GOODMAN GROUP — Capital/Financing Update 2009

Aug 5, 2009

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Goodman announces a comprehensive capital management plan and strategic initiatives

Date	6 August 2009
Release	Immediate

Summary

• • Extension of $4.1 billion of existing finance facilities across Goodman Group and its managed funds[1]
• • New strategic relationships with China Investment Corporation (CIC)[2] and the Canada Pension Plan Investment Board (CPPIB)[3]
• • $1.8 billion fully underwritten capital raising
• • Reduction of pro-forma gearing to 26.7%[4 ]
• • No unfunded Group debt expiries until May 2012

Goodman Group (Goodman or the Group) has successfully implemented a series of initiatives that significantly strengthen the balance sheets of the Group and its managed funds. These initiatives include extensive debt restructuring; $1.3 billion fully underwritten ordinary equity raising; investment by CIC of $0.5 billion in the Group and the formation of a $0.2 billion joint venture with CPPIB to invest in China. These partnerships will enable the Group to capitalise on its leading logistics, funds management and development platform.

Goodman Group’s Chairman, Ian Ferrier said “We have capitalised on our leading industrial real estate platform. The relationships with CIC and CPPIB, formed after extensive enquiry, demonstrate the attractiveness of the Group’s business model to large strategic investors.”

Goodman Group’s Chief Executive Officer, Greg Goodman said “The implementation of these capital management initiatives has been key to de-gearing the Group’s balance sheet and provides a comprehensive capital management solution. The support from the Group’s lenders via the extension of existing facilities has enabled us to preserve capital and we remain focussed on reducing debt and maintaining a robust balance sheet and liquidity position.

The Group has refined its business model in line with the current operating environment and is committed to its core markets in Asia Pacific and UK / Europe.”

Level 10, 60 Castlereagh Street, Sydney NSW 2000 | GPO Box 4703, Sydney NSW 2001 Australia Tel +61 2 9230 7400 | Fax +61 2 9230 7444 | info@goodman.com | www.goodman.com Goodman Limited ABN 69 000 123 071 Goodman Funds Management Limited ABN 48 067 796 641 AFSL Number 223621

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Capital Management Initiatives

Goodman has worked collaboratively with debt and equity providers to deliver a comprehensive plan of capital management initiatives across the Group and managed funds. These initiatives undertaken include:

• • the extension of $4.1 billion of debt facilities, improved covenant positions have been obtained on $2.9 billion of fund debt extensions
• • $2.0 billion of improved covenant positions on existing fund debt facilities[1] where no extensions were sought
• • $1.5 billion of completed asset sales in the last 12 months
• • $0.2 billion China joint venture with CPPIB
• • $1.3 billion fully underwritten 1 for 1 non renounceable entitlement offer and placement (Equity Offer)
• • $0.5 billion issue of hybrid securities to CIC (subject to securityholder approval)

The above initiatives position Goodman, in the current environment, to focus on its core markets and result in the following :

• • Reduction of Group debt to a more sustainable level
• • Pro forma gearing reduced to 26.7%
• • Weighted average term to facility expiry increased to 4.2 years and 3.2 years for the Group and managed funds respectively
• • No unfunded Group debt expiries until May 2012

The Group estimates FY2010 operating profit after tax (post minorities) of $310 million, assuming no material change to market conditions. This would equate to undiluted operating earnings per security of 5.7 cents[5] and distribution per security of 3.4 cents. The first half distribution is expected to be paid in February 2010.

The Group has taken the prudent step of revising its distribution policy to provide ongoing working capital by distributing the higher of 60% of operating earnings and taxable income. The amount to be distributed is reviewed by the Board at the end of each financial period in light of operating performance and current market conditions.

Other initiatives being investigated include an asset for equity swap with the Goodman family which involves a significant and strategically located property in Moorabbin, Melbourne. This initiative is still being considered and, if proposed, will require an independent expert’s report and be subject to securityholder approval.

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Strategic Relationships

New strategic relationships with CIC and CPPIB demonstrate the strength of Goodman Group’s business platform and provide ongoing sources of capital to expand the Group’s business.

CIC

CIC has agreed, subject to securityholder approval, to make a significant investment of $500 million in Goodman by participating in a hybrid security issue. For further details of the hybrid security to be issued to CIC refer to the Summary Terms and Conditions.

CIC is attracted to Goodman’s leading logistics platform in the Asia Pacific and Europe regions. The combination of CIC’s capital with Goodman’s management expertise provides both companies with new opportunities to explore and participate in the global logistics market. CIC and Goodman have entered into a Relationship Agreement that will involve both parties working together to explore a range of opportunities including:

• Participation in new acquisitions

• Acquisition of assets currently held on Goodman’s balance sheet

• Participation in significant private and public market situations across Goodman’s platform

• CIC working with Goodman to grow its business globally.

Any opportunities undertaken with CIC would be subject to review and approval of the Investment Committee of CIC.

CIC has received approval from the Foreign Investment Review Board in relation to its investment in up to 19.9% of the Goodman Group stapled securities in relation to the bridge facility in June 2009. CIC will now apply for further approval in relation to its investment in the hybrids. Providing the issue of the hybrid and CIC options are approved by securityholders, CIC’s holding in the Group will not exceed 19.9% following the conversion of the hybrid and options. CIC will be invited to nominate a member to be appointed to the Board of Goodman, subject to the appointment being confirmed at Goodman’s next Annual General Meeting.[8]

CPPIB

The CPPIB is a professional investment management organization that invests the assets of the Canada Pension Plan (CPP) not required to pay current benefits and has assets under management of $110 billion.

CPPIB will invest $163 million in the joint venture with Goodman, which will own and undertake the development of logistics assets in mainland China. The initial portfolio consists of four properties seeded by Goodman. The joint venture could invest a further $185 million to develop facilities on land owned by Goodman in Shanghai. To further facilitate this, the joint

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venture has a first right of refusal over all logistics opportunities sourced by Goodman in mainland China.

Goodman will receive the usual funds management, property management and development management revenues associated with the operation of the joint venture.

The joint venture is the first step in what is likely to be a strong relationship with CPPIB as Goodman considers other Asia Pacific opportunities through further joint ventures.

“We are pleased to be entering into this joint venture with Goodman as it enables us to gain access to the fast growing China logistics market while tapping into the expertise of a global logistics space supplier. It will provide us with the opportunity to acquire a diversified portfolio of high-quality logistics assets that can yield attractive returns over the long term,” said Graeme Eadie, Senior Vice President, Real Estate Investments, CPP Investment Board.

The support provided by CIC and CPPIB should benefit Goodman as it considers the expansion of its real estate platform in China, one of the largest logistics real estate markets globally, in a disciplined manner.

The Equity Offer

The Equity Offer is fully underwritten at an issue price of $0.40 per stapled security in order to raise $1,279 million. The Equity Offer is made up of two components:

• • a $167 million institutional placement (Placement); and
• • a $1,112 million 1 for 1 accelerated non-renounceable pro rata entitlement offer (Entitlement Offer)

The structure of the Equity Offer enables all securityholders to participate in the Entitlement Offer on a pro-rata basis to their existing holdings.

The application of the net proceeds of the Equity Offer, the CIC hybrid and CPPIB JV transactions to the reduction of net debt will result in a substantial improvement in Goodman’s capital structure. Goodman’s gearing will improve from 47.9% to 26.7% as at 30 June 2009 on a pro forma basis.

Whilst Goodman intends to apply the majority of the net proceeds from the capital management initiatives to debt reduction, it has allocated $250 million to participate in potential future equity raisings of its managed funds if required.

See below for further details of the Equity Offer.

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Financial Results FY2009

Goodman also announces a summary of its substantially audited financial results for the year ended 30 June 2009. The results include;

• • Operating profit after tax of $408 million
• • Operating earnings per security of 17.4 cents
• • Distribution per security of 9.65 cents
• • Statutory accounting loss of $1,120 million – reflecting property and equity investment revaluation losses of $1,395 million, derivative mark to market losses of $62 million and other non-operating losses of $71 million
• • Headline gearing of 47.9% and NTA of $0.85 cents per security.

In order to conserve capital since December 2008, the Group has withdrawn from a large number of previously committed developments and refrained from entering into new unfunded commitments. This has resulted in a decline in development revenues.

The full year results for the financial year ended 30 June 2009 will be reported on or before 31 August 2009.

Outlook and FY10 Earnings

Following the initiatives outlined herein, Goodman will be strengthened and its business model well positioned to capitalise on market opportunities. The Group’s core business segments have been refined to reflect the current market conditions. Key areas are:

• • Ownership in high quality logistics real estate remains the Group’s primary activity.
• • Development of new facilities underpins investment and management activities of the Group and generates management fees and development profits.
• • Management of $14.5 billion[6] of external assets across 9 funds.

The Group estimates FY2010 operating profit after tax (post minorities) of $310 million, assuming no material change to market conditions. This would equate to an undiluted operating earnings per security of 5.7 cents and distribution per security of 3.4 cents.

This FY2010 earnings guidance incorporates a full period of cost reduction strategies and assumes no forecast of non-cash movements.[7]

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“The severe deterioration in global financial markets presented us with unprecedented conditions and had a significant impact on the Group’s financial position. In response Goodman has undertaken comprehensive capital management and strategic initiatives to provide a complete solution. Our operating model remains strong and Goodman is committed to continue focusing on its core business of owning, developing and managing industrial property in its key markets.” stated Mr Goodman

For further information, please contact Goodman Group:

Greg Goodman Group Chief Executive Officer +61 2 9230 7400

Further details of the Equity Offer

Goodman has commenced a fully underwritten equity offer (Equity Offer) in order to raise $1,279 million consisting of:

• • a $167 million institutional placement (Placement); and
• • a $1,112 million 1 for 1 accelerated non-renounceable pro rata entitlement offer (Entitlement Offer)

Under the Entitlement Offer, eligible securityholders are invited to subscribe for 1 new Goodman stapled security for every 1 existing stapled security held at the Record Date. The issue price for the new stapled securities to be issued under the Equity Offer (New Securities) is $0.40 per New Security.

The Record Date for the Entitlement Offer will be 7.00pm (AEST) on 11 August 2009. The Institutional Entitlement Offer and the Placement, which are expected to raise approximately $945 million, will be conducted on Thursday 6 and Friday 7 August 2009. Goodman will remain in a trading halt until completion of the Institutional Entitlement Offer and the Placement and is expected to recommence trading on Monday 10 August 2009.

The Retail Entitlement Offer, which is expected to raise approximately $334 million, will open on Friday, 14 August 2009 and close at 5.00pm (AEST) on Friday, 4 September 2009. Eligible retail securityholders may apply for New Securities in excess of their Entitlement (Additional Securities). Additional Securities will only be allocated to eligible retail securityholders if and to the extent that Goodman so determines, in its absolute discretion, having regard to offsetting the dilutionary impact of the Placement and the issue of hybrid securities to CIC. The Retail Entitlement Offer is not being extended to any securityholder outside Australia or New Zealand.

Retail securityholders will receive a retail entitlement offer booklet including a personalised Entitlement and Acceptance Form in relation to the Retail Entitlement Offer which will provide further details of how to participate.

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Securityholder enquiries

Retail securityholders who have any queries about the Entitlement Offer should contact the Goodman Offer Information Line on 1300 723 040 (local call cost within Australia) or on +61 3 9415 4043 (from outside Australia) or go to the Goodman website at www.goodman.com. Eligible retail securityholders will receive a retail entitlement offer booklet including a personalised Entitlement and Acceptance Form in relation to the Retail Entitlement Offer which will provide further details of how to participate. Institutional securityholders and nominee companies should contact their account manager at one of the Joint Lead Managers.

Further detail on the capital management initiatives, strategic relationships, FY2009 results and FY2010 outlook described in this announcement is also set out in an investor presentation which Goodman has filed with the ASX today. This investor presentation contains important information including risk factors and foreign selling restrictions with respect to the Equity Offer.

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About Goodman

Goodman Group is an integrated property group with operations throughout Australia, New Zealand, Asia, Europe and the United Kingdom. Goodman Group, comprised of the stapled entities Goodman Limited and Goodman Industrial Trust, is the largest industrial property group listed on the Australian Securities Exchange and one of the largest listed specialist fund managers of industrial property and business space globally.

Goodman’s global property expertise, integrated own+develop+manage customer service offering and significant fund management platform ensures it creates innovative property solutions that meet the individual requirements of its customers, while seeking to deliver longterm returns for investors

For more information please visit www.goodman.com

About CIC

China Investment Corporation (CIC) is an investment institution established under the Chinese Company Law on September 2007. It seeks stable and long term risk adjusted financial return and it is operated strictly on a commercial basis.

For more information please visit www.china-inv.cn/cicen/

About CPP Investment Board

The CPP Investment Board is a professional investment management organisation that invests the funds not needed by the Canada Pension Plan to pay current benefits on behalf of 17 million Canadian contributors and beneficiaries. In order to build a diversified portfolio of CPP assets, the CPP Investment Board invests in public equities, private equities, real estate, inflation-linked bonds, infrastructure and fixed income instruments. Headquartered in Toronto, with offices in London and Hong Kong, the CPP Investment Board is governed and managed independently of the Canada Pension Plan and at arm's length from governments. At March 31, 2009, the CPP Fund totaled C$105.5 billion.

For more information, please visit www.cppib.ca.

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IMPORTANT INFORMATION

This announcement does not constitute an offer to sell, or the solicitation of an offer to buy, any securities in the United States or to any "U.S. person" (as defined in Regulation S under the U.S. Securities Act of 1933 (the "Securities Act")) ("US Person"). This document may not be distributed to, or relied upon by, persons in the United States or who are, or are acting for the account or benefit of, US Persons. Securities may not be offered or sold in the United States or to, or for the account or benefit of, US Persons, absent registration under the Securities Act or an exemption from registration. Neither the entitlements nor the new securities offered under the Equity Offer have been, or will be, registered under the Securities Act or the securities laws of any state or other jurisdiction of the United States. In addition, neither Goodman Limited nor Goodman Industrial Trust has been, or will be, registered under the US Investment Company Act of 1940 (the “Investment Company Act”) in reliance on an exception provided by Section 3(c)(7) thereof. Accordingly, the new securities to be offered and sold in the Equity Offer may only be offered or sold in the United States or to, or for the account or benefit of, US Persons in transactions exempt from, or not subject to, the registration requirements of the Securities Act and applicable state securities laws and exempt from the registration requirements of the Investment Company Act.

This announcement may contain 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. Statements regarding certain plans, strategies and objectives of management and indications of, and guidance on, future earnings and financial position and performance are also forwardlooking 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 Goodman 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. Recipients are cautioned not to place undue reliance on forward-looking statements. Goodman Group assumes no obligation to update such information.

• Ends –

Endnotes

All figures are in AUD unless stated otherwise

1 Credit approved commitments subject to Goodman equity raising and final documentation

2 Investment conditional on securityholder approval, FIRB approval, completion of a minimum equity raising, final documentation of the extension of Goodman’s existing finance facilities and no material adverse changes to the Group.

3 Conditional on Goodman equity raising.

4 Calculated as (net debt / total assets less cash)

5 Equates to 5.2 cents per security diluted for the CIC hybrid securities and the Macquarie and CIC options.

6 Proforma 30 June 2009 post new China joint venture with CPPIB (and including Colworth JV).

7 Eg. valuations and mark to market of derivatives

8 Subject to CIC holding a minimum of 10% of Goodman’s issued capital

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