full year results+ - goodman
TRANSCRIPT
Contents+ Section 01 Overview+ Section 02 Financial overview+ Section 03 Investment portfolio+ Section 04 Investment activity+ Section 05 Development portfolio+ Section 06 Outlook+ Appendices
2
Overview
3
Portfolio
+ Portfolio occupancy of 96% and a weighted average lease term of 5.4 years achieved at 31 March 2012
+ Over 155,000 sqm of space leased across GMT’s investment portfolio
+ Devaluation of $19.5 million or 1.2% and a portfolio capitalisation rate of 8.5%
Earnings & Profit
+ $53.5 million before tax profit compared to $43.0 million in pcp
+ $40.5 million after tax profit compared to $36.7 million in pcp
+ Distributable earnings before tax of $80.9 million or 8.41 cpu ($77.5 million or 8.74 cpu, pcp)
+ Distributable earnings after tax of $74.8 million or 7.78 cpu ($78.0 million or 8.79 cpu, pcp)
+ Net property income increased by 2.4% to $111.3 million
+ Development commitments totalling $64.2 million across 49,615 sqm of space in FY12
+ Seven development completions encompassing 39,250 sqm achieved in FY12
+ Further development commitment to Frucor Beverages Limited post balance date
Development
+ Loan to value ratio of 35.7% and interest cover ratio of 2.5 times
+ Weighted remaining term across all debt facilities now 3.1 years
+ $132.0 million of refinancing completed ($106.0 million GMT proportionate share)
+ $63.4 million of equity raised through operation of DRP
+ Asset sales to provide additional flexibility
Capital Management
Financial performance
5
12 months ended March 12$ million
March 11 $ million
Change %
Distributable earnings before interest and tax 102.8 101.1 1.7
Interest (21.9) (23.7) 7.6
Distributable earnings before tax 80.9 77.5 4.4
Tax on distributable earnings (6.1) 0.5 1,320.0
Distributable earnings after tax 74.8 78.0 (4.1)
Revaluation Loss (19.5) (24.8) 21.4
Other non-cash items (14.8) (16.5) 10.3
Profit after tax 40.5 36.7 10.4
Note: Values in table above may not appear to sum accurately due to rounding.
Financial position
6
as at March 12$ million
March 11 $ million
Change %
Total assets 1,674.3 1,618.0 3.5
Property assets 1,629.5 1,576.0 3.4
Net borrowings 581.2 578.4 0.5
Liabilities 739.2 725.9 1.8
Equity 935.1 892.1 4.8
Net borrowings to property assets (%) 35.7 36.7 n/a
NTA per unit (cpu) 92.9 94.8 (2.0)
Adjusted NTA per unit (cpu)1 95.4 97.3 (2.0)
Note: Values in table above may not appear to sum accurately due to rounding.
1 Adjusted for derivative financial instruments (net of tax)
Net tangible assets
8
Cents per unit NTA
NTA at 31 March 2011 94.8
Retained earnings 1.1
DRP 0.2
Devaluation (2.0)
Mark to market swaps (0.2)
Deferred tax (1.0)
NTA at 31 March 2012 92.9
Derivative financial liability (net of tax) 2.5
Adjusted NTA at 31 March 2012 95.4
Capital management+ Prudent management
- Loan to value ratio of 35.7% remains at the lower end of the Board’s targeted 35% to 40% band
- Interest cover ratio of 2.5 times1
+ Trust deleveraged by 1% over the year (on an LVR basis) with the quantum of debt static around $580 million
+ New development opportunities continue to be matched to new equity- Distribution Reinvestment Plan raised $63.4 million at premium to NTA
+ Future asset sales will provide additional flexibility
91 Main GMT facility
Capital management+ GMT is currently 72% hedged with an average term of 2.7 years across its
swap book+ Positioned towards the bottom of the policy band, taking advantage of
lower floating rates+ Effective interest rate in FY12 was 7.75%
10
GMT Hedging profile – % hedged
Capital management+ Further refinancing completed in FY12
- $80.0 million tranche of the Trust’s main bank facility renewed for a further five years - $52.0 million amalgamation and extension for 5 years across GMT’s Viaduct
Corporate Centre joint venture ($26.0 million GMT proportionate share)+ Weighted term across all debt facilities at 31 March 2012 is 3.1 years
11
GMT debt facilities maturity profile - $millions
Earnings outlook+ The current business environment is likely to persist in the short term with only
modest economic growth anticipated over the next 12 months. + The Trust is expected to deliver similar results under these conditions maintaining
a cash distribution at 6.25 cpu, around 80% of distributable earnings after tax+ Future earnings growth dependent on strength and timing of economic recovery,
but remains sensitive to: - Rental growth - Interest rate movements- Investment and development activity- Capital management initiatives
12
Portfolio leasing
+ Over 155,000 sqm of space leased on new and revised terms in FY12- This new leasing equates to $18.3 million of portfolio income or 15.8% of portfolio
NLA + On average, 138,000 sqm of space has been secured per annum across the stabilised
portfolio over the last 6 years as a result of active management 14
Space leased - NLA1 sqm Key leasing deals completed in FY12
Property Customer NLA1
sqmComm.
DateTermyears
Highbrook Business Park
DHL Supply Chain NZ
31,630 Sept 2011 5
Highbrook Business Park
McPhersons Consumer Products
7,516 Sept 2015 3
Westney Industry Park Cotton On Clothing NZ
8,412 May 2012 10
Highbrook Business Park
National Aluminum
3,467 Mar 2012 10
The Gate Industry Park FEL Group 3,986 Jan 2012 12
M20 Business Park Kuehne+Nagel 2,306 Apr 2012 2
Total 57,317 6.0
1 Net lettable area (net of canopies and yard)
Portfolio occupancy
+ Portfolio occupancy of 96% at 31 March 2012+ Portfolio rental growth remains flat+ Focus on leasing up vacant space
15
Property Tenancy NLA1
sqmDate
became vacant
M20 Business Park Warehouse/office 5,803 Sept 2011
The Gate Industry Park Warehouse/office 1,903 Nov 2009
The Gate Industry Park Warehouse/office 1,750 Aug 2010
Connect Business Estate Office 1,878 Jan 2012
Central Park Corporate Centre Office 662 May 2009
Central Park Corporate Centre Office 663 Sept 2011
Other Various 25,762
Total 38,421
1 Net lettable area (net of canopies and yard)
Portfolio occupancy – portfolio income (%) Key vacancies
Portfolio expiries
16
Lease expiry profile – portfolio income (%)
Property Customer NLA1
sqmExpiry
Connect Business Estate Fletcher Building 1,609 June 12
Gateside Industry Park Toll 8,031 Sept 12
M20 Business Park Ford 9,112 Oct 12
Savill Link Toll 8,051 Jan 12
Central Park Wood & Partners 1,034 Feb 13
Connect Business Estate Fletcher Building 5,084 Mar 13
Total 32,921
Key customer expiries – FY13
+ Weighted average lease term of 5.4 years at 31 March 2012 - WALT of 5.8 years across GMT’s industrial assets- WALT of 4.7 years across GMT’s office assets
+ 8.4% of income due to expire in FY13
1 Net lettable area (net of canopies and yard)
Valuations+ Annual devaluation of $19.5m compared to $24.8m in FY11
- The investment portfolio recorded its first gain since 2008 with an increase of $3.8m or 0.3%
- The development portfolio declined by $23.2m or 11.6%+ Portfolio capitalisation rate firmed by 10bps to 8.5%+ Remains 2.6% over-rented
17
Valuation Summary March 2012$m
Valuation gain/loss
Annual change %
Weighted cap rate
%
Cap rate shift %
Office portfolio 527.1 (1.1) (0.2) 8.75 0.03
Industrial portfolio 925.9 4.9 0.5 8.35 (0.21)
Development portfolio 176.4 (23.2) (11.6) - -
Total 1,629.5 (19.5) (1.5) 8.5 0.10
Note: Values in table above may not appear to sum accurately due to rounding.
18
Operating costs
+ Goodman is pro-active in managing the operating expenses of its buildings+ Any increase impacts on the total occupancy costs of its customersInsurance+ Portfolio insurance is sourced locally utilising Goodman Group’s global purchasing
power + The cost of insuring the Auckland portfolio has fallen from $3.04m to $2.90m while
the sum insured has risen from $1.53bn to $1.63bn+ For Christchurch the premium has increased from $0.34m to $0.56m while the sum
insured has increased by 32%+ The portfolio premium represents 0.19% of the sum insured compared to 0.21% last
year.Rates+ Supercity merger has created significant rating increases for certain types of
property in particular locations+ The GMT portfolio has been less impacted than retail or CBD office portfolio’s+ Submissions have been made to the to Supercity on the level of rates and
development contributions being proposed in the long term plan
20
NZ investment market activity
+ Improved transaction volumes in the second half of 2011- 58 sales totalling $818 million in 2H 2011 compared to 39 sales totalling
$478 million in 1H 2011.+ More interest from both vendors and purchasers + Investment activity maintained into 2012 with institutions active
Source: CBRE Research
Total Investment Sales Value - $5 million+
21
Sale of non-core assets
+ Strengthening investment market with interest from local & offshore investors+ GMT portfolio has received unsolicited offers with $35 million of assets under
conditional contract + Recycling of capital will ensure GMT can take advantage of investment and
development opportunities as the economy recovers
Development update
+ Significant increase in development activity over the last 15 months - 49,615 sqm of commitments totalling $64.2 million versus 11,485 sqm or $18.3
million in FY11+ Visible signs of improved economic conditions with increased levels of enquiry
- 17,150 sqm of development already committed in 1H 2013
23
GMT development activity – NLA1 sqm
1 Net lettable area (net of canopies and yard)2 Reflects FY13 YTD development commitment to Frucor Beverages Limited
Development activity – FY12
Customer NLA1
sqmLease term
years Ownership
% Total Cost2
$mcompletion
date
The Crossing Stage One,Highbrook Business Park 9,800 6 - 10 50 21.83 June 2013
Super Cheap Auto (New Zealand) Pty Limited,Savill Link 20,530 10 100 24.0 Complete
Scalzo Food Industries Limited, Highbrook Business Park 4,950 10 50 3.5 Complete
Panasonic New Zealand Limited,Highbrook Business Park 7,500 10 50 6.4 February 2013
National Aluminium Limited (extension),Highbrook Business Park 2,250 10 50 2.2 Complete
Stanley Black & Decker NZ Limited,Highbrook Business Park
3,500 8 50 2.9 August 2012
Big Chill Distribution (extension), Glassworks Industry Park
1,085 15 100 3.5 October 2012
Total 49,615 64.2
24
Note: Values in table above may not appear to sum accurately due to rounding1 Net lettable area (net of canopies and yard)2 Reflects GMT’s interest 3 Includes $4.2 million (GMT’s 50% interest) of works attributable to future stages
Recent development completions
25
Customer Super Cheap Auto
NLA1 20,560 sqm
Lease term 10 years
Ownership % 100
Total project cost $m 24.0
Development timeframe June 2011 – March 2012
Customer Scalzo Food Industries
NLA1 4,950 sqm
Lease term 10 years
Ownership % 100
Total project cost $m2 6.9
Development timeframe June 2011 – March 2012
Savill Link Highbrook Business Park
1 Net lettable area (net of canopies and yard)2 GMT’s interest is $3.45 million
26
Highbrook update
+ Construction well underway- Driven and bored piles completed - First stages of basement slab pour complete - Precast panels to basement structure being stood onsite
+ Good levels of enquiry from retail and amenity customers
Customer NLA1
sqmTerm years
Quest branded serviced apartment 3,000 10
New Zealand Post 250 9
Westpac 345 6
Hollywood Bakery 345 8
Wynyard Wood 635 9
Vacant 5,225 -
Total 9,800
Leasing progressThe Crossing - Stage One
1 Net lettable area (net of canopies and yard)
Frucor beverages
27
NLA1 17,150 sqm
Lease term 10 years
Total project cost $m 22.3
Expected Completion March 2013
M20 Business Park
1 Net lettable area (net of canopies and yard)
+ Post balance date commitment + More than 50,000 sqm of
development undertaken at M20+ Estate now 84% complete
29
Development strategy
+ Development activity over the last 2 years has been more than 90% pre-committed+ Prudent strategy in that environment+ Improving economic conditions are expected to drive a strengthening development
business into the future
Strategy going forward+ Accelerate development programme+ Key influencing factors
- Cyclical low in building costs- Improving occupancy in key markets
+ Continue design-build activity+ Produce uncommitted product at certain estates
30
Construction pricing+ Construction pricing remains extremely competitive, tenders are regularly 8-
10% below quantity surveyor estimates+ Recent tender at Highbook was almost 20% below expectations, with the top
3 bids within a tight $50,000 range on a $5.1 million contract + Suppliers and contractors absorbing price increases and cutting margins, as
forward work books are extremely light+ Pricing of concrete, labour and steel has plateaued+ Christchurch rebuild has been delayed and Wellington seismic work is low
intensity- Potential to escalate pricing as greater volume of work commences
32
Outlook and summary
Capital management
+ Weighted average debt term of 3.1 years with next expiry in FY14
+ Equity, bank debt and bond markets are all future funding options
+ Asset disposals underway, DRP proven way of raising equity - cost effective and timely
Strategy
+ Continuing focus on customer relationships and maximising the rental streams from the portfolio
+ Accelerating the development programme to take advantage of current conditions
+ Equity fund new investment and development opportunities
Summary
+ Property markets are strengthening but it remains a highly competitive operating environment
+ Consistent operating results are expected to continue
+ FY13 cash distribution maintained at 6.25 cpu, around 80% of distributable earnings after tax
Outlook
+ Low growth economic environment expected to continue through FY13
+ Competitive leasing market also restricting rental growth
+ Medium to longer term growth prospects more positive
+ Investment returns strengthening as investors covet prime defensive assets
+ Higher levels of development activity dependent on business confidence being maintained
Important Notice This presentation has been prepared by Goodman (NZ) Limited as the manager of Goodman Property Trust (“GMT”). The details in this presentation provide general information only. It is not intended as investment or financial advice and must not be relied upon as such. You should obtain independent professional advice prior to making any decision relating to your investment or financial needs. This presentation is not an offer or invitation for subscription or purchase of securities or other financial products. Past performance is no indication of future performance. All values are expressed in New Zealand currency unless otherwise stated. May 2012.
Goodman NZ Limited, Queen Street office
Thank you+
Appendix – GMT financial performance
34
Period ended March 12$ million
March 11$ million
March 10$ million
March 09$ million
March 08$ million
Net rental income 111.3 108.7 106.2 103.7 95.8
Administrative expenses (8.5) (7.6) (6.8) (7.3) (6.3)
Distributable earnings before interest and tax 102.8 101.1 99.4 96.4 89.5
Interest (21.9) (23.7) (20.2) (9.4) (16.1)
Distributable earnings before tax 80.9 77.5 79.2 87.0 73.4
Tax on distributable earnings (6.1) 0.5 (1.7) (3.2) (4.7)
Distributable earnings after tax 74.8 78.0 77.5 83.8 68.7
Gain/(loss) on disposal of property - 0.2 (2.1) (0.2) 1.6
(Loss)/gain on interest rate derivatives (2.9) (5.4) 13.2 2.3 -
Revaluation movement (19.5) (24.8) (49.9) (172.8) 28.9
Deferred tax (6.9) (6.9) (8.0) 12.8 0.1
Performance fee - - (3.5) - -
Changes in cash flow hedge reserve (3.8) (4.2) (24.4) - -
Interest in deferred settlements (1.2) (0.9) - - -
Net gain resulting from business combination - 0.6 - - -
Profit after tax 40.5 36.7 2.8 (74.1) 99.3
Weighted average units on issue 961.1 887.4 851.2 838.8 693.8
Distributable earnings before tax per unit (c) 8.41 8.74 9.31 10.38 10.59
Distributable earnings after tax per unit (c) 7.78 8.79 9.10 10.00 9.90
Less retained earnings per unit (c) 1.53 1.05 0.60 - -
Cash distributable earnings per unit (c) 6.25 7.74 8.50 10.00 9.90
Note: Values in table above may not appear to sum accurately due to rounding.The 2010 year result has been restated following a change in the Trust’s accounting policies. GMT is an early adopter of the amendment to NZ IAS 12 Income Taxes.
Appendix – GMT assets and liabilities
35
as at March 12$ million
March 11$ million
March 10$ million
March 09$ million
March 08$ million
Total assets 1,674.3 1,618.0 1,510.4 1,561.6 1,600.2
Property assets 1,629.5 1,576.0 1,474.1 1,512.7 1,550.8
Net borrowings1
581.2 578.4 544.7 546.0 418.9
Total Liabilities 739.2 725.9 656.3 659.4 514.4
Equity 935.1 892.1 854.1 902.2 1,085.8
Underlying net borrowings to property assets (%) 35.7 36.7 36.9 35.3 27.2
NTA per unit (cpu) 92.9 94.8 98.3 105.6 129.0
Adjusted NTA per unit (cpu)2
95.4 97.3 100.4 106.0 129.3
Unit price (cents) 103.5 93.0 100.0 133.0 160.0
Note: Values in table may not appear to sum accurately due to rounding.The 2010 year result has been restated following a change in the Trust’s accounting policies. GMT is an early adopter of the amendment to NZ IAS 12 Income Taxes.
1Total borrowings net of cash
2Adjusted for derivative financial instruments (net of tax)
Appendix - GMT debt facilities
36
GMT Debt Expiry Profile Total Facility GMT Share Facility Remaining Term
as at 31 March 2012 $ million $ million Expiry years
GMT Main Facility Tranche A 80.0 80.0 Oct-16 4.6
GMT Main Facility Tranche B 100.0 100.0 Dec-15 3.8
GMT Main Facility Tranche C 150.0 150.0 Apr-13 1.1
Highbrook Development Tranche A 75.0 37.5 Oct-13 1.5
Highbrook Development Tranche B 150.0 75.0 Oct-15 3.5
Viaduct Corporate Centre 52.0 26.0 Dec-16 4.7
Show Place Facility 31.0 31.0 Sep-13 1.5
Bank Facilities 638.0 499.5 2.8
GMT Retail Bond 150.0 150.0 Jun-15 3.2
GMT Wholesale Bond 45.0 45.0 Sep-17 5.5
Total Bond Issuance 195.0 195.0 3.7
Total Debt Facilities 833.0 694.5 3.1
Appendix – GMT portfolio metrics
37
1 Net lettable area (net of canopies and yard)2 Weighted average lease term as at 31 March 2012
Top ten customers - portfolio income (%) Customer industry exposure - portfolio income (%) Asset diversity – property value (%)
The charts above represent the portfolio as at 31 March 2012 upon completion of commenced developments
as at March 12$ million
March 11$ million
March 10$ million
March 09$ million
March 08$ million
NLA1
(sqm) 987,569 928,420 896,440 880,016 839,438
Weighted average capitalisation rate (%) 8.5 8.6 8.6 8.7 8.0
Portfolio occupancy (%) 96 97 96 96 97
WALT2 (years) 5.4 5.6 5.8 5.9 6.0
Customers 246 225 217 236 242
Appendix – GMT investment portfolio
381 Net lettable area (net of canopies and yard)2 Valuations have not been adjusted to reflects GMT’s interest 3 Weighted average lease term at 31 March 2012
Property GMT
ownership %
NLA1
sqmValuation2
$M Market cap
rate %Occupancy
%WALT3
yearsKey Customers
Highbrook Business Park
+ HDL Assets 50 157,266 292.8 7.00 - 8.50 100 7.8 PaperLinX, Datamail, GEON, NALCO, Scalzo
+ HBPL Assets 75 83,219 153.0 7.50 - 8.63 98 7.1 DHL, McPherson's, Big Chill, BMW, NZ Post
M20 Business Park 100 82,957 110.6 7.38 - 8.49 92 5.8 Frucor, Ford, ACC, Kmart, Bridgestone
Connect Business Estate 100 31,204 47.5 9.25 94 3.1 Fletcher Building, Synovate
The Gate Industry Park 100 79,760 127.0 8.00 95 6.9 FEL Group, Tapper Transport, Recall, SCA
Westney Industry Park 100 102,572 105.4 9.00 - 9.25 100 4.2 Linfox, SCS, Toll, Cotton On, Pacnet
Savill Link 100 76,817 98.0 7.75 - 8.75 100 4.5 Toll, USG, Holden, Super Cheap
Enterprise Park 100 61,289 47.0 9.25 77 4.1 PMP, Mainstream, Bikes International
Penrose Industrial Estate 100 30,945 37.0 8.75 87 4.2 Turners Auctions, Vehicle Safety Systems
Gateside Industry Park 100 17,861 26.0 8.25 100 4.5 TNL, Toll, Metropack and Port of Tauranga
120 Pavilion Drive 100 6,762 7.8 9.00 93 0.2 UPS
Viaduct Corporate Centre 50 31,198 151.0 8.38 - 8.63 98 5.0 Vodafone, KPMG, Microsoft. HP
Central Park Corporate Centre 100 33,307 112.2 9.25 91 3.7 Armourguard Security, SIMPL Group, Fairfax
Millennium Centre Phase Two 100 19,814 66.5 8.75 97 3.3 Spotless Services, MWH, Pharmacy Brands
Air New Zealand House 100 15,587 61.2 8.75 100 7.3 Air New Zealand
Millennium Centre 100 15,526 55.6 9.00 100 4.6 Mighty River Power, Genesis Energy, Bridgestone
Yellow HQ 100 8,177 32.2 8.25 94 7.5 Chevron, Yellow Pages, Hollywood Bakery
OnGas House 100 4,774 18.9 8.5 80 3.8 Vector, BTI, SMEC New Zealand Limited
Vector Centre 100 4,821 19.7 8.13 100 8.6 Vector
Southpark Industrial Estate 100 21,921 21.0 9.75 100 2.4 Bullet Freight, Halls Refrigerated Transport
Glassworks Industry Park 100 30,729 25.2 8.75 99 5.9 Fisher & Paykel, NZ Safety, Big Chill , Downer
Show Place Office Park 100 22,395 85.3 8.75 100 4.6 IAG NZ, Solid Energy, Transpower, Holcim
Carter Holt Harvey 100 20,381 12.2 10.75 100 4.4 Carter Holt Harvey
Total 959,283 1,713.1 8.5 96 5.4
Appendix – GMT current active developments
39
1 Net lettable area (net of canopies and yard)2 Valuations have not been adjusted to reflects GMT’s interest 3 Not all developments were sufficiently progressed to be independently valued at 31 March 20124 Announced post balance date
Property GMT
ownership %
NLA1
sqm
Expected market value on
completion2,3
$M
Adopted cap rate
%
Occupancy%
Lease term
yearsExpected date of completion
Highbrook Business Park
+ The Crossing Stage 1 50 9,800 35.1 8.50 40 6-10 June 2013
+ Panasonic 50 7,500 13.4 7.50 100 10 February 2013
+ Stanley Black & Decker 50 3,500 6.1 7.25 100 8 August 2012
Glassworks Industry Park
+ Big Chill extension 100 1,085 3.9 8.00 100 15 October 2012
Total 21,885 58.5
M20 Business Park
+ Frucor Beverages 4 100 17,150 24.6 7.75 100 10 March 2013