Interim Result 2019 Goodman Property Trust
Contents Overview 3 Presented by: John Dakin Chief Executive Officer Andy Eakin Chief Financial Officer James Spence Director Investment Management Financial Summary 5 Portfolio Update 11 Summary & Outlook 20 Appendix 23 Unless otherwise indicated, all numerical data provided in this presentation is stated as at 30 September 2018. All financial information is NZD unless otherwise stated. All figures are rounded. 2
Overview 3
Results overview Continuation of development-led growth improving quality of portfolio and earnings + Cash earnings for period of 3.61 cpu, up 2.3% on 1H18 with developments and underlying portfolio offsetting impact of sales + $209.6 million of development underway across 63,313 sqm. Programme over 50% 1 committed (~70% terms agreed 1 ): further $86.4 million 2 of developments announced following strong leasing results + Acquisition of Roma Road in line with strategy to focus on well-located infill industrial sites Quality industrial portfolio producing strong results + Occupancy maintained at 98.4% with WALE of 5.5 years + Rental growth continuing with strong reversion taking place across all estates + Less capital intensive nature of asset class will continue to benefit GMT over the long-term Capacity for further investment + Major portfolio repositioning complete + Committed gearing of 25.8% 3 provides significant capacity 1 Projects under construction 2 Total project cost including land 3 After all post balance date acquisitions, announced developments and expected settlements 4
Financial Summary 5
Financial highlights $16.8m Movement in fair value of investment property $66.4m Profit before tax 140.2cpu Net tangible asset backing 17.5 % Pro-forma loan-to-value ratio 3.61cpu Cash earnings 3.325 cpu Cash distribution 6
+ Cash earnings guidance of around 7.0 cpu 1 reaffirmed for the full year + First half distributions of 3.325 cpu equate to around 92% of cash earnings + Cash earnings benefiting from development completions and rental growth, offset by disposals and deleveraging Cash earnings Cash earnings ($million) 1H19 Adjusted operating earnings after tax 2 51.7 51.4 1H18 Capitalised borrowing costs land (3.4) (4.7) Maintenance capex (1.6) (1.3) Cash earnings 46.7 45.4 Cash earnings after tax (cpu) 3.61 3.53 Distributions (cpu) 3.325 3.325 Distributions as % of cash earnings 92.1% 94.2% Cash earnings + Manager s base fee paid in cash (cpu) 3.21 3.16 Distributions as % of adjusted cash earnings 103.7% 105.4% 1 Cash earnings guidance assumes WPH sale settles on 31 January 2019 2 GMT is required to cease equity accounting of WPH from the date of contracted sale, however it retains a 51% economic interest until settlement. Adjusted operating earnings incorporates GMT s share of WPH s operating earnings for the period after contracting its sale. Refer to note 4.2 of GMT s Interim Financial Statements 7
+ Active management of portfolio through capital transactions and developments continues to grow GMT s NTA + Pro-forma NTA of 142.6 cpu (including expected gain on sale of WPH) Capital growth + Industrial property continues to perform strongly worldwide with investor demand at record levels Net tangible assets (cents per unit) 142.6 +2.4 140.2 +0.9-0.3 +0.3 138.9 +0.4 FY18 NTA 614-616 Great South Road Complete + substantially complete developments Derivative fair value movement Other 1H19 NTA Expected gain on sale of WPH Pro-forma NTA 8
Balance sheet strength + Conservative gearing level: pro-forma LVR of 17.5% and committed LVR of 25.8% Trust Deed and debt covenants require LVR to be below 50% + Significant capacity for development pipeline and other opportunities + Interest cover ratio of 3.6 times 1 Loan-to-value ratio (Look-through basis, as at 30 September 2018) 25.0% 26.1% +1.7% 25.8% -7.8% +2.9% -0.8% 17.5% +3.7% FY18 LVR 1H19 LVR Sale of WPH Sale of Great South Road properties Pro-forma LVR Committed developments Roma Rd acquisition Development package announced Committed LVR 1 For financial covenant purposes, ICR is 2.7 times, including the cash cost of derivative terminations over the last 12 months. 9
+ Proven capital management programme with continued focus on long-dated core debt + Reduced reliance on bank funding with non-bank debt providing both tenor and, currently, pricing benefits Debt facilities + Refinancing risk managed through appropriate sized tranches + Credit cost risk reduced by utilising multiple sources + Bank facility provides significant operational flexibility + Weighted average debt term to expiry of 5 years 1 Debt maturity profile 2 (NZ$ million, 30 September 2018) USPP notes 100 Domestic bonds Bank facility Bank debt drawn 150 150 150 100 100 100 52 52 52 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 1 Calculated on drawn debt, assuming bank debt utilises longest term facility available 2 Excludes GMT s 51% share of the WPH debt facility 10
Portfolio Update 11
Portfolio highlights $209.6m Projects under development 98.4 $2.3bn % Property portfolio Occupancy 99 % Auckland industrial weighting 22 hectares Remaining development land 5.5 years Weighted average lease term Statistics as at 30 September 2018, prior to new development package announcement 12
Portfolio returns & strategy Re-positioned portfolio producing strong results + 39,055 sqm of leasing completed over period (4.1% of portfolio) + Limited expiry profile going forward with only 7% of portfolio due to expire prior to end of FY20 + Demand for additional space driven by expansion requirements from new and existing customers + Upwards rental pressure continuing: rental increases on reversion events 1 (which accounted for 6% of portfolio income) produced annualised increases of 6.3% portfolio estimated to be around 5% to 6% under-rented Actively managing portfolio to extract value and position for long-term growth + Continuing to monitor potential for higher and better uses across existing sites: 614-616 Great South Road re-zoned and sold for $11.6 million 2 or $3,000 per sqm of land + Additions to portfolio likely to be focused on well-located infill sites with future development, redevelopment or intensification opportunities (e.g. Roma Road) Balance leasing risk across both stabilised and development + Strong portfolio dynamics assisting in continuation of development programme which is largely on a build-to-lease (speculative) basis 1 Leases subject to a leasing event where rental has been reverted to market by way of a new lease, renewal or market review 2 $5.1 million gain over book value recorded as a fair value movement in this period 13
Roma Road + Strategic acquisition complementary to existing portfolio + Very strong distribution location: Portfolio addition direct frontage to SH20 with easy access to CBD and Airport purchasing power of $21.3 billion 1 rivals Penrose as strongest location for delivery to consumer homes + Area identified for intensification and significant government investment + Addition increases property portfolio to $2.4 billion and occupancy to 98.5% $93m Purchase price $710 Per sqm of land area 27 % Site coverage Roma Road, Mount Roskill 1 Annual estimated purchasing power of population that can be reached within a 20 minute truck drive time 14
Highbrook work in progress TOTAL PROJECT COST NET LETTABLE AREA $153.4m 40,763 sqm COMPLETION Nov 2018 July 2019 TERMS AGREED 74.3% 1 MOVE expansion Parade units Plytech Quest Crossing expansion Building 6 carpark Gateway warehouses 1 Where terms agreed via Agreement to Lease, Lease or Heads of Agreement 15
Savill Link work in progress TOTAL PROJECT COST NET LETTABLE AREA $54.3m 22,550 sqm COMPLETION Nov 2018 June 2019 COMMITTED 62.3% Savill Link warehouse NCI development 16
Leasing management + Stabilised portfolio performing strongly with occupancy of 98.4% and limited expiries over next 24 months + Current uncommitted 1 development exposure equates to 2.1% of GMT portfolio + Strong market, strength of portfolio and leasing of developments allows for continuation of programme, accelerating increase in portfolio quality and earnings growth Portfolio Occupancy 98% 98.2% 98.4% 97% 96% Leasing exposure sqm Currently under construction 63,313 Uncommitted 1 19,915 GMT portfolio 961,403 Exposure 2.1% FY15 FY16 FY17 FY18 1H19 1 Where terms not agreed on a development via Agreement to Lease, Lease or Heads of Agreement 17
+ Six new projects across Highbrook and Savill Link totalling 28,000 sqm of industrial space + Caters to variety of demand with smallest being 1,000 sqm and largest 10,000 sqm New projects + Exposure to speculative development remains low, equivalent to approximately 4%-5% of portfolio + Upon completion, Highbrook will be 86% complete and Savill 93% complete + Site works to commence in January 2019 with package subject to acceptable construction pricing $86m Forecast total project cost 8 % -8.5 % Forecast yield on additional spend 28,000sqm Net lettable area 18
+ Remaining land supply 17 ha post announcement of further developments + Supports 86,792 sqm of industrial and commercial development + Yield on additional spend expected to range between 8% to 9% Remaining land + Highbrook represents 79% of remaining land supply + Land weighting continues to fall, sitting < 4% following new developments Land weighting 1 12% 10% 8% 6% 4% 2% 0% FY14 FY15 FY16 FY17 FY18 1H19 1 Post announced development package 19
Summary & Outlook 20
GMT well-positioned to capture upside from global trends impacting industrial real estate Summary + Supply chain pressures with faster and cheaper deliveries required, highlights the importance of locations close to the consumer + GMT s customer base performing strongly providing a number of opportunities for growth + GMT s portfolio located in prime locations that are fast becoming scarce and near impossible to replicate + Acquisition of Roma Road during the period fits with strategy to concentrate investment in areas identified for intensification Outlook + Portfolio quality and strong property market fundamentals support continuation of development programme + Re-iterating expected cash earnings of around 7.0 cpu in FY19, consistent with FY18 + Distributions expected to be maintained at 6.65 cpu for the full year 21
Thank you 22
Appendix 23
Appendix Profit or loss 24
Appendix Balance sheet 25
Appendix Cash flows 26
Appendix Adjusted operating earnings 27
Rent reviews by next review type CPI 21% Market Review 26% Appendix Portfolio metrics Fixed 53% Top ten customers split by subsidiary companies (% of portfolio income) New Zealand Post Group DHL Coda Fletcher Building Limited Fliway Transport Ltd Toll Group New Zealand CSR Building Products Officemax Limited Cottonsoft Linfox Logistics (NZ) Ltd 0% 2% 4% 6% 8% 28
Development Estate Total project cost ($m) Net lettable area (sqm) Completion date Building 6 Highbrook Business Park 16.0 3,006 Nov-18 Parade units Highbrook Business Park 16.8 5,770 Dec-18 Plytech warehouse Highbrook Business Park 16.1 5,100 Nov-18 Appendix Projects underway Savill Link warehouse Savill Link 16.1 8,500 Nov-18 Quest expansion Highbrook Business Park 12.1 60 1 Mar-19 Gateway warehouses Highbrook Business Park 61.1 21,470 Dec-18 MOVE Logistics expansion Highbrook Business Park 15.9 5,417 Mar-19 The Crossing carpark Highbrook Business Park 10.7 324 2 Jul-19 NCI warehouse Savill Link 38.2 14,050 Jun-19 Waiouru yard Highbrook Business Park 4.7 - May-19 Lot 26 yard Westney Industry Park 2.1 - May-19 Total 209.6 63,313 3 Selwood units The Concourse 30.2 10,933 Under review 1 Number of rooms 2 Number of car park spaces 3 Excludes car park spaces and rooms 29