MGP’s Half –Year Result: Profit $13.84 Million
NZX Release – Macquarie Goodman Property Trust
MGP’s Half –Year Result to 30 September, Profit $13.84 million
Date: 10 November 2005
Macquarie Goodman Property Trust (“MGP”) is pleased to report an after tax profit of $13.84 million for the six months to 30 September, 2005. This compares with the $10.12 million after tax profit for the same period last year (which included the sale proceeds of $4.175 million from South City Shopping Centre).
Jim McLay, Chairman of MGP's manager Macquarie Goodman (NZ) Limited (“MGNZ”), said the solid half-year result was achieved through active management of the Trust, continuing success in the development and acquisition programme, along with the operation of the unique Macquarie Goodman Customer Service Model.
Mr McLay said "The Trust has delivered Unitholders a total return of 14.8% over the six months to 30 September 2005, which compares to 12.5% achieved by the wider stock market and 9.7% delivered by the NZX Listed Property Index."
Unitholders will receive a gross distribution of 2.465 cents per unit for the second quarter, comprising 2.266 cents per unit in cash and 0.199 cents per unit in imputation credits. This takes investors' distributions for the half year to 4.93 cents per unit compared with 4.65 cents per unit normalised for the corresponding period last year. The record date for the second quarter distribution is 2 December 2005 with payment on 16 December 2005.
MGNZ Chief Executive John Dakin said total operating revenue for the six months to 30 September increased 136% from the previous corresponding period to $25.3 million, following the acquisition of MGQ’s interest in certain stabilised and development properties in March, the purchase of Fujitsu House in April and the advancement of the development programmes at Savill Link, Westney Industry Park and The Gate Industry Park.
Mr Dakin said, “During the half year MGP had completed the development of Building 8 at Central Park Corporate Centre, Toll Logistics and Nylex at Savill Link, and a further unit at The Gate Industry Park. MGP has also secured new pre-commitments from Furniture City, Toll International and Winstone Wallboards. MGP's share in the cost of these developments is expected to total approximately $15.6 million which, once fully leased, will have an average weighted yield of 8.8%.
Mr Dakin added, “We remain focused on creating value for Unitholders by securing further pre-commitments across our development sites at investment returns that are attractive to MGP’s cost of funding.”
The purchase of Fujitsu House at 139 Carlton Gore Road, Newmarket in April for $30.55 million complements MGP’s existing properties along Carlton Gore Road and offers customers an alternative accommodation solution to Vector Centre and BTI House.
To take advantage of strong investor demand MGP is currently marketing the sale of two mature office assets; Windsor Court in Parnell, Auckland and NEC House (formerly Panasonic House) in Wellington. The proceeds of these disposals will be used to pay down debt in the short term with likely reinvestment into MGP’s development pipeline as new opportunities are secured.
The first six months of the year saw a period of strong leasing activity with new development commitments and lease commencements across the stabilised portfolio amounting to 70,700 sqm of rentable area and $8,109,000 of annual net rental income. The Trust has benefited from minimal vacancy with an occupancy rate of 97% which was underpinned by the successful retention of 86% of customers whose leases were due to expire during the last six months.
Of the 70,700 sqm of net lettable area that was leased 52,500 sqm was leased by existing customers and 18,200 sqm was leased to new customers. MGP’s expanded portfolio now has 151 customers with a weighted average lease expiry of 4.4 years.
Major new customers include SalesForce New Zealand, which has leased 2,370 sqm of office space in Building 8 at Central Park Corporate Centre and Fujitsu with 918 sqm of office space and naming rights at 139 Carlton Gore Road on five and seven year terms respectively.
Renewals and extensions of existing leases made up 74% of the total area that was leased, with Genesis at Millennium Centre and Toll Logistics at The Gate Industry Park being the most significant of these with a combined annual net rental of $1.1 million.
REFURBISHMENTS AND RENOVATIONS
Macquarie Goodman is currently undertaking a major refurbishment of Auckland Distribution Centre following the relocation of Linfox Logistics to a larger purpose built facility at Westney Industry Park. Frucor Beverages will occupy the majority of the refurbished space when it is completed in March 2006. The expected cost of the refurbishment is $8.0 million.
The scope of the works involves a redevelopment of the existing office facilities, the construction of a new building façade incorporating new entrance ways, the refurbishment of the warehouse space and partitioning of the warehouse and office facilities into two distinct tenancies. The rentable area will increase from 29,632 sqm to 32,172sqm with the projected rental for the whole of Auckland Distribution Centre expected to increase from $2.0 million to $2.9 million once fully leased.
This opportunity highlights the benefits of the Macquarie Goodman Customer Service Model. By assisting Linfox in the expansion of their business, MGP has benefited from the investment in Linfox’s new facility at Westney Industry Park, together with the successful leasing of the Auckland Distribution Centre to Frucor Beverages, a new customer for MGP.
During the six months MGP has provided Unitholders with an annualised total return of 35.5% which compares to the five year rolling average total return of 20.9% provided by its peers in the listed property sector. Unitholders approved a restructured management fee in March comprising a reduced base fee and the introduction of a performance fee component. Given the out-performance of MGP relative to its specified benchmark the manager is entitled to a performance fee of $1.049 million. The fee calculation has been verified by the Trust’s auditors and the fee has been accounted for in MGP’s results for the six months but is payable by the issue of units, as outlined to Unitholders in March this year. Accordingly the fee has not been deducted in the calculation of the distribution.
Mr McLay confirmed MGNZ’s ongoing commitment to best practice corporate governance. “MGNZ is conscious of the fact that certain inconsistencies presently exist between the requirements imposed on listed unit trusts and companies and the rights conferred on their respective investors. As part of its continual review of corporate governance MGNZ is actively considering its position in relation to these issues.”
With a quality portfolio positioned for long term earnings growth and a continuing emphasis on active management, MGP is on track to deliver its projected return of 9.86 cents per unit to Unitholders.
While the next six months may present challenges for all businesses, with commentators forecasting slowing economic growth, MGP remains well positioned to capitalise on continuing occupier demand in the industrial and business space sectors.
MGP’s active management style and its ability to leverage off existing Macquarie Goodman customer relationships give MGP opportunities to enhance the value of its portfolio and assist in the progression of the development programme.