GMT Special Meeting of Unitholders

WELCOME Good morning everyone and welcome to this special meeting of Unitholders. I'm John Dakin, Chair of Goodman (NZ) Limited, the current Manager of Goodman Property Trust. The purpose of today's meeting is to consider a proposal to internalise the management of GMT. The proposed change to the corporate structure is an important decision that will shape the future direction of our business. GMT's existing, externally managed trust structure has been the traditional model for listed property businesses in New Zealand for more than 30 years. Internalisation is a strategic shift that will create a fully integrated property entity, a contemporary structure appropriate for today's environment and GMT's future ambitions. The Board believe the Internalisation Proposal offers exciting growth opportunities for GMT and provides immediate and longer-term benefits to Unitholders. Given the related party nature of the resolutions our Deputy Chair and Independent Director, David Gibson has been nominated by the Trustee to act as Chair for this meeting. David led the Independent Board Committee that negotiated the internalisation agreement with Goodman Group. He also participated in the stakeholder engagement programme that followed the announcement. I'd now like to invite David to formally open the meeting. MEETING FORMALITIES Nga mihi John. Tena koutou katoa. Thank you, John, and greetings to everyone. Firstly some formalities. In accordance with the usual practice, I can confirm that this meeting has been properly convened and the requirements for a quorum have been satisfied. The meeting has a hybrid format, with Unitholders either participating in person or through a live webcast. For those in the room, please be aware there are cameras and audio equipment streaming proceedings. For Unitholders joining us online, questions can be submitted through the webcast portal at any stage. These will be moderated, and we have allocated time at the end of the meeting to answer these. Polling has also opened, and votes can be cast by selecting the polling icon on the instruction screen and following the prompts. Votes can be amended up until the time the poll closes at the conclusion of the meeting. EMERGENCY PROCEDURES Some health and safety practices relating to the use of this venue. In the unlikely event of an emergency, you will be required to evacuate to a designated safe zone. Should this occur please exit the room through the fire escape doors to the right and rear of the room, following the directions of the venue staff to the outside assembly area. BOARD REPRESENTATION I would now like to introduce the other directors of the Board and executives of the Manager who are in attendance today. Starting from the far left we have Keith Smith, Laurissa Cooney, Andy Eakin, Leonie Freeman, John Dakin, and James Spence. Greg Goodman joins us online from Sydney. We also have representatives from our Trustee, solicitors, tax consultants, and financial advisors present. These representatives will be available to answer any questions if required. We can now move on to the presentations. James and I will summarise the Internalisation Proposal, before reviewing the resolutions and inviting questions from the floor and online. At the conclusion of the meeting, we'll ask Unitholders to vote on the three resolutions to effect the change. I am pleased to confirm that with the exception of Unitholder approval all other necessary approvals have now been obtained. BACKGROUND TO THE INTERNALISATION Goodman Group has been the Manager of GMT and a cornerstone investor since 2003. The relationship has been positive, with the delivery of world-class developments like Highbrook Business Park establishing GMT as New Zealand's largest listed property entity. It has also been the best performing on a total return basis, over the last 10 years. On 26 February 2024 a conditional proposal to internalise the management of GMT was announced to the NZX. The announcement followed detailed negotiations between the Independent Directors and representatives of Goodman Group. Given the related party nature of the process, at the outset of negotiations, the Board established an Independent Board Committee, which comprised the independent directors of the Board. It was a comprehensive and carefully managed process, overseen by our solicitors Russell McVeagh and with specialist advice from KPMG, Macquarie and UBS. Deloitte were also commissioned to complete an Independent Appraisal Report to assess the value and fairness of the initiative. The Independent Directors are excited by the opportunity that internalisation presents and believe it positions GMT for the next phase of its business growth. In addition to alignment benefits and lower operating expenses, Internalisation provides GMT with a more contemporary corporate structure. It is this change that will enable GMT to pursue wider business opportunities, including the establishment of a funds management platform. EXISTING STRUCTURE Before we move onto the key terms of the Internalisation Proposal, I'll briefly summarise the existing arrangements and how these would change. Under the current corporate structure, GMT pays fees to Goodman Group for the services it provides as Manager of GMT. Goodman Group delivers these services through its New Zealand subsidiaries, Goodman (NZ) Limited and Goodman Property Services (NZ) Limited. Under an internalised structure these arrangements will end. GMT will no longer pay fees to Goodman Group and will now employ the team responsible for delivering these management services. KEY TERMS OF THE INTERNALISATION PROPOSAL To effect the internalisation Goodman Group will be paid $272.4 million to relinquish its management rights and for the ongoing co-operation arrangements and services outlined in the Notice of Meeting. The payment represents around 6% of the current value of GMT's property assets. Deloitte, the Independent Appraiser, assessed the $272.4 million consideration as being within their fair market valuation range of $268 million to $315 million and therefore fair to non-associated Unitholders. A binding ruling from IRD has confirmed the payment is deductible for tax purposes, with the net cost being $199.3 million. In addition to the $272.4 million, Goodman Group is also being paid $17.6 million to settle GMT's performance fee obligations, to acquire its interest in investment properties co-owned with GMT and for the net tangible assets of Goodman Property Services (NZ) Limited. That makes total consideration paid to Goodman Group of $290 million. Goodman Property Services (NZ) Limited will become the new Manager for an internalised GMT and will effectively be controlled by Unitholders. The acquisition of Goodman Property Services (NZ) Limited also provides business continuity, with current staff being retained and remunerated directly by GMT. The Internalisation Proposal also enhances GMT's corporate governance practices with all directors to be appointed and voted on by Unitholders going forward. It's an ongoing requirement of GMT's Managed Investment Scheme structure that the business is independently monitored. The Supervisor, Covenant Trustee Services Limited will continue to provide this oversight on behalf of Unitholders. Although no longer the Manager, Goodman Group will remain a highly committed business partner. Using its total consideration to subscribe for new units, it will increase its cornerstone investment in GMT from 25.2% to 31.8%. The issue price of the new Units is $2.14. This is the five-day, volume weighted average price ending on 20 February 2024. With an issue price above GMT's net tangible asset backing Deloitte also concluded that the issue of new units was fair to non-associated Unitholders. In addition to increasing its cornerstone investment in GMT, Goodman Group will also continue to provide access to its brand, corporate services and global expertise at no further cost to Unitholders. For an initial period of 10 years and with a further right of renewal of five years, it's a benefit to the business that highlights Goodman Group's ongoing commitment to the success of GMT. The share market has viewed the Internalisation Proposal positively with GMT's stock price increasing 7.5% since it was announced, just over a month ago. This compares to the listed real estate index which recorded 2.4% gain and the wider NZX50 which recorded a 1.9% increase. The Independent Directors unanimously recommend that Unitholders vote in favour of all three resolutions. I'd now like to hand over to our CEO, James Spence who will talk in more detail about the growth opportunity internalisation provides and what this means for our business strategy. BENEFITS OF THE PROPOSAL Thanks David and good morning, everyone. It's a pleasure to be here today discussing a unique opportunity to drive our business forward. Internalisation brings management inhouse, integrating investment, development and property management functions within GMT. It builds on what we've already achieved, leverages the knowledge and expertise of our team, and provides a framework for sustainable long-term growth. The immediate financial benefit of internalisation is the elimination of external management fees and a reduction in operating costs for GMT. The annual net saving reflects a 9.1x multiple on the net of tax internalisation cost of $199.3 million. The most significant benefit of a more contemporary corporate structure however is the flexibility it provides to pursue new business opportunities, including the establishment of a property funds management platform. DEVLOPMENT LED GROWTH We've refined our investment strategy over the last 5-to-10 years, to focus on the Auckland industrial market and the growing demand for high quality warehouse and logistics property close to consumers. Our portfolio has grown to $4.5 billion and now accommodates around 215 leading businesses. These customers lease over one million sqm of space and paid more than $175 million in annual rental, last year. Many of you will recall that we sold over $1 billion of assets in the Viaduct, Greenlane and Christchurch to reposition GMT. These sales have provided the balance sheet capacity to fund our recent development activity. It's been a successful growth strategy with over 285,000 sqm of high-quality industrial development since our last significant disposal in 2018. A pipeline of greenfield sites and redevelopment properties within the portfolio provide further opportunity. These sites are expected to support the development of over 400,000 sqm of urban logistics space over the next 10-to-15 years. The estimated cost to fully develop this pipeline is around $1 billion, using current construction pricing. A number of the redevelopment properties within the portfolio may also be suitable for repurposing as Data Centres, an area of emerging demand within the Auckland industrial market that we'd like to capitalise on. PROPERTY FUNDS MANAGEMENT PLATFORM The establishment of a funds management platform creates a scalable business that allows us to maximise the value of GMT's development pipeline in a capital efficient manner. It also provides the funding flexibility to take advantage of new investment opportunities. We expect more of these acquisition opportunities, as higher interest rates continue to impact more heavily leveraged investors. Subject to the internalisation proceeding our intention is to establish a property funds management platform anchored by a new Auckland logistics fund. The successful execution of this strategy will unlock new investment and development opportunities for GMT. It will generate fee revenue, diversify income and contribute to faster earnings growth. The investment focus will complement our existing strategy as we believe the underlying drivers and growth opportunity of the Auckland industrial market remain the strongest of all the commercial real estate sectors. It is also the asset class where our knowledge and expertise can deliver the greatest value. GMT will allocate $100 million (of assets or equity) to create the new fund, while Goodman Group will contribute up to $200 million of additional equity. We also intend to leverage Goodman Group's global investor relationships to help secure additional capital partners, another benefit of its ongoing support. The opportunity to sell assets directly into its funds management platform will limit the requirement for new equity and allow GMT to grow sustainably. Recycling capital in this way and co-investing in new investment and development opportunities is expected to generate significant value for Unitholders. Targeting the creation of a ~$2 billion property funds management business over the next three to five years, the positive contribution from management fee revenue is expected to support annualised earnings growth of between 5% and 7%. It's a strong forecast that reflects the growth a successful funds management business will deliver and we expect to make good progress establishing the Auckland logistics fund over the next 12 months. The assumption that the Internalisation Proposal proceeds is reflected in our FY25 earnings and distribution guidance. Cash earnings of around 7.5 cents per unit are forecast, this represents 5% increase on restated FY24 cash earnings. Cash distributions of 6.5 cents per unit are also forecast for FY25, a 5% increase on the 6.2 cents per unit previously reaffirmed for FY24. SUMMARY Before we move onto the resolutions I'd like to reinforce some key points from the presentations. GMT has always been an active business; internalising maximises the value of our investment focus and will provide us with alternative options around capital. The creation of a funds management platform and introduction of capital partners will reduce the reliance on debt and equity issuance to fund new growth opportunities. Retaining all the benefits of the Goodman brand, we've got the team, property portfolio, customer relationships and market expertise to scale up our business and deliver an investment strategy focused on sustainable value creation. I encourage you all to vote in favour of the resolutions to effect this change. Thank-you for your attention, everyone. I'll now hand back to David, to complete the formal business of the meeting. FORMAL BUSINESS Thank you, James, we'll now move onto the three resolutions and questions. For those of you participating through the live webcast, I encourage you to submit your questions now. As I mentioned earlier, these need to be entered through the online portal. RESOLUTIONS There are three resolutions detailed in the Notice of Meeting and on the Voting and Proxy Form you will have received. All resolutions must be approved for the Internalisation Proposal to proceed. As the resolutions have been notified, there is no requirement for a seconder. The Independent Directors unanimously recommend that Unitholders vote in favour of all three resolutions. There are voting exclusions on Resolutions 1 and 2, these are also detailed in the Notice of Meeting and on the Voting and Proxy Form. Resolution 1 - Approval of Internalisation Resolution 1 is shown on screen now. This Ordinary Resolution approves the Internalisation Proposal and gives authorisation to the Manager and Supervisor to do everything required to effect the change. I'll now open the floor for questions on this Resolution, please raise your hand and wait for the microphone to be provided. [Address any questions in the room] We'll now move onto questions from our webcast participants. [Address any online questions] Thank you everyone, there don't appear to be any further questions, so we'll now move on to Resolution 2. Resolution 2 - Issue of Units Resolution 2 is shown on screen now. This Ordinary Resolution approves the issue of new units to Goodman Group subsidiaries at an issue price of $2.14 per unit, being the five-day VWAP ending on 20 February 2024. I'll now open the floor for questions on this Resolution, please raise your hand and wait for the microphone to be provided. [Address any questions in the room] We'll now move onto questions from our webcast participants. [Address any online questions] Thank you everyone, there don't appear to be any further questions, so we'll now move on to Resolution 3. Resolution 3 - Appointment of new manager Resolution 3 is shown on screen now. This Extraordinary Resolution relates to the appointment of Goodman Property Services (NZ) Limited as the new manager of GMT upon settlement of the Internalisation. I'll now open the floor for questions on this Resolution, please raise your hand and wait for the microphone to be provided. [Address any questions in the room] We'll now move onto questions from our webcast participants. [Address any online questions] Thank you everyone, as there are no further questions we'll now procced to a poll. POLLING For those participating through the live webcast that have not already voted, please submit your votes now. The poll will be closing in a few minutes. For those of you in the room that have not already voted, please complete your voting and proxy form and place it in the boxes provided by Computershare. The result of the poll will be announced to the NZX in due course, and a copy of the announcement will also be available on our website. On behalf of the Board, I'd like to thank you all for your participation today and your continued support of the Trust. I'd also like to thank the Goodman team and the dedicated group of advisors that worked under a tight timeframe and strict confidentiality to deliver this proposal to Unitholders. I now declare this meeting closed and for those in the room, please join us for refreshments. For further information, please contact: John Dakin Chair Goodman (NZ) Limited (021)321 541 James Spence Chief Executive Officer Goodman (NZ) Limited (021)538 934 David Gibson Deputy Chair and Independent Director Goodman (NZ) Limited (021)276 9440 About Goodman Property Trust: GMT is a managed investment scheme, listed on the NZX. It has a market capitalisation of around $3.1 billion, ranking it in the top 20 of all listed investment vehicles. The Trust is New Zealand's leading warehouse and logistics space provider. It has a substantial property portfolio, with an expected value of $4.5 billion at 31 March 2024. The Trust also holds an investment grade credit rating of BBB from S&P Global Ratings. End CA:00428610 For:GMT Type:MEETING Time:2024-03-26 10:00:01