Goodman Property Trust

[Chaowee88]

Gaynor seems less than impressed with the carry on around the recent sales.Seems those in the trust have lost out on millions, if not tens of millions, with the managers doing very wellhttp://www.nzherald.co.nz/business/n...ectid=11358864

Ouch, that a scathing assessment

[percy]

Well I am not happy.Excellent article.
The trust I help out on was recommended by Macquaries to buy GMT and PCT for yield.
I told them I did not follow, or like these property trusts, as I thought they were run for the managers' benefit,rather than sharesholders' benefit.
Macquaries told me both GMT and PCT had internalised their management,so there were no conflicts of interest.
Looks as though the next meeting with Macquaries is going to another round of "frank talking" by Percy.

[Beagle]

Gaynor seems less than impressed with the carry on around the recent sales.

Seems those in the trust have lost out on millions, if not tens of millions, with the managers doing very well


http://www.nzherald.co.nz/business/n...ectid=11358864

I own a significant holding in GMT and am not overly enamoured with the deal. At first I was extremely angry and communicated with the trustee in an effort to block the deal. As a result of that communication John Dakin Chairman of Goodman called me and we had a lengthy and frank discussion.

The deal in effect involves the net disposal of approx. $80m of Viaduct property by GMT at 31 March 2014 values. I was assured that transaction costs were 1% so less than $1m.
John's position was that the benefit to GMT will be brought about by the greater diversification of properties /' tenants in the Viaduct area.
I outlined my position that with a well diversified portfolio already I thought the value of the extra diversification was negligible and that the deal should have at the very least been subject to a current valuation.
John responded that people should not get too caught up with the price as they'd "touched up" the 31 March 2014 valuation as they were working on the deal back then.
I'm not sure how you "touch up" a valuation by one of the major international valuers so don't really accept that explanation and told him that.

I went on to explain that their competitor Argosy had commissioned a valuation on their properties as at 3O September 2014 and the average market capitalisation rate had firmed by 20 bps such that the valuation of their properties had increased by just over 2% compared to 31 March 2014. John went on at some length about the strategy of Goodman which I don't have time to explain in detail today.
While I think it is great that Bryan Gaynor is piling the pressure on Goodman and the NZX and that the NZX should not have granted a waiver and I agree that there are some positives for the deal, albeit very minor, the net cost to GMT is nowhere near as high as Bryan makes out.

Best guess is Viaduct values would have gone up a similar amount based on market cap rates firming 20 bps so say about 2.5% on 80M ($2m) plus transaction costs of $800K total approx. $3m.
.
We had a lengthy discussion about their pay-out ratio, their strategy with Highbrook business park and how long that would take to complete.
As I said at the outset I am not overly enamoured with the deal but assertions its destroyed vast amounts of value appear exaggerated.

It is worth noting that GMT pays out only 80% of its after tax EPS while in a development phase with the completion of the highbrook park development.

[winner69]

Good report their Roger

Wasn't one of Gaynor's other grumps that the management company are working themselves into a situation where they cant be sacked (somehow building up 26% equity)

Jeez, you seem to pick up some doozie companies to put your money into. A Norah who sells just before an announcement and a Chairman John who 'touches' up valuations, Good god.

[Beagle]

GMT has been a solid performer for me this year. Bought at 96 cents early in 2014, now $1.11, collected 3 quarterly divvy's so far and another one due next month and this sort of return on a VERY low risk stock.

[RRR]

This inherent conflict of interest is the reason why I exited GMT! GMT is a quality stock, but we do have other LPTs with internalised management!

[Beagle]

This inherent conflict of interest is the reason why I exited GMT! GMT is a quality stock, but we do have other LPTs with internalised management!

You're absolutely right however when you look at the extremely high price ARG and KIP to name just two examples paid to internalise their management, the ongoing debt burden imposed on those entities to fund the buy-out and then add in the ongoing cost to manage the property themselves is there really all that much in it in terms of net benefit from internalisation ? I maintain there isn't much in it and at the end of the day investors are better to focus on the quality of the portfolio, the quality of the management and future prospects.
Whether GMT have received quality management in this instance is an open question. VHP is an example of a property trust that also has external management but due to its performance nobody seems to be making much noise about the management issue in regard to that stock. Whether internal managers of ARG, KIP and others do a better job than their previous external managers is also an open question. Internalising management removes any potential conflict of interest, no question about that.

[RRR]

Cost of internalisation is one off cost, although expensive, but it removes the constant threat of the conflict of interest in property portfolio transactions of the LPT.
VHP - the manager is from Canada and we have lost the opportunity to internalise the management forever! NZSA should have been a bit more lenient with this one, they are the ones who argued that the price of internalisation is expensive! So the ANZ (I think) just sold the right of management to SW group from Canada.

[percy]

Cost of internalisation is one off cost, although expensive, but it removes the constant threat of the conflict of interest in property portfolio transactions of the LPT.
VHP - the manager is from Canada and we have lost the opportunity to internalise the management forever! NZSA should have been a bit more lenient with this one, they are the ones who argued that the price of internalisation is expensive! So the ANZ (I think) just sold the right of management to SW group from Canada.

I was a shareholder in VHP at the time the Canadians brought their holding and the management contract.
VHP were about to internalise the management.
I thought it was a disgrace,so sold.

[Beagle]

Just on $25m clipped off the market cap of GMT yesterday as a result of Bryan Gaynor's article. Hmmm.
Thing is when you trawl through all the LPT's with internalised management I can't find anything more I like better than GMT.