-term impact of balance sheet deleveraging.”

The fourth-quarter distribution will be 1.67 cents per unit with 0.3 cents in imputations credits attached. The record date is June 6 with payment being made on June 20.

Goodman units closed yesterday at $1.785 and have risen more than 35 percent in the last 12 months compared with the benchmark S&P/NZX 50 Index’s 15 percent gain.


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