Goodman Property Trust Interim Result 2020 Contents 03 Overview - - PowerPoint PPT Presentation

Goodman Property Trust Interim Result 2020

03 Overview 05 Financial result 11 Capital management 14 Investment portfolio 25 Summary and outlook 28 Appendix

Contents

Presented by: John Dakin Chief Executive Officer Andy Eakin Chief Financial Officer James Spence Director - Investment Management

3

Gateway warehouse – Highbrook Business Park

Overview

Auckland industrial focus is driving strong operating results: ＋ Occupancy of 99.5%, retention rate of 74%1, WALE of 5.5 years ＋ 128,581 sqm of new leasing and market reviews completed with 7.3%2 rental growth. Portfolio assessed to be 7.6% under-rented ＋ Development workbook remains strong; 15 build-to-lease warehouses completed over last 12 months are fully leased ＋ Interim revaluation of $172.4 million driven by a combination of cap rate compression (28 bps) and underlying market rental growth3 $227.1 million of strategic investment: ＋ Acquisitions of Mt Wellington, Pilkington Road and Favona Road properties, all prime infill locations, settled for $103.9 million ＋ Development commitments: $123.2 million4 – nine new projects including two new customer expansions announced today Strengthened financial metrics: ＋ $175 million of new equity raised5 ＋ Gearing of 17.9% (20.6% on a fully committed basis) provides significant financial flexibility to continue accretive investment programme ＋ Refinancing of GMT’s bank facility completed in November 2019 ＋ Increase in NTA by 15.8 cpu (10%) to 172.8 cpu ＋ FY20 earnings guidance reaffirmed; cash earnings to be materially consistent with FY19 ＋ Distribution guidance maintained at 6.65 cpu

4

Overview

5

Premium Apparel – Highbrook Business Park

Financial result

Financial highlights

17.9%

Loan-to-value ratio

172.8cpu

Net tangible asset backing

$172.4m

Portfolio revaluation

$236.4m

Profit before tax

4.5 years

Weighted average debt term2

3.325cpu

Cash distributions

3.15cpu

Cash earnings

30.3%

Total Unitholder Return1 6 months to 30 September 2019

6

1H20 1H19 Adjusted operating earnings after tax 44.7 51.7 Manager’s base fee1

• (4.7)

Adjusted operating earnings after tax2 44.7 47.0 Capitalised borrowing costs – land (2.1) (3.4) Capitalised management fees – land (0.1) (0.3) Maintenance capex (1.4) (1.6) Cash earnings 41.1 41.7 Cash earnings per unit (cpu) 3.15 3.22 Distribution per unit (cpu) 3.325 3.325 Distribution % of cash earnings 105.6% 103.3%

＋ 1H20 cash earnings materially consistent with restated 1H192 ＋ Arrangement by which base fee was required to be used to subscribe for new units expired on 31 March 2019 ＋ Distribution of 3.325 cpu equates to approximately 106% of cash earnings for the period ＋ Income from acquisitions and developments in addition to like-for-like rental growth has mitigated much of the impact of asset disposals and de-leveraging ＋ FY20 cash earnings guidance reaffirmed, expected to be materially consistent with FY19 (6.24 cpu after allowing for base fee)

Cash earnings

Cash earnings summary ($m)

7

Financial result

172.8 +2.6 +11.6 +0.9 +0.7 157.0 140.0 145.0 150.0 155.0 160.0 165.0 170.0 175.0 31-Mar-19 Equity placement Stabilised revaluation Development revaluation Other 30-Sep-19

＋ NTA increased 15.8 cpu (10%) for the year to date to 172.8 cpu ＋ 6.5% increase in underlying portfolio valuation main contributor ＋ $150 million1 of equity raised at 23% premium to NTA2 ＋ $12.4 million revaluation gains on developments reflects an average margin of 16%

Capital growth

Net tangible assets (cents per unit)

8

Financial result

Valuation ($m) Cap rate Change ($m) Change (%) % attributable to cap rate compression

Highbrook Business Park 1,430.4 5.2% 102.8 7.7% 54% Savill Link 307.4 5.6% 15.4 5.3% 80% M20 Business Park 272.6 5.7% 23.7 9.5% 66% The Gate Industry Park 242.4 5.4% 8.1 3.5% 73% Westney Industry Park 125.0 7.0% 2.6 2.1% 100% Value-add estates 257.1 5.5% 7.3 2.9% 57% Underlying stabilised portfolio 2,634.9 5.4% 159.9 6.5% 65% Completed developments1 75.0 5.2% 10.4 n/a n/a Acquisitions2 105.4 4.7%3

• n/a

Right-of-use assets in respect of ground leases 62.2 n/a

• n/a

Total stabilised properties 2,877.5 5.3% 170.3 6.3% n/a Partially completed developments4 97.0 5.3% 2.0 n/a n/a Land 48.6 n/a 0.1 0.2% n/a Total investment portfolio 3,023.1 5.3% 172.4 6.0% n/a Investment property contracted for sale 8.8 n/a

• n/a

Total portfolio 3,031.9 5.3% 172.4 6.0% n/a

Interim portfolio valuation

Portfolio valuation summary

9

Financial result

＋ GMT continues to be conservatively leveraged ＋ LVR of 17.9% at 30 September with fully committed LVR at 20.6% ＋ ICR of 3.9x on a normalised basis1 (covenant: not less than 2.0x) ＋ Significant capacity for investment in development pipeline and other opportunities

Balance sheet strength

Loan-to-value ratio

10

Financial result 17.9% 20.6% +3.0% +1.2% +0.6% +3.5%

• 0.4%
• 1.3%
• 5.0%
• 0.8%

19.7% 10% 12% 14% 16% 18% 20% 22% 24% 26%

Refer to note 2.5 of GMT’s Interim Financial Statements for further detail regarding calculation of LVR

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NCI Packaging – Savill Link

Metrics 30-Sep-19 31-Mar-19 Non-bank funding (drawn debt) 100% 98% Headroom within bank facility $400m1 $288m Weighted average debt term (drawn debt) 4.5y 5.0y Gearing covenant (<50%) 20.5% 22.4%

＋ Refinancing of GMT’s bank facility completed in November 2019 ＋ Increased facility size by $100m to $400m, with funding from BNZ, CBA, HSBC and Westpac ＋ Significant headroom provides capacity for further development and investment ＋ Committed to continued accessing of non-bank funding ＋ Maintained Standard & Poor’s corporate rating of BBB (stable), BBB+ debt issue rating

Managing funding risk

Bank funding maturity profile Non-bank funding maturity profile

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Capital management 100 100 100 100 52 52 52

FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 USPP notes Domestic bonds

150 150 135 135 130

FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 Bank facility - old Bank facility - new

Metrics 30-Sep-19 31-Mar-19 12m forward hedging level 77% 76% Weighted average debt cost 5.0% 4.9% ICR covenant1 (>2.0x) 3.9x 3.6x

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Y1 Y2 Y3 Y4 Y5

＋ Debt repayment has resulted in elevated hedging levels over the next 12 months ＋ Greater exposure to floating rates from late CY20 ＋ Cross currency swaps USD:NZD movement on USPP notes (ITM $34.8 million) ＋ Interest rate swaps net ITM $3.4 million ＋ WACD for FY20 expected to be around 4.9%

Managing interest rate risk

Hedging profile

13

Capital management

14

Premium Apparel – Highbrook Business Park

Investment portfolio

Portfolio highlights

$123.2m

Development commencements

3.4%

Underlying net property income growth

5.5 years

Weighted average lease term

99.5%

Occupancy

15

100%

Auckland industrial weighting

Gateway warehouse – Highbrook Business Park

70 80 90 100 110 120 130 140 150 2014 2015 2016 2017 2018 2019 Prime Industrial Secondary Industrial Penrose Rosebank Albany East Tamaki Wiri Airport Corridor Mangere

Market update

16

Source: JLL (Jun 2019)

Investment portfolio

Total: 162,000 sqm GMT: 47,000 sqm Source: CBRE (Oct 2019) 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (F)

Industrial speculative development (sqm) Auckland warehouse rents ($psm) ＋ Auckland industrial market near capacity with 1.9% vacancy rate1 ＋ Prime industrial rental growth of 5.6% in year to June 20191 ＋ Prime locations, close to consumers, expected to deliver best returns ＋ Industrial market showing strongest investment performance and investor confidence of all property sectors ＋ Speculative development around 160,000 sqm (1.5% of total stock) in Auckland’s central industrial locations — GMT is responsible for around 30% of this build-to-lease activity. We constantly monitor our exposure to uncommitted product alongside market conditions Auckland prime industrial absorption (sqm)

Auckland central industrial precincts

Source: CBRE (Aug 2019)

95% 96% 97% 98% 99% 100% FY16 FY17 FY18 FY19 1H20

Portfolio leasing

＋ First half stabilised leasing totalled 67,778 sqm (equates to approximately 7% of the portfolio) ＋ Occupancy of 99.5% with limited expiries remaining in FY20 ＋ FY21 expiries equate to 10.8% of portfolio, down from 15.0% as at March 2019 ＋ Development leasing a strong mixture of expansions for GMT’s existing customer base (15,976 sqm) and 4 new customers (6,405 sqm)

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Lease expiry profile (% of portfolio income) Occupancy (% of portfolio income)

Investment portfolio 0% 5% 10% 15% 20% 25% Vacant FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 >FY28 Vacant Expiring Income

64.0 10.2 +2.3 +6.2 +1.7 +0.3

• 3.2
• 10.2

74.2 71.3 40 45 50 55 60 65 70 75 80 1H19 Disposals Acquisitions Developments Underlying portfolio Other 1H20 GMT WPH GMT WPH

Net property income

Look-through net property income bridge ($m) ＋ Income from acquisitions and developments in addition to like-for-like rental growth has mitigated much of the impact of asset disposals ＋ Average occupancy of 99.2%, reflecting the portfolio re-weighting to Auckland Industrial ＋ Underlying NPI growth equated to 3.4% for the period, (4.1% when adjusting for straightlining and the impact of fitout rents)

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Investment portfolio

Reversion event Estate New WH rental rate (psm) % Increase on passing Incentive (%) Renewal Highbrook 130 4.9% 5.4% Market Review (10% cap/collar)2 Highbrook 128 10.0%

• Market Review (10% cap/collar)2

The Gate 122 10.0%

• Market Review (10% cap/collar)2

Savill 119 10.0%

• Renewal

M20 135 1.9% 7.1% Income subject to reversion in 1H20 Rental increase from 1H20 reversion events Rental increase from 1H20 reversion event pa1 Total 12.5% 7.3% 4.6%

Rental growth

Rental reversion ＋ New leases, renewals and market reviews (reversion events) across 12.5% of portfolio produced average annualised passing rental increases of 4.6%1 ＋ Strength of market rental growth has resulted in a number of market reviews being limited to the pre agreed capped level

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Investment portfolio

Leasing and market review examples above 10,000 sqm

＋ Portfolio assessed as being 7.6% under-rented as at 30 September1 ＋ 36% of portfolio is subject to market review or expiry prior to the end of

• FY22. Of these, 34% are subject to a form of cap with an average cap
• n rental increases of 9%

＋ Fixed reviews have an average increase of 2.6% per annum

Future reversions

Portfolio review profile (% of portfolio income)

20

Investment portfolio

19% 57% 54% 3% 11% 8% 3% 5% 5% 2% 11% 15%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 2H20 FY21 FY22 Fixed CPI Market Expiries

Metrics Expansion net lettable area 15,976 sqm Total project cost $48.4m Yield on additional cost 7.7% Yield on total cost (incl. land) 5.7%

Expansion of Mainstream at Savill Link and Ingram Micro at M20 Business Park: ＋ 5,972 sqm of expansion space to cater for businesses which are currently operating their facilities at capacity ＋ Average term to expiry of 7.3 years ＋ Developments add to the expansion workbook announced in September 2019, which included expansions of the OfficeMax and Panasonic buildings at Highbrook Business Park

Customer expansions

Highlights – customer expansions1

Mainstream – Savill Link Ingram Micro – M20 Business Park

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Investment portfolio

Savill Link

99%

complete1

Mainstream expansion

22

Savill Drive Units

100%

• ccupancy

$365.4m

valuation

Ingram Micro expansion M20 9,000

M20 Business Park

23

100%

complete1

$279.9m

valuation

100%

• ccupancy

Estate Total project cost ($m) Lettable area (sqm) Expected completion date2 Leased Highbrook 156.1 47,107 Feb-21 43% Savill Link 25.2 7,502 Oct-20 51% Westney 16.4 8,347 Dec-20 0% M20 37.9 13,582 Dec-20 32% Total 235.6 76,538 38%

Current development programme

＋ 15 warehouses completed by GMT on a build-to-lease basis in FY19 are fully leased ＋ Current development programmeof 76,538 sqm is 38% committed (49% terms agreed) and average time to completion of nine months1 — average warehouse face rent achieved on current workbook of $135 psm and incentives of 4.7% ＋ GMT’s exposure to build-to-lease (uncommitted) development remains low, equating to just 4.4% of total portfolio

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Work-in-progress summary Leasing exposure

sqm Currently under construction 76,538 Uncommitted 48,954 Total GMT portfolio 1,116,869 Exposure 4.4%

Investment portfolio

25

Gateway warehouses - Highbrook Business Park

Outlook

Underlying fundamentals are expected to continue to drive sustainable growth in the Auckland Industrial market ＋ Scarcity of land in infill locations likely to result in increased brownfield development / site intensification ＋ Industry continues to see significant change with customers re-evaluating supply chains and becoming more focused on locations which provide efficient and timely distribution within a congested transport network ＋ Expect to see increased use of technology & automation as distributors seek to maximise productivity from within existing assets ＋ Structural trends are expected to continue to attract strong capital investment into the sector GMT focused on making the right decisions for the long term ＋ The location of GMT’s real estate will support our customers supply chain evolution, forecast to provide resilient cash flows in a low interest rate / low growth environment ＋ Substantial balance sheet capacity to further increase footprint in preferred Auckland markets through incremental site acquisitions in line with strategy

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Summary and outlook

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Goodman office – VXV Precinct

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NCI Packaging – Savill Link

Work-in-progress summary

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Appendix

Development Estate Total project cost ($m) Lettable area (sqm) Expected completion date Leased Underwood 1,000 Highbrook Business Park 3.6 1,026 Oct-19 Uncommitted The Crossing Carpark Highbrook Business Park 12.7

• Dec-19

50% El Kobar Units Highbrook Business Park 18.0 5,330 Dec-19 34% Underwood 2,600 Highbrook Business Park 9.4 2,990 Dec-19 100% Business Parade 3,100 Highbrook Business Park 11.2 3,530 Dec-19 100%1 Panasonic Expansion Highbrook Business Park 8.0 2,660 Feb-20 100% Big Chill Expansion Highbrook Business Park 13.2 5,203 Feb-20 100% Savill Drive Units Savill Link 18.0 5,482 Mar-20 64%1 OfficeMax Expansion Highbrook Business Park 20.3 7,344 Jul-20 100% El Kobar 10,000 Highbrook Business Park 26.1 10,400 Sep-20 Uncommitted Waiouru Point Highbrook Business Park 15.1 4,359 Oct-20 Uncommitted Westney 4,500 Westney Industry Park 9.8 4,970 Oct-20 Uncommitted M20 9,000 M20 Business Park 25.0 9,630 Dec-20 Uncommitted 68 Westney Road Westney Industry Park 6.6 3,377 Dec-20 100%1 Island Units Highbrook Business Park 18.3 4,265 Feb-21 Uncommitted Total existing projects 215.6 70,566 Ingram Micro Expansion M20 Business Park 12.8 3,952 Oct-20 100% Mainstream Expansion Savill Link 7.2 2,020 Oct-20 100% Total new developments (announced 14 November 2019) 20.0 5,972 Total work in progress 235.6 76,538

Profit or loss

30

Appendix

Balance sheet

31

Appendix

Cash flows

32

Appendix