Goodman Property Trust (GMT), a leading owner of Auckland logistics property, has announced a proposal to internalise its management and establish a property funds management business.

The proposal, which requires Unitholder and other approvals, would end the existing external management arrangement with Goodman Group, an ASX-listed property group that has been GMT’s manager and cornerstone investor since 2003.

Goodman Group would be paid $272.4 million to relinquish its management rights and transfer them to Goodman Property Services (NZ) Limited (GPSNZ), a new entity that would be effectively controlled by Unitholders.

Goodman Group would also receive $17.6 million for other assets and obligations, and use the total consideration of $290 million to subscribe for new units in GMT at $2.14 per unit, increasing its stake in GMT to 31.8%.

The Independent Directors of Goodman (NZ) Limited (GNZ), the manager of GMT, have unanimously recommended the proposal, which has been assessed as fair by Deloitte, the Independent Appraiser.

David Gibson, Deputy Chair and Independent Director of GNZ, said, “Internalisation is a positive initiative that positions GMT for the next phase of its business growth. With the many benefits it provides and within Deloitte’s fair value range, the initiative presents a great opportunity for our Unitholders.”

James Spence, Chief Executive Officer of GNZ, said, “Internalisation is expected to provide growth opportunities for our business, and immediate and longer-term benefits to our Unitholders. It reduces expenses, diversifies income, and enhances the ability to recycle capital through the establishment of a complementary property funds management business.”

Subject to internalisation proceeding, GPSNZ will seek to establish a funds management platform anchored by a new Auckland logistics property fund.

GMT will initially invest up to $100 million itself, and with a commitment of up to $200 million from Goodman Group, will leverage Goodman Group’s global investor relationships to secure further third-party capital.

John Dakin, Chair of GNZ, said, “We believe internalisation will enable GMT to reach its full potential and create further value for all our stakeholders.”

The funds management platform has a target of scaling to ~$2 billion within three-to-five-years, and is expected to support annualised earnings growth of between 5% and 7% for GMT within the same period. Greg Goodman, Chief Executive Officer of Goodman Group, said, “This transaction is all about growth and capturing the opportunity available in the New Zealand market. Additionally, access to alternative funding sources will allow GMT to finance this growth in a way that will generate significant value for GMT Unitholders.” A Special Meeting of Unitholders will be held at 10am on Tuesday 26 March 2024 at the Park Hyatt Hotel, 99 Halsey Street, Auckland 1010, to vote on the proposal. There are three resolutions detailed in the Notice of Meeting and all resolutions must be approved for the proposal to proceed. GMT has reaffirmed its underlying cash earnings guidance for FY24 at around 7.4 cents per unit, with full year cash distributions of 6.2 cents per unit expected to be paid. It has also provided FY25 guidance for an internalised GMT, with cash earnings forecast to be around 7.5 cents per unit and cash distributions of 6.5 cents per unit.