Strong Interim Results and Acquisitions Provide Platform for the Future - NZX Announcement
Macquarie Goodman Property Trust (“MGP”) is pleased to announce:
- an after tax profit of $23.2 million for the six months ended 30 September 2006;
- the acquisition of 11 industrial assets with a total value of $107.2 million; and
- a private placement of 76.9 million new units at $1.25 to partly fund the $107.2 million of acquisitions.
Interim Result
MGP has delivered an after tax profit of $23.2 million for the six months ended 30 September 2006. The record result represents a 68% increase on the $13.8 million profit for the previous corresponding period.
Weighted earnings before tax, on a normalised basis, increased 5.7% to 5.04 cents per unit and gross distributions increased 3.4% to 5.10 cents per unit.
The record date for the second quarter distribution is 1 December 2006 with payment to be made on 15 December 2006. Unitholders will receive a gross distribution of 2.55 cents per unit, comprising 2.35 cents per unit in cash and 0.20 cents per unit in imputation credits.
Other highlights include:
- Total return to MGP unitholders of 8.9% for the six months
- The completion of 91,500 sqm of development projects and the commencement of a further 17,300 sqm of pre-committed industrial facilities
- Average annual rental growth of 4.8% across the 19 rent reviews completed during the period
- Lease commencements encompassing 98,200 sqm of rentable area
- Occupancy rate and weighted average lease expiry maintained at 98% and 5.6 years respectively
John Dakin, Chief Executive Officer of MGP's manager Macquarie Goodman (NZ) Limited (“MGNZ”), said the half-year result was consistent with projections made in March 2006 and was the result of an expanded and improved portfolio. “Success in the acquisition and development programme along with the active management of the underlying property portfolio has all contributed to this impressive result.”
Over the half year MGP made property acquisitions of $57.9 million and divestments of $28.9 million. Following its interim balance date of 30 September 2006 MGP announced the sale of the HSBC Centre for $24.4 million and the partial sale of the Fletcher Head Office facility for $28.8 million.
Mr Dakin commented that the transactions undertaken since March 2006 conclude what has been a very active period for MGP. “We have continued our objective to recycle non-core stand alone office assets by reinvesting sale proceeds into industrial and business park investments.”
Mr Dakin added, “We have also remained focused on maximising returns from the underlying portfolio. A prime example of this active management has been the restructuring of the Fletchers property, announced earlier this week. This transaction is particularly pleasing as it shows the strength of our customer service model, delivering an ideal outcome for both MGP unitholders and Fletcher Building.”
New Acquisitions
The package of new acquisitions comprises 11 high quality industrial assets for $107.2 million (“Acquisitions”). The Acquisitions comprise $36.1 million in Development Pre-commitments and an additional $71.1 million in Redevelopment Opportunities, as described below:
Development Pre-commitments
The remaining 50% of three assets currently owned jointly by MGP and Macquarie Goodman Group (“MGQ”) at Westney Industry Park and Savill Link for $10.2 million.
The second stage of Highbrook Business Park comprising four assets for $25.9 million (MGP to acquire a 75% interest).
The Development Pre-commitments provide an initial yield of 8.1% and a weighted average lease term of 9.7 years. The location, quality and design of these facilities ensure they are well positioned for future rental growth.
Redevelopment Opportunities
- Plunket Ave, Auckland – Two brownfield development sites adjoining Auckland Distribution Centre have been secured for $47.5 million. Totaling 14.6 hectares the purchase will create an expanded industrial estate (to be known as M20 Business Park) of 24.9 hectares offering significant redevelopment opportunities for MGP.
- Glassworks Industry Park, Christchurch – MGP has secured two adjoining sites totaling $23.6 million over a total site area of 15.2 hectares. This investment provides MGP the ability to develop space to service customer requirements in the Christchurch market.
At 7.3% of gross assets, development land is now within the stated target range of 5-10%, and MGP’s development capacity is significantly increased. With a risk managed approach to development and projected yields on cost of 8.5% these redevelopment opportunities are expected to deliver enhanced returns to unitholders over time.
A portion of the Redevelopment Opportunities are currently income producing.
On the Acquisitions, Mr Dakin said, “The package is an exciting opportunity for MGP. Firstly, the Development Pre-commitments represent an attractive investment opportunity of 100% pre-committed high grade industrial facilities. Secondly, the Redevelopment Opportunities enable the potential for MGP unitholders to access superior returns through the redevelopment of these brownfield opportunities in the key industrial markets of Auckland and Christchurch.”
The blended yield across the Development Pre-commitments and stabilised component of the Redevelopment Opportunities is 8.4%.
Settlement of certain acquisitions is subject to OIO approval as detailed in the attached acquisition summary.
Equity Raising
MGP is today undertaking a private placement to raise $96,168,601 via the issue of 76,934,881 new units at $1.25 to partially fund the Acquisitions. The private placement is restricted to institutional and habitual investors, and a copy of the placement presentation will be provided to the New Zealand Exchange Limited later this morning. The new units will rank pari passu with existing units from allotment (i.e. will qualify for the September 2006 distribution payable in December 2006) with the issue price representing a 3.8% discount to the 5 day VWAP.
The private placement is underwritten as to 50% each by Macquarie Securities (New Zealand) Limited and UBS New Zealand Limited. The underwriting agreement is subject to standard conditions and termination rights.
MGQ has committed to subscribe for its pro-rata share in the placement at the issue price of $1.25 representing a total investment of $28.2 million but may receive a smaller allocation as a consequence of investor demand.
Impact on MGP
The Acquisitions together with the impact of the post balance date divestments provide the following benefits to MGP:
- Increased weighting of industrial and business park assets to over 50% of gross assets
- Increased development capacity with 7.3% of gross assets in development land
- Weighted average lease expiry increasing from 5.6 to 5.9 years
- Enhanced customer diversity with the top 10 customers representing 33% of portfolio net rental, down from 36%
- Reduced gearing provides the platform for future growth
MGNZ considers that the previously announced acquisitions and divestments, together with the Acquisitions and associated equity raising, will be neutral to FY07 gross DPU and the projected FY07 distribution will be maintained at 10.2 cpu. The transactions are expected to be accretive in FY08 underpinning MGP’s 3.5%+ DPU growth target.
Importantly the gearing of MGP will be 34.3% following the placement, assuming all announced acquisitions, divestments and developments are completed. This provides MGP with an approximate debt capacity of $105 million for additional development and acquisition opportunities.
The transactions increase MGP’s proforma NTA by 1.2% to $1.14.
A trading halt in relation to MGP’s units is in place on the New Zealand Stock Exchange and will continue for two business days unless terminated earlier.
John Dakin
Chief Executive Officer
Macquarie Goodman (NZ) Limited
Tel: (09) 375 6063
Mobile: (021) 321 541