Goodman Group (Goodman or Group) announced its results for the full year ended 30 June 2012, delivering A$463 million operating profit, up 21% on FY2011, and is positioned to deliver FY2013 operating profit after tax of A$524 million. The growth of the Group’s Greater China portfolio made a significant impact on the success of the business in the past year.
Global operational highlights:
- Robust property fundamentals across core investment portfolio, with high occupancy maintained at 96%, weighted average lease expiry of 5.2 years and like- for-like net property income growth of 2.8%
- Work in progress at A$1.9 billion, with A$1.8 billion of development commitments across 77 projects, 74% pre-committed and 87% matched to third party capital
- Established North American operating platform and secured US$890 million of equity on a 55% / 45% basis with Goodman and CPPIB respectively
- Privatisation of Japan platform approved and external commitments1 to Japan Core Fund and Japan Development Fund increased to US$350 million
Greater China operational highlights:
- A total of 327,400 sqm of leasing transactions were concluded in Greater China including new leases and renewals, with average occupancy maintained at 98%
- China represents 9% of the global development book, up from 2% in FY2011
- Land bank and land reserves of more than 4 million sqm land in mainland China with the ability to deliver over 2.6 million sqm of development projects
- 400,000 sqm of development in progress with a 800,000 sqm development target in FY2013
Goodman’s Group Chief Executive officer, Mr Greg Goodman said, “The Group has exceeded initial targets in FY2012, to deliver a solid result with a strong contribution made by all parts of our business. The 21% year on year increase in operating profit we are announcing today reflects the successful delivery of our focused strategy and our ability to leverage opportunities in all our markets given the size and scale of our business, quality portfolio, global operating platform and our significant global customer and capital partner relationships.”
Goodman has used its industrial sector specialisation and development capability to focus on securing high quality opportunities in line with the continued strong customer and investor demand for prime quality industrial space in its key operating markets. This is represented by development work in progress of A$1.9 billion and over A$0.9 billion of third party equity raised from new and existing investors during the year. Further to our announcement on 20 June 2012, we have now completed on the development joint venture in North America, with targeted third party equity of US$400 million from Canada Pension Plan Investment Board (CPPIB).
As at 30 June 2012, the Group’s work in progress was A$1.9 billion, generating a yield on cost of 8.5%, and equating to 1.5 million sqm of new space.
The Group secured A$1.8 billion of new development commitments during the year across 77 projects. An overall leasing pre-commitment of 74% was achieved on new projects with an average lease term of 7.0 years. Development activity remains strong in Europe, particularly in Germany, France and Benelux, and China now represents 9% of the overall development book, up from 2% this time last year. The undersupply of quality logistics space in China is driving demand, with Goodman experiencing substantial growth in development activity and increased market share. Consistent with Goodman’s low risk approach, 87% of current development commitments are either pre-sold to, or pre-funded by our managed funds or third parties.
“Demand from customers and investors for our development product continues to be strong. This is being driven by the undersupply of prime quality industrial space globally and a number of structural changes taking place, including the rapid growth in e-commerce, greater supply chain efficiencies, building obsolescence and consolidation among third party logistics providers. These factors, together with the commencement of our development activity in North America and the expected growth in our development commitments in China to 800,000 sqm in FY2013, will see Goodman’s development book grow towards A$2.5 billion in the medium-term.” Mr Goodman said.
Greater China highlights
Goodman has made significant progress with its portfolio in Greater China, over 327,400 sqm of leasing transactions were concluded in FY2012, including new leases and renewals. Due to the lack of quality logistics space and continued strong demand, there was a rental uplift of 14.4% for the year.
Mr Philip Pearce, Goodman’s Managing Director, Greater China, said, “The substantial increase in our development book in mainland China is driven by strong demand for prime quality logistics space and we are already seeing significant leasing activity around our current development projects. The first phase of the Group’s largest investment in China, Goodman Pudong International Airport Logistics Park, which totals 43,000 sqm, reached practical completion at the end of July and is 71% pre-leased. Customers include Kuehne + Nagel, a leading international logistics provider, committing to 17,500 sqm; one of the world’s largest luxury goods groups,
Richemont is taking up 9,000 sqm; and Ferrari Logistics, an international logistics provider for high-end products is committing to 4,000 sqm. In light of the keen interest, we have already commenced the construction of the second phase which will provide 56,000 sqm when completed in Q4 2013. When fully developed, the park will provide around 200,000 sqm of high quality warehouse space with an end value of over US$170 million.”
“We are confident that phase 2 of Goodman Beijing Airport Logistics Centre will be 100% pre- leased prior to its practical completion at the end of August. The 31,000 sqm development already has pre-commitments from Nippon Express for 11,700 sqm and Pantos Logistics for 11,800 sqm, with the remaining space in final stages of negotiation.”
Pearce added, “Our footprint in China is expanding rapidly and we now have in excess of 4 million sqm of land available, including land secured and under negotiation, which provide us the capability to deliver over 2.6 million sqm of development projects. Currently, we have over 400,000 sqm of developments in progress and we have a target development of 800,000 sqm for FY2013. We are excited about our progress as we continue to find more opportunities in China, and look forward to announcing further projects in the near future.”
Goodman is committed to the prudent yet active delivery of its business strategy. The Group is well positioned in the current low growth environment given its focus on capital management, active asset management and increasing the contribution from its development and management activities, and the strength of its investor and customer relationships. Goodman’s FY2013 earnings guidance is for an operating profit of A$524 million, up 13% on FY2012, equating to an operating EPS of 32.3 cents, up 6% on FY2012.
1 Agreed commercial terms, subject to execution of final legal documentation.
For further information, please contact:
Marketing Director, Asia
Tel + 852 2249 3149
Citigate Dewe Rogerson
Tel +852 3103 0108
For more information, please go to www.goodman.com