Investors in New Zealand's most valuable listed real estate business, ranked highly by the investment sector, heard it was "uniquely placed" to perform in the year ahead.
Auckland-focused logistics specialist Goodman Property Trust has a market capitalisation of $3b which puts it well ahead of second-biggest Precinct Properties at around $2.1b, Kiwi Property Group at $1.6b, PFI at $1.1b, Vital Healthcare at $1.1 and Argosy at $1b.
Chief executive John Dakin today told investors at the annual meeting that the impacts of Covid-19 were ongoing and would constrain economic activity in the next 18 to 24 months at least.
But Goodman has a trump card in the type of property it buys.
"With a high-quality portfolio focused on urban logistics, Goodman is uniquely placed to benefit from the growing demand for distribution facilities close to consumers," Dakin said.
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He was distinguishing Goodman from other listed vehicles, many of which hold office or commercial properties and retail - both areas susceptible to pandemic impacts.
"The pandemic is accelerating this trend with businesses responding to the challenges and opportunities of a growing online marketplace. While we're cautious about the year ahead, we're confident we have the best assets and the right strategy for a more challenging operating environment," Dakin said.
Keith Smith, chairman, said the strength of Goodman's recent stock price performance reflected investor support.
Goodman's inclusion in the FTSE EPRA NAREIT Global Real Estate Index in March would add greater diversity and liquidity to the register. Many offshore funds were now required to hold the units, Smith said.
"With a total unit holder return of 28.1 per cent, last year, the trust significantly outperformed its listed peers through the period," Smith told investors.
"With a relative return 39.4 per cent above its benchmark index, a performance fee of
$11.4m was earned by Goodman as manager of the trust. The relative performance hurdle measure means the manager only earns a performance fee when Goodman out-performs its listed property peer-group, and provides positive total returns to investors," Smith explained.
Dakin told of significant progress in the trust's development programme in the last year when 11 projects were completed and a further $100m of work was in progress.
Shares are trading around $2.17 in the business.
Smith said although the operating environment was more uncertain, the investment strategy remained unchanged.
"The focus on urban logistics in New Zealand's largest consumer market means the trust is uniquely positioned to take advantage of any new customer requirements created by the accelerating growth of e-commerce. As we look ahead, the quality and scale of the portfolio, together with the low level of gearing and focused investment strategy gives the board confidence that the trust will continue to deliver sustainable long-term growth," Smith told investors today.
The trust has 11 New Zealand properties valued at $3.1b and rented to 185 tenants which it calls customers.
Those include the business park Highbrook in East Tamaki, The Gate industry park in Onehunga, Roma Road Estate in Mt Roskill and the M20 business estate at Wiri.
Goodman is committed to a gearing ratio of just 20.6 per cent, making it extremely low in the property sector. It has undrawn bank facilities of $400m, giving it big headroom for further expansion.
In May, it said it had pushed up revenue 10.7 per cent to make $171m but less spectacular revaluation gains pushed net profit after tax down 18 per cent from $319.5m to $261m for the year to March 31, 2020.
Goodman made a statutory profit of $284.4m before tax, including investment property valuation gains of $165.8m, compared to the previous year's $334.8m when investment property valuation gains were far higher at $201.9m.
The trust's investment strategy had been refined in recent years to meet rising demand for warehouse and distribution space across Auckland. That area had been New Zealand's best performing commercial real estate sector, it says.
On its forecast for the 2021 year, the business said in May that the operating environment had deteriorated and the immediate outlook was uncertain.
But it cited the important role industrial property played in the supply chain, "providing the physical infrastructure that allows goods and materials to be stored and distributed quickly and efficiently has been clearly demonstrated in the consumer response to Covid-19".