Trust investors query pay system

Chief executive John Dakin was upbeat at yesterday's meeting about Goodman Property Trust's performance. Picture / Greg Bowker

Shareholders Association leads concerns over Goodman Property’s external manager and the way it is paid

Investors in $2 billion landlord Goodman Property Trust yesterday questioned its Australian-headquartered manager Goodman Group being paid its annual management fee in units instead of cash.

Goodman Group, controlling 17.6 per cent of the trust's units on issue and all of its management contract, makes about $8 million annually from the trust and has also been paid about $1 million a year for an undeveloped New Zealand land bank.

The proposal at yesterday's annual meeting in Auckland was to change Goodman Group's base management in the next five years and make a rebate on certain of the undeveloped land bank fees.

More than 100 unit-holders were at the trust's meeting held in a building it developed, the Waipuna Highbrook Conference Centre, to vote on the changes.

Shareholders Association associate director Alan Best said his organisation had long criticised property trusts like Goodman with external managers, and took a swipe at Goodman's entrenched position in the sector where most other listed real estate vehicles have internalised their management structures and managers had been paid to leave.

"Our policy is in favour of corporatisation or internal managers, and the resolutions are about the best we can expect, given we have a no-sell manager," Best told the meeting.

However, he said, Goodman's publications and compliance with NZX listing rules had been excellent.

After upbeat presentations from chairman Keith Smith and chief executive John Dakin, another investor questioned growth in distributable earnings which he said had been "pretty static" despite excellent economic conditions.

Dakin said the trust expected to develop $100 million of property this financial year and had $40 million to $50 million of this in progress.

Smith said the trust was operating in a more buoyant economic environment. and Dakin said $21 million rent generated in 2004 had now risen to $127 million.

Chief financial officer Andy Eakin said the $134.1 million after-tax profit in the last year was a record result. The trust had a pay-out ratio of 80 per cent and last year's 6.25c cash distribution was forecast to rise to 6.45c this financial year.

The trust had sold more than $100 million of property, most of that above book value, Eakin said, and more disposals were planned in a capital recycling move.

Dakin said it was 10 years since Goodman Group became an "investor and partner, repositioning Goodman as an industrial and office specialist".

The trust now owned about 1 million square metres of floor space, equivalent to 150 Eden Parks, which "gives us real scale and depth in our business".

He praised the relationship with Goodman, saying it benefited the trust, which had record $23.8 million revaluation gains last year, "the strongest uplift since 2008 and largely attributable to the investment performance of the office portfolio and recent development completions".

Twelve new projects were announced last year and another three in the first quarter of this year.

"We have activity on every development site we own in Auckland and Christchurch," Dakin said.

Last year's biggest deal was the $92.6 million purchase of Fonterra's global headquarters, being put up by Fletcher Construction on Fanshawe St and to be finished by 2016.

Unit-holders voted 99.79 per cent in support of a new management fee structure, a notice to NZX late yesterday said.