Over the last five years we have successfully repositioned our business, concentrating investment in the rapidly growing and supply-constrained Auckland industrial market. A development-led growth strategy and successful sales programme have underpinned this transformation.
With $0.7 billion of new development projects and almost $1.2 billion of asset disposals and contracted sales since 2013, we are confident that the Trust’s portfolio now represents the very best quality industrial property.
Our quality focus extends beyond the physical characteristics of the assets we own. It also includes the valued relationships we share with customers, investors, our own people and the communities where we operate.
With our development programme well advanced and asset sales now largely complete, the Board is extremely pleased with the progress that has been achieved. The Directors are equally satisfied with the Trust’s operational and financial performance. Positive leasing results have maintained occupancy above 98% and also contributed to a statutory profit of $207.2 million before tax.
We will pay cash distributions totalling 6.65 cents per unit this year, with $85.5 million to be distributed to our almost 10,000 investors. This is consistent with earlier guidance.
With a strong balance sheet and a portfolio focused on the best performing property sector, the Board is confident that the business is well positioned for sustainable long-term growth.
Industrial property provides the built infrastructure that businesses need to operate.
Our properties directly support the 260 companies that lease space in our portfolio and are the daily workplace for their 20,000 employees.
It is also an important part of the supply chain, ensuring goods are stored efficiently and can be quickly distributed to meet demand, whenever and wherever that may be.
We also believe industrial property is likely to provide the best risk-adjusted returns over the long-term.
These positive investment characteristics are reflected in another strong valuation result for GMT this year. The $106.3 million or 4% uplift in the value of the portfolio (on a look-through basis) contributed to the 6.5% increase in GMT’s net tangible asset backing, to $1.39 per unit at 31 March 2018.
The evolution of e-commerce and online retailing is contributing to the strong demand for warehousing and distribution space across Auckland. Sustained economic growth together with demographic changes are adding to the requirement for large logistics facilities located close to consumers. GMT’s position as the largest owner and developer of industrial property in New Zealand means it is uniquely placed to benefit from rising e-commerce and the rapidly growing population in the country’s largest city.
Our development programme has been accelerated to meet this demand. At the same time, diminishing greenfield opportunities and competition for land for residential conversion means that strategic brownfield sites are becoming more desirable. This emerging trend is reflected in our investment strategy as we look to secure a future pipeline.
This year we extended the breadth of the commentary within our annual report to provide a broader overview of our business. This approach allows stakeholders to assess performance on measures that matter to them.
It’s a story we are proud to tell, and this report includes additional information about our business model, the current investment strategy and achievements in our sustainability programme.
All of these areas receive attention from the Board and, as a responsible corporate citizen, we want to secure a positive mandate for the things we do.
We conducted a survey to determine our material factors this year, asking a representative group of our stakeholders to identify and prioritise the items they believe we should focus on. The comprehensive results, detailed on page 38, included 16 factors. The most significant being:
- Customer relationships
- Sustainable development
- Resilient property portfolio
- Capital structure and financial results
- Health, safety and wellbeing.
These key areas are well aligned with our business priorities and underpin this year’s reporting focus.
The Board believes that strong governance structures provide transparency and lead to better decision making. Governance is an area of continual refinement and I’m pleased to note that as a business we comply with the eight principles of the recently updated NZX Corporate Governance Code.
Our performance against these guidelines is described throughout this report and more specifically in the Corporate Governance summary section on page 114.
Better property sector representation
The drive for better and more equitable outcomes for our stakeholders underpins our submissions to local and central government.
We undertake this work both directly as an individual business and collectively through our various industry memberships. John Dakin was confirmed as the new President of the Property Council of New Zealand’s governing National Council in April 2018. It is a voluntary position that offers opportunities to provide industry leadership on a range of topics.
John’s appointment is extremely positive, ensuring our interests on matters such as regional growth, transport policy and taxation are represented at the highest level.
He has also expressed his desire to make the industry’s leading body more contemporary, with improvements required across the sector in the areas of inclusion and diversity.
This year’s Annual Meeting is to be held at 1:30pm on 4 July 2018 at Eden Park in Auckland. The Board encourages investor participation at all its forums and so we have selected a meeting venue that is easily accessible by both public transport and private motor vehicle. A live webcast will be broadcast for those who are unable to attend.
The formal business will include the election of one Independent Director. Further details will be contained in the Notice of Meeting, which is expected to be distributed on or around 12 June 2018. Please take the opportunity to vote, either using the forms you receive or through the online portal.
Recognising that our investors are located throughout the country, the Board and management team also intend to conduct a national roadshow later this year. Please take the opportunity to attend this biennial event and engage directly with those responsible for managing your investment.
Our business strategy has continued to enhance the portfolio, adding to the financial strength of GMT, improving the quality of its earnings and reducing gearing to a historically low level.
The conditional sale of GMT’s interests in the VXV Portfolio, following its 31 March balance date, has completed the repositioning of the portfolio with the investment focus now almost exclusively on Auckland industrial property. The transaction will also provide additional balance sheet capacity, reducing the loan to value ratio from an already low 25% to less than 20% of total assets. Consequently the Trust has the means to complete its development programme and pursue new investment opportunities while still maintaining a very prudent level of debt.
The Board expects to achieve cash earnings of around 7.0 cents per unit in FY19, a similar level to last year. Cash distributions of 6.65 cents per unit are expected to be paid.
We view the portfolio repositioning as transformative for GMT. It’s a positive outcome that outweighs the short-term reduction in earnings growth as a result of asset disposals and balance sheet deleveraging. Reinvesting in our development programme will drive future growth and continue to lift the quality of the portfolio. The execution of this investment strategy means that the business we share is extremely will positioned.
On behalf of the Board
Chairman and Independent Director