By Jenny Ruth
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Thursday 18th November 2010 |
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A key positive of Goodman Property Trust's first-half was that six new leasings with average weighted average lease terms (WALTs) between six and 12 years and covering $6.7 million in net rental were completed, says Buffy Gill, an analyst at Goldman Sachs & Partners.
"In particular, two of the key expiry risks for full-year 2011, Turners Auctions and Vector, have been renewed for six and nine years respectively," Gill says.
"These two leasings increase the WALT of the portfolio to 5.7 years, well above the sector average of 4.6 years," she says.
"We believe this is also positive as it opens up further opportunities for asset sales and reduces the requirement for future DRP (dividend reinvestment plan) underwriting/capital raisings to fund developments," Gill says.
"While enquiry for development has increased significantly over the past six months, we suspect this may not turn into meaningful activity until the first-half next year."
With the units trading at 97 cents, Goodman provides the most attractive yield in the sector at 8% compared with the 7% sector average, Gill says.
"Given Goodman's above average rental quality (average property quality but well above average WALT of 5.7 years), we believe a fair yield for Goodman should be 6.7%."
Recommendation: Buy.
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