GOODMAN GROUP — Interim / Quarterly Report 2015

Feb 11, 2015

Results for the half year ended 31 December 2014 12 February 2015

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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 the Goodman Group Financial Report for the half year ended 31 December 2014 and 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 Presentation uses operating profit and operating EPS to present a clear view of the underlying profit from operations. Operating profit comprises profit attributable to Securityholders, adjusted for property valuations resulting from fair value adjustments (refer Note 6 of the Financial Statements), derivative and foreign currency mark to market and other non-cash or non-recurring items. It is used consistently and without bias year on year for comparability. A reconciliation to statutory profit is provided in summary on page 10 of this Presentation and in detail on page 4 of the Directors’ Report as announced on ASX and available from the Investor Centre at www.goodman.com.
• • 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

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• • Section 1 Highlights

• Section 2 Results overview

• • Section 3 Operational performance
• • Section 4 Outlook and summary

• Appendices

• Results analysis

• Investment

• Development

• Management

• Capital management

3

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4

Highlights

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+ Maintaining focused strategy delivering above expectation performance

• Operating profit[1] of $327 million, up 10% on 1H FY14

• Statutory profit of $513 million (1H FY14 $160 million)

• Operating EPS[1] of 18.7 cents[2] , up 9% on 1H FY14

• Distribution per security of 11.1 cents, up 7% on 1H FY14

+ Asset recycling continues to be a key feature across all markets

• Disposed of $1.1 billion (1H FY14 $0.7 billion) of investment properties across the Group and managed funds in the half

• Growth in asset valuations providing ongoing opportunities to rotate assets and recycle capital into development activities driving higher returns for investors

• Temporarily lowering income growth from funds but providing finance for developments and cornerstone funding

+ Robust real estate fundamentals

• Occupancy maintained at 96% across the Group and managed funds

• Development work in progress has increased to $2.9 billion across 69 projects in 12 countries generating an 8.7% yield on cost

• Growth in asset valuations reflected in 20 bps compression in the Group’s weighted average cap rate to 7.3%

• $286 million of asset revaluations in the half, urban renewal contributing over 50%

• At this point in the cycle, favourable market conditions are driving average managed funds total returns of 15%

• Operating profit and operating EPS comprises profit attributable to security holders adjusted for property valuations, derivative and foreign currency mark to market and other non-cash or non-recurring items 2. Calculated based on weighted average diluted securities of 1,749.2 million which includes 9.5 million LTIP securities which have achieved the required performance hurdles and will vest in September 2015 and September 2016

Highlights

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+ Capital partners continue to support sector specialist model

• Assets under management have grown to $29.4 billion on the back of development completions and growth in asset pricing

• $1.5 billion of third party equity commitments raised in the 1H FY15

• Disciplined approach to capital deployment including developments in under supplied markets

+ Urban renewal projects

• $500 million of sites now conditionally contracted

• Upside for the period arising from zoning changes and comparable sales, reflected in asset revaluations and expected to be a recurring theme

• Proceeds from sale of urban renewal projects provide long term funding for the Group and managed funds

• Pipeline of identified urban renewal sites remains in excess of 35,000 apartments

+ Operationally benefitting from global operating platform

• Foundation laid for future contribution from the US platform through the rollout of its $1.8 billion development pipeline

• Disciplined and targeted approach to the Brazilian market resulting in 275,000 sqm of active developments

• Benefiting from improving business activity in New Zealand and United Kingdom

• Targeted China and Japan approach in terms of location and delivering sustainable returns

• Australian and European markets benefiting from the size and scale of operations

• Brand is recognised as a global leader

+ Forecast second half operating profit expected to be in line with first half, resulting in

• Forecast operating EPS of 37.2 cents, up 7% on FY14 and ahead of guidance

• Forecast distribution of 22.2 cents up 7% on FY14

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Highlights

	+	High occupancy maintained at 96%
	+	Retention rate of 75% and WALE of 4.8 years
Own	+	Like for like rental growth at 2.6% and positive lease reversions of 3.4% on new leasing deals
	+	Leased 1.7 million sqm across the global platform equating to $179 million of property income across the Group and
		managed funds
	+	WIP at $2.9 billion across 69 projects in 12 countries with a forecast yield on cost of 8.7%
	+	Development commitments of $1.4 billion with 68% pre-committed and 60% pre-sold to funds or third parties
	+	Development completions of $1.3 billion with 85% pre-committed and 90% pre-sold to funds or third parties
Develop	+	Development capital increasing in line with increased EBIT contribution from the development business
	+	Urban renewal projects being realised with benefit flowing through asset revaluations
	+	Disciplined risk management practices applied to development activities, low gearing, capital recycling, capital partnering
		and constant monitoring of supply and demand
	+	Total assets under management of $29.4 billion, external assets under management increased to $24.6 billion
	+	Raised$1.5billion of new third party equity primarily for North America, China and Japan
Manage	+	Continued focus on asset recycling: disposed $1.1 billion of property assets across the Group and managed funds
	+	$6.4 billion1in undrawn debt and equity providing opportunities for funds to participate in growth opportunities from the
		Group and broader market
	+	Grew operating profit by 10% and maintained gearing at 20.2%2(32.7% look through)
	+	ICR 5.9 times (4.1 times look through)
Corporate	+	Procured debt facilities of $2.2 billion with an average term of 5.0 years across Group and managed funds securing
		current market rates
	+	Distribution reinvestment remained active over the period raising $45 million

1. Fund investments are subject to Investment Committee approval

2. Calculated as total interest bearing liabilities over total assets, both net of cash and fair values of cross currency swaps used to hedge foreign liabilities denominated in currencies other than those to which the proceeds are applied equating to $121.6 million – refer to Note 8 of the Financial Statements

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M7 Business Hub, Australia

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8

Results overview

• • Operating results ahead of expectations and full year forecast:

• 1H FY15 operating earnings 50% of revised FY15 forecast

• Development business and sound property fundamentals driving overall outperformance

• Benefiting from global platform with offshore earnings contributing 54% of operating EBIT

• • Investment EBIT contributing 51% of earnings, 49% Development and Management:

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		1H FY15
	Operating profit ($m)	327.1
	Statutory accounting profit ($m) Operating EPS (cents)1	512.7 18.7
	Distribution per security (cents)	11.1

• 57% Investment and 43% Development and Management on a look through basis

• In response to earnings mix, maintaining low gearing and high liquidity

• • Statutory result impacted by $286 million of unrealised property valuation gains including $170 million on urban renewal sites where positive planning outcomes have been achieved

• Net tangible assets increased 9% to $3.15

		As at
		31 Dec 2014
	NTA ($)	3.15
	Gearing (balance sheet)2(%)	20.2
	Available liquidity ($b)	1.5
	WACR (look through) (%)	7.3

Operating EBIT

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Operating EBIT by geographic segment

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1. Operating profit and operating EPS comprises profit attributable to security holders adjusted for property valuations, derivative and foreign currency mark to market and other non-cash or non-recurring items and calculated based on weighted average securities of 1,749.2 million which includes 9.5 million LTIP securities which have achieved the required performance hurdles and will vest in September 2015 and September 2016

2. Calculated as total interest bearing liabilities over total assets, both net of cash and fair values of cross currency swaps used to hedge foreign liabilities denominated in currencies other than those to which the proceeds are applied equating to $121.6 million – refer to Note 8 of the Financial Statements

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Profit and loss

• • Half year operating profit of $327 million:

• Investment income in line with balance sheet initiatives with ROA > 7% maintained

• Increasing asset values growing management earnings

• – Development volumes continue to increase, driving increased EBIT and average ROA circa 11%

• Active earnings now contributing 49% of EBIT and offshore earnings contributing 54% of EBIT

• Average exchange rates constant with the prior period resulting in minimal currency impact on operating profit

• Statutory profit of $513 million includes property valuations, derivative mark-to-markets and other noncash or non-recurring items

• Cap rate compression and revaluations from higher and better use projects contributing $286 million in property revaluations

• • Operating EPS of 18.7 cents per security, up 9% on 1H FY14
• • DPS of 11.1 cents per security, up 7% on 1H FY14

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Income statement

		1H FY14 $M	1H FY15 $M
	Investment (look through)¹	244.4	248.8
	Management	57.5	59.7
	Development Unallocated operating expenses	102.3 (24.6)	127.3 (25.5)
	Operating EBITDA (look through)¹	379.6	410.3
	Operating EBIT (look through)¹	376.2	407.1
	Look through interest and tax adjustment1	(57.8)	(53.4)
	Operating EBIT	318.4	353.7
	Net borrowing costs	(6.6)	(6.5)
	Tax expense	(5.0)	(9.2)
	Operating profit (pre minorities) Minorities2	306.8 (10.8)	338.0 (10.9)
	Operating profit (post minorities)	296.0	327.1
	Weighted average securities (million) 3 Operating EPS (cps) **Non operating items4 **	1,725.0 17.2	1,749.2 18.7
	Property valuations	98.9	286.0
	Derivative and foreign currency mark to market	(219.3)	(76.4)
	Other non-cash or non-recurring items	(15.2)	(24.0)
	Statutory profit	160.4	512.7

1. Reflects adjustment to GMG proportionate share of managed funds’ interest and tax 2. Includes Goodman PLUS Trust hybrid securities

2. Includes 9.5 million LTIP securities which have achieved the required performance hurdles and will vest in September 2015 and September 2016

3. Refer Appendix 1 slide 24

10

Balance sheet

+ Strong balance sheet maintained:

• 60% payout ratio of operating profit and DRP ensure the Group is sustainably funded for the long term

• Realisation of urban renewal sites provide further long term funding

• • Stabilised investment properties and cornerstones increasing from cap rate compression and revaluation of higher and better use sites
• • Development holdings increasing on the back of increased activity in North America and Brazil

+ Lower closing AUD rates contributing to:

• Statutory unrealised foreign exchange and derivative loss of $76.4 million offset by movement in balance sheet and foreign currency translation reserve gain of $167.0 million

• Increasing gearing to 20.2%

• Increase in NTA of 9% to $3.15

• • $1.5 billion of liquidity fully covering maturities to December 2018

+ Resulting in the following key metrics

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Balance sheet

		30 June 2014	31 Dec 2014
		$M	$M
	Stabilised investment properties	2,191	2,349
	Fund cornerstones1	3,434	3,778
	Development holdings	2,203	2,453
	Intangibles	933	967
	Cash	360	480
	Other assets	283	375
	Total assets	9,404	10,402
	Interest bearing liabilities	(2,160)	(2,583)
	Other liabilities	(1,013)	(1,035)
	Total liabilities	(3,173)	(3,618)
	Minorities	(326)	(326)
	Net assets (post minorities)	5,905	6,458
	Net asset value ($)	3.42	3.70
	**Net tangible assets ($)2 **	2.88	3.15
	Balance sheet gearing3(%)	19.5	20.2

1. Includes Goodman’s investments in its managed funds and other investments 2. Based on 1,745.5 million securities on issue

2. Gearing calculated as total interest bearing liabilities over total assets, both net of cash and fair values of cross currency swaps used to hedge foreign liabilities denominated in currencies other than those to which the proceeds are applied equating to $121.6 million - refer to Note 8 of the Financial Statements

3. Gearing of 20.2%³ (32.7% look through)

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Group liquidity position

Goodman Group debt maturity profile¹

• • Capital structure and hedge strategies have enabled the Group to withstand foreign currency volatility

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• • Goodman Group has cash and available lines of credit of $1,531 million at 31 December 2014:

• $480 million cash

• $1,051 million available lines

• • Significant covenant headroom maintained
• • Average debt maturity profile of 5.2 years
• • ICR at 5.9 times (4.1 times look through)

• • Debt markets remain open to the Group and managed funds:

  • Includes total available credit facilities

• $0.6 billion through debt capital markets with an average expiry of 6.9 years

• $1.6 billion of bank facilities with an average expiry of 4.3 years

• • Continued favourable outlook by credit agencies

• GELF’s credit rating upgraded to Baa2 by Moody’s

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Section 3+ Operational Performance

Interlink, Hong Kong Goodman Fiege Brieseleang, Berlin Osaka Nanko, Japan

Investment

• • Property fundamentals remain robust reflecting quality of the portfolio and customers:

• Maintained occupancy at 96%

• Retention remains high at 75%

• WALE of 4.8 years

• Like for like rental growth of 2.6%

• • Direct investments and cornerstone investments impacted by asset recycling initiatives

• $1.1 billion of asset disposals across the Group and managed funds

• • Asset recycling initiatives used to fund growth opportunities

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	Investment ($m)	1H FY14	1H FY15
	Direct	77.2	74.7
	Cornerstones	167.2	174.1
	Look through EBITDA	244.4	248.8
	**Key metrics1 **	1H FY14	1H FY15
	WACR (%)	7.8	7.3
	WALE (yrs)	4.9	4.8
	Customer retention (%)	77	75
	Occupancy (%)	96	96

  1. Key metrics shown in the above table relate to Goodman and managed fund properties

• • Further asset recycling initiatives contracted or under due diligence include

• Urban renewal projects totalling $500 million

• Further asset sales in Europe, Australia and UK

• • Overall return on direct assets and cornerstones maintained above 7% despite increasing asset values

14

Development

• • Development WIP at $2.9 billion

• Contribution from America’s at 19% of WIP

• • Structural changes remain a key driver of development volumes

• Improved business activity in UK and NZ will contribute to higher development volumes in 2H FY15

• • Increasing development risk profile paying dividends

• EBIT up 24% compared with the same period last year

• Development revenue from WIP increasing to 11%

• • Overall development risk being mitigated through:

• Speculative developments undertaken in supply constrained markets which are proven logistic locations

• Speculative projects have higher embedded margins

• Capital partnering approach in our larger markets of the US, Brazil, Japan and China

• 90% of completions sold to third parties or funds

• • Enquiry levels remain strong over speculative developments

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	Development ($M)	1H FY14	1H FY15
	Revenue	132.8	157.8
	EBITDA	102.3	127.3
	Key metrics	1H FY14	1H FY15
	Work in progress ($bn) Work in progress (million sqm)	2.6 1.9	2.9 2.4
	Number of developments Development for third parties or funds (%)	63 88	69 76
	Pre-commitment (%)	71	61
	Yield (%)	8.4	8.7

	Work in progress (end value)	$B
	Opening (June 2014)	2.6
	Completions	(1.3)
	Commitments	1.4
	FX	0.2
	Closing (December 2014)	2.9

• Goodman Mizue, Tokyo, Japan, 100% leased prior to completion (59,000 sqm)

• Goodman Citylink, Langfang, China, 100% leased prior to completion (100,000 sqm)

• Appropriate allowances in development feasibilities to cover reasonable letting up periods

15

Management

• • Average managed fund total returns of 15%
• • External assets under management of $24.6 billion increased 10% on 30 June 2014
• • Development completions organically growing assets under management
• • Raised $1.5 billion in new third party equity
• • Active asset management focusing on the following:

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Management ($M)	1H FY14	1H FY15
Management income²	97.6	105.0
EBITDA	57.5	59.7
Key metrics	1H FY14	1H FY15
Number of managed vehicles	15	15
External AUM (end of period $B)	21.6	24.6

• Development led approach to accessing investment properties

• Asset recycling for reinvestment into high growth opportunities

• – Improved net property income prospects by focusing on A-grade locations in land constrained markets

• Improving overall property portfolio quality and performance

• • Opportunities for funds to participate in growth opportunities

• $1.2 billion in undrawn debt facilities

• $5.2 billion in undrawn equity¹

• Fund investments are subject to Investment Committee approval

• Includes gross up of property outgoings of $8.7million (1H FY14: $8.6 million)

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Management – AUM

• • Major achievements during the half year include:

  • CPPIB increased equity commitment to GNAP by US$500 million

• Commitment of a further US$500 million for GCLH taking total equity for that fund to US$2.0 billion

• ¥23 billion equity raised by GJCF for new acquisitions

• Established a NZ$500 million strategic partnership in New Zealand with GIC, investing in the Viaduct Harbour precinct of Auckland, subject to regulatory approval

• Managed funds continue to pursue alternate sources of debt funding to extend maturities and provide flexibility

• GELF successfully priced its second 7 year €400 million Eurobond issue at an annual coupon of 1.75%

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Third party AUM by region

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• GELF’s credit rating upgraded to Baa2 by Moody’s

Third party AUM by type

Third party AUM

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17

Management platform

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	GAIF	GTA	GELF	GHKLF	**GMT1 **	GCLH	ABBP	EPF	GJCF2
Total assets	$6.0bn	$3.6bn	$3.6bn	$3.5bn	$2.1bn	$1.7bn	$1.2bn	$1.2bn	$1.1bn3
GMG co-investment	27.5%	19.9%	20.4%	20.0%	17.8%3	20.0%	43.1%	37.4%	22.8%
GMG co-investment	$1.0bn	$0.4bn	$0.4bn	$0.5bn	$0.2bn3	$0.3bn	$0.3bn	$0.3bn	$0.1bn
Number of properties	116	60	109	14	173	22	9	19	123
Occupancy	96%	96%	98%	99%	97%	92%	93%	100%	100%
Weighted average lease expiry5	5.8 years	4.2 years	5.0 years4	2.7 years	5.5 years	3.6 years	4.8 years	7.1 years	3.1 years
WACR	7.6%	7.3%	7.2%	6.0%	7.9%	8.5%	7.4%	7.1%	5.2%
**Gearing6 **	37.4%	34.9%	36.3%	23.5%	36.5%	9.4%	25.4%	39.7%	33.5%
Weighted average debt expiry	4.8 years	3.7 years	4.9 years	6.0 years	3.5 years	2.1 years	2.5 years	3.8 years	3.7 years

1. As at 30 September 2014 (as disclosed to the New Zealand stock exchange on 12 November 2014) 2. As at 30 November 2014

2. As at 31 December 2014

3. Includes current developments

4. WALE of leased portfolio to next break as at 31 December 2014

5. Gearing calculated as total interest bearing liabilities over total assets, both net of cash, GCLH is excluding net of cash

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Capital

Pudong International Airport Logistics Park, China China

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Strategy and outlook

	+	Australian listed, leading global industrial property operator and fund manager
	+	Rotating assets to fund development opportunities which in turn is improving property portfolio quality and performance
	+	Globally diversified operating platform across key logistics markets managed by a highly skilled entrepreneurial team of people
	+	Customer service focus and asset management capabilities are key to business model
Strategy	+	Delivering significant benefit from global platform and differing timing of economic cycles
	+	Demand for core, high quality, stable yielding industrial real estate remains strong from capital partners, with Goodman’s
		development capabilities a key differentiator
	+	Structural change continuing to drive development demand along with the need for customers to realise operating efficiencies
	+	Focus on cost containment ensuring overheads remain in line with growth outlook - efficiencies key driver
	+	Cross selling of customers, capital partners and business processes across global platform
	+	Low gearing providing appropriate risk adjusted returns and growth outlook
Capital	+	Controlled and managed approach to development work book. Developments undertaken in proven locations, adopting a capital
management		partner approach with appropriate embedded margins
	+	Maintain gearing below 25% providing financial flexibility and funding of long term growth opportunities
	+	Increasing development earnings on the back of a growing work book, and growing contribution from the Americas
	+	Asset recycling to be maintained around $2 billion annually, given continued demand of real estate assets, providing long term
		funding of growth
Outlook	+	Fund total returns to remain strong for our investors
	+	Urban renewal to incrementally drive long term value and funding for the Group
	+	Positioned to deliver FY2015 forecast operating EPS of 37.2 cents (up 7% on FY2014) and a forecast distribution of 22.2 cents (up
		7% on FY2014

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Appendix 1+ Results analysis

Pinnacle Corporate Park, Australia Westney Industry Park, New Zealand

Banfield Distribution Centre, Australia Kobe, Japan

Profit and loss

Total income by business segment for the half year ended 31 December 2014

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Category Total Investment Management Development Unallocated Non- operating items	Category Total Investment Management Development Unallocated Non- operating items	Category Total Investment Management Development Unallocated Non- operating items	Category Total Investment Management Development Unallocated Non- operating items	Category Total Investment Management Development Unallocated Non- operating items	Category Total Investment Management Development Unallocated Non- operating items	Category Total Investment Management Development Unallocated Non- operating items
$M $M $M $M $M $M
Gross property income Management income Development income Net gain from fair value adjustments on investment properties Net gain on disposal of investment properties Share of net results of equity accounted investments1 Net gain on disposal of equity investments	104.3 104.8 400.5 183.5 8.5 313.7 0.4	104.8 - - - - 120.7 -	- 104.8 - - - 0.2 -	- - 400.5 - 8.5 69.2 0.4	- - - - - - -	(0.5) - - 183.5 - 123.6 -
Total income	1,115.7	225.5	105.0	478.6	-	306.6
Property and development expenses Operating expenses Impairment losses	(350.9) (128.0) (16.8)	(30.1) - -	- (45.3) -	(320.8) (30.5) -	- (28.7) -	- (23.5) (16.8)
EBIT	620.0	195.4	59.7	127.3	(28.7)	266.3
Look through NPI adjustment (Goodman share of interest and tax within its fund investments)		53.4	-	-	-
Look through operating EBIT		248.8	59.7	127.3	(28.7)

Includes share of associate and JVE property valuation gains of $119.3 million, share of associate and JVE unrealised derivative gains of $4.3 million, net gains on disposal of investment properties in associates of $1.3 million and deferred tax adjustments in associates of ($1.3) million

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Profit and loss (cont)

Category	Category	Total Investment Management Development Unallocated Non-operating items	Total Investment Management Development Unallocated Non-operating items	Total Investment Management Development Unallocated Non-operating items	Total Investment Management Development Unallocated Non-operating items	Total Investment Management Development Unallocated Non-operating items	Total Investment Management Development Unallocated Non-operating items
		$M $M $M $M $M $M
EBIT – per statutory accounts		620.0	195.4	59.7	127.3	(28.7)	266.3
Net gain from fair value adjustments on investment properties Share of net gain from fair value adjustments on investment properties and interest rate swaps in associates and JVEs Impairment losses Straight-lining of rental income Share based payment expense		(183.5) (123.6) 16.8 0.5 23.5	- - - - -	- - - - -	- - - - -	- - - - -	(183.5) (123.6) 16.8 0.5 23.5
Operating EBIT		353.7	195.4	59.7	127.3	(28.7)	-
Net finance expense (statutory) Less: fair value adjustments on derivative financial instruments Add: foreign exchange loss Net finance expense (operating) Income tax expense Minorities		(87.2) (26.4) 107.1
		(6.5) (9.2) (10.9)
Operating profit available for distribution		327.1
Net cash provided by operating activities1		327.8

1. Difference between operating profit pre-minorities and cash provided by operating activities of $(10.2) million relates to: - $(68.6) million of prepaid and capitalised interest

2. $97.7 million cash share of equity accounted income

3. $(39.3) million of development cash flow and other working capital movements

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Reconciliation non-operating items

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Non-operating items in statutory profit & loss		Half Year ended
		31 Dec 2014
	$M	$M
Property valuations
Net gain from fair value adjustments on investment properties	183.5
Share of net gain from fair value adjustments on investment properties in associates and joint ventures	119.3
Subtotal		302.8
Impairment losses
Impairment – inventories	(3.4)
Impairment – receivables	(1.2)
Impairment – other financial assets	(12.2)
Subtotal		(16.8)
Derivative and foreign currency mark to market
Fair value adjustments on derivative instruments – GMG	26.4
Unrealised foreign exchange loss	(107.1)
Fair value adjustments on derivative instruments – associates and joint ventures	4.3
Subtotal		(76.4)
Other non-cash or non-recurring items
Share based payment expense	(23.5)
Net gain on disposal of investment properties - associates	1.3
Deferred tax adjustments - associates	(1.3)
Straight-lining of rental income	(0.5)
Subtotal		(24.0)
TOTAL		185.6

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Financial position

1. Calculated as total interest bearing liabilities over total assets, both net of cash and fair values of cross currency swaps used to hedge foreign liabilities denominated in currencies other than those to which the proceeds are applied equating to $121.6 million – refer to Note 8 of the Financial Statements 2. Calculated based on 1,745.5 million securities on issue 25 As at 31 December 2014 Direct Assets $M Investments $M Developments $M Other $M Total $M Cash - - - 480.0 480.0 Receivables - 34.9 210.0 334.0 578.9 Inventories - - 1,333.2 - 1,333.2 Investment properties 2,348.9 - 348.1 - 2,697.0 Investments accounted for using equity method - 3,742.4 559.7 - 4,302.1 Other financial assets - 0.8 - - 0.8 Intangibles - - - 966.8 966.8 Other assets - - 2.0 41.4 43.4 Total assets 2,348.9 3,778.1 2,453.0 1,822.2 10,402.2 Interest bearing liabilities 2,583.2 2,583.2 Other liabilities 1,035.1 1,035.1 Total liabilities 3,618.3 3,618.3 Net assets 6,783.9 Gearing1 20.2% NTA (per security)2 3.15 Australia / NZ 2,114.4 1,972.7 664.0 84.3 4,835.4 Asia - 919.5 452.4 228.8 1,600.7 CE 31.7 530.0 311.5 645.0 1,518.2 UK 202.8 355.9 660.3 345.8 1,564.8 Americas - - 364.8 9.0 373.8 Other - - - 509.3 509.3 Total assets 2,348.9 3,778.1 2,453.0 1,822.2 10,402.2 Capital allocation	1. Calculated as total interest bearing liabilities over total assets, both net of cash and fair values of cross currency swaps used to hedge foreign liabilities denominated in currencies other than those to which the proceeds are applied equating to $121.6 million – refer to Note 8 of the Financial Statements 2. Calculated based on 1,745.5 million securities on issue 25 As at 31 December 2014 Direct Assets $M Investments $M Developments $M Other $M Total $M Cash - - - 480.0 480.0 Receivables - 34.9 210.0 334.0 578.9 Inventories - - 1,333.2 - 1,333.2 Investment properties 2,348.9 - 348.1 - 2,697.0 Investments accounted for using equity method - 3,742.4 559.7 - 4,302.1 Other financial assets - 0.8 - - 0.8 Intangibles - - - 966.8 966.8 Other assets - - 2.0 41.4 43.4 Total assets 2,348.9 3,778.1 2,453.0 1,822.2 10,402.2 Interest bearing liabilities 2,583.2 2,583.2 Other liabilities 1,035.1 1,035.1 Total liabilities 3,618.3 3,618.3 Net assets 6,783.9 Gearing1 20.2% NTA (per security)2 3.15 Australia / NZ 2,114.4 1,972.7 664.0 84.3 4,835.4 Asia - 919.5 452.4 228.8 1,600.7 CE 31.7 530.0 311.5 645.0 1,518.2 UK 202.8 355.9 660.3 345.8 1,564.8 Americas - - 364.8 9.0 373.8 Other - - - 509.3 509.3 Total assets 2,348.9 3,778.1 2,453.0 1,822.2 10,402.2 Capital allocation
Cash - - - 480.0	480.0
Receivables - 34.9 210.0 334.0	578.9
Inventories - - 1,333.2 -	1,333.2
Investment properties 2,348.9 - 348.1 -	2,697.0
Investments accounted for using equity method - 3,742.4 559.7 -	4,302.1
Other financial assets - 0.8 - -	0.8
Intangibles - - - 966.8	966.8
Other assets - - 2.0 41.4	43.4
Total assets 2,348.9 3,778.1 2,453.0 1,822.2	10,402.2
Interest bearing liabilities 2,583.2	2,583.2
Other liabilities 1,035.1	1,035.1
Total liabilities 3,618.3	3,618.3
Net assets	6,783.9
**Gearing1 **	20.2%
**NTA (per security)2 **	3.15
Australia / NZ 2,114.4 1,972.7 664.0 84.3	4,835.4
Asia - 919.5 452.4 228.8	1,600.7
CE 31.7 530.0 311.5 645.0	1,518.2
UK 202.8 355.9 660.3 345.8	1,564.8
Americas - - 364.8 9.0	373.8
Other - - - 509.3	509.3
Total assets 2,348.9 3,778.1 2,453.0 1,822.2	10,402.2

Net tangible asset bridge

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• For period ended 31 December 2014¹

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1. Calculated on 1,745.5 million securities being closing securities on issue and excludes minority interest

26

Property valuations

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• • Cap rate compression continuing to be realised across most markets with WACR firming to 7.3%
• • Firming UK cap rates driven by asset sales and the resulting change in portfolio mix
• • Continental Europe devaluation arising from the write down of the European Business Park investment
• • Independent valuers adopting more conservative rental growth assumptions and incentive allowances, given the low growth outlook in Europe, UK and Japan

31 December 2014 property valuations (look through)

		Book value	Movement since	WACR	WACR movement
	(GMG exposure) $M		June 2014 $M	%	since June 2014 %
Australia		5,163	257.9	7.5	0.2
New Zealand		450	2.2	7.9	-
Hong Kong		685	28.9	6.0	-
China		643	5.2	8.5	(0.1)
Japan		419	7.4	5.1	0.3
UK		1,336	(4.4)	7.8	0.4
Continental Europe		1,180	(11.2)	7.3	0.2
USA		212	-	n/a	n/a
Brazil		107	-	n/a	n/a
Total / Average		10,195	286.0	7.3	0.2

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Appendix 2+ Investment

Goodman Interlink, Hong Kong

Leasing

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Across the Group and Funds platform:

+ 1.7 million sqm leased during the half year

• • Positive lease reversions of 3.4% on new leasing deals, with like for like NPI growing at 2.6%

+ Occupancy maintained at 96%

Region	Leasing area (sqm)	Net annual rent (A$M)	Average lease term (years)
Australia	675,183	81.0	4.5
New Zealand	59,124	9.1	5.0
Hong Kong	90,134	21.7	3.7
China	237,267	20.8	5.3
Japan	13,747	1.9	5.0
UK	140,866	14.3	6.6
Europe	461,205	30.7	3.4
Total	1,677,526	179.5	4.6

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Customers

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Top 20 global customers (by net income – look through basis)

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30

Geographic exposure

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31

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Direct portfolio detail

Key metrics

Portfolio snapshot

Total assets	$2.3 billion
Customers	298
Number of properties	37
Occupancy	94%
Weighted average cap rate	7.5%

• • 37 properties with a total value of $2.3 billion located across key Australian and UK markets
• • Leasing deals remain strong across the portfolio:

• 294,674 sqm ($27.3 million net annual rental) of existing space leased

• customer retention of 64%

• • 94% occupancy and a weighted average lease expiry of 4.9 years
• • Average portfolio valuation cap rate of 7.5%

WALE of 4.9 years (by net income)

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Top 10 customers make up 23.3% of portfolio income

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32

Rheinberg Logistics Centre , Germany

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A endix 3+ pp Development

Bungarribee Industrial Estate, Australia

Developments

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	1HFY15 Developments		Completions	Commencements	Commencements	Work in progress
	Value ($M)		1,336		1,440	2,867
	Area (m sqm)		1.1		1.2	2.4
	Yield (%)		9.0		8.7	8.7
	Pre-committed (%)		85		68	61
	Weighted Average Lease Term (years)		9.4		10.2	9.8
	Development for Third Parties	or Funds (%)	90		60	76
	Australia / New Zealand (%)		26		29	27
	Asia (%)		47		32	35
	Americas (%)		-		20	19
	Europe (%)		26		19	20
	Work in progress	On balance sheet	Third party funds	Total end value	Third party funds	Pre committed
	by region	end value	end value		% of total	% of total
		$M	$M	$M
	Australia / New Zealand	138	643	781	82	84
	Asia	184	805	989	81	40
	Americas	-	533	533	100	42
	Europe	380	184	564	33	84
	Total	702	2,165	2,867	76	61

34

Developments (cont)

• • Development pipeline from controlled land sites maintained at $10 billion

Developments volume

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• • Development holdings increasing on the back of increased activity in Japan, North America and Brazil
• • The Group’s development future cash commitments

Cash commitments as at 31 December 2014	$M
Gross GMG cost to complete	489
Less pre-sold1cost to complete	(58)
Net GMG cost to complete	431
Net GMG managed funds cost to complete	1,024

Work in progress as at 31 December 2014

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1. Pre-sold projects are reimbursed by instalments throughout the project or at practical completion of the project

35

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Appendix 4+ Management

BirminghamBusiness Park, U.K Senec Logistics Centre, Slovakia Interlink Industrial Estate, Australia

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Global platform

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37

Goodman Australia Industrial Fund

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Key events

• • Acquired South Sydney industrial property for $14 million
• • Execution of asset recycling strategy disposing $86 million of investment properties in Victoria
• • Conditionally exchanged on the sale of part of Cambridge Office Park
• • Completed 40,492 sqm of developments with an end value of $75 million
• • Work in progress of 133,316 sqm with end value of $258 million
• • $108 million of upward revaluations

Key metrics¹

Total assets	A$6.0 billion
Interest bearing liabilities	A$2.3 billion
Gearing²	37.4%
Customers	562
Number of properties	116
Occupancy	96%
Weighted average lease expiry	5.8 years
Weighted average cap rate	7.6%
GMG co-investment	27.5%
GMG co-investment	A$1.0 billion

Debt maturity profile

1. As at 31 December 2014

2. Gearing calculated as total interest bearing liabilities over total assets, both net of cash

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Goodman Trust Australia

Key metrics¹

Key events

Total assets	A$3.6 billion
Interest bearing liabilities	A$1.3 billion
Gearing²	34.9%
Customers	272
Number of properties	60
Occupancy	96%
Weighted average lease expiry	4.2 years
Weighted average cap rate	7.3%
GMG co-investment	19.9%
GMG co-investment	A$0.4 billion

• • Acquired adjoining re-development site in Redbank, Queensland for $80 million
• • Completed 69,602 sqm of developments with an end value of $86 million
• • Work in progress of 109,438 sqm with an end value of $190 million
• • Refinanced $365 million of bank debt with an average expiry of 4.4 years
• • DRP remains in partial operation

Debt maturity profile

• • $90 million of upward revaluations

• As at 31 December 2014 2. Gearing calculated as total interest bearing liabilities over total assets, both net of cash

39

Goodman European Logistics Fund

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Key events

• • Commitments on new acquisitions and developments total €116 million over the last 6 months:

• GMG €108 million (including on-balance sheet developments)

• Third party €8 million

• • Leased 382,873 sqm of space during the year (excluding developments) representing €16.8 million of net property income
• • Significant weighting maintained to core Western European countries (78%)[4]
• • GELF’s credit rating upgraded to Baa2 by Moody’s
• • GELF successfully priced its second 7 year €400 million EMTN issue with an annual coupon of 1.75%

• As at 31 December 2014

• Gearing calculated as total interest bearing liabilities over total assets, both net of cash 3. WALE of leased portfolio to next break including developments

• Core Western European countries comprise Belgium, France, Germany and The Netherlands

Key metrics¹

Total assets	A$3.6 billion
Interest bearing liabilities	A$1.3 billion
Gearing ²	36.3%
Customers	112
Number of properties	109
Occupancy	98%
Weighted average lease expiry3	5.0 years
Weighted average cap rate	7.2 %
GMG co-investment	20.4%
GMG co-investment	A$0.4 billion

Debt maturity profile

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40

Goodman Hong Kong Logistics Fund

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Key events

• • A total of 90,134 sqm of new leases and renewals were transacted from July to December 2014, representing 6.2% of the GLA in the portfolio
• • 99% occupancy with a weighted average lease expiry of 2.7 years
• • Acquisition of investment property with future value add or redevelopment opportunities for A$160 million
• • A$156 million of upward revaluations for the six months driven by continued rental growth

Key metrics¹

Total assets	A$3.5 billion
Interest bearing liabilities	A$0.8 billion
Gearing2	23.5%
Customers	219
Number of properties	14
Occupancy	99%
Weighted average lease expiry	2.7 years
Weighted average cap rate	6.0%
GMG co-investment	20.0%
GMG co-investment	A$0.5 billion

• • Implementation of Retention of Distributable Income initiative commencing in December 2014 quarter, greatly improving liquidity and the capital position of the Fund for the medium term

• Gearing calculated as total interest bearing liabilities over total assets, both net of cash

Debt maturity profile

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1. As at 31 December 2014

41

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Goodman Property Trust

Key metrics[1 ]

Key events

Total assets	A$2.1 billion
Interest bearing liabilities	A$0.8billion
Gearing	36.5%
Customers	251
Number of properties2	17
Occupancy	97%
Weighted average lease expiry	5.5 years
Weighted average cap rate	7.9%
GMG co-investment²	17.8%
GMG co-investment²	A$0.2 billion

• • New Viaduct joint venture created with GIC, subject to regulatory approval
• • Capital management program:

• NZ$64 million of assets disposed at an average exit yield of 7.25%

• Suspension of the Distribution Reinvestment Plan

• 36.5% loan to value ratio at the bottom of the Board’s targeted range of 35% to 40%

• Interest cover ratio of 2.7 times at 30 September 2014

+ Active portfolio management:

Debt Maturity Profile[2 ]

• Over 71,000 sqm of space secured on new or revised terms

• WALE of 5.5 years and 97% occupancy rate

+ Development activity

• $78 million of new development commitments yielding 8.0%

• Land weighting of 10.5%[3] at 30 September 2014

• As at 30 September 2014 (as disclosed to the NZX in November 2014)

• As at 31 December 2014

• Land weighting after completion of commenced developments and pending settlement of unconditional sales

42

Goodman China Logistics Holding

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Key events

• • Strong support from capital partners to capitalise on the ongoing demand for prime logistics space in China
• • US$500 million equity upsizing from Canada Pension Plan Investment Board (CPPIB) and GMG, increasing total equity commitment to US$2.0 billion
• • GCLH portfolio continues to expand with 22 stabilised properties and 12 development projects
• • Completed four strategic acquisitions and commenced three development projects during the half year
• • Strategically located development pipeline expanding the portfolio offering to over 2.3 million sqm on completion

Key metrics¹

Total assets	A$1.7 billion
Interest bearing liabilities	A$0.2 billion
Gearing²	9.4%
Customers	62
Number of properties	22
Occupancy	92%
Weighted average lease expiry3	3.6 years
Weighted average cap rate	8.5%
GMG co-investment	20.0%
GMG co-investment	A$0.3 billion

Debt maturity profile

• • Acquisition of investment properties from the Group with an end value of $202 million

• Gearing calculated as total interest bearing liabilities over total assets 3. WALE of leased portfolio to next break as at 31 December 2014 including vacancy.

• As at 31 December 2014

43

Arlington Business Parks Partnership

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Key Events

• • Arlington Business Parks Partnership (ABPP) is a core plus unlisted fund which invests, develops and manages business parks located in key UK regional and urban fringe office markets
• • Portfolio comprising 6 business parks and 3 stand alone assets valued at £0.6 billion
• • Leased 89,393 sqft in the period equating to £1.4 million of contracted income
• • Occupancy of 93% at 31 December 2014

Key metrics¹

Total assets	A$1.2 billion
Interest bearing liabilities	A$0.3billion
Gearing²	25.4%
Customers	91
Number of stabilised properties	9
Occupancy	93%
Weighted average lease expiry3	4.8 years
Weighted average cap rate	7.4%
GMG co-investment	43.1%
GMG co-investment	A$0.3 billion

• • Completed £181 million of gross asset sales

Debt maturity profile

• • Committed development book of £80 million
• • Gearing reduced to 25% through prudent capital management while maintaining capacity to undertake future development projects

• As at 31 December 2014

• Gearing calculated as total interest bearing liabilities over total assets, both net of cash 3. WALE of leased portfolio to next break as at 31 December 2014

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Goodman Japan Core Fund

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Key Events

• • Acquired a new industrial asset from the Goodman Japan Development Partnership in December 2014 for ¥17.3 billion
• • 100% Occupancy on portfolio with an average lease expiry of 3.1 years as at November 2014
• • Raised ¥23 billion of equity to acquire current and future development completions from Goodman Japan Development Partnership
• • ¥18 billion uncalled equity as at 31 December 2014 post acquisition of one asset in December 2014

Key metrics[1 ]

Total assets3	A$1.1 billion
Interest bearing liabilities	A$0.3 billion
Gearing²	33.5%
Customers	19
Number of stabilised properties³	12
Occupancy	100%
Weighted average lease expiry	3.1 years
Weighted average cap rate	5.2%
GMG co-investment	22.8%
GMG co-investment	A$0.1 billion

Debt maturity profile[3 ]

2. Gearing calculated as total interest bearing liabilities over total assets, both net of cash 3. As at 31 December 2014

As at 30 November 2014

45

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management

Torun Logistics Centre, Poland

Group financial covenants

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Covenants	Test	Covenant	Result	Headroom
Gearing ratio	Net liabilities1as a percentage of net tangible assets is not more than 55.0%	55.0%	28.1%	26.9%
Interest cover ratio	EBITDA to interest expense at least 2.0x	2.0x	5.9x	3.9x
Priority debt	Secured debt as a percentage of total tangible assets is not more than 12.5%	12.5%	0%	12.5%
	Net unsecured debt (total unsecured debt less
Unencumbered real property assets	unrestricted cash) to be not more than 100% of the amount of unencumbered real property assets (all unencumbered direct assets including stabilised assets,	100%	56.7%	43.3%
	development WIP and land bank)
Unencumbered assets	Unsecured debt as a percentage of unencumbered assets is not more than 66.7%	66.7%	28.8%	37.9%

1. Net liabilities = total liabilities less cash and excludes trade payables, mark to market derivatives, deferred tax liabilities and provisions for Securityholder distributions

47

Currency mix

Currency mix – outstanding debt

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Currency mix – including the impact of Capital Hedging FX Swaps

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48

Financial risk management

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Financial risk management in line with Group Board policy

+ Interest risk management:

• 84% hedged over next 12 months

• Weighted average hedge maturity of 5.2 years

• Weighted average hedge rate of 4.86%[1] vs spot 1.17%[2]

+ Foreign currency risk management:

• 81% hedged as at 31 December 2014, of which 67% is debt and liabilities and 33% is derivatives

• Weighted average maturity of derivatives 3.0 years

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

• Spot refers 5 year swap market rate as at 05 February 2015

49

Financial risk management (cont)

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Interest rate

Interest rate hedge profile

• • Interest rates are hedged to 84% over next 12 months
• • Weighted average hedge rate of 4.86%[1] vs spot 1.17%[2]

• NZD – (hedge 4.67%, spot 3.56%)

• JPY – (hedge 1.40%, spot 0.28%)

• HKD – (hedge 1.80%, spot 1.34%)

• GBP – (hedge 6.67%[3] , spot 1.32%)

• Euro – (hedge 2.13%, spot 0.30%)

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• USD – (hedge 6.37%, spot 1.42%)

• • Weighted average maturity of 5.2 years

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

• Spot refers 5 year swap market rate as at 05 February 2015 3. Includes the 10 year EMTN £250 million at 9.75% fixed rate

50

Financial risk management (cont)

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Interest rate hedging profile

	Euro payable GBP payable HKD payable NZD payable JPY payable USD payable AUD receivable
As at Dec	€M Fixed rate % £M Fixed1 rate % HK$M Fixed rate % NZ$M Fixed rate % ¥M Fixed rate % US$M Fixed rate % A$M Fixed Rate %
2015	(560.5) 2.01 (517.5) 6.84 (2,093.2) 1.42 (240.0) 4.38 (10,711.0) 0.93 (380.0) 6.39 680.0 3.43
2016	(600.0) 2.58 (540.0) 6.70 (1,986.9) 1.47 (218.0) 4.64 (9,848.9) 1.28 (380.0) 6.39 680.0 3.43
2017	(537.3) 2.45 (497.0) 6.74 (1,600.0) 1.98 (160.0) 4.95 (7,200.0) 1.51 (380.0) 6.39 680.0 3.43
2018	(397.3) 2.36 (287.9) 6.27 (1,279.5) 2.24 (138.0) 4.92 (6,224.7) 1.51 (380.0) 6.39 382.3 3.47
2019	(200.0) 1.23 (8.1) 3.62 (766.6) 2.63 (32.7) 4.50 (3,200.0) 1.52 (380.0) 6.39 - -
2020	(200.0) 1.23 - - - - - - (3,200.0) 1.52 (357.2) 6.39 - -
2021	(132.6) 1.27 - - - - - - (2,715.1) 1.72 (60.4) 6.24 - -
2022	- - - - - - - - (1,200.0) 3.32 - - - -
2023	- - - - - - - - (305.8) 3.32 - - - -
2024	- - - - - - - - - - - - - -

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

51

Financial risk management (cont)

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Foreign currency denominated balance sheet hedging maturity profile

Currency			Maturity	Weighted average	**Amount receivable1 **	**Amount payable1 **
				exchange rate
NZ$			2017 / 2018	1.2252	A$65.4m	NZ$100.0m
HK$			2016 / 2018	7.8154	A$332.5m	HK$2,590.0m
¥			2017 / 2019	86.0500	A$128.0m	¥11,000.0m
€	2016	/	2017 /2018	0.7713	A$610.5m	€470.0m
£			2017 / 2018	0.6035	A$282.2m	£170.0m
£			2023	131.5400	¥11,300.0m	£85.9m
US$			2020 / 2022	0.6286	US$210.0m	£132.0m
US$	2020	/	2021 / 2022	0.7195	US$455.0m	€327.4m

1. Floating rates apply for the payable and receivable legs for the cross currency swaps except for the USDGBP, USDEUR and JPYGBP cross currency where the receivable for US$445 million is fixed at 6.375%, US$220 million is fixed at 6.0% and ¥11,300 million is fixed at 3.32%

52

Exchange rates

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• Statement of Financial Position – exchange rates as at 31 December 2014

– AUDGBP – 0.5240 (31 December 2013 : 0.5388)

• AUDEUR – 0.6748

(31 December 2013 : 0.6475)

• AUDHKD – 6.3309 (31 December 2013 : 6.9219) – AUDBRL – 2.1700 (31 December 2013 : 2.1090) – AUDNZD – 1.0475 (31 December 2013 : 1.0834) – AUDUSD – 0.8165 (31 December 2013 : 0.8927) – AUDJPY – 97.8390 (31 December 2013 : 93.9340) – AUDCNY – 5.0718 (31 December 2013 : 5.4021)

• Statement of Financial Performance – average exchange rates for the 6 months to 31 December 2014 – AUDGBP – 0.5471 (31 December 2013 : 0.5818) – AUDEUR – 0.6912 (31 December 2013 : 0.6863) – AUDHKD – 6.8999 (31 December 2013 : 7.1461) – AUDBRL – 2.1402 (31 December 2013 : 2.1022) – AUDNZD – 1.0956 (31 December 2013 : 1.1344) – AUDUSD – 0.8899 (31 December 2013 : 0.9216) – AUDJPY – 96.9768 (31 December 2013 : 91.8434) – AUDCNY – 5.4788 (31 December 2013 : 5.6286)

53

thank+ you

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