Industrial assets work for Goodman

Goodman Property Trust's investments include Highbrook Business Park in East Tamaki. Photo / Supplied

Listed industrial landlord Goodman Property Trust has drawn praise from analysts as one of the best listed real estate vehicles.

Last week, a group of NZX-listed real estate businesses published their results and outlook, and analysts have now crunched the numbers and made their recommendations.

Goodman, Kiwi Income Property Trust and Kermadec Property Fund all published results for the year to March 31. AMP NZ Office Trust, which has a June 30 balance date, announced a third-quarter result. Yesterday ING Property Trust released its annual result.

Goodman stood out in reports as being one of the analysts' favourites.

AMP was criticised for putting pressure on shareholders with its rights issue; analysts worried over Kiwi's high exposure to the poorly performing retail sector and Kermadec is seen as too small to draw much attention - although one analyst said its result was flat but OK given the poor environment for real estate.

John Dakin of Goodman said he had not seen analysis on the other listed property trusts and noted there was little mention of financial issues with manager and cornerstone unit-holder Goodman Group of Australia. "On a day-to-day basis, there's no real impact on what's going on at a group level," Dakin said of the Australian parent's troubles.

Goodman Group sold two European properties for A$101 million ($129.5 million) and said this month a partner would inject A$460 million to help it pay debts.

Yesterday, the ASX-listed business got nine months of breathing space, signing a new A$300 million facility providing it with enough liquidity to repay all money due in this financial year. The facility, underpinned by Macquarie Bank, is repayable in nine months, Goodman said yesterday.

In New Zealand, analysts praised Goodman for reducing debt by selling properties, not having a capital-raising plan and beating operating profit forecasts by 3 per cent.

"Phew, no capital-raising [for now]," wrote Jason Lindsay, research analyst at First NZ Capital, praising Goodman's high exposure to industrial property, which he said had shown its strength over the years.

"In the current environment, we view Goodman's exposure to industrial assets (55 per cent of portfolio) and the Viaduct area (about 15 per cent of portfolio with long leases and quality tenants) positively.

"In previous cycles, industrial property rents have been the most resilient and recovered the quickest out of any sector."

Rob Foster and Daniel Reynolds, analysts of ABN Amro Craigs, have a "buy" recommendation on Goodman, saying it had successfully refinanced $902 million of debt and nothing more was due until October 2011.

"We believe Goodman management have been proactive in managing the portfolio to protect the trust's capital base and position it for earnings growth as the recessionary period ends," Foster wrote.

"We support Goodman's prudent capital management and debt refinancing strategies and continue to support the recycling of assets as an option to shore up the balance sheet.

"While management remains cautious that the slowing domestic economy has impacted on occupier demand, the effect is likely to be softened by moderate vacancy rates generally and limited supply.

"Goodman remains very well-positioned given its prime quality asset base, high occupancy levels and solid enquiry rate."

Foster and Reynolds were not so keen on AMP, heading their report "a cannon to the head" due to its nine for 20 rights issue to raise $201 million.

Marcus Culey and Buffy Gill of Goldman Sachs JBWere rate Goodman as a "hold", noting its strengthening balance sheet. But they are generally cautious about listed property.

"History would suggest the listed property sector will be hard-pressed to outperform the broader market during periods when monetary and fiscal stimulus gain traction," they wrote, noting declining cap rates, tighter credit and downward pressure on distributions from listed real estate businesses.

Lindsay said Kiwi's result was good overall but its outlook and comments on dividend guidance were less so.

"Our current rating since January 14 is neutral," he said, although ING investment manager Craig Tyson criticised the trust for cutting its distribution and said it should have used reserves.