Rising demand for warehouses and logistics centres and strong revaluations drove listed landlord Goodman Property Trust's net after-tax profit for the past year up 18 per cent, to $748.6 million.
The business, with $4.8b of real estate, was boosted by $660.4m revaluations, up on last year's $560m, showing the rising worth ascribed to the type of property the trust specialises - increasingly popular because of online shopping.
"The revaluation result is the main contributor to the 17.7 per cent increase in profit before tax to $763.8m, previously $648.9m," Goodman noted.
Strong property market fundamentals and continued investor demand for the warehouse and logistics space the trust specialises in were also cited for the strong result.
Greater customer demand is being reflected in high occupancy levels, sustained rent growth and an increased level of development activity for the trust.
"A balance sheet with low gearing has also facilitated the acquisition of yielding properties in Mt Wellington and Penrose during the year, for $116.5m. These factors have offset the revenue impact of the Favona Rd and Roma Rd redevelopments and contributed to the 2.7 per cent increase in net rental income, to $157.1m," Goodman said today.
Total expenses of $38.8m were 1.8 per cent higher than last year.
An increased base management fee and higher administrative expenses, partly offset by lower interest costs, contributed to the $700,000 increase.
Operating earnings before tax were $118.3m, 3 per cent up on last year's $114.9m.
A performance fee of $15.7m was also earned by the Australian manager. Goodman outperformed its benchmark of listed peers by around 8 per cent on a total return basis.
Chairman Keith Smith said: "The underlying strength of our operating results has reinforced the value of an investment strategy focused on urban logistics in the Auckland industrial market."
The trust's portfolio provides essential business infrastructure for more than 220 tenants.
John Dakin, chief executive, said: "The pandemic has accelerated the key structural changes that are driving demand for urban logistics space. The expansion in e-commerce is a positive trend for the trust with customers extending their business operations to incorporate the growth in online retail."
The average occupancy is 99.4 per cent so the portfolio is running at capacity.
The positive demand dynamic is also being reflected in an increased level of development activity, with five new projects starting in the past 12 months, Dakin said.
That is the busiest the trust has been.
The demand for space is also being reflected in the $300.2m of new development projects announced during the year.
The largest of the projects are a supersite facility for Mainfreight at Favona Rd, Māngere, and a parcel processing facility for NZ Post at Bush Rd, Albany. Seven other active projects are worth around $426m.
Dakin said the projects were around 98 per cent pre-committed. The current development workbook will add almost 100,000sq m of net lettable area to the portfolio.
These new warehouse and logistics facilities are expected to generate more than $21m annual rental income once complete.
Guidance for FY23 includes a 4 per cent increase in cash earnings to around 6.9 cents per unit, with a 7 per cent increase in cash distributions to approximately 5.9cpu.
This month, the Herald reported on Goodman's plans for its new Roma Rd Estate, Mt Roskill, the ex-Foodstuffs North Islands headquarters.
"A lot of market feedback was that we were mad at the time," said Dakin of $250 million logistics/warehouse centre plans in Puketāpapa/Mt Roskill.
He was referring to 2018 market opinion about the trust paying what was seen at the time as the extremely pricey $93 million for the 13.1ha site at the end of Roma St.
For decades, Foodstuffs North Island's headquarters was at 58-60 Roma Rd, around 35,000sq m of building covering less than 30 per cent of the site. But last year Foodstuffs shifted to rented premises at the airport.
Four years ago, Goodman bought the big site. That was before Covid hit and the trust paid what people at the time said was well over the odds, Dakin recalls.
What those sceptics didn't factor in was the growth in online shopping about to hit during the pandemic, Dakin pointed out.
Goodman has also bought land at Villa Maria for a much larger, $500m industrial storehouse and distribution hub.
Goodman struck a deal with the receivers of the vineyard business to pay only $75m for the 35ha. That is subject to planned litigation by Sir George Fistonich who has engaged law firm MC to bring that case before the courts.
The trust's manager is a subsidiary of ASX-listed Goodman Group, a A$68.2b specialist global warehouse and logistics real estate developer/manager. That business announced this week it was buying Sydney's Alexandria Homemaker Centre for about A$202m.
That deal is via cash and scrip through the Goodman Australia Industrial Partnership and gives the group a dominant position in the south Sydney area.
Goodman Property Trust in New Zealand has been trading down 7 per cent annually around $2.08. It has 1.3m shares on issue, giving a market capitalisation of $2.9b, ranked in the top 20 New Zealand listed stocks.