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GMT Advances Repositioning Strategy

GMT Advances Repositioning Strategy

9 November 2017

Goodman (NZ) Limited, the manager of Goodman Property Trust (“GMT” or “Trust”) is pleased to announce the Trust’s interim result for the six months ended 30 September 2017.

The Trust has continued to take advantage of the positive business environment and has delivered a half-year result consistent with earlier guidance.

Financial and operational highlights include:

+ Operating earnings1 after tax of $51.4 million or 4.0 cents per unit on a weighted average unit basis, compared to $51.0 million in the previous corresponding period.

+ Cash distributions of 3.325 cents per unit, relating to the first six months, representing around 94% of cash earnings2.

+ Profit after tax of $39.5 million compared to $67.6 million previously. The main variance is driven by the recognition of $8.4 million of fair value losses on certain investment properties in this period, compared to gains of $19.8 million last year.

+ Strong leasing with over 70,000 sqm of space secured on new or extended terms. Portfolio occupancy of 97% and an average lease term of 5.8 years.

+ The commencement of six new development projects with a total project cost of $148.7 million3 and yield on additional spend of 8.3%.

+ Further sales success with $229.4 million of assets contracted for sale following the Trust’s interim balance date.

Improving the business

Keith Smith, Chairman of Goodman (NZ) Limited said, “The Board is extremely pleased with the results achieved and the improvements being made to the composition and quality of the Trust’s $2.6 billion property portfolio.”

The progression of the development programme, selective asset sales and targeted acquisitions are all having a positive impact, refining the portfolio and positioning GMT for sustainable growth.

John Dakin, Chief Executive Officer of Goodman (NZ) Limited said, “Development and transactional activity are rebalancing and repositioning the portfolio which is now over 80% invested in the rapidly growing and supply constrained Auckland industrial sector.”

“This investment focus reflects the positive return characteristics of industrial property and the stronger economic drivers of New Zealand’s largest city.”

Further information on the financial result is provided in the Trust’s interim report. The report was released today and is available from a link on the Trust’s website at:

Development and transaction activity raising asset quality

John Dakin said, “Economic growth, demographic changes, technological advances and the development of online retailing, are all contributing to the strong demand for logistics and warehouse space in Auckland.”

The buoyant operating conditions are reflected in GMT’s leasing results with over 70,000 sqm of space secured on new or extended terms since 31 March 2017.

John Dakin said, “To meet current and forecast demand the Trust is also undertaking a greater level of development activity. Six substantial new industrial projects, with a total project cost of almost $150 million, have been announced already this financial year. This volume of new starts is the highest it’s been since 2008.”

Asset sales are facilitating the current investment strategy, providing balance sheet capacity to fund the intensification of the Trust’s development programme.

Two further sales were secured following the interim balance date, they include;

+ the conditional sale of Central Park Corporate Centre for $209 million4.

+ the recently completed Steel & Tube development in Hornby, Christchurch for $20.4 million. The unconditional sale is due to settle in April 2018.

John Dakin, said, “The sale of Central Park is a significant transaction for the Trust. It is the last of the planned major asset disposals and its successful conclusion would complete a substantial rebalancing of the portfolio, focusing investment in the Auckland industrial sector.”

Lower gearing after portfolio repositioning

Asset sales are also providing the Trust with greater financial flexibility.

At 30 September 2017 GMT’s look through loan to value ratio was 32.4%. The low level of gearing provides the Trust with considerable headroom against the 50% maximum allowed under its debt and Trust Deed covenants.

The completion of the $100 million Goodman+Bond offer in May 2017 has also improved GMT’s liquidity and debt diversity position. At 30 September 2017, the Trust had undrawn bank facilities of $260 million.

Following the settlement of both conditional and unconditional sales the Trust’s gearing would reduce to 25.8% and its undrawn bank facilities would increase to over $500 million, on a proforma 30 September 2017 basis.

Sustainable long term growth

Strong leasing results, development progress and further asset sales have been the operational highlights of the first six months of this financial year.

These activities are also improving the financial metrics of the business, de-leveraging the balance sheet and providing substantial funding capacity for the future.

With a stable business outlook, the Trust is expected to deliver full year operating earnings of around 9.1 cents per unit before tax.

Cash earnings of around 7.0 cents per unit are forecast for the year, with cash distributions totalling 6.65 cents per unit expected to be paid.

1 Operating earnings are a non-GAAP financial measure included to provide an assessment of the performance of GMT’s principal operating activities. Calculation of operating earnings are as set out in GMT’s Profit or Loss statement.

2 Cash earnings are a non-GAAP financial measure that assesses free cash flow, on a per unit basis, after adjusting for certain items. Calculation of GMT’s cash earnings is set out in the accompanying result presentation.

3 Total project cost including land allocation, all construction costs, management and other professional fees.

4 The transaction remains conditional on certain factors including Overseas Investment Office approval.


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