GOODMAN GROUP — Interim / Quarterly Report 2016

Nov 16, 2015

Carla updating GMG Quarterly presentation Q1 2016 - Quarterly operational update 6 May 2015

Important notice and disclaimer

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• • This document has been prepared by Goodman Group (Goodman Limited (ABN 69 000 123 071), Goodman Funds Management Limited (ABN 48 067 796 641; AFSL Number 223621) as the Responsible Entity for Goodman Industrial Trust (ARSN 091 213 839) and Goodman Logistics (HK) Limited (Company Number 1700359; ARBN 155911142 – A Hong Kong company with limited liability)). 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 Goodman Group’s other announcements released to 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 document 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 forwardlooking 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. Neither the Group, nor any other person, gives any representation, warranty, assurance or guarantee that the occurrence of the events expressed or implied in any forward looking-statements in this document will actually occur.
• • This document does not constitute an offer, invitation, solicitation, recommendation, advice or recommendation with respect to the issue, purchase, or sale of any stapled securities or other financial products in the Group.
• • This document 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.

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Contents

• Section 1

• Section 2

• Appendices

Quarterly operational highlights

Urban renewal

• Leasing - Development

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• Management platform - Global platform

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• Section 1

Quarterly Operational Highlights

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Centenary Distribution Centre, Australia
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Quarterly operational highlights

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+ Current global economic environment is resulting in the following

• Goodman’s strategy has remained unchanged

• Focus remains on improving asset and income quality across the portfolio

• Asset rotation continuing at the same pace as 2015 with $0.6 billion disposed in the quarter (excluding urban renewal sites)

• Re-investment of capital into high quality development activities

• Continued demand for yield is driving capital values higher, resulting in further deleveraging

• Focus remains on sustainable long term growth

+ Developments continuing to provide the best “risk-adjusted” returns

• Structural and cyclical themes unchanged which is driving customer led development

• E-commerce, outsourcing, supply chain efficiencies, cross border trade and infrastructure improvements are all positive contributors to development activity

• Europe and US are the main contributors to increased development work in progress while other markets remain stable

• Development work in progress of $3.4 billion across 78 projects with a forecast yield on cost of 8.7%

+ Strong capital partners supporting the global platform and fully integrated business model

• Continuing the move to a “develop to hold” strategy, demonstrated by the establishment of the UK Logistics Partnership

• Investment Management platform recognised as a global leader of quality real estate assets with a team that has the expertise to execute on transactions

• Total assets under management of $32 billion with external assets under management of $27 billion

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Quarterly operational highlights

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+ Globally diversified platform providing sustainable growth opportunities

• Australia : Continued cap rate compression on the back of recent market transactions. Recycled $0.3 billion of property assets in the quarter

• New Zealand : development workbook maintained due to customer demand; 74% is pre-committed

• Greater China : Focus remains on selective, quality developments in targeted tier one cities and operating within capital allocation for mainland China. Hong Kong benefiting from supply constraints

• Japan : Development pipeline providing the best means of accessing quality investment product, supported by capital partners

• Europe : Maintained strong operational performance across Europe with 98% occupancy. Increased occupier demand for new developments increasing WIP to over 800,000 sqm, 93% of which is pre-committed

• UK : Strong property capital markets are leading capital partners to a “develop to hold” strategy

• North America : Development activity driven by customer demand. Continued focus on land procurement and land entitlement process

• Brazi l: A prudent, low risk approach remains on tier one cities of Sào Paulo and Rio de Janeiro and operating within our capital allocation

+ Urban renewal sites in Australia continuing to be contracted

• Conditionally contracted $1.7 billion of sites in Sydney and completed $110 million in the quarter

• Urban renewal precincts continuing to evolve. Maintained pipeline of approximately 35,000 apartments in Sydney and Melbourne, over and above the 10,000 apartment sites completed and conditionally contracted to date

• Continuing contributor to asset revaluations and increase in net tangible assets

+ Reaffirm forecast FY2016 full year operating earnings per security of 39.4 cents, up 6% on FY2015

• Strong first quarter operating performance continuing into the first half of the financial year

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Snapshot

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A$32.3 billion A$26.9 billion A$3.4 billion A$5.4billion
total assets external assets Development work direct property
under under in progress investment portfolio
management management
+
6.4%¹ 6.6%¹ 12.7%¹ 5.1%¹
1,850 32 1,118
customers cities people
globally (approx) worldwide
418 17.8 million
properties under sqm of industrial and
management business space
under management
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1. % increases based on 30 June 2015 reported numbers

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Quarterly operational highlights - Own

• • Property fundamentals remain sound across all markets, reflecting the quality of assets and customers

Total assets under management

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• Leased 0.7 million sqm across the platform over the quarter equating to $83 million of annual net property income

• Maintained occupancy at 96% since 2011

• Retention remains high at 77%

• WALE of 5.0 years

• Positive reversions of 6.4% per annum on new leasing deals primarily attributable to contributions from Hong Kong

• • Investment yields expected to firm coming into 2015 on the back of recent market transactions

• Further revaluation gains to continue in first half results

• • Asset recycling active across all markets

Total AUM by type

• $0.6 billion completed to date (excluding urban renewal sites) across the Group and Partnerships

• Improving quality of portfolio and quality of income being generated

• Asset recycling expected to be consistent with 2015 with $1 billion under offer or in due diligence

• • Globally, demand and pricing of real estate assets remains strong due to the current low interest rate environment

• Continued cap rate compression expected globally

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Quarterly operational highlights - Develop

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• • Development workbook of $3.4 billion across 78 projects with a forecast yield on cost of 8.7%

Development WIP ($bn)

• Active development book with a focus on location and quality

• Globally diverse development workbook with globally diverse customers

• • Development commencements of $0.9 billion for the quarter with 73% precommitted

• 60% of commencements were from Europe

• • Development completions of $0.7 billion for the quarter
• • North America to be a significant contributor to development commencements leading into December 2015
• • Disciplined risk management practices applied to development activities, low gearing, capital recycling and constant monitoring of supply and demand

• Capital partnering of development projects now standard practice

• Board oversight on overall development volume and exposure

Work in progress as at 30 September 2015

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Quarterly operational highlights - Manage

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• • Continued growth in AUM to $32 billion driven by

Total AUM ($bn)

• Growing development work book

• Revaluations and favourable FX movements

• • $0.6 billion of asset recycling enhancing the quality of portfolios

• Primary funding source of developments

• • Major achievements completed during the quarter include

• Established a £1 billion UK Logistics Partnership with CPPIB and APG

• GAP rated BBB / Stable by Standard & Poor’s

• • $1.6 billion of debt refinancing

• Average debt expiry of 4.6 years on new facilities

• Continued access into the unsecured debt capital markets, including A$258 million USPP issued by GAP with 10,12 and 15 year maturities

Total AUM by geography

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+ Section 2
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Urban Renewal

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Centenary Distribution Centre, Australia
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Australian urban renewal pipeline

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• • Deliberate strategy of ensuring returns are optimised for individual properties
• • Sale of $1.8 billion of sites completed and conditionally contracted representing approximately 10,000 apartment sites

• $110 million settled in the quarter

• International buyers continue to dominate the buyer profile

• • Proceeds from sales to be realised over the next three years

• Currently the Group’s lowest cost of capital and ensures it is self funded

• Long term capital for future opportunities for the Group and Australian Partnerships

• • Urban renewal continuing to expand and evolve in both Sydney and Melbourne

• State and local governments are both motivated to encourage urban renewal

• Additional precincts emerging both short and longer term

• Current pipeline remains at approximately 35,000 apartments, excluding the 10,000 already completed and conditionally contracted

• • Goodman benefiting from the relocation of customers resulting from the change in use of traditional industrial precincts
• • Further revaluations to emerge leading into December 2015

• Continued deleveraging of the balance sheet

• Revaluations excluded from operating profit

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Australian urban renewal pipeline

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Entity	State	Region	Site Area (ha)	Potential GFA (sqm)	Approx # of apartments
Partnership	NSW	Northern Sydney	1.3	59,778	809
GMG	NSW	South Sydney	9.0	186,153	2,396
GMG	NSW	Western Sydney	27.2	546,622	6,667
Completed and conditionally contracted			37.5	792,553	9,872
Partnerships	NSW	Northern Sydney	10.4	306,388	3,758
Partnerships	NSW	Western Sydney	25.7	959,950	11,315
Projects with short to medium term outcomes			36.1	1,266,338	15,073
GMG / Partnerships	VIC	Port Melbourne	29.4	606,000	8,000
Partnerships	NSW	Northern Sydney	2.6	61,843	773
Partnership	NSW	Inner Western Sydney	9.6	228,139	2,853
GMG	VIC	South East Melbourne	31.0	560,880	6,840
Partnership	NSW	South Sydney	4.0	99,500	1,244
Projects with medium to longer term outcomes			76.6	1,556,362	19,710
Future pipeline			112.7	2,822,700	34,783

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+ Appendices
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Centenary Distribution Centre, Australia
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Leasing¹

Across the Group and Funds platform:

• • 0.7 million sqm leased during the quarter
• • Reversions of 6.4% per annum on new leasing deals primarily attributable to contributions from Hong Kong
• • Occupancy maintained at 96%

	Region	Leasing area (sqm)	Net annual rent (A$m)	Average lease term (years)
Australia		139,508	20.3	4.3
New Zealand		27,435	2.7	3.7
Greater China		178,120	29.9	3.2
Japan		12,086	2.1	5.0
UK		7,812	5.5	7.7
Europe		343,164	22.2	3.2
Total		708,125	82.8	3.8

1. Leasing for investment properties only and excludes developments for the 3 months to 30 September 2015

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Development

Q1 FY16 Developments		Completions	Commencements		Work in progress
Value ($m)		708	908		3,430
Area (m sqm)		0.5	0.8		2.2
Yield (%)		8.5	8.1		8.7
Pre-committed (%)		75	73		66
Weighted Average Lease Term (years)		8.8	9.3		10.6
Development for Third Parties or Partnerships (%)		69	33		63
Australia / New Zealand (%) of WIP		33	14		24
Asia (%) of WIP		16	11		26
Americas (%) of WIP		19	15		10
Europe (%) of WIP		31	60		40
Work in progress	On balance sheet	Partnerships	Total end value	Partnerships	Pre committed
by region	end value	end value	$m	% of total	% of total
	$m	$m
Australia / New Zealand	143	664	807	82	82
Asia	225	662	887	75	33
Americas	-	348	348	100	54
Europe	907	481	1,388	35	82
Total	1,275	2,155	3,430	63	66

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Management platform

	GAIP	GHKLP	GAP	GEP	GCLP	GMT1	GJCP2	ABPP	ABPP
Total assets	$6.1bn	$4.4bn	$3.5bn	$3.9bn	$2.2bn	$2.1bn	$1.7bn	$1.3bn
GMG co-investment	27.5%	20.0%	19.9%	20.4%	20.0%	18.0%	20.0%3	43.1%
GMG co-investment	$1.0bn	$0.7bn	$0.5bn	$0.5bn	$0.3bn	$0.2bn	$0.2bn3	$0.3bn
Number of properties	117	14	58	100	24	16	13	7
Occupancy	96%	99%	96%	98%	96%	96%	100%	94%
Weighted average lease expiry4	5.6 years	2.5 years	4.4 years	4.8 years	3.7 years	5.2 years	4.6 years	6.2 years

1. As at 30 September 2015 (as disclosed to the New Zealand stock exchange in November 2015) 2. As at 31 August 2015

1. As at 30 September 2015

2. WALE of leased portfolio to next break as at 30 September 2015

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Global latform p

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thank+ you