Goodman Property earnings fall 4.1% as depreciation changes double tax bill

Goodman Property Trust, which owns the Highbrook Business Park in Auckland, reported lower distributable earnings as it faced a bigger tax bill after the government changed the treatment of depreciation in 2010.

Distributable earnings, property investors' favoured way of measuring profit as it strips out unrealised movements in property portfolio values, fell to $74.8 million, or 7.78 cents per unit, in the 12 months ended March 31, from $78 million, or 8.79 cents per unit, a year earlier, Goodman said in a statement.

Bottom line profit rose 10 percent to $40.5 million.

Goodman's tax bill more than doubled to $13 million in the year after its effective tax rate rose due to the government's 2010 decision to remove building depreciation as a tax deduction.

At the time of the change, commercial property investors complained the government's target residential property investors only made up a quarter of depreciation claims, and that they were being unfairly caught.

Goodman will pay full-year cash distributions of 6.25 cents per unit, which is 80.4 percent of its distributable earnings, and expects to make the same payment next year, with earnings likely to be flat in 2013.

"While immediate growth prospects are limited, rising business confidence and a positive economic forecast provide a more encouraging longer term outlook," the property trust said.

"The trust is well positioned to take advantage of the anticipated lift in economic activity with new leasing initiatives and recent development success strengthening the business."

The value of Goodman's property portfolio rose 3.4 percent to $1.63 billion. Net borrowings were $581.2 million as at March 31, compared to $578.4 million a year earlier.

The property investor's loan to value ratio was 35.7 percent.

The units rose 0.5 percent to $1.04 today, and have gained 5.1 percent since the May 2010 budget when the depreciation changes were announced.

(BusinessDesk)