MGP’s half-year result to 30 September $10.1 mill

NZX Release – Macquarie Goodman Property Trust (“MGP”)

MGP’s half-year result to 30 September, up to $10.1 million

Macquarie Goodman Property Trust (MGP) is pleased to report an after tax profit of $10.1 million for the six months to September 30, 2004.

This compares with the $5.9 million after tax profit the same time last year, but includes a $4.175 million gain from the sale of the South City Shopping Centre which boosted MGP’s operating surplus. This gain has been transferred to retained earnings.

Jim McLay, chairman of MGP’s manager Macquarie Goodman (NZ), said excluding the sale of South City Shopping Centre, MGP recorded a solid result in line with forecast unitholder returns.

Mr McLay said the solid half-year result was achieved on the back of four property acquisitions, two property sale settlements, the refurbishment of existing properties, and new and renewed leases.

“We have actively repositioned our portfolio in line with MGP’s new strategy and increased occupancy levels across the portfolio.”

Unitholders will receive a gross 2.825 cents per unit for the second quarter, comprising 1.893 cents in cash and 0.932 cents per unit in imputation credits. This takes investors’ distributions for the half year to 5.65 cents per unit compared with 4.75 cents per unit for the corresponding period last year. The 5.65 cents per unit includes one off imputation credits of 1 cent per unit associated with the repositioning of the trust as outlined in the Explanatory Memorandum to Unitholders in March 2004. The record date for the second quarter distribution is 3 December with payment date on 17 December.

Macquarie Goodman is also pleased to announce that MGP unitholders will soon be invited to take part in a Distribution Reinvestment Plan giving unitholders the option to exchange distributions for units in MGP. While the units will not be offered at a discount, unitholders will enjoy the benefit of acquiring more units in MGP without incurring brokerage fees. The details of this offer will be sent out in booklet form to unitholders shortly.

Macquarie Goodman (NZ) chief executive John Dakin said total operating revenue for the six months to September 30, fell 2.8% from the previous corresponding period to $10.7 million, following the sale of Unisys House and South City Shopping Centre. This was partially offset, however, by the purchase of the Fletcher Site.

Mr Dakin said during the year MGP had actively sought new properties in line with its new strategy to complement its portfolio and provide strong returns and/or development potential. MGP now has 18 properties owned in joint partnership with Australian co-ownership partner Macquarie Goodman Industrial Trust (MGI). Total assets rose from $225.6 million to $230.3 million in the six months from March 31, 2004.

MGP’s share in these investments totalled approximately $77.0 million. This includes the purchase of Savill Link in Otahuhu for $17.2 million, Fletcher Site in Penrose for $36.0 million, HP House in the Viaduct Harbour for $12.9 million and the HSBC Building in Albany for $11.0 million, which settled after the reporting period.

“Customer interest in Savill Link has been strong with demolition work now well under way,” Mr Dakin said. Stage 1 works on the 26.5 hectare site is scheduled to commence in 2005.

The purchase of the Fletcher Site in Penrose increased MGP’s footprint in Penrose where the trust’s presence already includes the Central Park Corporate Centre, the Millennium Centre, and The Gate Industry Park.

HP House is a modern and high quality building with well established cornerstone customers HP and Bayleys Real Estate, while the purchase of the HSBC Centre has strategically placed MGP in the rapidly expanding industrial and commercial development area of Albany.

To fund these acquisitions, Macquarie Goodman completed an institutional placement in early May 2004, raising $20.9 million. At the beginning of the financial year, MGP also negotiated a revolving credit facility totalling $150 million on favourable terms with Westpac Banking Corporation and the Commonwealth Bank of Australia.
Disposals

As part of Macquarie Goodman’s plan to refocus the trust’s portfolio, the last of two planned property divestments was settled. The South City Shopping Centre in Christchurch was sold for $40 million in May to Multiplex, and the transaction was settled in early September. The sale of MGP’s other non-core property - Unisys House in Wellington - was settled at the end of April. Both sales were at premiums to book value.

While MGP initially indicated to the market at the beginning of the year that it would divest non-core asset Panasonic House in Wellington, Macquarie Goodman’s recent lease success with the asset has caused us to reconsider, and we now plan to retain this property at least for the medium term.

Leasing Activity

Leasing activity has been strong during the past six months with the overall occupancy rate increasing from 98.3 per cent to over 99.2 per cent currently. This has improved yields for several properties within our portfolio. Property refurbishments and business confidence has helped fill the little vacant space MGP has left in its portfolio. In the six months to September 30, MGP secured commitments for 45,573 square metres of space, or 16.3 per cent the portfolio. This was achieved through a combination of 28,559 square metres leased by existing customers, and 17,014 square metres leased by new customers.

Leases were secured with several major customers during this period. These included the lease of 8,714 square metres of warehouse office and canopy space at the Gate Industry Park to Toll Holdings Limited. The lease commenced in April of this year, contributing an annual rental of $0.54 million.

In April Macquarie Goodman also successfully completed the leasing of 2,334 square metres of the Kodak and Ricoh Buildings in Parnell, Auckland to Travelplan Holidays. An air bridge built to link the two adjacent buildings was instrumental in securing the expanding Travelplan Holidays business. Occupancy at Kodak House is now 92.5% while Ricoh House has no vacancy, both buildings have annual rentals of $0.8 million.

Fonterra has also agreed to renew its lease of 2,812 square metres at Central Park from December. Together with 170 carparks total rental is $0.84 million a year.

Other major leasing deals completed in this half year involved key customers Yates New Zealand who extended their premises and signed a new lease for five years, and BJ Ball Papers also agreed to renew their premises at The Gate Industry Park for four years.

Refurbishment and Renovations

Macquarie Goodman has pro-actively initiated refurbishment and re-development of properties across the portfolio in the past half year.

A total foyer makeover was completed in the IBM Building in central Auckland in September this year. We have also undertaken extensive ongoing landscaping, foyer, lift, and signage upgrades for the Central Park Corporate Centre, in conjunction with the construction of a new childcare centre, gym and café. These enhancements will make the park an even more attractive location for businesses and their employees and has helped boost occupancy levels in the the park since Macquarie Goodman first bought the property two years ago from about 72 per cent to near full occupancy today.
The exterior and interior refurbishment of the Kodak Building in Parnell was also successfully completed in September with leasing interest for the remaining vacant space left in the building strong.

Finance Information

Due to the impending introduction of International Financial Reporting Standards ("IFRS") in New Zealand and the effect that they will have on the way that MGP accounts for deferred tax, MGP has elected to not claim depreciation in respect of property acquisitions and developments acquired from 1 April 2004. While this will result in increased taxation payable by MGP, the gross distribution payable to unitholders will be unaffected due to the corresponding increase in the amount of imputation credits available to unitholders.

Future Outlook

Despite predictions that the property sector will experience pressure over the next year, New Zealand listed property trusts have continued to perform consistently in the investment market.

We expect current high levels of business and consumer confidence to continue to positively influence the commercial and industrial property sector. Business demand for high quality, well managed properties remains strong and is expected to continue in the medium term.

Macquarie Goodman (NZ) has already made significant progress towards achieving the strategic goals we set out at our inception. Our intention is to remain focused on delivering our strategy of being a leader in the industrial/office space sector of the New Zealand property market.

I look forward to reporting further results of this at the conclusion of this defining financial year.

Hon Jim McLay
Chairman
Macquarie Goodman (NZ)

Macquarie Goodman Property Trust Overview

Macquarie Goodman Property Trust (“MGP”) owns 18 properties including warehouse and distribution centres, industrial estates, and business and office parks in New Zealand. The portfolio is split in ownership between two listed trusts, namely MGP, and Macquarie Goodman Industrial Trust (MGI) which is listed on the Australian Stock Exchange.

As at 30 September the combined assets of MGP and MGI total $467.1 million, of which MGP owns $225.7 million excluding the purchase of HSBC which settled outside the period and including the 100 per cent ownership of Panasonic House.

Below is a list of the properties and developments:

Auckland

HSBC Centre, Albany*
Nestle Building, Wiri
Millennium Centre, Greenlane
IBM Centre, Auckland
BTI House, Newmarket
Vector House, Newmarket
EDS Building, Mt Wellington
Windsor Court, Parnell
Ricoh Building, Parnell
Kodak Building, Parnell
Auckland Distribution Centre, Wiri
The Gate Industry Park, Penrose
Penrose Industrial Estate, Penrose
Central Park Corporate Centre, Greenlane
HP House, Auckland
Savill Link, Otahuhu
Fletcher Head Office, Penrose

Wellington

Panasonic House, Wellington

* Settled outside the first half to September 30, 2004.

For further information please visit the Macquarie Goodman website on www.macquariegoodman.co.nz

© Scoop Media