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Goodman grows assets under management to over $24 billion in Q1 FY2014

Thursday, November 7, 2013

Goodman Group (Goodman or Group) has today announced an operational update for the quarter ended 30 September 2013, which has seen assets under management for the Group grow to over $24 billion during the quarter, up from $23 billion at 30 June 2013.

Goodman remains focused on, and continues to benefit from, its strategy of being a leading global industrial operator and fund manager. The Group’s global operating platform is a key point of differentiation due to the access it provides to a broad range of opportunities driven by its geographic diversity and the varied timing of economic cycles across different markets.

With total assets under management rising to over $24 billion and with undrawn debt and equity commitments at $6 billion, the Group has the financial capabilities to further grow assets under management in the short to medium term. During the quarter, $1.8 billion of third party equity was committed from global institutional investors supporting sector specialists with solid and proven development capabilities.

Goodman’s development activities continue to grow strongly and it remains one of the largest developers of industrial property in the world. Structural changes in the occupier market have driven the development pipeline to $2.5 billion across 69 projects as customers demand quality product, certainty of delivery and cost effective solutions to improve business efficiencies.

Goodman’s Group Chief Executive Officer, Mr Greg Goodman said: “Goodman experienced robust underlying operational activity in the first quarter of FY2014. With developments underway across all regions, we continue to benefit from the diversity of our global operating
platform, specialist sector and development capability, proven ability to access third party capital and strength of our customer and investor relationships. The quality of our product offering is reflected in the high occupancy rate of 96% across the portfolio.

When combined with the focused and disciplined execution of our prudent business strategy and day to day operational activities, Goodman is well positioned to take advantage of future growth opportunities, which in turn gives us the confidence to reaffirm our FY2014 earnings guidance of operating earnings per security of 34.3 cents, up 6% on FY2013.”

Key operational highlights for the quarter ended 30 September 2013

Own

 Total assets under management increased to over $24 billion, up 5.2%

 Leased 631,000 sqm across the Group and managed funds, representing $75 million of annual rental income, with reversions of 3.6% on new leasing deals

 Occupancy maintained at a high 96% across the Group and managed funds, achieving a weighted average lease expiry of 4.8 years

“Our teams achieved significant leasing success across our global platform, particularly in Australia, Greater China and Continental Europe. This result reflects the strong underlying property fundamentals being experienced, which continue to underpin high occupancy levels and retention rates across our portfolios.” Mr Goodman said.

Goodman’s active asset management approach ensured it was well positioned to capitalise on asset recycling opportunities during the quarter, with a key transaction being the sale of a €213 million German portfolio of seven properties sourced from the Group and Goodman European Logistics Fund (GELF), into a new investment vehicle established between Goodman and Malaysia’s Employees Provident Fund (EPF). The sale comprised three properties from the Group and four properties from GELF, valued at €105 million and €108 million respectively.

Develop

 Development work in progress of $2.5 billion across 69 projects, with a forecast yield on cost of 8.8%

 Secured $0.6 billion of new development commitments and completed $0.5 billion of projects in the quarter

 69% of new developments pre-committed and 68% pre-sold

 Goodman Sakai, 130,000 sqm in Osaka Bay 100% pre committed five months prior to completion

 Urban renewal projects to contribute to development earnings over the medium term

The undersupply of prime logistics space and a number of structural changes taking place globally, including the rapid growth in e-commerce, remain key drivers of Goodman’s development business. With active developments underway in all operating markets, Goodman’s development work book increased to $2.5 billion over the quarter.

“With our globally diversified platform, specialist industrial property expertise and available capital, our business is well positioned to capture the ongoing strong customer and investor demand for our development product and to take advantage of a broad range of high quality opportunities in all of our markets.

“Activity remains robust across all markets, and more pleasing is the contribution from the United
Kingdom, with the commencement of two new logistics developments for a combined 89,000 sqm on behalf of Kuehne + Nagel and leading French express parcel business, Geopost. In China, we have a 556,000 sqm development work book with 516,000 sqm of new projects currently in planning, highlighting the strong customer demand for prime logistics space in that market. In Australia, we are progressing our urban renewal strategy, with contracts exchanging for the $73 million sale of a second Sydney property in one of the five Goodman sites in NSW
 

Urban Activation Precincts in which Goodman holds sites identified as suitable for rezoning.” Mr Goodman commented.

Manage

 External assets under management increased to $20 billion

 $1.8 billion of new third party equity raised in the quarter

 Established new investment partnership with EPF in Germany

During the quarter, Goodman completed a number of initiatives across its managed fund platform, which highlights the strong support of its capital partners and demand for Goodman’s specialist industrial product offering.

GELF completed a €550 million equity raising, with Goodman selling a further €110 million of its cornerstone investment in the Fund to meet excess investor demand. In China, the Canada Pension Plan Investment Board and Goodman contributed a further $500 million of committed equity to the Goodman China Logistics Holding partnership. A new EPF partnership, KWASA Goodman Germany (KGG), was established on a 70:30 basis (EPF holding the larger share), with an initial combined equity commitment of €500 million. KGG was launched through the acquisition of a €213 million portfolio of German assets.

“We continue to work hard to build on our extensive capital partner relationships and this was again reflected in the magnitude of the equity inflows achieved during the quarter. As a result, our funds are well positioned to participate in opportunities from the Group and broader market with $5.8 billion in uncalled equity and debt. The significant momentum and investment capacity this brings to our managed fund platform is highlighted by the organic growth achieved in our third party assets under management, which has been primarily driven by development completions.” Mr Goodman said.

Japan operating platform update

Goodman obtained full ownership of the Japan management platform at the beginning of this calendar year, consistent with its long-term commitment to Japan and ongoing execution of its business strategy in that market. A significant number of initiatives have subsequently been undertaken, which are driving the expansion of Goodman’s Japanese operating platform and highlight the value of the Group’s proven full service customer offering.

The Goodman Japan Core Fund (GJCF) has capitalised on the undersupply of modern logistics space, achieving high occupancy of 99%, with rental growth evident on lease renewals in its stabilised property portfolio. Since relaunch at the end of last year GJCF raised $260 million of new equity, recycling the capital returned to Goodman into developments and acquiring a modern, high quality stabilised asset in Matsudo, Tokyo.

With the current development book, GJCF has the potential to grow to in excess of $1.5 billion within two years. Currently, GJCF is undertaking a $100 million equity raising, with the proceeds to be used for the acquisition of the Goodman Sakai development at Osaka Bay (now 100% pre- leased). The target equity amount of the raising is likely to be exceeded given investor demand received to date, with any excess to be used to fund the acquisition of future stabilised opportunities expected to primarily come from the existing development book.

In response to the robust market conditions and significant customer demand for well located, modern logistics properties, development of the 60,000 sqm Goodman Mizue project in Tokyo Bay is expected to commence in the second quarter. The 51,000 sqm Goodman Obu project in Nagoya which is 50% pre-leased is also currently under construction. It is anticipated that construction will commence on the 64,000 sqm Goodman Ichikawa project in Tokyo Bay in the New Year with significant customer pre commitment interest across all projects. Further Goodman and ADIC are considering an expansion of the 50/50 joint venture Goodman Japan Development Partnership to take advantage of several other development opportunities as they arise.

Outlook

“Goodman is uniquely positioned as one of the most diversified and largest global industrial managers and developers offering a consistent, quality, long term product for both its customers and investors. When combined with the structural and cyclical changes that are taking place across the industry, including the rapid growth in e-commerce and network consolidation, we have seen our development work in progress grow to $2.5 billion this quarter. The Group is provided with a strong competitive advantage through its global customer relationships, capital partners and the quality of its team, which enables it to selectively pursue a range of opportunities,” said Mr Goodman.

The robust property fundamentals and strong operating momentum across Goodman’s business in the first quarter of FY2014 ensures Goodman is well positioned to execute on its business strategy and drive earnings over the remainder of FY2014. Accordingly, the Group reaffirms its FY2014 earnings guidance for a full year operating earnings per security of 34.3 cents, up 6%
on FY2013.