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GOODMAN GROUP Annual Report 2009

Aug 27, 2009

64998_rns_2009-08-27_d708d743-1169-43f2-a860-b3981377ca3d.pdf

Annual Report

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Goodman Group Results for the year ended 30 June 2009 28 August 2009

Important notice and disclaimer

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    • This document has been prepared by Goodman Group (Goodman Limited (ABN 69 000 123 071) and Goodman Funds Management Limited (ABN 48 067 796 641) (AFSL Number 223621) as the Responsible Entity for Goodman Industrial Trust (ARSN 091 213 839)). This document is a presentation of general background information about the Group’s activities current at the date of the presentation. It is information in a summary form and does not purport to be complete. It is to be read in conjunction with the Goodman Limited Full Year Financial Report lodged with the Australian Securities and Investments Commission and Australian Securities Exchange (ASX) and Goodman Group’s other periodic announcements released to the ASX (available at www.asx.com.au). It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. These should be considered, with professional advice, when deciding if an investment is appropriate.
    • This presentation is not an offer or invitation for subscription or purchase of securities or other financial products. This presentation does not constitute an offer to sell, or the solicitation of an offer to buy, any securities in the United States or to any “US person” (as defined in Regulation S under the US Securities Act of 1933, as amended (Securities Act) (US Person)). Securities may not be offered or sold in the United States or to US Persons absent registration or an exemption from registration. The stapled securities of Goodman Group have not been, and will not be, registered under the Securities Act or the securities laws of any state or jurisdiction of the United States.
    • This announcement contains certain "forward-looking statements". The words "anticipate", "believe", "expect", "project", "forecast", "estimate", "likely", "intend", "should", "could", "may", "target", "plan" and other similar expressions are intended to identify forward-looking statements. Indications of, and guidance on, future earnings and financial position and performance are also forward-looking statements. Due care and attention has been used in the preparation of forecast information. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of the Group, that may cause actual results to differ materially from those expressed or implied in such statements. There can be no assurance that actual outcomes will not differ materially from these statements.

2

Contents

  • Section 1

Introduction

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  • Section 2 Results overview + Section 3 Market overview

    • Section 4

Summary

  • Appendices

3

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Section 1+ Introduction Anagni Industrial Estate, Italy

Introduction

    • FY09 result consistent with announcement of strategic initiatives on 6 August 2009
    • Underlying fundamentals remain sound

  • Customer occupancy remains high at 94% across the Group and its managed Funds

  • Sufficient enquiry for new developments ($1.5 billion of gross development value)

  • Funds in sound capital position

    • Platform is stabilised and poised for growth long term

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  • Maintain low gearing

  • Pre-funded, pre-leased developments

  • Maintain income and capital stability in core Funds

  • Continue to build on new relationships (CIC/CPPIB)

Year ended
30 June 2009
Operating profit ($M) 408.1
Operating earnings per security (cents)1 17.4
Distribution per security (cents) 9.65
Payout ratio (%) 55.4

5

  1. Operating Profit and EPS excludes unrealised gains on property revaluations, AIFRS and other non-cash adjustments and calculated based on weighted average securities of 2,341.1 million (June 09)

Recent initiatives recap

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  • As announced on 6 August 2009, Goodman has successfully implemented a series of initiatives that significantly strengthen its platform
Group capital + $1.3 billion raised via a fully underwritten institutional placement and 1 for 1 non-renounceable entitlement offer
raising and + $500 million hybrid securities issue to CIC subject to securityholder approval (with a conversion range of $0.43 – $0.45 per stapled security and
debt paying a 10% coupon)
refinancing + $1.1 billion of Group debt facilities extended and a new $100 million unsecured facility committed by Macquarie Bank Ltd
Managed + $2.9 billion of Fund debt facilities extended (with improved covenant positions obtained on $2.7 billion of these extensions)
funds + A further $2.0 billion of improved covenant positions obtained on existing Fund debt facilities where no extensions were sought
strengthened + $1.0 billion of Fund asset sales over the last 12 months
CIC
relationship
and China JV
with CPPIB		 +
+		 New partnership with CIC provides opportunities for Goodman’s China business and further capital to pursue global opportunities
Creation of a new joint venture for Chinese logistics property with CPPIB – initial portfolio of four assets ($163 million) with Goodman retaining a 20%
interest
+ $0.5 billion of Group asset sales over the last 12 months
Other
initiatives		 +
+		 Group’s distribution policy amended to distribute the higher of 60% of operating earnings and taxable income to provide ongoing working capital –
forecast FY10 full-year distribution of 3.4 cps to be paid semi-annually
Investigating an asset for equity swap with the Goodman family – involves a significant, strategically located property in Moorabbin, Melbourne
–
Any transaction will require an independent expert’s report, securityholder approval and must be of financial benefit to the Group

6

Group business model and outlook

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+ Goodman will continue to focus on its core business of owning, developing and managing industrial property

  • Significant opportunities to consolidate the business within existing Asia Pacific and European markets where Goodman has a strong presence
+ Significant de-gearing of the Group’s balance sheet – seek to maintain a sustainable capital structure by limiting the Group’s level of indebtedness
+ Proactively manage all debt expiries well ahead of due dates – no unfunded Group expiries until May 2012
Prudent + Negotiated significant covenant increases within managed funds which combined with ongoing asset sales and other equity initiatives provide
financial substantial headroom
approach + Group’s distribution policy amended to distribute the higher of 60% of operating earnings and taxable income to provide ongoing working capital
+ Revision of hedging policy to reduce levels of capital hedging to range of 70 – 95% thereby reducing impact of FX movements on Group liquidity and
covenant positions (increased borrowing cost factored into projections)
Own + High quality, diversified industrial property portfolio across Group and Funds
+ Investment in high quality industrial property remains the main activity of the Group (87% of Group FY10E operating EBITDA1)
+ Goodman currently manages $14.5 billion of AUM across nine funds and enjoys strong relationships with its investment partners2
Manage + New relationships with CIC and CPPIB provide confidence in the Group’s business model and are strong indicators of Goodman’s ability to attract
new partners and capital
+ Strengthening of the Group’s balance sheet and Goodman’s leading position in key markets provide a favourable outlook for AUM growth
+ Development of new industrial facilities underpins other segments of the Group business model and generates management fees plus development
profits for the Group
Develop + Continued focus on mitigating ‘take-out’ and funding risk via pre-sales, development JVs and turnkey projects
+ Sufficient market demand combined with less-competitive landscape allows enhanced margins and reduced reliance on land banking – expect to
reduce existing land bank
  1. Based on look through investment EBITDA

7

  1. Pro forma 30 June 2009 post new China joint venture with CPPIB (and including the Colworth joint venture)

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Section 2+ FY09 results Venlo North Logistics Centre, The Netherlands

FY09 results – profit and loss

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    • Full year operating profit of $408.1 million

  • $0.9 billion in pre-committed development projects were withdrawn as a means of capital rationalisation

  • Withdrawal from projects generated result below previous guidance in October 2008

    • Represents operating EPS of 17.4 cents per security and DPS of 9.65 cents per security
    • ICR maintained above 3.0x
    • Reclassification of development management fees from management into development segment going forward
    • Non-recurring items include $38 million gain from ESAP cost reversal, $(86) million of restructuring costs, $(26) million of other non-recurring items within Funds and capital profits/losses not distributed

30 June 2009 income statement

Investment
Management		 449
96
FY08A
$m		 64
534
FY09A
$m
Development 299 90
Unallocated operating expenses (47) (24)
Operating EBITDA (look through) 797 664
Operating EBIT (look through) 790 655
Look through interest and tax adjustment1 (80) (155)
Operating EBIT 710 500
Net borrowing costs (117) (91)
Tax benefit/(expense) (8) 23
Operating NPAT (pre minorities) 585 432
Minorities (18) (24)
Operating NPAT (post minorities) 567 408
Weighted average securities (undiluted) (million) 1,668 2,341
Operating EPS (cps) 34.0 17.4
Valuation movements (378) (1,395)
Derivative mark to market 11 (62)
Other non-cash items (33) 41
Non-recurring items 84 (112)
Statutory profit/(loss) 251 (1,120)

9

  1. Reflects adjustment to GMG share of Fund interest and tax

FY09 results – balance sheet

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    • $1.2 billion reduction in aggregate asset valuations for FY09
    • Adverse FX and interest rate movements have led to a $0.2 billion derivatives mark to market liability position

  • Majority of which relates to interest rate hedges that will be spread over the life of the instruments in the profit and loss account

    • Resulted in the following key metrics at 30 June 2009 (pre initiatives)

  • Gearing of 47.9%[1]

  • NTA of $0.85 per security[2]

    • Look-through portfolio weighted average cap rate of 7.9% post revaluations

  • Valuations supported by contracted asset sales undertaken over the last 12 months (Group and Funds)

  • $1.5 billion of sales at a weighted average sale cap rate of 7.9%

30 June 2009 balance sheet (pre initiatives)

30 June 2008 30 June 2009
$m $m
Stabilised assets 2,953 2,820
Fund cornerstones3 2,638 2,733
Development holdings 1,539 1,318
Intangibles 1,073 1,125
Cash 639 242
Other assets 792 345
Total assets 9,634 8,583
Other liabilities
Interest bearing liabilities		 (736)
(4,229)		 (565)
(4,240)
Total liabilities (4,965) (4,805)
Minorities (321) (319)
Net assets (post minorities) 4,348 3,459
Net asset value (per security) $2.60 $1.26
Net tangible assets (per security)2 $1.96 $0.85
Balance sheet gearing1 39.9% 47.9%

  • Represented a 4.2% discount to trailing book value

  • Calculated as net debt/total assets less cash

  • Undiluted for the Macquarie and CIC options on issue

10

  1. Includes Goodman’s investments in its managed funds (GAIF, ABPP, GELF, GHKLF, GMT, GEBPF, MGJLF and Colworth) and its other investments (IIF, J-REP, HDL and other JV’s)

Pro forma balance sheet

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    • $1.8 billion equity raising ($2.0 billion post the exercise of options) and the joint venture with CPPIB significantly reduces Group leverage
Upfront
initiative		 30 June 2009
 Options
conversion
 30 June 2009
30 June 2009 adjustments (pro forma) adjustment (pro forma)
$m $m1 $m $m $m
Stabilised assets 2,820 (157) 2,663 2,663
Fund cornerstones2 2,733 44 2,777 2,777
Development holdings 1,318 1,318 1,318
Intangibles 1,125 1,125 1,125
Other assets 345 (26) 319 319
Total assets (net of cash) 8,341 (139) 8,202 - 8,202
Net interest bearing liabilities (3,998) 1,804 (2,194) 190 (2,004)
Other liabilities (565) 10 (555) (555)
Total liabilities (net of cash) (4,563) 1,814 (2,749) 190 (2,559)
Minorities (319) (481) (800) (800)
Net assets (post minorities) 3,459 1,194 4,653 190 4,843
Balance sheet gearing3 47.9% 26.7% 24.4%
Net asset value (per security) $1.26 $0.78 $0.73
Undiluted net tangible assets (per security) $0.85 $0.59 $0.564
Diluted net tangible assets (per security) $0.745 $0.546 $0.546

  1. China JV adjustment on a completed transaction basis. Adjustment to other liabilities represents DTL adjustment associated with the China JV. Adjustments net of transaction costs

  2. Includes Goodman’s holdings in its managed funds (GAIF, ABPP, GELF, GHKLF, GMT, GEBPF, MGJLF, Colworth and China JV) and its other investments (IIF, J-REP, HDL and other JV’s) 3. Calculated as net debt/total assets less cash

  3. Reflects exercise of the Macquarie and CIC options on issue

  4. Diluted for the Macquarie and CIC options on issue

  5. Fully diluted for the CIC hybrid securities and the Macquarie and CIC options on issue

11

Capitalisation rates

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    • Liquidity starting to return to the market
    • Less property being offered for sale
    • Asset markets stabilising

  • Australia - $237 million Sold at a premium to book of 8.0% on a yield of 8.2%

  • Europe – $305 million Sold at a premium to book of 4.0% on a yield of 7.7%

  • UK Logistics – $79 million Sold at a discount to book of 7.3% on a yield of 6.8%

  • UK Business Parks – $449 million sold at a discount to book of 5.6% on a yield of 7.8%

    • Spread to risk free rate is very attractive
    • Some markets materially below replacement cost (such as the UK)

30 June 2009 property valuations (look through)

GMG 2H09
Fund 2H09
Book value
WACR
Region movement movement 30 Jun 09
30 Jun 091
$m $m $m %
Australia (193) (188) 4,268 8.0%
New Zealand (4) (21) 362 8.7%
Hong Kong - (5) 536 7.1%
Japan (2) (40) 180 5.5%
China - - 248 9.2%
UK (93) (27) 2,098 8.1%
Europe (ex-UK) (32) (64) 1,386 7.6%
Total (324) (345) 9,078 7.9%

Contracted asset sales in last 12 months (Group and Funds)

W/avg sale
Relative to
Region cap rate book value
$m % %
Asia Pacific 673 8.1% (6.7)%
UK and Europe 833 7.7% (2.0)%
Total 1,506 7.9% (4.2)%

12

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Section 3+
Market overview
Highbrook,
New Zealand
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Leasing

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    • Maintain close customer contact
    • Low propensity for customers to re-locate leading to less “churn” costs
    • Minimal new supply keeping vacancy low
    • Minimal rental arrears (less than 0.4%)
    • New Rents struck inline with passing rents (+0.1%)
Division Leasing Area Net Annual Rent (A$m) Average Lease Term Occupancy at 30 June
(sqm) 2009
Australia – Direct 233,434 26.5 3.6 95.5
Australia – GAIF 395,953 41.6 5.0 97.0
UK – ABPP 93,234 18.4 12.8 88.6
Europe – GELF 408,994 31.8 5.8 98.0
Hong Kong – GHKLF 255,614 2.3 3.2 95.1
New Zealand – GMT 168,064 19.0 7.3 96.0
Europe - GEBPF 34,102 9.4 4.1 73.0
Total 1,589,395 149.1 6.1
% of Managed Portfolio 15.1% 12.4%

14

Developments

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    • Pre-lease opportunities still exist

  • 872,051 sqm of shortlisted enquiries

    • Less competitive market
    • Pre-funded / pre-leased developments
    • Attractive risk-adjusted returns

  • Higher cap rates

  • Lower costs

  • Higher rents

FY09 Developments Completions Commitments Withdrawn Work in Progress
Value ($M) 2,125 533 864 596
Area (m sqm) 1.28 0.40 0.42 0.50
Yield 7.51% 8.22% 6.99% 7.65%
Pre-committed 88% 94% 23% 93%
Weighted Average Lease Term (years) 10.5 8.9 2.5 10.7
Development for Third Parties or Funds 79% 85% 76% 87%
Asia Pacific 51% 31% 82% 40%
UK/Europe 49% 69% 18% 60%

15

Management services

    • Core funds are in a sound position

  • Property performance sound (94% occupancy)

  • Balance sheets strengthened (42.9% weighted average gearing)

    • Investor appetite exists for the right opportunities

  • GHKLF raised $310 million of new equity

  • ABPP completed $764 million asset for equity swap

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Business space AUM
growth drivers FY09		 Third party AUM
$ billion
Open 14.3
Acquisitions on market 0.7
Acquisitions from GMG 0.6
Developments 0.9
Disposals
Revaluation		 (1.0)
(1.8)
FX 0.6
Close 14.3
    • Recycle existing capital within mature funds

  • Asset sales of $1 billion achieved during the year

    • Look for new funding opportunities

16

Funds management - fund summary

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    • Refinancing package provides significant headroom for Goodman’s funds

  • Weighted average gearing of 42.9%[1,2]

  • Current weighted average cap rate of 7.7%[2]

  • Weighted average cap rate to covenant breach of 10.6% for FY10[2]

+ Following summary is at 30 June 2009

Goodman’s five largest Fund cornerstones Goodman’s five largest Fund cornerstones Goodman’s five largest Fund cornerstones Goodman’s five largest Fund cornerstones Goodman’s five largest Fund cornerstones
GAIF ABPP GELF GHKLF GMT3
GMG co-investment 45.4% 35.8% 32.9%4 24.2% 28.0%
GMG co-investment $1.1bn $0.4bn $0.4bn $0.2bn $0.2bn
Total assets $4.6bn $3.1bn $2.8bn $1.7bn $1.3bn
Gearing1 41.6% 55.6% 45.3% 32.4% 35.3%
Weighted average debt expiry 2.8 yrs 4.1 yrs 3.3 yrs 2.8 yrs 2.1 yrs
WACR 7.9% 7.9% 6.8% 7.1% 8.7%
WACR at covenant5 11.1% 10.4% 9.1% 11.2% 10.6%
Cap rate expansion to breach 320bps 250bps 230bps 410bps 190bps

  1. Calculated as net debt/total assets less cash

  2. Based on GAIF, ABPP, GELF, GHKLF and GMT (as Funds in which Goodman has a significant investment)

  3. As at 31 March 2009 (as disclosed to the New Zealand stock exchange on 14 May 2009). Subsequent to 30 June 2009 Goodman sold down 11% of its interest in GMT to a 17% holding.

  4. Committed uncalled equity contributions will increase co-investment to 40.0%

  5. Based on amended individual Fund covenants that are currently most capable of triggering an event of default in the Fund for FY10.

17

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Section 4+
Summary
Amazon,
Germany
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Summary

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    • Full year result achieved in context of market conditions and focus on strengthening our financial position

+ Property fundamentals resilient and market conditions showing signs of stabilising

+ Strategic focus on:

  • Prudent capital management

  • Leveraging our business platform and work with partners to capitalise on new opportunities

  • Development strategy predicated on pre-leased and pre-sold or recycled into investments

    • Stable fund management platform
    • Estimated FY2010 operating earnings of $310 million and operating EPS of 5.7 cents[1] and DPS of 3.4 cents

  • Assuming no material change to market conditions

19

  1. 5.7 cents per security is on an undiluted basis. This equates to 5.2 cents per security on a fully diluted basis for the CIC hybrid securities and the Macquarie and CIC options on issue.

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Appendices+
M7 Business Hub,
Australia
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FY09 results – profit and loss

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  • FY09 operating profit of $408.1[1] million + Operating EPS of 17.4 cents and DPS of 9.65 cents
Year ended Year ended Increase/
30 June 2009 30 June 2008 (decrease)
Operating earnings per security (cents)1 17.4 34.0 (48.7%)
Distribution per security (cents) 9.65 34.0 (71.6%)
Payout ratio (%) 55.4 100.0 (44.7%)
Total assets ($M) 8,583.0 9.633.5 (10.9)%
Gearing (%)2 47.9 39.9 8.0%
Liquidity ($M) 308 1,687 (81.7%)
NTA per security ($)3 0.85 1.96 (56.4%)
Securities on issue (M)3 2,738.0 1,675.2 63.4%
  1. Operating Profit and EPS excludes unrealised gains on property revaluations, AIFRS and other non-cash adjustments and calculated based on weighted average securities of 2,341.1 million (June 09).

  1. Gearing is calculated as total interest bearing liabilities (net of cash) over total assets (net of cash).

  2. Calculated on 2,738.0 million securities being closing securities on issue of 2,779.7 million less 41.7 million securities related to ESAP.

21

FY09 results – profit and loss

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Operating income – FY08 to FY09

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47 (37)
567 (32)
(209)
25 31 (6) 408
22
FY08 operating Cornerstone Direct income Management Development Unallocated Borrow ing Tax Minorities FY09 operating
income income operating costs income
expenses
(actual)
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NPAT – FY08 to FY09

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251 (1,017)
(1,120)
(159)
(196)
(73) 74
-74.0
FY08 NPAT Revaluations Operating income Non-recurring items Derivative mark to Other non-cash FY09 NPAT
market items
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22

FY09 results – profit and loss

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GMG results Year ended Year ended Increase /
30 June 2009 30 June 2008 (decrease)
$M $M $M
Property investment 382.0 370.3 11.7
Management services 226.2 317.7 (91.5)
Development 23.9 191.3 (167.4)
Operating revenue net of property expenses 632.1 879.3 (247.2)
Unrealised losses on investment properties (1,165.7) (283.8) (881.9)
Non-operating income (25.2) 115.2 (140.4)
Total income (558.8) 710.7 (1,269.5)
Expenses from operations (177.2) (210.7) 33.5
Impairment losses on investments (229.7) (108.2) (121.5)
Net interest expense (153.6) (110.5) (43.1)
Income tax (expense) / credit – current 23.3 (5.2) 28.5
Minority interests (24.0) (17.6) (6.4)
Profit after tax attributable to Securityholders – continuing operations (1,120.0) 258.5 (1,378.5)
Profit from discontinued operations - (7.8) 7.8
Profit after tax attributable to Securityholders for the Year (1,120.0) 250.7 (1,370.7)
Add unrealised losses on investment properties 1,165.7 270.5 895.2
Add Impairment losses on equity investments 229.7 108.2 121.5
Other AIFRS adjustments and non-operating items 132.7 22.1 110.6
Operating profit after tax attributable to Securityholders 408.1 651.5 (243.4)
Transfer from reserves - (84.4) 84.4
Total distributable income 408.1 567.1 (159.0)
Operating basic earnings per security (cents) 17.4 34.0 (16.6)
Distribution per security (cents) 9.65 34.00 (24.35)
Weighted average number of securities – EPS1 (million) 2,341.1 1,668.2 672.9

23

  1. Excludes weighted average number of treasury securities on issue.

FY09 results – profit and loss

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+ Total income by business segment for year ended 30 June 2009

Category
Total
Property
investment
Management
Realised
gains /
(Losses)
Unallocated
Unrealised
profit / (loss) /
Non-operating
items		 Category
Total
Property
investment
Management
Realised
gains /
(Losses)
Unallocated
Unrealised
profit / (loss) /
Non-operating
items		 Category
Total
Property
investment
Management
Realised
gains /
(Losses)
Unallocated
Unrealised
profit / (loss) /
Non-operating
items		 Category
Total
Property
investment
Management
Realised
gains /
(Losses)
Unallocated
Unrealised
profit / (loss) /
Non-operating
items		 Category
Total
Property
investment
Management
Realised
gains /
(Losses)
Unallocated
Unrealised
profit / (loss) /
Non-operating
items		 Category
Total
Property
investment
Management
Realised
gains /
(Losses)
Unallocated
Unrealised
profit / (loss) /
Non-operating
items		 Category
Total
Property
investment
Management
Realised
gains /
(Losses)
Unallocated
Unrealised
profit / (loss) /
Non-operating
items
$M
$M
$M
$M
$M
$M
Property income
Net unrealised gain/(loss) from fair value adjustment on investment
property
Net gain on disposal of investment properties
Net gain on disposal of controlled entities
Share of net results from equity accounted investments
Net gain/(loss) on disposal of equity investments
Funds management
Property services
Development management
Distributions from investments		 264.3
(527.0)
1.8
40.6
(508.7)
11.9
84.4
65.5
305.4
19.6		 264.3
151.3
19.6		 (1.0)
32.8
2.5
84.4
65.5
305.4		 6.4
5.6
11.9		 (527.0)
(3.6)
2.2
(662.5)
Total income (242.2) 435.2 489.6 23.9 - (1,190.9)
Development and property expenses
Operating expenses
Impairment losses on equity investments		 (296.6)
(197.2)
(229.7)		 (53.2) (243.4)
(116.2)		 (32.5) (48.5)
(229.7)
EBIT (965.7) 382.0 130.0 23.9 (32.5) (1,469.1)
Straight-lining of rent and amortisation of lease incentives
NPI look through adjustment		 (3.3)
154.8
Look through operating EBIT 533.5 130.0 23.9

24

FY09 results – reconciliation of distribution

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Category
Total
Property
investment
Management
Realised
gains /
(losses)
Unallocated
Unrealised
profit / (loss) /
Non-operating
items		 Category
Total
Property
investment
Management
Realised
gains /
(losses)
Unallocated
Unrealised
profit / (loss) /
Non-operating
items		 Category
Total
Property
investment
Management
Realised
gains /
(losses)
Unallocated
Unrealised
profit / (loss) /
Non-operating
items		 Category
Total
Property
investment
Management
Realised
gains /
(losses)
Unallocated
Unrealised
profit / (loss) /
Non-operating
items		 Category
Total
Property
investment
Management
Realised
gains /
(losses)
Unallocated
Unrealised
profit / (loss) /
Non-operating
items		 Category
Total
Property
investment
Management
Realised
gains /
(losses)
Unallocated
Unrealised
profit / (loss) /
Non-operating
items		 Category
Total
Property
investment
Management
Realised
gains /
(losses)
Unallocated
Unrealised
profit / (loss) /
Non-operating
items
$M
$M
$M
$M
$M
$M
EBIT (965.7) 382.0 130.0 23.9 (32.5) (1,469.1)
Unrealised gains/losses on investment property revaluations
Unrealised gains/losses included in associate share of profits
Impairment loss on investments
Employee LTIP
Straightling of rent and amortisation of lease incentives
Non-operating items1		 527.0
638.7
229.7
(38.1)
(3.3)
111.8		 (3.3) 527.0
638.7
229.7
(38.1)
111.8
Operating EBIT 500.1 378.7 130.0 23.9 (32.5) -
Net interest expense
Unrealised losses/gains on fair value of derivatives
Income tax credit – current
Minorities		 (153.6)
62.3
23.3
(24.0)
Operating profit available for distribution 408.1
Total distribution 188.2
Pari passu 76.0
Total distribution paid 264.2

25

  1. Non-operating items includes $85.7 million of restructure costs, $23.9 million of non-cash losses from funds not distributed and $2.2 million of capital losses added back.

FY09 results – financial position

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+ Headline gearing of 47.9%

As at 30 June 2009
Asia Pacific
$M
Europe
$M
Total
$M		 As at 30 June 2009
Asia Pacific
$M
Europe
$M
Total
$M
Investment properties
2,314.4
1,219.6		 3,534.0
Investments in funds
1,852.7
880.7		 2,733.4
Other segment assets1
291.4
1,474.2		 1,765.6
Cash 242.5
Other assets 307.5
Total assets 8,583.0
Interest bearing liabilities 4,239.8
Other liabilities 565.6
Total liabilities 4,805.4
Net assets/(liabilities) 3,777.6
Gearing2 47.9%
NTA (per security)3 $0.85

  1. Other segment assets include intangibles of $1,125.4 million.

  2. Gearing calculation based on debt (net of cash) over total assets (net of cash).

  3. Calculated based on 2,779.7 million securities on issue less 41.7 million Treasury securities.

26

FY09 results – capital allocation

+ Total property investment portfolio $5.6 billion

  • reduction in directly owned assets $0.1 billion

  • increase of $0.1 billion cornerstone[1] , predominately from ABPP asset-for-equity swap

  • $1.2 billion devaluation of direct property and proportionate share of Fund owned properties

    • Group owned development assets down $0.2 billion to $1.3 billion

  • impact of the capital management initiatives to reduce capital allocation to development

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Direct assets Cornerstone Total investments Development WIP
investments1 (on GMG B/S)
$M $M $M $M
Asia Pacific 2,242.0 1,852.7 4,094.7 505.1
Europe 577.2 880.7 1,457.9 813.0
Total 2,819.2 2,733.4 5,552.6 1,318.1

27

  1. Includes equity accounted investments, investment in IIF and joint ventures

FY09 results – net tangible assets

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+ Movement in net tangible assets for the year ended 30 June 2009

Net tangible asset reconciliation $M
$M
Per security1
Net assets at 1 July 2008
Less: Minority interests		 4,669.1
2.79
(320.6)
(0.19)
Net assets attributable to security holders
Valuation of non-current assets during the year
Valuation of investments properties
Valuation of investments properties in associates
Valuation of investments (includes IIF)
Impairment of intangibles
Movements in equity
Equity issues (net of issue costs and effect of ESAP and additional securities)
Other
Movement in reserves (and other AIFRS adjustments)
Pari Passu
Change in fair value of derivatives and foreign exchange losses
Attributable to minority interests (includes Goodman PLUS)		 4,348.5
2.60
(527.0)
(638.7)
(211.1)
(33.2)
(1,410.0)
(0.52)
927.7
(0.67)
3.7
0.00
(76.0)
(0.03)
(311.1)
(0.11)
(24.0)
(0.01)
Net assets attributable to securityholders at 30 June 2009 3,458.8
1.26
Less Intangibles (1,125.4)
(0.41)
Net tangible assets at 30 June 2009 2,333.4
0.85
Net tangible assets excluding derivative MTM position as at 30 June 2009 2,502.8
0.91
  1. Includes equity accounted investments, investment in IIF and joint ventures

28

FY09 results – net tangible asset bridge

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  • For year ended 30 June 2009

$ per security

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----- Start of picture text -----

2.60 (0.67)
(0.52)
(0.11) (0.04) 1.26 (0.41)
0.85
Net assets Equity raising Valuation of non- Change in fair Other movements Net assets Intangibles Net Tangible
attributable to current value of (IFRS and Pari attributable to Assets as at 30
ecurityholders as investments derivatives and FX Passu) securityholders as June 2009
at 1 July 2008 at 30 June 2009
----- End of picture text -----

29

  1. Calculated on 2,738.0 million securities being closing securities on issue of 2,779.7 million less 41.7 million securities related to ESAP and excludes minority interest

FY09 results – valuations and asset sales

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    • $669 million devaluation of direct properties and proportionate share of Fund owned properties for 2H FY09 ($1,158 million for full year)

  • 2H FY09 7.3% average decline driven by 61bps weighted average cap rate expansion to 7.9%

  • Represents devaluations of (10.7)% or 99bps for full year FY09

  • 100% of portfolio revalued – 61% externally valued

    • Direct stabilised assets devalued $324 million for 2H FY09 ($522 million for full year)

    • 64bps WACR expansion to 8.1% (105bps for full year)

    • Fund owned property devalued $345 million for 2H FY09 ($636 million for full year)

    • 55bps WACR expansion to 7.7% (93bps for full year)

    • Development land and WIP devalued $149 million for 2H FY09 ($210 million for full year)
    • Valuations supported by asset sales undertaken over the last 12 months

30 June 2009 property valuations (look through)

Region GMG 2H09
movement		 Fund 2H09
movement		 Book value
30 Jun 09		 WACR
30 Jun 091
$m $m $m %
Australia (193) (188) 4,268 8.0%
New Zealand
Hong Kong
Japan		 (4)
-
(2)		 (21)
(5)
(40)		 362
536
180		 8.7%
7.1%
5.5%
China - - 248 9.2%
UK (93) (27) 2,098 8.1%
Europe (ex-UK) (32) (64) 1,386 7.6%
Total (324) (345) 9,078 7.9%

Contracted asset sales in last 12 months (Group and Funds)

Region W/avg sale
cap rate
Relative to
book value
$m % %
Asia Pacific 673 8.1% (6.7)%
UK and Europe 833 7.7% (2.0)%
Total 1,506 7.9% (4.2)%

30

  1. Stabilised properties only

FY09 results – intangibles and derivatives

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    • A substantially audited review of intangibles valuation has been conducted

  • Review based on DCF and has resulted in a $33 million write-down

  • UK logistics businesses primarily affected by market conditions, remaining European and Asia Pacific value intact reflecting substantial growth and improvement in earnings quality since acquisition

  • No balance sheet recognition for internally generated intangibles in Australia

  • European intangibles valuation based on discount rates of between 11 – 15%

  • Short term cash flow period assumptions reflect current or lower than current income levels with a recovery to normalised levels in four – five years

Intangibles – segment carrying values

Book value Book value Adjusted for
acquisitions		 Book value
30 June 2009
30 June 2008
$m		 and FX
$m		 post write-down
$m
Continental Europe 689 728 728
UK business parks 233 233 224
UK logistics 146 146 122
New Zealand 5 5 5
Hong Kong - 25 25
China - 21 21
Total
1,073		 1,158 1,125

  • Long term growth assumptions are typically 2.5% pa

    • Adverse FX and interest rate movements have impacted the balance sheet

  • $(229) million interest rate hedge mark to market movement due to falling global interest rates

  • $(128) million mark to market movement in Group share of Fund interest rate hedges has impacted cornerstone values

  • A$ depreciation has resulted in a $(51) million cross currency mark to market movement and has increased gearing as a result of foreign denominated debt

    • No near term liquidity events from maturing cross currency swaps with maturities between 2011 to 2013

FY09 derivative movements

FY09 net movement GMG liability as at
from FY08
$m		 30 June 2009
$m
Interest rate hedges (Group) (229) (163)
Cross currency swaps (51) (36)
Forward exchange contracts
Total		 -
(280)		 (1)
(200)
Interest rate hedges (share of Funds) (128) n/a
    • Costs of out of the market interest rate hedges will be spread over the life of the derivatives and have been factored into forecasts

31

Developments

    • Development & development management (13% of operating EBIT)

  • ROC of 6.4% (profit & fees)

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Work in progress $B
Opening 3.1
Completions
Projects Withdrawn		 (2.1)
(0.9)
Commencements 0.5
Closing 0.6
Work In Progress On Balance Sheet Third Party Funds Total End Value Third Party Funds
By Region End Value End Value % of total
$M1 $M $M
Asia Pacific 45 195 240 81
Europe 34 322 356 90
Total 79 517 596 87

+ GMG development future cash commitments (WIP) has decreased

$M
GMG developments
Less pre-sold1
GMG cash commitments ($30m post China JV)
GMG managed funds ($156m Post China JV)		 196
(136)
60
126

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32

  1. Presold projects are reimbursed by instalments throughout the project or at Practical Completion of the project.

Funds management - AUM

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Assets Under Management

    • Total assets under management of $14.3 billion (excluding direct assets)[1]
    • Diversified across markets in Australia, New Zealand, Hong Kong, Japan, UK and Europe

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33

  1. GMG holds a further $4.2 billion of assets under management on balance sheet

Funds management - customers

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Top 20 Global Customer Base

(Moody’s/S&P)

  1. Includes customers of GMG and its managed funds and is based on net rental income

  2. Parent company rating adopted for Coles, NYK Logistics and T-Mobile.

34

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Capital management – liquidity

    • Cash and available lines of credit of $308 million at 30 June 2009

Sources and uses of liquidity

Sources $m Uses $m
Opening liquidity 1,686 Net investing cash flow 1,160
Operating profit 408 Distribution paid 430
Capital raising 924 Debt repayments 1,327
Finance Facility1 300 FX impacts 72
Cash in China escrow 21
Total 3,318 Total 3,010
Closing liquidity 308
    • Liquidity has been impacted by the following:

  • A$ depreciation, particularly to the Euro – result of A$ facility limits and multi-currency drawings

  • Committed acquisitions, Fund commitments and development capex – now largely funded

  • February 2009 distribution

  • Lower than expected asset sales and operating cash flows

  • Repayment of facilities ($560 million in 2H FY09 and $767 million in 1H FY09)

Liquidity bridge ($m)

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----- Start of picture text -----

408 (1,160)
1,686
924 (1,327)
(430)
300 (21) 308
(72)
As at 30 June Operating profit Net investing Distribution paid Capital raising Debt FX impacts Finance Facility 1 Cash held for Cash and
2008 cashflow repayments China in escrow available
(ex Finance) facilities as at
30 June 2009
----- End of picture text -----

  1. Additional $185 million undrawn portion of Finance Facility conditional on FIRB approval and signing of audited accounts

35

Capital management – currency mix

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36

Financial risk management

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+ Financial risk management in line with Group board policy

  • interest risk management is conservative with:

  • 78% hedged in the first 12 months

  • Weighted average hedge maturity of 4.7 years

  • Weighted average hedge rate of 4.88%[1] vs spot[2] 3.92%

  • FX rates 100% hedged on known cash flows for 3 years at rates of:

  • EUR (hedge 0.5322, spot 0.5817)

  • HKD (hedge 5.0551, spot 6.4187)

  • NZD (hedge 1.1697, spot 1.2151)

  • Includes the 10 year EMTN £250 million at 9.75% fixed rate and the AUD receiver leg from the cross currency swaps 2. Spot refers 5 year swap market rate as at 26 August 2009.

37

Financial risk management

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Capital hedging

    • The Group, historically hedged 100% of its capital investments to mitigate translation risk due to the volatility in foreign exchange rates
    • Where practical, the Group had funded its international commitments and investments in local foreign currency, creating a natural hedge

  • Cross currency swaps had been used on a case by case basis as required

    • The above policy had been effective in hedging Australian Dollar value of equity against currency movements
    • However, with a weakening Australian Dollar, this had adversely impacted the Liquidity and Gearing
    • In April 2009, the Group modified its capital hedging policy to hedge the balance sheet within the 70% - 95% range
    • Under the revised policy, the impact of a 10% foreign exchange movements result in

  • Liquidity sensitivity decrease by A$14 million (from A$133 million)

  • Gearing sensitivity reduce by 0.1% (from 1%)

Foreign sourced income

    • Foreign currency exposures in GBP, EUR, NZD, HKD, JPY and USD for the Group’s investments in direct property, cornerstone investments and management companies
    • The Group’s risk management policy allows for foreign currency hedging to a minimum of 95% of known foreign cash flows for a minimum of three years

38

Financial risk management

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Interest rate

    • Interest rates are hedged to 78% over next 12 months
    • Weighted average hedge rate of 4.88%[1] vs spot[2] 3.92%

  • NZD – (hedge 7.48%, spot 5.37%)

  • JPY – (hedge 1.55%, spot 0.84%)

  • HKD – (hedge 4.27%, spot 2.66%)

  • GBP – (hedge 6.97%, spot 3.41%)

  • Euro – (hedge 4.35%, spot 2.80%)

    • Weighted average maturity of 4.7 years

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  1. Includes the 10 year EMTN £250 million at 9.75% fixed rate and the AUD receiver leg from the cross currency swaps

39

  1. Spot refers 5 year swap market rate as at 26 August 2009.

Financial risk management

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Interest rate hedging profile

Euro payable
GBP payable
HKD payable
NZD payable
JPY payable
As at June €M
Fixed
rate
%
£M
Fixed1
rate
%
HK$M
Fixed
rate
%
NZ$M
Fixed rate
%
¥M
Fixed
rate
%
2010 (660.0)
3.82%
(785.0)
5.54%
(1,530.4)
4.28%
(173.0)
7.70%
(15,750.0)
1.51%
2011 (386.1)
4.17%
(744.8)
6.40%
(871.2)
4.25%
(135.2)
8.10%
(14,911.6)
1.53%
2012 (173.2)
4.98%
(685.0)
6.99%
(345.5)
4.30%
(110.0)
8.79%
(13,633.9)
1.55%
2013 (140.0)
5.12%
(685.0)
6.99%
(124.7)
4.25%
(110.0)
8.79%
(4,000.0)
1.69%
2014 (132.4)
5.16%
(685.0)
6.99%
-
-
(110.0)
8.79%
(3,758.9)
1.69%
2015 (50.0)
5.91%
(648.8)
7.09%
-
-
(68.8)
7.33%
-
-
2016 (50.0)
4.50%
(530.5)
7.54%
-
-
(50.0)
5.75%
-
-
2017 (33.3)
4.50%
(378.0)
8.43%
-
-
(16.2)
5.75%
-
-
2018 -
-
(266.0)
9.50%
-
-
-
-
-
-

40

  1. Includes the 10 year EMTN £250 million at 9.75% fixed rate.

Financial risk management

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Currency hedging profile

Amount Amount Amount
Maturing in Hedge rate payable Hedge rate payable Hedge rate payable
year ending June
€M HK$M NZ$M
2010 0.5667 (24.0) 5.3333 (68.5) 1.1491 (5.6)
2011 0.5273 (17.0) 5.0701 (62.6) 1.1630 (5.3)
2012 0.5229 (14.5) 4.9885 (62.6) 1.1768 (5.3)
2013 0.4837 (9.0) 4.9077 (62.6) 1.1932 (5.0)

Foreign currency denominated balance sheet hedging maturity profile

Currency Maturity Weighted average exchange Amount receivable1 Amount payable1
rate
€M 2012/2013 0.5665 A$369.3M €209.0M
£M 2011/2013 0.4700 A$272.3M £128.0M
NZ$M 2012 1.2590 A$81.0M NZ$102.0M
HK$M 2011/2012 6.4213 A$234.6M HK$1500.0M
¥M 2012 97.4500 A$44.5M ¥4,340M

41

  1. Floating rates apply for the payable and receivable legs for the cross currency swaps except for the Euro and NZD cross currency where the receivable is at a fixed rate.

Exchange rates

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    • Statement of Financial Position – exchange rates as at 30 June 2009
– AUDGBP – 0.4872 (30 June 2008 – 0.4860)
– AUDEUR – 0.5751 (30 June 2008 – 0.6117)
– AUDHKD – 6.2586 (30 June 2008 – 7.4812)
– AUDSGD – 1.1699 (30 June 2008 – 1.3093)
– AUDNZD – 1.2428 (30 June 2008 – 1.2678)
– AUDUSD – 0.8114 (30 June 2008 – 0.9592)
– AUDJPY – 77.760 (30 June 2008 – 103.58)
– AUDCAD – 0.9377 (30 June 2008 – 0.9741)
    • Statement of Financial Performance – average exchange rates for the 12 months to 30 June 2009
– AUDGBP – 0.4625 (30 June 2008 – 0.4475)
– AUDEUR – 0.5416 (30 June 2008 – 0.6100)
– AUDHKD – 5.8048 (30 June 2008 – 6.9822)
– AUDSGD – 1.0916 (30 June 2008 – 1.2855)
– AUDNZD – 1.2289 (30 June 2008 – 1.1668)
– AUDUSD – 0.7473 (30 June 2008 – 0.8961)
– AUDJPY – 74.206 (30 June 2008 – 98.659)
– AUDCAD – 0.8631 (30 June 2008 – 0.9048)

42

thank+you

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