GMT Announces Interim Financial Result

10 November 2010
For immediate Release
 
 
GMT Announces Interim Financial Result
 
Goodman (NZ) Limited, the manager of Goodman Property Trust (“GMT” or “Trust”) is pleased to announce the Trust’s interim financial result for the six months ended 30 September 2010.

The operating result is consistent with the previous corresponding period and within the guidance range provided in May 2010.

Key highlights include:

+        After tax distributable earnings of $37.3 million or 4.30 cents per unit.

+        After tax profit of $30.9 million (excluding tax depreciation changes).

+        Issue of a seven year, $45.0 million wholesale bond. 

+        Renegotiating debt facilities of $331.0 million well before expiry (GMT’s proportionate share $218.5 million).

+        Acquired the balance of Show Place Office Park in Christchurch for an equity investment of $23.0 million.

+        Leasing over 45,000 sqm of industrial and business space to new and existing customers.

+        Achieving an average occupancy rate of 95% and a weighted average lease term of 5.5 years across the investment portfolio.

Changes to tax legislation, removing the ability to depreciate buildings for tax purposes, resulted in a $131.7 million deferred tax charge. This one-off, non-cash accounting adjustment results in an after tax loss of $100.8 million being recorded.

Result Overview

Operating revenue of $53.1 million compares with $53.5 million in the previous corresponding period. The relatively stable performance, in a persisting low growth economic environment, reflects the robustness and scale of GMT’s $1.5 billion property portfolio with recent development completions and one acquisition largely offsetting the impact of earlier asset sales. 

While the Trust’s quantum of debt has remained stable, higher financing costs have contributed to the 3.1% reduction in after tax distributable earnings from the $38.5 million recorded in the previous corresponding period.

John Dakin, Chief Executive of Goodman (NZ) Limited (“GNZ”) said, “It has been a very active six months and delivering after tax distributable earnings of $37.3 million or 4.30 cents per unit is a pleasing result, consistent with our expectations and market guidance.”

Before accounting for the deferred tax charge due to building depreciation changes, after tax profit was $30.9 million compared to $13.2 million recorded in the previous corresponding period.

Deferred Tax Charge

Changes to tax legislation, which included the removal of tax deductions for building depreciation, were announced by the Government in May 2010. The changes impact on all commercial property owners, including listed entities like GMT.

The change will increase the amount of tax paid by the Trust from 1 April 2011 and also result in a one-off adjustment to its deferred tax liability. The $131.7 million adjustment is the tax effect of the portfolios’ remaining depreciable tax base.

Keith Smith, Chairman of Goodman (NZ) Limited said, “GMT has recorded a solid operational performance and what should be a strong profit result of $30.9 million has been impacted by an accounting adjustment, required under NZ IAS 12 Income Taxes, that has resulted in an after tax loss of $100.8 million being recorded.”

The deferred tax liability will not result in any payment of tax under current tax legislation and will have no impact on GMT’s operating profitability, cashflows or distributions but it does contribute to a reduction in net tangible asset backing to 82.3 cents per unit.

Adjusted net tangible assets per unit, which includes the reversal of this accounting adjustment, are 99.4 cents per unit compared to 99.2 cents per unit at the year end.

Capital Management

The Trust has maintained a strong balance sheet through prudent capital management.  During the period, further initiatives were undertaken to diversify and extend the Trust’s capital base. These included:

+        Renegotiating debt facilities of $331.0 million well before expiry (GMT proportionate share $218.5 million).

+        Issue of a seven year, $45.0 million wholesale bond.  

+        Underwrite of the Distribution Reinvestment Plan for the September Quarter raising $17.0 million of new equity to fund new development commitments.

The refinancing and bond issue increases the overall tenor of GMT’s debt facilities by more than a year, with the average remaining term on drawn debt now 3.3 years.

John Dakin, said, “GMT has a very active capital management programme and the variety of funding sources it can access reflects the strength of its balance sheet. The underwrite of the Distribution Reinvestment Plan for the September quarter has also facilitated the growth of the business, allowing us to match additional equity funding to new development opportunities.”

At 30 September 2010, the total level of debt within the portfolio equates to 37.0% of property assets, within the targeted 35% to 40% range.

Portfolio Performance

Active management and a continuing focus on customer relationships has supported the stable operating performance with the Trust achieving an average occupancy rate of 95% over the preceding six months and a weighted average lease term of 5.5 years at 30 September 2010.

Key portfolio highlights include:

+        Leasing over 45,000 sqm of industrial and business space equating to approximately $8.0 million of annual rent.

+        Managing the impact of the Canterbury earthquakes ensuring the safety of customers and the continuation of their business operations.

+        Following its interim balance date, the Trust also announced two new development commitments totalling 6,900 sqm to Downer Limited and Bridgestone New Zealand Limited.

In its first acquisition since 2008, GMT acquired the balance of Show Place Office Park in Christchurch from its joint venture partner for an equity investment of $23.0 million.  The purchase of the premium office estate and associated development land includes a deferred settlement arrangement with the consideration being a combination of GMT units and cash.

Earnings and distributions

Earnings guidance of 8.6 to 8.8 cents per unit was provided in May 2010. The Board expects the full year result to be around 8.6 cents per unit, reflecting the low growth operating environment and the impact of recent refinancing and investment activity.

Under the Trust’s distribution policy, this earnings guidance equates to a full year cash distribution of 7.74 cents per unit.

A second quarter cash distribution of 1.935 cents per unit has been declared and there are no imputation credits attached. The record date for the distribution is 2 December 2010 with payment to be made on 16 December 2010.

Eligible Unitholders will again have the opportunity to participate in the Trust’s Distribution Reinvestment Plan which operates with a 2% discount. Any amendments to their participation should be advised to the registrar, Computershare Investor Services by 5:00pm on the record date.
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