Goodman Reports Half Year Earnings of $42.7m
Goodman Reports Half Year Distributable Earnings of $42.7m
Goodman Property Trust (“GMT” or “Trust”) is pleased to announce its interim financial result together with new initiatives to further strengthen its balance sheet.
The Trust has delivered a strong operational performance for the 6 months ended 30 September 2008, with distributable earnings increasing 36.9% to $42.7 million. The increase on the previous corresponding period is principally the result of an expanded portfolio, consistent rental growth and continued development success.
Jim McLay, Chairman of Goodman (NZ) Limited (“GNZ”) said, “Despite the current economic and financial environment being more challenging than expected, GMT has recorded a strong operational performance.“
While distributable earnings have grown in line with expectations, net profit has fallen following the completion of the interim valuation review. A devaluation of $57.0 million, has contributed to a recorded loss of $11.3 million, compared to a net profit of $28.7 million in the previous corresponding period. No valuation review was undertaken in the previous corresponding period.
The devaluation follows a thorough review of the portfolio by the Trust’s panel of independent valuers. While transactional evidence remains limited, demand for investment property globally has softened as a result of tighter credit controls and the increasing cost of capital.
While the devaluation has no impact on distributable earnings it contributes to a 5.9% reduction in net tangible assets (adjusted), now $1.22 per unit.
Jim McLay said, “The global credit crisis is an extraordinary situation that has directly impacted on the value of most asset classes. A consequence of falling asset values and the increasing risk around corporate refinancing has been a renewed focus on the debt levels and available liquidity of all investment vehicles. Management has deliberately pursued a conservative debt funding policy for GMT which has ensured the Trust remains well capitalised.”
The Trust’s total assets at 30 September 2008 are $1.62 billion compared to $1.60 billion as at 31 March 2008. The current level of debt within the portfolio equates to 32.0% of property assets.
Balance Sheet Strengthening
To ensure GMT retains its strong balance sheet position, the Board has overseen the incorporation of certain balance sheet strengthening initiatives into its strategy for the Trust. These include:
- Renewing the majority of GMT’s main debt facility more than 12 months ahead of its expiry.
- Extending the panel of banks in the funding syndicate.
- Lifting the investment return thresholds on all new development and acquisition opportunities.
- Suspending uncommitted developments.
- Disposing of certain non-core assets.
GNZ Chief Executive Officer, John Dakin said “The early debt renewals and other balance sheet strengthening initiatives show the adaptability of GMT’s strategy in a changing world. With a low level of debt, secure funding and a high quality portfolio, the Trust is in the best possible position for the likely challenges ahead.”
Most significant of the initiatives has been the refinancing of a substantial portion of GMT’s $625.0 million main debt facility well in advance of its January 2010 expiry. When combined with other recent refinancing activity, GMT has renewed $481.0 million of debt for a three year term.
The refinancing completed to date is sufficient to cover all the existing and known capital commitments from the Trust’s main facility.
The decision to renew the facility ahead of schedule was considered prudent given the increasing scarcity of debt funding and expanding bank margins. The opportunity was also taken to extend the funding syndicate from the present four trading banks to include Kiwibank, providing additional diversity to the Trust’s funding lines.
John Dakin said, “Renewing the debt facility ahead of schedule and undertaking the other capital management initiatives is a considered response to the current market conditions. While these measures add strength and security to the business they do have a cost, although minor, that will impact on forecast earnings for the balance of the year.”
As a result, the Board has revised its forecast cash distribution for the Trust for the 2009 Financial Year from 10.25 cents per unit to 10.00 cents per unit. The revision to the cash distribution assumes no new development or acquisition activity this financial year and that operating earnings are not unexpectedly impacted by the deteriorating economic environment.
The Trust will pay a second quarter cash distribution of 2.47917 cents per unit with an additional 0.047559 cents per unit of imputation credits attached. The record date for the distribution is 4 December 2008 with payment to be made on 18 December 2008.
Eligible Unitholders will, again, have the opportunity to participate in the Trust’s Distribution Reinvestment Plan.
Despite the impact of declining investor sentiment on property values, GMT’s assets continue to deliver operating performances in line with expectations.
High occupancy levels and consistent rental growth have characterised the portfolio while the attraction of the Trust’s development estates has been reflected in the steady demand from customers for new purpose built facilities.
Key portfolio highlights include:
- The leasing of 57,000 sqm of rentable space to new and existing customers.
- Achieving annualised rental growth of 5.15% pa on market and inflation linked rent reviews.
- New development commitments of 39,800 sqm, with an average lease term of 10.0 years.
- The acquisition of the Tapper Transport Facility for $10.15 million and the sale of Hawkins House and the Ricoh Building for $22.95 million.
Following the post balance date announcement of the lease renewal and development pre-commitment to Toll at Savill Link the Trust now has 250 customers, an occupancy rate of 98% and weighted average lease term of 5.9 years.