Greg Goodman, chief executive of Goodman Group. Picture: James Croucher
Goodman is riding the global tide of e-commerce and has lifted its property funds empire to $51.7bn of industrial assets and stepped up development on expectations of a global recovery.
The $36bn company, led by Greg Goodman, has been rerated by the market, and is tipped to again lift earnings guidance as major companies restructure and set up new logistics operations and institutions scramble to buy into the boom.
Goodman lifted its workbook to $7.3bn, most of which is undertaken with the backing of global pension funds in markets across Australia, China, Japan Europe and the US.
Despite the prospect of global trade turmoil, the company reaffirmed its forecast 2021 fiscal year operating earnings per security at 62.7c, a 9% lift on last year.
“COVID-19 continues to disrupt markets. We have adapted the way our business is operating to meet these changes. Importantly, we are well positioned to provide opportunities for our customers to meet supply chain requirements,” Mr Goodman said.
Major corporations are chasing ever larger warehouses as they restructure their business, and Mr Goodman said the company’s development work had doubled over the past 12 months, “with strong levels of precommitment and long lease terms being sought by our customers, as they secure essential infrastructure to support their operations”.
Goodman indicated that most of the new warehouses would be kept within the Goodman empire so the company was “organically growing” its assets under management, “which will be in the late $50s [billions] by June 30”.
He said the Australian business had grown strongly during the COVID-19 crisis as consumers caught up with e-commerce trends in other parts of the world.
“[Australia] was a little bit behind what was happening in Europe and the rest of the world,” he said. He predicted that over the next three years there would be greater penetration of online shopping, which would prompt further demand from retailers and suppliers for warehousing.
Mr Goodman played down concerns about international tensions, saying Goodman’s operations were geared towards serving daily needs of large domestic populations that were seeking greater convenience.
The company is also being supported by a limited supply of new space in most markets and growing demand, which is reflected in stable occupancy at 97.8 per cent and net property income growing at 2.3%.
Goodman leased 3.4 million square metres across its business over the year to the end of September, but the real shift has been in development where tenants are committing to larger projects, including multi-storey industrial and data centres, as well as longer lease terms.
The company’s yield on development cost has remained stable at 6.7% and it is still buying up sites globally to boost its pipeline.
Goodman had development starts of $1.7bn with 62% pre-committed and completions of about $900m, about 92% of which are leased.
Goodman said the strong levels of demand from institutions were expected to continue to support pricing, with further cap rate compression likely near term.
Investors backed Goodman’s trajectory, with the share price rising 2.2 per cent to $19.34, with analysts expecting Goodman to beat its earnings guidance. JPMorgan expects it to come in closer to 12 per cent growth.
JPMorgan said the sharp jump in the development workbook mid-year had been consolidated with good growth this quarter and expectations this would rise further in the 2021 fiscal year.
“Development metrics showed an increase in precommitments, a material lift in the average lease term and steady yield on cost as tenant demand remains strong across e-commerce, data centres, food and third-party logistics,” JPMorgan said.
Looking ahead the industrial property company is expected to defy the local recession as the economy bounces back from the coronavirus crisis. “We expect earnings momentum to remain strong in fiscal 2021-2023,” JPMorgan said.
