NZX Release - A defining year for MGP
NZX Release – Macquarie Goodman Property Trust (“MGP”)
defining year for MGP
Date: 12 May 2004
We are pleased to present MGP’s results for the year ended 31 March 2004. It has been a defining year for MGP, with the following events recorded as the major highlights:
1. Macquarie Goodman Management
(MGM) acquires the manager of MGP;
2. MGM takes a 20% cornerstone investment in MGP;
3. liquidity improves in MGP’s units as a result of Sovereign’s sell down;
4. Unitholders approve the co-ownership arrangement with MGI;
5. portfolio increases by $4.3 million as a result of property revaluations; and
6. new position as a leading industrial space and service provider in New Zealand.
Over the year, operating surplus before income tax decreased by 16.5% to $13.3 million due to the sale of three properties, which was reported in the last Annual Report. In that report, the previous manager foreshadowed that the gross distribution for the year to 31 March 2004 would fall within the range of 9.0 to 9.5 cents per unit. We are pleased to advise that the gross distribution was 9.48 cents per unit. (Refer to Attachment 2 for Results at a Glance).
MGNZ is now the Manager of MGP
On 23 December 2003, MGM became the Manager of MGP following its acquisition of the management company of MGP from Colonial First State Property for $5.75 million.
To demonstrate MGM’s commitment to MGP, it acquired a 20% stake in MGP at an aggregate acquisition price of $27.6 million from Sovereign. Further, Sovereign disposed of an additional 30% of units to other institutions and qualifying investors via an underwritten placement.
This change in Manager and MGM’s acquisition of a core investment in MGP provided the opportunity for MGP to be repositioned as a leader in the industrial property market.
Jim McLay, Chairman of Macquarie Goodman (NZ) Ltd (MGNZ), said “MGM brings a proven track record as Australasia’s largest space and service provider of industrial property to MGP. Central to this position is MGM’s customer service model, which is designed to provide customers with holistic and integrated property solutions. Our dedicated in-house team provides these integrated solutions to customers every day.”
Successful Pooling of Assets with Macquarie Goodman Industrial Trust (MGI)
In March 2004, Unitholders passed a resolution to pool MGP’s Core Properties with MGI’s Properties under a co-ownership arrangement to take effect on 1 April 2004. As a result, on 1 April 2004 MGP and MGI became co-owners of 13 core properties as follows:
Number of properties
contributed Value attributable to
MGP as at
1 April 2004 $000¤Net lettable area attributable to MGP
MGP’s Core Properties 9 62,581 26,759
MGI’s Properties 4 72,615 73,414
Total Pooled Assets 13 135,196 100,173
MGP’s Non-core Properties 2 47,980 27,411
MGP’s Portfolio 15 183,176 127,584
The pooling of assets will
deliver significant benefits to the portfolio, and in turn
to MGP’s Unitholders, including:
the strong alignment of MGP’s interests with MGI;
the collaboration of two synergistic trusts with a strong Manager;
access to our consistent and proven customer service model;
more diversified rental income from a larger and varied customer base;
exposure to a larger, sector specific industrial property portfolio; and
“The transaction will also give MGP an enhanced position as a leader in New Zealand’s fragmented industrial property market,” said Mr McLay.
The following four Auckland properties were
added to the portfolio from 1 April 2004 as part of the
pooling of assets between MGP and MGI:
Auckland Distribution Centre in Wiri, Manukau is a high quality warehouse/distribution centre valued at more than $20 million. The property is fully occupied with an average weighted lease expiry of 3.5 years.
The Gate Industry Park is a premium industrial estate in Penrose that is also 100% occupied. The property is valued at more than $46 million, with an average weighted lease expiry of 5.2 years.
Penrose Industrial Estate is valued at more than $33 million. It has an average weighted lease expiry of 7.0 years and an occupancy rate of 100%.
Central Park Corporate Centre in Greenlane is an office park valued at more than $54 million, with an average lease expiry of 3.5 years.
In total these four properties are valued at $154.5 million and cover 156,200 sqm. They enjoy 98% occupancy and have an attractive yield of 9.4%.
Intensive portfolio management has delivered strong leasing results for MGP over the past 12 months, with 17,850 sqm of space leased, contributing $3.6 million in annual net rental income.
Details of the major leasing transactions during the year appear in Attachment 3. Coupled with the customers introduced through new leases, the addition of MGI’s Properties from 1 April 2004 introduced an impressive list of new customers such as Armourguard Security, Avis Rent a Car, BOC Gases, Carter Holt Harvey, Ford NZ, Linfox, Rapak Asia Pacific, Turners Auctions, USG and Yates New Zealand.
At 1 April 2004 MGP’s occupancy rate was 98.3% and had a weighted average lease term of 3.8 years.
During the year, the portfolio was revalued resulting in a gain of $4.3 million and a weighted average capitalisation rate of 9.77%.
MGP settled the sale of two Auckland assets, BNZ Vincent Street and Greenpark Office Park over the year. It also exchanged contracts in March 2004 to sell Unisys House in Wellington, with settlement occurring on 30 April 2004. The sale was unconditional in all respects on 31 March 2004 and has therefore been accounted for in the year ended 31 March 2004.
The total sale proceeds of over $58 million has been utilised to reduce debt and is also earmarked to equalise the interests of MGP and MGI to 50%, under the co-ownership arrangement.
In April 2004, Westpac and Commonwealth Bank of Australia agreed, subject to final documentation and Trustee approval, to provide MGP with revolving credit facilities for the amount of $75 million each. This total facility of $150 million provides MGP with an ongoing ability to acquire properties under the co-ownership arrangement with MGI. The facilities are for three years and have been achieved with very competitive pricing.
On 5 May 2004 MGP placed 21,750,000 units to institutions at a price of $0.96. This placement was issued pursuant to Listing rule 7.3.5 which allows a listed entity to issue 15% of its issued capital in any 12 month period. The gross proceeds of $20.88 million will be utilised in the funding of the post balance date transactions detailed below.
Post Balance Date Transactions
Savill Drive, Otahuhu
On 13 April 2004, MGP and MGI agreed to jointly acquire a 26.5 hectare development site in Otahuhu in Auckland’s south for $34.4 million under the co-ownership arrangement. The vision for this property is to develop a $130 million industry park over the next five years.
This transaction delivers a strategic opportunity for MGP and MGI to cater for the demands of customers requiring space between 5,000 and 20,000 sqm. MGP and MGI have entered into a marketing agreement with Auckland based property company Willis Bond & Co to assist in marketing the property.
The Gate Industry Park, Penrose
Under the co-ownership arrangement, MGP will acquire a 50% interest in two new facilities at The Gate Industry Park in Penrose for Recall and Norman Ellison.
The total acquisition price to MGP for the two facilities is around $5.8 million with settlement scheduled on practical completion of the developments, which is scheduled for January 2005. The final purchase price will be determined on completion by independent formal valuations.
The Gate Industry Park has been a very
successful development with its quality and location
consistently attracting high profile customers. It is now
70% precommitted and with these 2 new buildings the
weighted average lease term will extend to an impressive 7.2
Fletcher Head Office
On 4 May 2004 MGP and MGI jointly entered into a conditional contract to acquire the Fletcher Challenge Complex at 810 Great South Road, Penrose for $72 million. The 8.1 hectare property currently includes 5 office buildings and 18 industrial/warehouse buildings providing a net lettable area of 48,527sqm. With Fletcher Building Limited as the key tenant the current annual rental is $6.5 million and the weighted average lease expiry is 5 years.
The transaction is subject to rights of purchase by existing tenants.
The property occupies a strategic position with prime road frontage on both sides of Great South Road and offers future development potential for MGP.
These latest transactions demonstrate the opportunities MGP’s Unitholders can enjoy through the relationship with MGI and access to its healthy development pipeline. They also cement MGP as a leading provider of industrial space in New Zealand’s property market.
South City Shopping Centre
Late on 11 May 2004 MGP entered into a conditional agreement with the New Zealand subsidiary of a substantial ASX listed property and development group to sell South City Shopping Centre, Christchurch for NZ$40 million. The sale price includes 573-579 Colombo Street which was acquired by MGP in September 2003. The purchaser has requested that its identity remain confidential at this stage. The agreement is conditional upon the approval of the trustee of MGP and the purchaser obtaining the consent of the Overseas Investment Commission.
The disposal of the non-core asset is in line with our stated strategy and will enable MGP to reinvest the proceeds into high quality industrial assets.
Outlook for 2005
Over the next year and beyond, our dedicated team of property professionals will continue to work towards our goal of positioning MGP as a leading listed industrial service and space provider in New Zealand.
We will continue to identify high quality, well located properties in strong industrial markets and capitalise on our opportunity to explore development opportunities through our relationship with MGI.
Moving forward, we intend to demonstrate how our proven track record as a leading industrial fund manager and our customer service model will deliver strong results to customers and Unitholders alike.
Mr McLay concluded, “We are committed to generating superior returns for MGP’s Unitholders through strategic acquisitions and delivering the highest level of service to customers.”