Goodman Group · ASX:GMG
Goodman — Goodman Property Trust — FY2018 Earnings Presentation
46 slides from Goodman's earnings presentation, May 28, 2018
Slide 1: Annual Results 2018
Annual Results 2018 Goodman Property Trust
Slide 2: Contents
Contents Targeted strategy 03 Investment portfolio 10 Presented by: John Dakin Development programme 19 Chief Executive Officer Financial summary 25 James Spence Director – Investment Management Summary & outlook 33 Andy Eakin Chief Financial Officer Appendix 36 Unless otherwise indicated, all numer
Slide 3: Targeted strategy
Targeted strategy 3
Slide 4: Targeted strategy
Quality Auckland industrial portfolio ＋ Sale of WPH1 repositions GMT as industrial sector specialist, 99%2 weighted to Auckland ＋ Positive outlook for the investment portfolio: ▪ industrial property expected to benefit from e-commerce and immigration trends ▪ assets situated in key locations close t
Slide 5: Disposal programme
＋ Disposal of VXV portfolio largely completes the sales programme: ▪ almost $1.2 billion of sales contracted over last five years ▪ divesting mainly Auckland office and Christchurch assets ▪ provided funding capacity for the development programme and higher growth-orientated assets Disposal programm
Slide 6: Capital deployment
＋ $672 million of development starts over the last five years, providing average yield on additional spend of 9.4% and development gains of $81 million1 ＋ $165 million of new developments announced in FY18, with a further $54 million YTD ＋ 80% of remaining portfolio has been developed by Goodman, pr
Slide 7: Transformed GMT
＋ Disposals and development activity have transformed GMT into an industrial specialist: ▪ 99% focused on Auckland industrial ▪ <5% land weighting ▪ average building age of 12.2 years1 (Highbrook 6.4 years) Transformed GMT Total property portfolio Industrial weighting ($bn) 99.3% 100% 2.8 2.72 2.7 9
Slide 8: GMT capacity
＋ GMT to have strong liquidity post settlement of WPH disposal ＋ Increased ability to further invest in Auckland industrial through development pipeline and potential acquisitions ＋ Build out of full development pipeline including projects underway (circa $450 million1) would result in gearing of le
Slide 9: Total returns
＋ NTA growing strongly with CAGR of 8.9% over last five years ＋ Improving quality and focus on industrial reflected in returns with five year total return of 13.7% Total returns NTA per unit (cents) Total returns 2 150 20% (NTA + distribution) 141.4 17.2% 138.9 140 14.4% 5 year total 15% 13.8% 130.4
Slide 10: Investment portfolio
Investment portfolio 10
Slide 11: Operational highlights
Operational highlights 98.2 % Portfolio occupancy $2.7bn Property portfolio 201,623 sqm Leased on new or revised terms 6.1year WALT 3.9 % Like-for-like NPI growth 83.6 % Industrial retention rate 11
Slide 12: Property portfolio
＋ Portfolio provides 226.9 ha footprint within 25 km of CBD ＋ Positioned to benefit from growth in e-commerce ＋ Estates are situated in prime logistics locations, with 8% of portfolio identified as medium to long-term redevelopment (value-add) sites Property portfolio Portfolio diversity Office Valu
Slide 13: Rental growth
＋ Strong like-for-like NPI growth for the year of 3.9% ＋ New leases and market reviews (“reversion events”) within the industrial portfolio recorded average annualised increase of 4.7% ＋ Fixed and CPI leases comprise 75% of rental reviews: ▪ FY18 average CPI increase 1.7% Rental ▪ FY18 average fixed
Slide 14: Portfolio occupancy
＋ Re-positioning of portfolio and strength of market continues to support record occupancy levels for GMT (>99% post settlement of WPH) ＋ Supports build-to-lease programme, 54,000 sqm of NLA built on this basis over the past five years ＋ Large number of pending expiries secured in 2H 2018 with only
Slide 15: Portfolio metrics
＋ Increased exposure to logistics firms with focus on storage and distribution Top ten customers split by subsidiary companies (% of portfolio income) New Zealand Post DHL Fletcher Building Portfolio Coda Fliway Transport metrics Toll Spicers CSR Building Products Officemax Big Chill 0% 1% 2% 3% 4%
Slide 16: Capital expenditure
＋ Total capex spend of $15 million for the year on stabilised portfolio, $3.3 million of which is maintenance related ＋ Industrial portfolio requires lower through-cycle capital expenditure than other asset classes: ▪ lower build complexity for industrial assets: • fewer technical components (e.g. l
Slide 17: Portfolio valuation
＋ Third consecutive year of fair value gains of more than 5% (excluding impact of sales) ＋ Overall portfolio cap rate has firmed from 6.5% to 6.2% ＋ Around 55% of industrial valuation uplift for year resulted from factors other than cap rate (e.g. rent, occupancy and lease term) ＋ Development projec
Slide 18: Portfolio total returns
＋ Unlevered portfolio total return of 9.7% (income return 5.6%, capital return 4.0%) ＋ Industrial assets have provided a total return in excess of 10% (including land) Portfolio FY18 total returns by asset class1 14% total 12% 10.4% 12.2% 5.7% returns 10% 10.1% 5.3% 4.5% 9.7% 4.0% 8% 6.7% 6% 6.8% 6.
Slide 19: Development programme
Development programme 19
Slide 20: Work in progress
＋ $233 million of developments currently underway providing 74,246 sqm of NLA ＋ $164.8 million of developments announced in FY18, yield on additional cost 8.3% ＋ Development pre-commitment is around 43% with remaining uncommitted space minor in context of wider GMT portfolio, representing: ▪ just 5%
Slide 21: Completed projects
COMPLETION May 2017 CSR NLA The Gate Industry Park 4,937 sqm (Build-to-lease) Completed projects COMPLETION Jun 2017 Beijer NLA Highbrook Business Park 7,503 sqm (Build-to-lease) COMPLETION Aug 2017 ACCO NLA Highbrook Business Park 6,402 sqm 21
Slide 22: Completed projects
COMPLETION Nov 2017 Coda Stage 2 NLA 7,354 sqm Savill Link Completed projects COMPLETION Dec 2017 AB Equipment NLA 2,919 sqm Highbrook Business Park (Build-to-lease) COMPLETION Dec 2017 Showroom NLA Units 1,826 sqm Highbrook Business Park (Build-to-lease) 22
Slide 23: Completed projects
COMPLETION Mar 2018 Spicers NLA 9,918 sqm Highbrook Completed projects COMPLETION Feb 2018 Fliway NLA Westney 1,893 sqm 23
Slide 24: Development pipeline
＋ Remaining land supply 22 ha1 ＋ Supports a further 116,000 sqm of industrial and commercial development ＋ Yield on additional spend expected to range between 8-9% ＋ Estimated additional spend of approximately $290 million ＋ Highbrook represents 82% of remaining land supply Development ＋ New land op
Slide 25: Financial summary
Financial summary 25
Slide 26: Financial highlights
Financial highlights $207.2 m $106.3m $243.9 m $164.8 m Profit before tax Look-through property Contracted asset sales New development projects revaluation – total project cost 25.0 Look-through loan % 6.99cpu Cash earnings2 138.9cpu 6.65cpu Net tangible asset backing Cash distributions to value rat
Slide 27: Net property income
＋ Income from new acquisitions and developments in addition to underlying rental growth has offset the impact of significant asset disposals ＋ GMT portfolio income up $4.0 million on a like-for-like basis, a 3.9% increase on 2017 Net Net property income bridge 170 property 165 - 0.1 +4.0 +0.3 income
Slide 28: Cash earnings
＋ Improving trend since FY14 with distributions fully cash covered in 2018 ＋ Reduction in capitalised borrowing costs reflects lower land weighting and interest costs ＋ Maintenance capex is reducing as portfolio quality and industrial weighting increases Cash Cash earnings ($million) earnings FY18 F
Slide 29: Net tangible assets
＋ NTA increased by 8.5 cpu to 138.9 cpu ＋ Strong 6.6 cpu contribution from stabilised portfolio revaluation ＋ Further 2.5 cpu to come on settlement of WPH sale Net NTA bridge tangible (cents per unit) 145 assets 140 138.9 +2.5 141.4 +1.6 +1.1 -0.9 135 +6.6 130.4 130 125 120 FY17 Stabilised Developme
Slide 30: Balance sheet strength
＋ Conservative gearing level ▪ loan-to-value ratio of 25.0% on a look-through basis ▪ pro-forma around 14%, accounting for WPH sale ▪ well below the 50% maximum allowed under the Trust’s debt covenants ＋ Significant capacity for development pipeline and other opportunities Balance ＋ Interest cover r
Slide 31: Debt funding diversity
＋ Continued focus on securing long-dated debt ＋ Reduced reliance on bank funding ＋ Non-bank funding provides both tenor and pricing benefits ＋ Most diversified funding in NZ listed property sector ＋ Two $100m bonds issued in FY18 Debt ＋ WACD of 5.0% funding diversity Funding sources (drawn basis, 31
Slide 32: Debt maturity profile
＋ Proven capital management programme ＋ Refinancing risk minimised with appropriate sized tranches ＋ Credit cost risk minimised by utilising of multiple sources ＋ Bank facility provides operational flexibility ＋ Weighted average debt term to expiry of 4.5 years at 31 March 2018 Debt maturity profile
Slide 33: Summary & outlook
Summary & outlook 33
Slide 34: Summary & outlook
GMT well placed to benefit from key global trends ＋ Rising urban populations and technological changes are driving the growth of e-commerce around the world ＋ Growth in online sales increasing demand for distribution space ＋ Supply chain pressures with faster and cheaper deliveries required, shorter
Slide 35: Thank you
Thank you 35
Slide 36: Appendices
Appendices 36
Slide 37: 5 year financial summary
Appendix 5 year financial summary (1) Property portfolio metrics includes GMT’s joint venture interests. At 31 March 2018 it includes properties contracted for sale. (2) Net of canopies and yard. 37
Slide 38: Profit or loss
a Property income 150.5 165.6 Property expenses 29.4) 81.4) Net property income 1304 1342 ‘Share of operating earnings before tax from joint venture 24 103 a4 Interest Interest income 34 72 87 Interest cost 34 (25.9) 23.7) A di Net interest cost (18.7) (18.0) PP Aamir pms a eee . Profit pei ings els
Slide 39: Balance sheet
Appendix Balance sheet milion a a Non-current assets Stabilised properties 18 2,043.5 2,025.7 Developments 17 675 489 Land 18 120.0 147 Investment in joint venture 2.2 1143 70.7 Derivative financial instruments 52 ag 189 Other investments 2 - 120 Deferred tax assets 9.2 5.2 37 Total non-current asse
Slide 40: Loan to value ratio
Appendix Loan to value ratio 40
Slide 41: Portfolio key leasing
Leasing deals completed in FY18 Property Customer NLA (sqm) WPH Air New Zealand 15,096 WPH Auckland Transport 14,102 Highbrook DHL 31,631 Westney Linfox 26,201 Appendix Highbrook Cottonsoft 16,973 Portfolio+ WPH Highbrook Confidential – Tech company Beijer 2,201 7,503 key leasing The Gate Subtotal I
Slide 42: Highbrook Business Park
Appendix Highbrook Business Park 42
Slide 43: Savill Link
Appendix Savill Link 40 Savill Drive Warehouse Development ~~ te James Fletcher Drive =
Slide 44: M20 Business Park
Appendix M20 Business Park 44
Slide 45: The Gate Industry Park
Appendix The Gate Industry Park 45
Slide 46: Westney Industry Park
Appendix Westney Industry Park 46
Goodman Property Trust — FY2018 Earnings Presentation on 6ix