For some years now we have been focusing our investment strategy in the markets that we expect to deliver the strongest returns. We have also committed to owning the very best property portfolio.
Adopting a long-term view means we invest for tomorrow as much as today and seek to build positive and lasting relationships with all our customers. We believe these factors make GMT a more sustainable and resilient business.
Progression of our development programme, continuing asset sales and selective acquisitions are all having a positive impact, refining the portfolio and deleveraging the balance sheet.
The Trust has delivered strong financial results over the last three years while the portfolio has been transformed with asset sales and new development commitments. Further details on this year’s financial performance is provided on page 49.
Profit before tax of $207.2 million (including property valuation gains of $106.3 million), compared to $220.5 million (valuation gains of $114.7 million) previously
Operating earnings after tax of $101.6 million and cash earnings of 6.99 cents per unit, consistent with earlier guidance
- Extension to the Goodman+Bond programme, with two $100 million retail bond issues
A loan to value ratio of 25.0% at 31 March 2018, on a look-through basis, including contracted sales at that date.
The focus on superior customer service is a key point of difference for our business. We work hard at maintaining these professional relationships because they underpin demand for space within the portfolio. Superior service delivery also builds loyalty, so that our customers approach us first when their property requirements change.
We have achieved positive leasing results over the last 12 months with 201,623 sqm of space, representing around 18% of the portfolio, secured on new or revised terms. An impressive 130,574 sqm of these transactions are repeat business with existing customers.
This leasing success has maintained portfolio occupancy at over 98% and helped extend the weighted average lease term to beyond six years.
The progression of our development programme has helped build a portfolio of enviable quality, literally building by building, since 2004. Around 80% of the portfolio has been developed since then, creating assets that set the benchmark for industrial and commercial property.
It is also creating value, with $21.0 million of this year’s valuation gains attributable to recently completed projects.
New requirements from existing customers make up a sizable proportion of our ongoing work. This trend has continued over the last 12 months with three of the seven new development projects pre-committed by existing customers. The seven projects, which include 24 new warehouse facilities, have a total project cost of $164.8 million.
Strong customer demand has continued into the new financial year with two further projects, with a total cost of $54.1 million, announced in May.
All our developments are completed to a consistently high standard. They incorporate sustainable design elements and are constructed using materials and building processes that minimise waste and other environmental impacts. Energy saving technology and low flow water fittings also means these buildings are operationally efficient.
The additional investment required to meet this high-quality specification reflects our commitment to a low carbon and sustainable future. The benefits are both immediate and longer term, combining productivity gains and reduced operating costs for our customers with higher investment returns for our Unitholders and better environmental outcomes for our communities.
Asset disposals have provided the balance sheet capacity that is funding the rapid buildout of the Trust’s development pipeline. During the year three further sales were secured. Totalling $243.9 million, they included:
- The three level office building at 7 Show Place in Addington, Christchurch for $14.5 million
- The recently completed Steel & Tube development in Hornby, Christchurch for $20.4 million
- The conditional sale of Central Park Corporate Centre for $209 million.
Following our financial year-end, it was also announced that the VXV Portfolio had been conditionally sold to Blackstone, a sophisticated global investor. GMT’s 51% share in the joint venture that owns the office assets was sold based on an asset price of $323.9 million. The disposal is a particularly significant transaction for the Trust. It is the largest of the asset disposals and its settlement later in 2018 will complete a substantial rebalancing of the portfolio that has focused investment in the Auckland industrial sector.
Following completion of all current developments and contracted sales, the Trust’s Auckland industrial weighting will increase to around 95%, while remaining land holdings will represent approximately 5% of the total portfolio.
People and community
Our committed and hardworking team of more than 60 people continues to deliver the positive business outcomes that are the foundation of our operating results. Developing talent within this team and providing the tools and flexibility for individuals to perform their roles to the highest standard is always a priority.
The move to an activity-based working style, in a Green Star designed office space within the VXV Portfolio, has been the catalyst for some wider business improvements. We have formalised our commitment to being an equitable and diverse business and extended our inclusion and diversity policy to specifically focus on gender, ethnicity and age. To broaden representation, we have updated key policies and processes and, where appropriate, set targets for the future.
Our new workspace, which is designed to enhance productivity, is also facilitating new wellbeing initiatives for our employees. The focus is on our collective health with lifestyle advice, physical activities, medical checks and immunisations all being offered.
We’re also pleased to report that Goodman is engaging with our wider communities more than ever before. You can learn more about these initiatives in the Community report on page 32.
Workplace safety is another focus area. As a business, we are committed to minimising harm and mitigating risk with the aim of being free of serious harm accidents. We insist on best practice from our employees and contractors so were disappointed to record one serious injury during the year, the first in three years.
The incident involved a tradesman working at one of our estates and resulted from procedures not being followed. A serious leg laceration meant the individual was off work for almost a week. Extra training and safety inductions have been implemented to ensure this type of accident doesn’t occur again.
The strength of our customer relationships continues to underpin our business success. It drives leasing results and supports our development programme. Both activities have created significant value over the last 12 months, adding to the rental cashflows generated by the Trust and the strong revaluation gains that are being achieved.
Taking advantage of the positive operating environment and intensifying the development programme remains our key focus. Funded through asset sales, it is a disciplined approach to growth that is enhancing the portfolio and helping to create a sustainable and resilient business that delivers value for all our stakeholders.
Chief Executive Officer
Chief Financial Officer