Goodman Property Trust is building a new NZ Post parcel handling building in plans for 13.1.ha of land previously owned by Foodstuffs North Island. Video / Brett Phibbs
The state of the real estate market has been graphically illustrated by Goodman Property Trust declaring just $41.1m net after-tax profit, after its previous $555m, due to far less spectacular revaluations.
The listed trust’s latest profit in the September 30 half-year contrasts strongly with the previous corresponding period, showing howfirmly impacted even higher-ranked stocks are in the market.
But chairman Keith Smith and chief executive John Dakin highlighted other financial metrics in delivering the result, like underlying operating performance, extremely high occupancy of properties, a loan-to-value ratio of only 23 per cent and $446m of liquidity,
Revaluations aren’t money in the hand - just paper losses or gains.
Property income rose from $94.1m to $104.6m in the latest half-year but so did interest costs, from $9.4m to $13.4m.
Property revaluations, which were up $504.7m in the September 2021 half-year, only rose $1.3m in the latest period. That was the main factor responsible for the bottom-line change.
Goodman's Mike Gimblett and John Dakin at the Roma Rd logistics hub site in Auckland's Mt Roskill before building work started. Photo / Brett Phibbs
That pushed pre-tax profit down from $570m to just $48.8m and net profit after tax from $555.5m to just $41.1m.
“A stable portfolio valuation at 30 September 2022 contrasts with a substantial $504.7 million revaluation in the previous corresponding period and is the principal driver of GMT’s lower interim profit,” the trust said today.
Four new projects will make the trust’s development programme grow to more than $635m.
New buildings under development are about 93 per cent pre-committed, with an average lease term of 13.7 years.
Dakin said those buildings will add almost 150,000sq m of warehouse and logistics space to the portfolio during the next few years.
Smith said: “The most pleasing aspect of this interim result has been Goodman’s underlying operating performance, a 7.4 per cent increase in cash earnings to $49.4m, demonstrating the strength of our investment strategy and quality of our customer relationships.”
Goodman was benefiting from e-commerce growth and strong warehouse and logistics space demands, people wanting buildings close to consumers. The trust has a commendable occupancy of 99.6 per cent so its $4.9b portfolio is at near capacity.
It has 237 tenants in 169 buildings, with around 75 per cent of businesses it refers to as customers working in the warehousing or distribution sectors. The top 10 tenants pay around 38 per cent of portfolio income.
In September, the Herald reported that Goodman had a $635.7 million expansion underway via 10 developments, setting a workload record for that business.
Analyst Rohan Koreman-Smit questioned the drive, especially when building costs were high, but Dakin said it would advance the business significantly and the timing was right for the business with a $4.8b portfolio.
All 10 new projects are in Auckland but do not include $500m plans for the ex-Villa Maria Estate in Māngere where irrigation lines and vines are being removed to make way for Goodman’s new logistics/warehouse park on the horticultural land.
“This is the busiest the trust has been since Goodman Group took over the management in 2003 in terms of new workloads,” Dakin said, referring to the larger ASX-listed associate.
“Typically, in my 18 years here, the trust would have been working on only around $150m of new projects at any one time.”
The 10 projects will bring an extra 14.9ha of new floorspace to Auckland’s warehouse/logistics sector with businesses from major retailers to freight forwarders all needing new and much larger premises.
Units are trading around $2.05, down 16 per cent annually.
