Goodman builds on wave of confidence
Goodman Property Trust is riding a wave of rising economic confidence and post-earthquake demand, with about $112 million of new development in progress.
Its latest projects include the purchase of what will be the new Fonterra headquarters in Auckland's Viaduct Precinct, construction of a second office block in Greenlane, and the addition of nearly 18,000 square metres to its Christchurch Glassworks industrial estate.
And hot off the press this week was the announcement of another $25m facility for Metroglass at its Highbrook business park in Auckland's east Tamaki.
While Christchurch's dynamics are clear to see, chief executive John Dakin sees the Auckland market as going through "a bit of catch-up".
"If you go through a stagnant period in your economy people tend to put all their decisions on hold, but if you look at the indicators now where confidence is good, people are now making those decisions.
"Without a doubt I think we'll see more development in Auckland in the next couple of years than we've seen for a while."
Goodman Property is clearly in a boom period, with above-average leasing levels and about 60,000sqm under development, nearly one and half times the trust's annual workload in recent times.
One of its most strategic projects this year is the second office block it announced recently for Auckland's Central Park, in Greenlane.
The trust opened a 5500sqm building there in September, leased before completion to Genesis Energy and Restaurant Brands, and the second is of similar size.
Both projects were started on an uncommitted basis, "because we found everything was pretty much filling up through that part of town," says Dakin.
The new $22m project will replace an older, smaller building on the Great South Road frontage, part of the ongoing regeneration of Central Park, says Dakin.
"You need to keep investing in these assets. If they start to get stale or a little bit tired, you start to lose customers. And part of the repositioning is also some more reinvestment around the amenities, childcare and gyms, those sorts of things."
If Auckland is at a positive place in the development cycle, Christchurch is even more so. The trust is adding facilities for three new customers at its Glassworks industrial park in Hornby, at a cost of around $30m.
Dakin says the firm will focus on its existing landbanks in Hornby and Addington, rather than venture into the central city because of the high land prices there.
"Obviously the demand for space in Christchurch is very strong because the supply has been so affected, so occupancy has not been a problem for us and it's more about working with the current customers on that estate to make sure they are happy with what they're got.
Also keeping the company busy is $20m worth of extensions to its Auckland Highbrook estate, announced before Metroglass became a client, and the recent purchase of a 16,000sqm low-rise in the Viaduct, being built by its parent Goodman Group and Fletcher Building.
The $92.6m office block, which will be Fonterra's new headquarters, is flanked by two buildings GMT already owns.
Analysts have voiced concern about the fact the land is leased rather than owned, but GMT's chief financial officer Andy Eakin said the company would receive rent from Fonterra and had derisked its own payments.
"We are more than comfortable with the way we'e been able to structure that rental stream," he said.
To fund all this activity, the company has flagged a bond issue of up to $100,000 early next month - part of the "ongoing diversification of our capital base,"says Dakin.
It has also divested about $70m worth of assets over the last 18 months, including the $37m sale in August of its Gateside industrial park in Penrose to Port of Tauranga.
Dakin says GMT plans to continue with its sales programme "particularly while the investment market's so strong".
"But the sort of assets that we're looking at selling out of are assets that are maybe a bit more standalone in nature, because a lot of our development is around large-scale estates.
"The biggest one we own is Highbrook, which is 150 hectares, where we can have a big influence over the master plan and creation of a long-term asset."
Earlier in the year there were reports that the commercial property sector was being approached by buyers from Asia.
Dakin said at the time that he had been approached by Asian buyers but also others, and he says nothing has really changed.
"There are a range of buyers, a number of high-net-worth local investors wanting good assets, offshore buyers, syndicates and institutional investors like ourselves. The challenge is getting high-quality assets and that's why we've gone down this path of creating our own assets."
- © Fairfax NZ News
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