Goodman Property first half profit drops as decline in financial assets offsets rising rents

Goodman Property Trust [NZX: GMT], New Zealand's largest listed property investor by market capitalisation, reported an 8 percent drop in first-half profit as a decrease in the value of its interest rate swaps offset a lift in rental income.

Profit fell to $60.2 million in the six months ended Sept. 30, from $65.4 million in the same period a year earlier, the Auckland-based investor said in a statement. Sales rose 3.5 percent in the period to $82 million, while net rental and related income grew 4.9 percent to $66.2 million.

The company booked a loss in its fair value of derivative financial instruments of $4.2 million, from a profit of $14.1 million in the comparable period a year earlier.

In the six months Goodman sold three properties worth $45.2 million, as it continues on a strategy of shedding non-core assets to invest cash into further developments. In the period it spent $77.9 million on new projects, and expects to start more than $100 million worth of new developments this financial year.

"Advancing the development programme and growing cash earnings has been a real focus over the last 18 to 24 months," said John Dakin, chief executive of Goodman (NZ), the trust's manager. "Financing new development and investment activity through asset recycling is facilitating the trust's business growth while preserving its balance sheet capacity."

Post balance date the property investor has entered into a joint venture with Singapore's sovereign wealth investor, GIC, for its $313 million Viaduct Quarter development on Auckland's Waterfront. Goodman is retaining a 51 percent stake in the venture, but had been looking for a partner to build its Viaduct Corporate Centre, on Auckland's waterfront, having bought the Air New Zealand building and a 50 percent interest in the corporate centre in 2006. The development grew when Goodman bought the new Fonterra Cooperative Group building, which it is developing with Fletcher Building.

"Partnering with a sovereign wealth fund to broaden the trust's investment strategy in the Viaduct signals an important new direction for Goodman," said chairman Keith Smith. "It endorses the quality of the portfolio while increasing the range of capital options available for future investment opportunities."

The board confirmed its guidance for the full year, expecting distributable earnings to be 9.1 cents per unit before tax, with cash distributions totalling 6.45 cents per unit.

Units of the trust last traded at $1.105, and have gained 7.8 percent in the last 12 months.

(BusinessDesk)