GMT Annual General Meeting
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Goodman Property Trust (GMT) | 1:10 pm, Friday 25 July 2008 | GMT | 1.060 |
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WELCOME
Good afternoon ladies and gentlemen. It is a pleasure to welcome you to this
Annual General Meeting of Unitholders of Goodman Property Trust.
I'm Jim McLay, Chairman of Goodman (NZ) Limited, the manager of your Trust;
and, in accordance with the Trust Deed, I have been nominated by the Trustee,
Perpetual Trust Limited, to act as chairman of this meeting.
To simplify proceedings, and in accordance with the practice of past
meetings, I will, throughout this meeting, refer to Goodman Property Trust as
the "Trust" or "GMT", and Goodman (NZ) Limited - the manager of that Trust -
as the "Manager".
I would now like to introduce the other directors and executives of the
Manager who are present today.
From my far left - Peter Simmonds, Chief Financial Officer, James Hodgkinson,
Non-executive Director, David van Aanholt, Non-executive Director, Phil
Pryke, Independent Director, Susan Paterson, Independent Director and Rick
Bettle, Independent Director.
And I also want to introduce, to my left, our Chief Executive Officer, John
Dakin.
I'd like formally to welcome Susan, who has only recently joined the Board.
In our recent annual report I said that Unitholders benefited from a high
quality Board with a majority of experienced and committed Independent
Directors. Susan continues this tradition, and brings with her a wealth of
commercial experience, having held executive and board positions across a
variety of companies and industries.
APOLOGIES
There is an apology from Greg Goodman, Non-executive Director, who has been
struck by influenza and is therefore represented today by his alternate,
David van Aanholt.
Independent Director, Keith Smith is also unable to attend and has given his
apology.
Are there any other apologies?
REPRESENTATIVE OF TRUSTEE; EXECUTIVES AND ADVISORS PRESENT
There are also a number of executives of the Manager present today including
Scott Pritchard, Fund Manager of the Trust, Alister Fitzgerald, General
Counsel and George Crawford, General Manager of Finance.
In addition to these executives we also have present representatives from -
- our Trustee, Perpetual Trust Limited;
- our solicitors, Russell McVeagh;
- our auditors, PricewaterhouseCoopers; and
- our tax advisers, KPMG.
BRIEF OUTLINE OF THE RESOLUTION
The purpose of this meeting is to review the strategy and performance of the
Trust, and consider and vote on one ordinary resolution, being the annual
approval of the Co-ownership arrangements between the Trust and the ASX
Listed, Goodman Group.
INTRODUCTION AND FORMALITIES
There are a number of formalities to observe before we progress,
First, I record that -
- the meeting has been properly convened; and
- notice of the meeting has been properly given to Unitholders.
For a quorum to be achieved, GMT's Trust Deed requires at least five persons
holding, or representing by proxy, or as representative or attorney, at least
ten per cent of the number of Units on issue at the date of the meeting
carrying the right to vote at the meeting.
I confirm that these requirements have been met; and that a quorum is
present. On the basis of those matters, the meeting can proceed.
PROCEDURE FOR QUESTIONS FROM UNITHOLDERS
During the course of the meeting, Unitholders will be given the opportunity
to ask questions and comment on the resolution. Other matters can be raised
under General Business, following the voting on that resolution.
Goodman Property Trust has a broad and diverse group of investors with a
variety of individual investment objectives. Today's meeting is an
opportunity for all investors to communicate directly with the Board and
Management; and I encourage you all to make the most of this opportunity.
OVERVIEW
The 2008 financial year has proven to be another successful year with GMT
delivering a record net profit of $99.3 million. That profit is 7.4 percent
higher than the previous corresponding period and is ahead of the November
2007 Prospectus forecast.
The result is especially pleasing as, in addition to meeting its financial
and operational objectives, the Trust's portfolio has been enhanced and its
debt levels reduced.
It is no coincidence that the strong operating performance of GMT in recent
times has corresponded with the period that the Trust has been managed by
Goodman (NZ) Limited. Over this time GMT has evolved into a high quality
business with a strong balance sheet and a wide customer base.
The importance of building a robust business that can withstand market
fluctuations has never been more apparent than in current market and economic
conditions. In contrast to last year, today's business environment is more
challenging, with rising costs and lower growth negatively impacting on
business confidence.
Unitholders should be reassured that they have invested in a Trust that has
been positioned to perform across a variety of economic conditions.
While the current outlook is uncertain, the scale and strength of the
portfolio, together with a proven management capability, gives the Board
confidence that GMT will continue to deliver strong operating results.
Before I invite John Dakin to provide more detail of the Trust's recent
result and ongoing strategy, I would like to acknowledge the contribution of
Peter Simmonds, our Chief Financial Officer, who is retiring later this year.
Peter's experience and expertise have been important elements in the success
of the Trust. One example is the important contribution he made to the
collective effort that helped ensure property vehicles could participate in
the Portfolio Investment Entity (or PIE) Regime.
The Board is grateful to Peter for his efforts, and wishes him well for the
future.
I'm also pleased to announce today that George Crawford, Goodman's General
Manager of Finance, will be replacing Peter when he departs. George has
worked closely with Peter since joining Goodman in 2005 and previously held
senior finance-related roles in both the United Kingdom and New Zealand.
There will be an opportunity to talk with both Peter and George at the
afternoon tea following the conclusion of the meeting. It's now my pleasure
to invite our Chief Executive Officer, John Dakin, to address the meeting.
JOHN DAKIN'S SPEECH
Thank you Mr Chairman, and good afternoon ladies and gentlemen.
GMT has maintained its impressive track record under the management of
Goodman and has delivered another record result. It has been an impressive
performance with all parts of the business contributing to the strong
operating performance.
The 2008 Financial Year has seen the Trust complete one of the most important
transactions in its recent history, securing a 50 percent interest in
Highbrook Development Limited and raising $275 million in new equity.
Another important milestone was achieved when GMT opted into the Portfolio
Investment Entity Regime, which came into effect in October 2007. Under the
PIE Regime most investors now benefit from the tax deductions of GMT and have
no further tax to pay on their distributions.
This has led to an increasing focus on distributable earnings and I am
pleased to report distributable profit has increased 25.8 percent to $68.7
million, reflecting the impact of strategic acquisitions, continuing
development success and rental growth across the portfolio.
This increase in distributable profit meant Unitholders received a total cash
distribution for the year of 9.90 cents per Unit, 4.8 percent higher than
last year.
Total assets have increased 28.9 percent to $1.6 billion, reflecting the
development and investment activity over the year, while the level of debt
has reduced to 27.2 percent of property assets. Debt levels increase to 32
percent when all future capital commitments are included.
It has been a busy year and it's pleasing to report a result that is
consistent with November's Prospectus forecast.
Portfolio Overview
In a changing economic environment Unitholders should be reassured by the
quality and scale of GMT's property portfolio.
At the March balance date the Trust had interests in 27 properties totalling
almost 850,000 sqm of lettable space. With an occupancy rate of 97 percent,
the portfolio accommodates over 240 customers including such household names
as NZ Post, Vodafone, Air New Zealand, Linfox, Toll, Fletchers and DHL.
With a high quality customer base, the portfolio has a secure income stream
and a weighted average lease term of 6 years. This is an important measure as
it demonstrates how long the average lease has left to run. GMT has one of
the longest average lease terms in the listed property sector.
Another important measure is the level of rental growth that remains in the
portfolio. The Trust has recorded strong growth over the last year with
leases subject to market reviews achieving average annual rental increases of
4.5 percent per annum. Similar levels of growth are expected to flow through
over the next few years as further rent reviews and lease renewals are
completed.
The Manager has differentiated GMT from its competitors with the range of
property solutions it can offer. Active management and a strong customer
service focus complement the physical property offering and helps attract and
retain new and existing customers.
Investment Programme
The Trust continues to pursue a long-term investment strategy, investing in
well-located high quality assets that are leased to reputable customers.
We believe this strategy will deliver superior returns across a range of
market conditions. In last year's highly competitive investment market there
were few opportunities for third party acquisitions.
However through its relationship with the ASX-Listed Goodman Group the Trust
secured a number of strategic assets that complement the portfolio and offer
further growth potential.
Most significant of these was the 50 percent interest in Highbrook
Development Limited, which included stabilised and development assets of
$194.7 million. The acquisition of a share in this premier business park
development was identified as an important driver of future growth for GMT
and Unitholders voted overwhelmingly in support of the purchase.
In contrast to last year, the current investment market is subdued with less
competition from local and offshore funds. This situation is largely a
result of the global credit crisis with many investors facing increased
borrowing costs and more stringent lending criteria.
GMT's low level of gearing and prudent financial management means the Trust
has the capacity to make acquisitions if suitable opportunities arise.
However, in a more cautious investment market where capital is scarce, the
Trust will only be considering acquisitions that offer a compelling
investment case.
One such opportunity occurred in May with the purchase of an industrial
facility in Penrose for $10.1 million. The facility is leased to local
transportation and freight operator Tapper Transport Ltd and includes 6,112
sqm of warehouse and office space and 2,735 sqm of canopy area.
The current slide shows the property relative to our existing assets in
Neilson Street. The asset is expected to provide a strong yield once the
current rent review is settled.
With site coverage of just 35 percent, it also offers future development
potential that is enhanced by our ownership of the neighbouring sites. It
also allows for the reconfiguration of the existing estate and improvements
to traffic circulation.
Development progress
The acquisition of an interest in Highbrook Development Limited during the
year has extended the range of property solutions GMT can offer its
customers. The Trust's development activity will be an increasingly
significant component of earnings going forward.
Since the acquisition settled in December further pre-commitments have been
secured from Corporate Express and I'm pleased to announce today a new
facility for Blackwoods Paykel. These two pre-commitments total almost 14,000
sqm of office and warehouse space. These developments provide a blended yield
on cost of 8.5 percent and both have lease terms of 12 years.
Occupier demand remains strong for this estate with a number of other
pre-commitments in the final stages of negotiation. We expect to be able to
announce these to the market in due course.
The current slide demonstrates the progress at Highbrook with the completed
developments shown first. In the last few months both the Datamail and
OfficeMax facilities have achieved practical completion. The Lollipops
Childcare Centre has also recently completed.
Developments still under construction are the next properties highlighted and
these include, Office Building D, Courier Post and Just Group.
The location of the Corporate Express and Blackwoods Paykel pre-commitments
are now also highlighted.
Progress has been pleasing and the next stage in the development will be the
master planning of the hospitality and retail precinct with caf?s, a bar and
convenience type retail stores planned to service the park. It is expected
that resource consent applications will be made later in the year with
development likely to commence during 2009.
Following the success of last year's event another open day will be held at
Highbrook Business Park later in the year. Unitholders will be able to view
the concept plans for the hospitality and retail precinct and participate in
a guided tour of the estate with senior executives.
Also showing pleasing progress is the Trust's premium office development at
604 Great South Road, Greenlane.
Following the pre-commitment from Chevron, Yellow Pages have leased the
balance of the office space and this development is now 85 percent
pre-committed with practical completion expected in December 2008.
The following video clip provides a fly-through tour of the 604 Great South
Road office development and provides Unitholders with some idea of the scale
and quality of this new facility.
Recognising the growing importance of environmental sustainability to its
customers, GMT is increasingly constructing its developments to Green Star
specifications.
604 Great South Road and 15 Show Place in Christchurch are examples of this.
The Green Star rating system recognises environmentally considerate design,
which is energy efficient, utilises sustainable materials and provides an
enhanced work environment.
With lower operating costs than buildings of more traditional design,
customers are increasingly willing to pay a premium to enjoy the superior
working environment that Green Star rated buildings provide. In addition to
offering this level of specification in certain new developments, suitable
existing office buildings may also be upgraded.
With a targeted land weighting of around 10 percent, development is an
important part of the Trust's business strategy. To minimise the risks
traditionally associated with development activity, projects are typically
pre-committed, fixed price construction contracts sought and reputable
builders employed.
Acknowledging the current economic outlook the Manager has reviewed two
previously announced developments at Gateside Industry Park and Central Park
Corporate Centre. These will now only commence when a significant level of
pre-commitment has been achieved.
Asset Diversity
Following the extensive investment and development activity over the year,
the portfolio is now 50.2 percent industrial and 36.2 percent suburban
office.
With investment property making up 86.4 percent of the portfolio, the
remaining 13.6 percent is development land. At 6 percent of the portfolio,
Highbrook land makes up approximately half of the development land weighting.
Funding
GMT has typically used debt and equity to fund the growth of its business.
The Trust successfully raised over $290 million in new equity last year to
fund acquisition and development commitments.
Unitholders will be aware that global financial markets are currently
reassessing risk and borrowing is becoming increasingly expensive. Turmoil
in local and international share markets means equity funding is also scarce
and highly expensive.
In contrast to many businesses that find themselves constrained or over
extended, GMT remains in a strong position with a relatively low level of
debt at just 32 percent of property assets following all known commitments.
The strength of GMT's balance sheet and the availability of debt funding
facilities from the four main trading banks mean the Trust has significant
debt capacity remaining.
The majority of GMT's $625 million main debt facility is due for renewal in
2010. Management will negotiate well in advance of the facility expiry in
2010, balancing the requirement for additional term against the reality of
increasing margins.
The blended interest rate that the Trust currently pays on all its debt
facilities (including line fee and margin) is 7.5 percent per annum.
Business outlook
Since we last met in November to consider the Highbrook acquisition, there
has been a significant change in the economic outlook, both domestically and
globally. Increasing borrowing costs, a deteriorating housing market, a
slowdown in retail spending and relatively high inflation, have all impacted
on business confidence with lower growth now forecast.
These concerns are reflected in current stock market volatility and while we
cannot control unit price movements Unitholders should be confident about the
strength of the underlying business.
The Trust has been positioned to keep delivering strong operating
performances into the future. It is a low risk business with a secure income
stream, a high quality customer base and a proven operating model.
The property market we invest in continues to show strong fundamentals with
low vacancy, continuing rental growth and sound levels of occupier demand.
The Trust is a leading listed stock with high levels of disclosure and strong
corporate governance practices including a reputable board, with a majority
of independent directors representing your interests.
Our strategy remains consistent and targeted and can adapt to changes in the
economic and property environments. This flexibility will help to ensure the
Trust delivers its forecast cash distribution of 10.25 cents per unit.
I'll now pass you back to the Chairman Jim McLay to continue the formal
business of the meeting.
FORMAL BUSINESS
Thank you, John. In my view, John's presentation has demonstrated the
quality of our management team.
Before detailing the resolution set out in the Notice of Meeting sent to
Unitholders earlier this month, I'll outline the voting procedure.
VOTING FORMS AND POLLS
I will, in the first instance call for a vote on the resolution by a show of
hands. If the result is inconclusive I will call for a poll.
A poll may also be called for by Unitholders entitled to vote on the
resolution, provided that these Unitholders are at least five in number or
hold at least 5 percent of the Units entitled to vote on the resolution.
You should have brought a voting and proxy form with you to the meeting or
obtained one on arrival. Your voting form should be used if a poll is
requested.
Any poll will be held at the end of the meeting; and, if a poll is called,
the scrutineers will be the Trust's auditors, PricewaterhouseCoopers.
PROXIES
The Chairman and other Directors have been appointed as proxy by 543
Unitholders representing 111,011,473 units.
Proxies appointing others have been received from 30 Unitholders representing
95,120,406 units.
If required, these proxies will be voted by the proxy holders.
RESOLUTION - APPROVAL OF FUTURE QUALIFYING TRANSACTIONS
I now turn to the notified resolution.
Goodman Property Trust, and the ASX-listed Goodman Group, continue jointly to
own certain properties under their co-ownership agreement, and, as in the
past, they wish to retain the ability to buy and sell properties together as
co-owners.
It is critical that, as co-owners, the Trust and Goodman Group should be able
to buy and sell properties together without needing to obtain Unit holder
approval in each case.
In December 2004, the Trust obtained a waiver from NZX Regulation, or NZXR.
The purpose of this Waiver was to streamline the process of the Trust
entering into transactions as a co-owner with Goodman Group.
An extension of the waiver from NZXR was granted on 15 June 2007 for a
further period of 3 years (expiring 3 December 2010).
The waiver was from compliance with Listing Rule 9.2.1, and relieved the
Trust from having to seek Unitholder approval for arms-length transactions
where the Trust and Goodman Group are buying or selling properties together
as co-owners. This waiver is conditional on the Trust obtaining the annual
approval of Unitholders to these arrangements by ordinary resolution.
That approval has been sought and obtained in each of the last three, years;
and is sought again today.
This waiver is also subject to a number of other conditions, which are
outlined in the Notice of Meeting. These conditions are designed to ensure
that the relevant Qualifying Transactions are entered into on arms-length
terms, and are transparent.
The Independent Directors, Rick Bettle, Susan Patterson, Phil Pryke and Keith
Smith, consider that the Resolution is in the best interests of the Trust and
its Unitholders, and have therefore unanimously recommended that Unitholders
vote in favour.
NZX Regulation has ruled that the only persons not permitted to vote on the
Resolution are Goodman Group and its associated persons, other than where a
person is acting as proxy or representative for a person who is not
disqualified from voting, and is voting in accordance with the express
instructions of that other person.
I now move the Resolution in relation to the approval of future Qualifying
Transactions.
The Resolution is set out in the Notice of Meeting and for your convenience
is also displayed on the screen.
Is there a seconder?
[Pause - wait for a seconder to second motion]
Is there any formal discussion, or are there any questions, on the motion?
I ask that in speaking to the resolution or asking any questions, you please
use one of the microphones and identify yourself by name.
If you are a proxy for a Unitholder, could you please name the Unitholder on
whose behalf you hold that that proxy; and, if you represent a corporate or
similar Unitholder, please do likewise.
I now put the motion: All those in favour please raise a hand. All those
against please raise a hand.
I declare the Resolution carried/lost/inconclusive and a Poll is required.
GENERAL BUSINESS
I now move on to general business, and open the floor for questions or
comments from Unitholders or their appointed representatives.
Again, I ask that in addressing the chair with questions, you please use one
of the microphones and identify yourself by name; and that, if you are a
proxy for a Unitholder, that you please name the Unitholder on whose behalf
you hold that that proxy; and, if you represent a corporate or similar
Unitholder, please do likewise.
CLOSURE
Ladies and gentlemen, that concludes the formal business of the meeting. I
thank you for your attendance and participation. I formally declare the
meeting closed, and invite you to join us for refreshments.
A copy of the meeting presentation can be obtained by emailing lcr@nzx.com.
For further information please contact:
John Dakin
Chief Executive Officer
Goodman (NZ) Limited
(09) 375 6063
(021) 321 541
Scott Pritchard
Fund Manager
Goodman (NZ) Limited
(09) 966 3653
(021) 431 581
