28 May 2020

Goodman Property Trust's profits fall with property values

12:29 pm on 28 May 2020

Falling commercial property values have taken the shine off Goodman Property Trust's full year profit.

Auckland CBD Aerial view

Photo: 123rf

The property investment firm's net profit for the year ended March fell 18 percent to $261.9 million, which reflected a valuation gain of $165.8m, compared with $201.9m the year earlier.

"While the economic outlook has deteriorated rapidly over the last three months as a result of Covid-19, the quality of the Trust's $3.1 billion portfolio, its focus on the industrial sector and low level of gearing will enable it to respond to future challenges and opportunities," chair Keith Smith said.

GMT's investment strategy in recent years had been focused to meet increased demand for warehouse and distribution space across Auckland.

Revenue from operations rose 10.7 percent to $171.8m, with 99.4 percent occupancy and a weighted average lease term of 5.5 years as of 31 March.

It maintained a strong balance sheet with $400m liquidity.

"Despite the uncertain operating environment, customer demand in the online, logistics, food, consumer goods and digital economy, continues to support our portfolio fundamentals and targeted development activity," chief executive John Dakin said, adding most of its tenants had continued to operate as essential services under under Alert Level 4.

"Investing in the supply-constrained Auckland industrial market has delivered strong returns for unit-holders and demonstrated the trust is uniquely placed to benefit from the rapid growth in e-commerce and the critical role the city's industrial sector plays in the national supply chain," he said.

It completed $158.6m of projects during the year, with $101m of projects underway and another $50m or so on the drawing board.

It also bought the TAG Global facility in Mt Wellington in the past year for $65m, with the purchase of a $13m neighbouring property settling after the full year balance date.

Dakin said the trust expected earnings for the year ending 2021 to be in line with the 2020 result at 6.2 cents per unit.

The trust would distribute 6.65 cents per unit to shareholders in the year just ended, which represented about 107 percent of its total cash earnings of 6.22 cents a unit.

However, the 2021 payout would drop to at least 5.3 cents a unit, as the board revised down its target payout ratio to between 80 and 90 percent of cash earnings.

"The business is responding to the disruption caused by Covid-19 and we're adapting our approach to ensure GMT's stable cashflows and strong financial position are maintained," Dakin said, adding the firm continued to reinvest in the existing portfolio as well as negotiating new development opportunities.