We have refined our business to capitalise on thegrowth of Auckland, the expansion of e-commerceand rising consumerism. It’s a successful strategythat is delivering essential business infrastructurefor our customers, strong returns for our investors and positive outcomes for other stakeholders.
The disposal of the Trust’s interests in the VXV Portfolio in December 2018 was one of the last transactions in a sales programme that has spanned five years. It was a defining achievement in a portfolio repositioning process that has focused investment in the rapidly growing and supply-constrained Auckland industrial market.
The balance sheet capacity created by $1.2 billion of asset sales since 2014 has funded more than $675 million of new development projects. Our preference for high-quality industrial property reflects the positive investment attributes of this type of property and the superior growth profile it offers.
The disruption of traditional retail channels through e-commerce is driving demand for efficient warehouse and distribution space in key urban locations, all around the world. Being able to meet customers’ requirements for logistics space close to consumers is a real competitive advantage in these cities. The Trust’s Auckland focus and proven development capability mean it is uniquely placed to benefit from these global trends as they become more established in our local market.
The sustained economic and demographic growth that is a feature of New Zealand’s largest city is also contributing to GMT’s financial performance.
This year’s statutory profit of $334.8 million before tax was a record for the Trust and 61.6% higher than the previous year. Over $200 million of the profit was attributed to the portfolio revaluation. The 8.2% increase in value reflects strong property fundamentals and increased investor demand in the markets where we invest.
[Chart2](1) After all contracted sales, including post balance date transactions.
The Board is extremely pleased with the results being achieved and is confident that the current strategy of development-led growth, funded from the Trust’s substantial reserves, will support strong operating performances into the future.
The Directors are equally satisfied with GMT’s corporate performance and the progress being made with the various initiatives that make up the Trust’s sustainability programme. Our carbon rating has improved, we are doing more for our people, supporting our local communities and focusing our reporting on the things that matter to our stakeholders.
A property strategy focused on the strongly performing Auckland industrial market has resonated positively with the investment community and GMT is now the largest listed property stock on the NZX, with a market capitalisation of around $2.2 billion.
The Trust has delivered a Total Unitholder Return of 36.1% over the year to 31 March 2019, outperforming all the NZX listed property stocks. It’s a similar performance over longer timeframes with the Trust achieving annualised returns of 13.7% and 17.2% over the last three-and five-year periods. These returns were also higher than the NZX property sector and wider NZX50 averages over the same timeframes.
A market-leading fee structure, which includes a performance component that rewards the Manager when GMT achieves total returns greater than its listed peers, has been a feature of the Trust's external management arrangement since 2007.
With a relative return 12.1% above its benchmark, a full performance fee of $8.6 million was achieved this year. The Manager is required to use the fee to subscribe for new units in the Trust – continuing the close alignment of interests between Goodman, as the Manager and cornerstone investor, and other Unitholders.
NZX listings rules
The Board has always sought to maintain a contemporary governance structure for GMT incorporating many of the requirements of a listed company into its Trust Deed. The update to the NZX listing rules this year included changes to ensure consistency with the Financial Markets Conduct Act.
Under the new listing rules GMT’s unit trust structure meant it could be classified as either:
+ an issuer of fund securities, or
+ an issuer of equity securities.
The Board believes that the additional governance and reporting requirements that apply to equity issuers is a real benefit to GMT Unitholders and has obtained NZX's approval to have the Trust designated an equity security issuer
We have repositioned GMT as an industrial property specialist to meet the growing demand for warehouse and distribution space across Auckland. This strategy has enhanced the portfolio and reduced gearing to just 19.7%. The balance sheet capacity provided by the sales programme will be reinvested over time.
Making investment decisions focused on long-term growth is also improving the alignment between the cash earning of the Trust and the distributions paid to Unitholders. Distributions for the 2020 financial year are expected to be held at 6.65 cents per unit, a level that helps absorb the short-term impact of balance sheet deleveraging.
A continuation of the development programme will drive our future growth and deliver positive outcomes for all our stakeholders.
On behalf of the Board
Chairman and Independent Director