GOODMAN GROUP — Interim / Quarterly Report 2019

Feb 13, 2019

Results for the half year ended 31 December 2018

14 February 2019

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Rochedale Motorway Estate, QLD, Australia
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Important Notice and Disclaimer

• • 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 2018 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 earnings per share (EPS) to present a clear view of the underlying profit from operations. Operating profit comprises profit attributable to Securityholders adjusted for profit on disposal of investment properties, net property valuations gains, non-property impairment losses, net gains/losses from the fair value movements on derivative financial instruments and unrealised fair value and foreign exchange movements on interest bearing liabilities and other non-cash adjustments or non-recurring items e.g. the share based payments expense associated with Goodman’s Long Term Incentive Plan (LTIP). A reconciliation to statutory profit is provided in summary on page 10 of this Presentation and in detail on page 5 of the Directors’ Report as announced on ASX and available from the Investor Centre at www.goodman.com.
• • The calculation of fair value requires estimates and assumptions which are continually evaluated and are based on historical experience and expectations of future events that are believed to be reasonable in the circumstances
• • 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 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. 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.

2

Contents

+ Section 1 – Highlights

+ Section 2 – Results overview

+ Section 3 – Operational performance

• • Section 4 – Outlook

+ Appendices

• Results analysis

• Property investment

• Development

• Management

• Capital management

3

Section1 - Highlights

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Highlights

• • Market fundamentals remain positive with the Group delivering a strong 1H19 performance. Key financial metrics include:

• Operating profit[1] of $465.0m million, up 10.4% on 1H18

• Operating earnings per share (EPS)[2] of 25.5 cents, up 9.4% on 1H18

• Gearing 6.5%³ (5.1% at FY18)

• Distribution per security (DPS) of 15.0 cents, up 9.1% on 1H18

• Statutory accounting profit of $929.2 million, includes $596.7 million valuation gains, contributing to 8.8% growth in net tangible assets (NTA) since 30 June 2018 to $5.05 per security

+ Structural changes in our customers’ businesses is driving strong demand in our infill markets globally

• Technology and modernisation of supply chains is driving demand with WIP currently at $3.6 billion and expected to be above $4 billion in the near term

• Our locational focus on urban centres is being rewarded with higher intensity use occurring. This is supporting growth in rents and redevelopment opportunities which should continue to contribute to WIP over time

• Majority of development undertaken on behalf of Partnerships

+ Location and quality of our assets is driving strong performance in the Partnerships including $2.3 billion in revaluations for the half

• External assets under management (AUM) grew significantly, up 27% to $39.6 billion, with total AUM up 24% to $42.9 billion on 1H18

• Revaluations and investment, predominantly through our increasing development activity and completions, will support further AUM growth

• Strong portfolio fundamentals combined with continued investment demand, are supporting performance of the Partnerships with returns expected to be in the mid teens for FY19

• Operating profit comprises profit attributable to Securityholders adjusted for property valuations, derivative and foreign currency mark to market and other non-cash or non-recurring items

1. Operating EPS is calculated using Operating Profit and weighted average diluted securities of 1,824.5 million which includes 15.0 million LTIP securities which have achieved the required performance hurdles and will vest in September 2019 and September 2020

1. Gearing is calculated as total interest bearing liabilities over total assets, both net of cash and the fair values of certain derivative financial instruments included in other financial assets of $204.4 million (30 June 2018: $154.3 million). Total interest bearing liabilities are grossed up for the fair values of certain derivative financial instruments included in other financial liabilities of $81.1 million (30 June 2018: $31.9 million).

5

Highlights

+ Improving property fundamentals

• Tight supply in our locations has continued to support strong performance across the investment portfolio with like for like net property income (NPI) growth of 3.2% and occupancy maintained at 98% as at 31 December 2018

+ Strong capital position

• $3.1 billion of available liquidity, including cash of $2.1 billion

• Gearing at 6.5% consistent with FRM policy and with weighted average debt expiry of 6.9 years

+ Market conditions for our business are strong supported by structural themes

• Strong development activity, robust property fundamentals and increasing opportunities for deployment of capital

• Favourable supply and demand dynamics in infill markets and investment market demand remaining strong

+ Consequently we have upgraded forecast FY19 operating EPS to 51.1cps, (up 9.5% on FY18)

• DPS guidance confirmed at 30cps for FY19 (+7% on FY18)

6

Highlights

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Own
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Develop
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Manage
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• • Occupancy maintained at 98% and WALE of 4.7 years + Like for like NPI growth at 3.2% supported by tight supply in infill markets + Leased 1.6 million sqm across the global platform equating to $223 million of annual rental property income across the Group and Partnerships in 1H19
• • Competing demand for space in infill markets is intensifying, including urban renewal
• • WIP of $3.6 billion across 68 projects in 12 countries with a forecast yield on cost of 7.1% + Customer-led enquiry remains strong in our locations. This should drive WIP above $4 billion in the near term + 79% of current WIP is being undertaken within Partnerships + Development commencements of $1.9 billion with 54% committed and a WALE of 10.9 years + Development completions of $2.1 billion with 82% committed
• • Total AUM of $42.9 billion, external AUM increased to $39.6 billion + Strength in asset pricing driving $2.3 billion in valuation uplift across the Partnerships resulting in global weighted average cap rate (WACR) of 5.2%
• • Strong AUM growth, driven by increasing, WIP and completions over the next few years + Management revenues consistent at ~1% of AUM and expected to increase on a full year basis + $14.2 billion in undrawn debt, equity and cash providing opportunities for Partnerships to participate in growth opportunities from the Group¹

• Partnership investments are subject to Investment Committee approval

7

Section 2 - Results overview

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Results overview

• • Operating EPS of 25.5 cents per security, up 9.4% on 1H18
• • DPS of 15.0 cents per security, up 9.1% on 1H18
• • Statutory accounting profit $929.2 million

• Includes property valuations, derivative and foreign currency mark-to-market and other non-cash or non-recurring items

• • Net tangible assets (NTA) per security increased 8.8% to $5.05 per security

• Strong contribution from development and management in 1H19

• Direct investments impacted by asset sales over past two years

Operating earnings by geographic segment

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	1H FY19
Operating profit ($m)	465.0
Statutory accounting profit ($m)	929.2
Operating EPS (cents)	25.5
Distribution per security (cents)	15.0
	As at
	31 December
	2018
NTA per security ($)	5.05
Gearing (balance sheet) (%)1	6.5%
Available liquidity ($b)	3.1
WACR (look through) (%)	5.2

1. Gearing is calculated as total interest bearing liabilities over total assets, both net of cash and the fair values of certain derivative financial instruments included in other financial assets of $204.4 million (30 June 2018: $154.3 million). Total interest bearing liabilities are grossed up for the fair values of certain derivative financial instruments included in other financial liabilities of $81.1 million (30 June 2018: $31.9 million).

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Profit and loss

• • Half year statutory accounting profit of $929.2 million, includes property valuations, derivative mark-to-markets and other non-cash or nonrecurring items

• Global property revaluation gains for 1H19 were $2.4 billion driven by rent growth, cap rate compression and development completions in Partnerships

• • Half year operating profit of $465.0 million

• Direct investment income growth impacted by full period effect of asset sales

• Partnership cornerstone income increasing due to net investment into development and underlying growth

• Management earnings up 15% driven by strong property fundamentals and performance fees. Second half is expected to be stronger. Further growth is expected from this segment

• Continued growth in development revenue supported by strong margins and volume

• Operating expenses stable, movement broadly in line with inflation

• Borrowing costs (adjusted for FX) lower due to refinance benefits in prior periods

• FX translation benefit in operating profit offset by hedges included in borrowing costs

Income statement

		1H18	1H19
		$M	$M
	Property investment	193.1	181.8
	Management	164.7	189.4
	Development	243.4	273.3
	Operating expenses	(125.1)	(129.0)
	Operating EBITDA	476.1	515.5
	Operating EBIT¹	472.8	512.4
	Net borrowing costs	(21.4)	(20.3)
	Tax expense	(25.5)	(27.1)
	Operating profit (pre minorities)	425.9	465.0
	Minorities2	(4.6)	-
	Operating profit (post minorities)	421.3	465.0
	Weighted average securities (million)3	1,809.2	1,824.5
	Operating EPS (cps)	23.3	25.5
	Non operating items4
	Property valuation related movements	341.1	596.7
	Fair value adjustments and unrealised foreign currency exchange movements related to capital management	(75.4)	(49.7)
	Other non-cash adjustments or non-recurring items	(144.3)	(82.8)
	Statutory profit	542.7	929.2

1. Look through Operating EBIT is $562.0 million and reflects $49.6 million adjustment to GMG proportionate share of Partnerships interest and tax (1H18: $515.5 million reflecting $42.7 million adjustment)

2. Goodman PLUS Trust hybrid securities

3. Includes 15.0 million securities which have achieved the required performance hurdles and will vest in September 2019 and September 2020

4. Refer slide 24

10

Balance sheet

• • Strong balance sheet and intention to maintain low leverage

• Gearing at 6.5%[5] (up from 5.1% FY18) and 17.6%[1] on a look through basis

• • Stabilised investment properties increasing through positive valuations
• • Partnership cornerstone growth resulting primarily from valuation increases, development completions, FX and equity drawdown
• • Development holdings increased but consistent as a proportion of total assets given expanding opportunity set globally
• • Total property revaluations across the Group and Partnerships of $2.4 billion with Goodman’s share amounting to $597 million

• NTA increased 8.8% to $5.05 per security since June 2018

Balance sheet

		30 June	31 December
		2018	2018
		$m	$m
	Stabilised investment properties	1,624	1,705
	Partnership cornerstones2	6,087	6,890
	Development holdings³	1,994	2,140
	Intangibles	817	841
	Cash	2,407	2,063
	Other assets	530	596
	Total assets	13,459	14,235
	Interest bearing liabilities	(3,082)	(2,959)
	Other liabilities	(1,204)	(1,269)
	Total liabilities	(4,286)	(4,228)
	Net assets	9,173	10,007
	Net asset value ($)4	5.09	5.52
	Net tangible assets ($)4	4.64	5.05
	Balance sheet gearing (%)5	5.1	6.5

1. Based on $2.5 billion of Group and proportionate share of managed Partnerships net debt on net assets including managed Partnerships proportionate share of total assets of $14.4 billion

2. Includes Goodman’s investments in its Partnerships and other investments

3. Includes inventories, investment properties under development and investments in Partnerships which have a principle focus on development

4. Based on 1,813.9 million securities on issue

5. Gearing is calculated as total interest bearing liabilities over total assets, both net of cash and the fair values of certain derivative financial instruments included in other financial assets of $204.4 million (30 June 2018: $154.3 million). Total interest bearing liabilities are grossed up for the fair values of certain derivative financial instruments included in other financial liabilities of $81.1 million (30 June 2018: $31.9 million).

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Group liquidity position

• • Cash and available lines of credit of $3.1 billion as at 31 December 2018

• $2.1 billion in cash

• $1.0 billion of available lines

• • Significant liquidity and balance sheet capacity maintained

• Weighted average debt maturity profile of 6.9 years

• • Substantial headroom to financial facility covenants

• Average interest coverage ratio (ICR) at 17.4 times (9.8 times look through)

• • Cost of debt in line with contemporary environment with a net weighted average cost of debt (WACD)[1] of 2.4%
• • The Group expects to undertake an increased volume of development activity over the next few years. As a result, more capital will be allocated to development and Partnership investments on a consistent basis
• • In order to maintain low financial leverage in accordance with the Group’s Financial Risk Management policy, a payout ratio in the low 50% range will be targeted

Goodman Group drawn debt expiry profile

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• With a payout ratio in this range, the Group will be able to cater for an ongoing development WIP of over $4 billion while maintaining a disciplined approach to financial leverage and further strengthening the Groups balance sheet over the longer term

• The target payout ratio will be achieved by growing DPS by 7% in FY19 to 30cps and maintaining that level of DPS until the target is met, expected by the end of FY20 (subject to market conditions and no unforeseen circumstances)

• Once at the desired ratio, the rate of earnings and distribution growth will re-align (taking into account earnings composition and statutory requirements)

• WACD inclusive of derivatives and facility costs

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Section 3 - Operational performance

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Property investment

• • Property fundamentals remain strong, reflecting the quality of the portfolio after the clear and structured asset sale programme

• High occupancy at 98%

• Like for like NPI growth of 3.2%

• • Transacted $0.9 billion of asset sales across the Group and Partnerships

• Temporarily lowering income growth but providing funding for development activities driving higher total returns

• Cornerstone income increased in line with allocation of capital over past 18 months, predominantly into develop to hold focussed vehicles in US and China

• • Quality of the portfolio focussed on infill markets is being reflected in rental growth and real estate returns in most markets
• • Improvement in the quality of the global portfolio is translating into the WACR tightening 50bps to 5.2% over the period

Property investment ($m)	1H18	1H19
Direct	60.3	37.8
Cornerstones	132.8	144.0
Property investment earnings	193.1	181.8
Key metrics1	1H18	1H19
WACR (%)	5.7	5.2
WALE (yrs)	4.8	4.7
Occupancy (%)	98	98

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

• Revaluation gains of $2.4 billion across the Group and Partnerships

• • Scarcity of land in urban centres where Goodman is focussed and competition for sites is seeing increased intensity of use

• Proximity to consumers vital for e-commerce and traditional retail fulfilment driving increased demand for finite space

• Technology driven occupiers such as data centres significantly increasing demand for sites close to customers`

• Residential conversion continues with our focus on taking sites through planning for change of use

14

Development

+ WIP robust at $3.6bn and growing

• An increase in demand from our customers, driven by structural change, is expected to increase development activity. Volumes are expected to trend higher with WIP likely to exceed $4 billion

• Selective choice of developments improving portfolio quality and value. Speculative development undertaken in infill and proven logistics locations

• Risk appropriate given our portfolio occupancy is 98% and our locations are supply constrained

• Scarcity of sites in infill areas and competition is driving intensification of existing properties to multi-storey or change of use and will support development volumes long term

• Goodman is one of the world leaders in multi-storey logistics and has scale and operational capacity to deliver

• • 1H19 development earnings reflecting strong margins and volumes

• Increase in risk adjusted returns, improved development ROA

• Strong development returns yielding development performance fees

• • Development yield on cost reflects the geographic mix of developments

• High embedded margin given current asset pricing

+ Improving quality and risk profile across development book

• Pre-commitment on commencements lower reflecting speculative projects in US and Japan, but completions 82% leased and 81% pre-sold reflecting strength in our locations and investment demand

• Continued investment partnering and capital efficiency with 79% of developments undertaken in Partnerships

	Development ($M)	1H18	1H19
	Development income	597.2	793.9
	Development expenses	(353.8)	(520.6)
	Development earnings	243.4	273.3
	Key metrics	1H18	1H19
	Work in progress ($b)	3.5	3.6
	Work in progress (million sqm)	2.3	2.2
	Number of developments	78	68
	Development for third parties or Partnerships (%)	80	79
	Committed (%)	63	54
	Yield on cost (%)1	7.5	7.1
	Work in progress (end value)		$B
	Opening (June 2018)		3.6
	Completions		(2.1)
	Commencements		1.9
	FX and other		0.2
	Closing (December 2018)		3.6

1. 1H18 yield on cost on a like-for-like basis. Previously 1H18 reported 7.7% yield on cost, including China projects on a gross cap rate basis.

2. Adopting low financial leverage

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Management

• • Management earnings up 15% on 1H18

• AUM increase due to strong revaluation gains and development completions across the platform

• Performance fees continue to grow following consistent Partnership outperformance returns over several years

• • AUM growth over the next few years supported by strong development activity and revaluations, generating underlying base management fee revenue

	Management ($M)	1H18	1H19
	Management earnings	164.7	189.4
	Key metrics	1H18	1H19
	Number of Partnerships	15	16
	External AUM ($B)	31.1	39.6

• Net investment from development pipeline to contribute ~$3.5 -$4.0 billion per annum

• Stronger rental growth and tighter cap rates supporting further valuation growth driving underlying base management revenue

• Continued outperformance of Partnerships sustained by portfolio locations will support performance fees

• Performance fees expected to be strong in 2H19

• • External asset AUM of $39.6 billion up 27% on 1H18
• • Significant equity commitments and liquidity available of $14.2 billion

• $4.3 billion in undrawn debt facilities and cash

• $9.9¹ billion in undrawn equity

Third party equity raised within Partnerships

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1. Partnership investments are subject to Investment Committee approval

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Management platform – largest Partnerships

	GAIP	GHKLP	GEP	GCLP	GAP	GNAP	GMT3	GJCP	GUKP
Total assets	$7.8bn	$6.9bn	$5.7bn	$4.1bn	$4.0bn	$2.9bn	$2.5bn	$2.5bn	$0.4bn
GMG co-investment	27.9%	20.0%	20.4%	20.0%	19.9%	55.0%	21.2%	17.3%	33.3%
GMG co-investment	$1.5bn	$1.0bn	$0.7bn	$0.6bn	$0.7bn	$1.5bn	$0.4bn	$0.3bn	$0.1bn
Number of properties	100	11	119	33	33	12	12	12	4
Occupancy1	97%	100%	97%	99%	98%	93%	98%	100%	100%
Weighted average lease expiry1	5.0 years	3.0 years	4.8 years	3.6 years	4.3 years	8.4 years	5.5 years	3.0 years	9.4 years
WACR	5.4%	4.5%	5.3%	5.8%	5.5%	4.0%	6.2%	4.6%	4.5%
Gearing2	27.7%	18.9%	26.9%	6.7%	2.0%	n/a	17.5%4	36.2%	n/a
Weighted average debt expiry	5.6 years	4.9 years	4.7 years	2.0 years	5.8 years	n/a	5.0 years	5.0 years	n/a

	GAIP	GHKLP	GEP	GCLP	GAP	GNAP	GMT3	GJCP	GUKP
Total assets	$7.8bn	$6.9bn	$5.7bn	$4.1bn	$4.0bn	$2.9bn	$2.5bn	$2.5bn	$0.4bn
GMG co-investment	27.9%	20.0%	20.4%	20.0%	19.9%	55.0%	21.2%	17.3%	33.3%
GMG co-investment	$1.5bn	$1.0bn	$0.7bn	$0.6bn	$0.7bn	$1.5bn	$0.4bn	$0.3bn	$0.1bn
Number of properties	100	11	119	33	33	12	12	12	4
Occupancy1	97%	100%	97%	99%	98%	93%	98%	100%	100%
Weighted average lease expiry1	5.0 years	3.0 years	4.8 years	3.6 years	4.3 years	8.4 years	5.5 years	3.0 years	9.4 years
WACR	5.4%	4.5%	5.3%	5.8%	5.5%	4.0%	6.2%	4.6%	4.5%
Gearing2	27.7%	18.9%	26.9%	6.7%	2.0%	n/a	17.5%4	36.2%	n/a
Weighted average debt expiry	5.6 years	4.9 years	4.7 years	2.0 years	5.8 years	n/a	5.0 years	5.0 years	n/a

1. Occupancy and WALE of stabilised portfolio 31 Dec 2018

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

3. As at 30 September 2018. WALE includes leased developments 4. After contracted sales as at 30 September 2018, as reported to the New Zealand stock exchange in November 2018

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Section 4 - Outlook

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Outlook

+ Our customers’ industries continue to experience considerable change which is creating opportunity

• Consumer behaviour and rapidly changing technology solutions are driving change in consumer fulfilment

• Most industries including e-commerce, traditional retail and 3PL’s are re-evaluating supply chains

• Barriers to entry remain high in our chosen locations but we have management infrastructure built over several decades to facilitate these customer led opportunities

+ Our global footprint is significant and concentrated

• We have concentrated our portfolio in urban locations providing close proximity to consumers and retailers alike, helping expand relationships with customers across multiple global markets

• Being proactive and providing flexible solutions to assist our customers service their customers in this changing environment is key

+ Our strategic focus on infill markets is paying off and driving long term value

• Continued urbanisation, growth in the middle classes and increasing internet access are all expected to generate demand from our customers, in order to fulfil consumer expectations

• Combined with limited supply, competing uses in these locations is supporting rental growth and investment demand

• Intensification of use and redevelopment of Goodman’s existing infill sites into significantly higher value assets is increasingly viable, should support returns, development pipeline and AUM growth in future years

+ Demand for space across competing uses will continue to drive higher value uses

• Data centres, residential, multi-storey logistics and other commercial uses are all potential value added options

• The Group has sites capable of delivering >35,000 apartments, across multiple locations. Management focused on planning outcomes

19

Outlook

+ Underlying real estate fundamentals should continue to drive sustainable growth

• Customer structural change and locational preferences are consistent with our business strategy

• Robust market rental growth and high occupancy

• Strong and growing pipeline of development product should see an increase in WIP above $4 billion over the medium term

+ Management performance and outlook

• Revaluations and Partnership returns are expected to remain robust given increasing investment demand for logistics sector real estate augmented by the strong fundamentals

• Increasing development activity should deliver strong organic growth in AUM over the next few years with performance emerging within the Partnerships through NTA

• In addition, we believe the opportunity to deploy capital at an attractive return is growing in line with increasing customer demand driven by structural changes

• • Goodman's portfolio has been deliberately focused on infill markets. Market conditions there are favourable, and we are experiencing high levels of profitability supported by the ongoing structural changes across our customers businesses which are expected to be prolonged

+ As a result, FY19 EPS guidance is being increased to 51.1cps, (up 9.5% on FY18)

• FY19 DPS will be up 7% to 30cps consistent with prior forecasts

20

Appendix 1 – Results analysis

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Profit and loss

Total income by business segment for the half year ended 31 December 2018

Category Total Property investment Management Development Operating expenses Non- operating items	Category Total Property investment Management Development Operating expenses Non- operating items	Category Total Property investment Management Development Operating expenses Non- operating items	Category Total Property investment Management Development Operating expenses Non- operating items	Category Total Property investment Management Development Operating expenses Non- operating items	Category Total Property investment Management Development Operating expenses Non- operating items	Category Total Property investment Management Development Operating expenses 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 investments Net gain on disposal of equity investments	56.0 189.4 757.8 100.8 13.6 672.2 6.2	56.1 - - - - 144.0 -	- 189.4 - - - - -	- - 757.8 - 13.6 16.3 6.2	- - - - - - -	(0.1) - - 100.8 - 511.91 -
Total income	1,796.0	200.1	189.4	793.9	-	612.6
Property and development expenses Employee, administrative and other expenses	(538.9) (209.2)	(18.3) -	- -	(520.6) -	- (132.1)	- (77.1)
EBIT / Segment operating earnings	1,047.9	181.82	189.42	273.32	(132.1)	535.5

1. Includes share of associate and JV property valuation gains of $510.9 million, share in associate and JV derivative valuation gains of $6.6 million and share of other non-cash, non-recurring items within associates of $(5.6) million

1. Segment operating earnings is total income less property and development expenses (excludes employee, administrative and other expenses)

22

Profit and loss (cont’d)

Category Total Property investment Management Development Operating expenses Non-operating items	Category Total Property investment Management Development Operating expenses Non-operating items	Category Total Property investment Management Development Operating expenses Non-operating items	Category Total Property investment Management Development Operating expenses Non-operating items	Category Total Property investment Management Development Operating expenses Non-operating items	Category Total Property investment Management Development Operating expenses Non-operating items	Category Total Property investment Management Development Operating expenses Non-operating items
$M $M $M $M $M $M
EBIT / Segment operating earnings	1,047.9	181.8	189.4	273.3	(132.1)	535.5
Net gain from fair value adjustments on investment properties Share of net gain from fair value adjustments on investment properties, unrealised derivative gains and non-recurring items within associates and JVEs Straight-lining of rental income Share based payments expense	(100.8) (511.9) 0.1 77.1					(100.8) (511.9) 0.1 77.1
Operating EBIT¹ / Segment operating earnings	512.4	181.8	189.4	273.3	(132.1)	-
Net finance expense (statutory) Add: fair value adjustments on derivative financial instruments Add: foreign exchange loss Net finance expense (operating) Income tax expense (statutory) Add: deferred tax on fair value adjustments on investment properties Income tax expense (operating)	(76.6) 45.1 11.2 (20.3) (42.1) 15.0 (27.1)
Operating profit available for distribution	465.0
Net cash provided by operating activities²	398.9

1. Look through Operating EBIT is $562.0 million and reflects $49.6 million adjustment to GMG proportionate share of Partnerships interest and tax (1H18: $515.5 million)

2. Difference between operating profit pre-minorities and cash provided by operating activities of ($66.1) million relates to:

3. $32.1 million development activities including capitalised and prepaid interest

4. ($13.6) million of development cashflows recognised in investment activities

5. ($15.3) million cash share of equity accounted income

6. ($69.3) million of other working capital movements

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Reconciliation non-operating items

Non-operating items in statutory income statement		Half year ended
		31 December 2018
	$M	$M
Property valuation related movements
Net gain from fair value adjustments attributable to investment properties	100.8
Share of net gain from fair value adjustments attributable to investment properties in associates and joint ventures after tax	510.9
Deferred tax on fair value adjustments on investment properties	(15.0)
Subtotal		596.7
Fair value adjustments and unrealised foreign currency exchange movements related to capital management
Fair value adjustments on derivative financial instruments – GMG	(45.1)
Share of fair value adjustments on derivative financial instruments in associates and joint ventures	6.6
Unrealised foreign exchange loss	(11.2)
Subtotal		(49.7)
Other non-cash adjustments or non-recurring items
Straight-lining rental income	(0.1)
Share based payments expense	(77.1)
Net capital losses not distributed and deferred tax adjustments	(5.6)
Subtotal		(82.8)
TOTAL		464.2

24

Financial position

As at 31 December 2018 Direct Assets $M Property investments $M Developments $M Other $M Total $M	As at 31 December 2018 Direct Assets $M Property investments $M Developments $M Other $M Total $M
Cash - - 2,062.6	2,062.6
Receivables - - 405.0 313.5	718.5
Inventories - - 935.7 -	935.7
Investment properties 1,705.2 - 106.6 -	1,811.8
Investments accounted for using equity method - 6,887.6 685.1 -	7,572.7
Intangibles - - - 841.5	841.5
Other assets - 2.7 7.4 282.1	292.2
Total assets 1,705.2 6,890.3 2,139.8 3,499.7	14,235.0
Interest bearing liabilities (2,958.5)	(2,958.5)
Other liabilities (1,269.4)	(1,269.4)
Total liabilities (4,227.9)	(4,227.9)
Net assets	10,007.1
Gearing1 %	6.5
NTA (per security)2 $	5.05
Australia / New Zealand 1,674.3 2,886.1 405.9 136.5	5,102.8
Asia - 1,881.2 241.7 305.0	2,427.9
CE - 845.9 512.7 826.1	2,184.7
UK 30.9 142.3 493.2 108.7	775.1
Americas - 1,134.8 486.3 31.7	1,652.8
Other - - - 2,091.7	2,091.7
Total assets 1,705.2 6,890.3 2,139.8 3,499.7	14,235.0

Capital allocation

1. Gearing is calculated as total interest bearing liabilities over total assets, both net of cash and the fair values of certain derivative financial instruments included in other financial assets of $204.4 million (30 June 2018: $154.3 million). Total interest bearing liabilities are grossed up for the fair values of certain derivative financial instruments included in other financial liabilities of $81.1 million (30 June 2018: $31.9 million). 2. Calculated based on 1,813.9 million securities on issue

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Net tangible asset movement

• • For year ended 31 December 2018¹

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1. Calculated on 1,813.9 million securities being closing securities on issue

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Property valuations

• • The Group’s results for 1H19 reflect the high quality of the global portfolio and current strong industrial market fundamentals
• • Market rental growth, cap rate compression, development completions within the Partnerships and FX have been the drivers of the valuation increase
• • The global portfolio cap rate has compressed by 28bps in 1H19 to 5.2%
• • Revaluation gains across the global portfolio for the half year totalled $2.4 billion, with the Group’s share $643.5[¹] million

31 December 2018 property valuations (look through)

		Valuation
	Book value	movement since	WACR	WACR movement since
	(GMG exposure) $M	June 2018 $M	%	June 2018 %
Australia² / New Zealand	5,761.1	359.2	5.5	-0.4
Asia	2,877.5	144.9	4.9	-0.1
UK / Continental Europe	2,284.2	45.7	5.2	-0.2
Americas	1,669.4	93.7	4.2	-
Total / Average	12,592.2	643.5	5.2	-0.3

1. Excludes deferred taxes of $46.8 million. Net revaluation for Goodman share of $596.7 million

2. Australia excludes urban renewal sites which are valued on a rate per residential unit site basis

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Appendix 2 – Property investment

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Leasing

Across the Group and Partnerships:

• • 1.6 million sqm leased during the period
• • Occupancy maintained at 98%
• • Like for like NPI growth at 3.2%

Region	Leasing area (sqm)	Net annual rent ($M)	Average lease term (years)
Australia / New Zealand	601,253	85.2	4.1
Asia	607,270	107.8	3.3
UK / Continental Europe	375,901	30.5	2.9
Total	1,584,424	223.5	3.6

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Customers

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

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Geographic exposure

Top 20 sub-regions (by AUM)

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31

Direct portfolio detail

Portfolio snapshot

• • 24 properties with a total value of $1.7 billion located primarily in the Sydney market

• Represents a significant part of the urban renewal portfolio

• • Leasing transactions remain strong across the portfolio

• 127,216 sqm ($14.5 million net annual rental) of existing space leased

Key metrics¹

Total assets	A$1.7 billion
Customers	296
Number of properties	24
Occupancy	90%
Weighted average cap rate	5.6%¹

1. Stabilised properties

2. • 90% occupancy and a weighted average lease expiry of 4.1 years
3. • Average portfolio valuation cap rate of 5.6%

WALE of 4.1 years (by net income)

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Top 10 customers make up 25.3% of portfolio income

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32

Appendix 3 – Development

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Developments

1H19 Developments		Completions	Commencements	Commencements	Work in progress
Value ($bn)		2.1		1.9	3.6
Area (m sqm)		1.1		1.1	2.2
Yield (%)		7.1		6.8	7.1
Committed (%)		82		54	54
Weighted average lease term (years)		8.9		10.9	8.7
Development for third parties or Partnerships (%)		81		80	79
Australia / New Zealand (%)		25		18	15
Asia (%)		8		16	31
Americas (%)		28		35	22
UK / Continental Europe (%)		39		31	32
Work in progress	On balance sheet	Third party funds	Total end value	Third party funds	Committed
by region	end value	end value		% of total	% of total
	$M	$M	$M
Australia / New Zealand	122	415	537	77	74
Asia	38	1,059	1,097	97	34
Americas	-	803	803	100	37
UK / Continental Europe	597	562	1,159	48	75
Total	757	2,839	3,596	79	54

34

Developments (cont’d)

• • Strong demand from customers supporting WIP at $3.6 billion and expected to grow to $4 billion in future periods
• • Maintained development pipeline of $10 billion

• Forecast GLA of 5.2 million sqm

• Development pipeline allocated as Australia/New Zealand 15%, Asia 46%, UK/Europe 30% and Americas 9%

• • The Group’s development future cash commitments

Commitments as at 31 December 2018	$M
Gross GMG cost to complete	445
Less pre-sold¹cost to complete	4
Net GMG cost to complete	441
GMG share of Partnerships cost to complete	970

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

Development volume

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Work in progress as at 31 December 2018

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35

Appendix 4 - Management

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Global platform

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37

Management - AUM

+ Major achievements completed during the year include

• GCLP equity upsize of $US1.75bn

• GMT settlement of viaduct sale to Blackstone

• GNAP acquired 616,992 sq ft logistics centre in Teterboro, New Jersey

Third party assets under management

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Third party AUM by region

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Total AUM

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38

Appendix 5 – Capital management

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Currency mix

Currency mix – outstanding debt

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Currency mix – including the impact of Capital Hedging FX Swaps

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40

Financial risk management

• • The Group has implemented a robust capital management framework, under its revised Financial Risk Management (FRM) policy. This provides:

• Stronger balance sheet which has been reflected in higher credit ratings upgrade from S&P and Moody’s BBB+ / Baa1 respectively

• Covenants that are flexibly appropriate for our operations

• Diversified sources of funding

• Long term debt sources to stabilise the funding base

• • The Group has been actively reducing financial leverage in the business:

• Group target gearing range reduced to 0% - 25% (from 25% - 35%) and reflective of existing practice

• Gearing level will be determined with reference to mix of earnings and ratios consistent with credit rating but expected to remain low

+ Interest risk management :

• Policy to ensure between 60% and 100% of current year interest rates are fixed

• 94% hedged over next 12 months

• Weighted average hedge maturity of 5.9 years

• Weighted average hedge rate of 3.34%[1,2]

+ Foreign currency risk management :

• Policy to hedge between 65% and 90% of foreign currency denominated net assets

• 74% hedged as at 31 December 2018, of which 56% is debt and liabilities and 44% is derivatives

• Weighted average maturity of derivatives 4.7 years

• Includes the strike rate on interest rate cap hedges

• Incudes the 8 year Reg S €500 million at 1.375% fixed rate

41

Financial risk management (cont’d)

Interest rate hedge profile

• • Interest rates are hedged to 94% over next 12 months
• • Weighted average hedge rate of 3.34%[1]

• NZD – hedge rate 3.31%

• JPY – hedge rate 3.05%

• HKD – hedge rate 2.55%

• GBP – hedge rate 2.85%

• Euro – hedge rate 1.25%[2]

• USD – hedge rate 4.86%

• • Weighted average maturity of 5.9 years

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1. Includes the strike rate on interest rate cap hedges

2. Incudes the 8 year Reg S €500 million at 1.375% fixed rate

42

Financial risk management (cont’d)

Foreign currency denominated balance sheet hedging maturity profile

Currency	Weighted average	Weighted average	Amount receivable1	Amount payable1
	maturity	exchange rate
NZ$	3.7 years	1.0943	A$274.2m	NZ$300.0m
HK$	3.7 years	5.7594	A$762.4m	HK$4,390.0m
€	4.1 years	0.6538	A$642.7m	€420.0m
£	5.1 years	0.5660	A$496.6m	£280.0m
US$	5.5 years	0.7696	US$95.0m	€48.8m
CNY²	3.5 years	7.1390	US$322.1m	CNY2,299.6m

1. Floating rates apply for the payable and receivable legs for the cross currency swaps except for the USDEUR cross currency where the receivable for US$65 million is fixed at 3.70% and US$30 million is fixed at 6.375% 2. Forward exchange contract, net settled in USD

43

Exchange rates

• Statement of Financial Position – exchange rates as at 31 December 2018 – AUDGBP – 0.5525 (30 June 2018: 0.5604) – AUDEUR – 0.6151 (30 June 2018: 0.6332) – AUDHKD – 5.5156 (30 June 2018: 5.8015) – AUDBRL – 2.7338 (30 June 2018: 2.8565) – AUDNZD – 1.0494 (30 June 2018: 1.0922) – AUDUSD – 0.7043 (30 June 2018: 0.7394) – AUDJPY – 77.238 (30 June 2018: 81.912) – AUDCNY – 4.8443 (30 June 2018: 4.8975)

• • Statement of Financial Performance – average exchange rates for the 6 months to 31 December 2018

– AUDGBP – 0.5594 (30 June 2018: 0.5760) – AUDEUR – 0.6286 (30 June 2018: 0.6498) – AUDHKD – 5.6743 (30 June 2018: 6.0659) – AUDBRL – 2.8088 (30 June 2018: 2.5684) – AUDNZD – 1.0817 (30 June 2018: 1.0851) – AUDUSD – 0.7240 (30 June 2018: 0.7752) – AUDJPY – 81.1838 (30 June 2018: 85.5326) – AUDCNY – 4.9712 (30 June 2018: 5.0429)

44

Thank you

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Important Notice 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 223621) as the Responsible Entity for Goodman Industrial Trust (ARSN 091
213 839)). The details in this presentation provide general information only. It is not intended as investment or financial advice and must
not be relied upon as such. You should obtain independent professional advice prior to making any decision. 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 of
securities in the United States. Securities may not be offered or sold in the United States unless they are registered under the US
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Securities Act of 1933 or an exemption from registration is available. Past performance is no indication of future performance. All values
are expressed in Australian currency unless otherwise stated.
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