I am delighted to be presenting Unitholders with the 2017 Annual Report.
The Board is extremely pleased with the operating results that have been achieved and even more satisfied with the refinements being made to the portfolio. The progression of the development programme, significant asset sales and selective acquisitions are all having a positive impact on GMT, lifting the quality of the portfolio and reinforcing the Trust's position as a premium property provider. These activities are also improving the financial metrics of the business, de-leveraging the balance sheet and providing substantial capacity for future investment and development opportunities.
A commitment to building a portfolio of exceptional quality has always underpinned the investment strategy of GMT. The acquisition of the remaining interests in Highbrook Business Park in 2012 and a focus on organic growth since then, have transformed the portfolio. With more than $535 million of new development projects over the last five years, GMT’s strategic land holdings are being converted into high quality, income producing assets.
While development activity is enhancing and extending the portfolio it is also providing essential business infrastructure that is enabling companies to operate more efficiently and cost effectively. Funded through asset sales, development is a sustainable business activity that is growing revenue and increasing investment in the preferred Auckland industrial sector. Continued development success has also improved the alignment between the cash earnings of the Trust and the distributions it pays.
The Board and Management Team work closely and constructively overseeing the governance and business operations of the Trust.
To support a more dynamic investment strategy a new senior management role, reporting to the Chief Executive Officer, has been created. James Spence was appointed Director Investment Management in September 2016 and is now responsible for overseeing the investment decisions of GMT. James has spent the last five years managing Goodman wholesale funds and leading its capital transaction programme across Europe. His biography is available on the Trust’s website together with those of the other executives. Led by John Dakin, it is a highly capable and experienced executive team. The quality of John’s leadership was recognised during the year with a special service award from the Property Council of New Zealand. It complements the Honorary Fellowship he had previously received from the Royal Institution of Chartered Surveyors and reflects the significant contribution he has made to the property industry over the last 25+ years.
Financial Markets Conduct Act 2013
As a leading investment entity with strong governance structures, the Board has welcomed the additional regulation of the fund management industry provided by the Financial Markets Conduct Act 2013. GMT has transitioned into the new regulatory regime with minor amendments being made to the governing Trust Deed to ensure that it complies with the Act.
To ensure Unitholders are fully informed about their investment, GMT’s Trust Deed and the Statement of Investment Policies and Objectives are provided on the Trust's website (as well as the Disclose Register), together with other key documents and market announcements.
With a dedicated investor relations resource, Unitholders also have direct access to professional support, through a toll free number or email correspondence. The contact details are located in the Corporate Directory on page 93 of this report.
Annual Meeting of Unitholders
This year’s Annual Meeting is to be held at 1:30 pm on 2 August 2017 at the SKYCITY Convention Centre, Auckland. The Board encourages investor participation at all its forums and has again selected a centrally located hotel with complimentary parking at the venue for this year’s meeting. 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 30 June 2017.
Outlook and guidance
The execution of a sustainable business strategy has continued to enhance the portfolio. It has also added to the financial strength of GMT, improving the quality of its earnings and reducing gearing to a historically low level. The Board believes that the existing strategy, with its focus on maximising the performance of the investment portfolio and development led growth, remains appropriate while operating conditions are favourable.
We also expect to complete further debt initiatives and have announced a new corporate bond issue, to be undertaken in May 2017. The extension to the existing bond programme will further increase the diversity of GMT’s capital sources.
GMT’s operating earnings for the 2018 financial year are forecast to be 9.0 cents per unit before tax. The reduction from 2017 reflects the impact of asset sales and balance sheet de-leveraging. The progression of the Trust's development programme is expected to support underlying cash earnings in 2018, consistent with the prior year. Distributions will be maintained at 6.65 cents per unit.
On behalf of the Board
Chairman and Independent Director