Goodman's Highbrook Business Park estate in East Tamaki. Photo: Supplied / Goodman
Property investor and development firm Goodman (GMT) will internalise its management as a first step to the establishment of a large property fund.
GMT chief executive James Spence said it was necessary to bring the management inside the business in order to establish a fund focused on investment in Auckland-based logistics properties, such as industrial properties and data centres.
An initial $300 million would be invested in the fund with an expectation to grow it to $2 billion within three- to five years.
"Internalisation is expected to provide growth opportunities for our business, and immediate and longer-term benefits to our unitholders," he said.
"It reduces expenses, diversifies income, and enhances the ability to recycle capital through the establishment of a complementary property funds management business."
Spence said the arrangement sets the company up for growth, with unitholders to benefit in the medium-term.
"We're putting out there for the first time, a medium- to long-term earnings growth profile of about 5 - to 7 percent for GMT, and shareholders will get another 5 percent lift in their dividend this year, on top of 5 percent for the year that's just been."
The deal
The deal will see the company end its external management agreement with ASX-listed Goodman Group (GNZ) in exchange for a deal valued at $272.4m.
GMT chair John Dakin said the deal was not just about the internationalisation of management, but about setting up the business for growth.
"Once it's affected, generates better returns for all shareholders and particularly if you look at it from a Goodman Group point of view - they're going to go from 25 percent of the company (GMT) to around 32 percent," Dakin said.
"So I think it's a really, really good proposal for all unitholders."
Independent appraiser Deloitte assessed the deal as being within a fair market valuation range of $268m to $315m and concluded the internalisation proposal was fair to non-associated unitholders.
Fund management to be established
Spence will be retained in the revamped business model, along with other members of the executive team, and will also assume the management of Goodman Property Services (GPSNZ), which will establish the fund management business.
"Subject to internalisation proceeding, GPSNZ will seek to establish a funds management platform anchored by a new Auckland logistics property fund," he said, adding the fund's initial investment would be up to $100m, with commitment from GNZ of up to $200m Goodman Group.
The directors of GNZ also become directors of GPSNZ, with the new management entity to be effectively controlled by unitholders.
The agreement was conditional on the approval of unitholders and approvals.
Under the arrangement, GNZ will be paid $272.4m to relinquish its management rights, in exchange for shares in GPSNZ and the associated co-operation arrangements and services.
An additional $17.6m will be paid to GNZ to settle GMT's performance fee obligations.
GNZ will use the total consideration of $290m to subscribe for new units in GMT at $2.14 per unit, increasing its cornerstone investment in GMT to 31.8 percent.
Deputy chair and independent director of GNZ David Gibson said the independent directors unanimously recommend that unitholders vote in favour of resolutions supporting the plan.
A meeting of unitholders will be held on 26 March.