Goodman Plans A$500 Million of Acquisitions to Boost Assets

Goodman Group, the world’s second-biggest industrial property manager by market value, plans to spend A$500 million ($512 million) on acquisitions to boost its assets over the next year.

The company is also planning to develop as much as A$2.2 billion of projects, which it will own jointly with partners globally, Chief Executive Officer Greg Goodman said in a telephone interview yesterday.

“There may be some assets acquired in the U.S., but primarily in Asia, Australia and Europe,” Goodman said. “It’s pretty hard to go past Asia for flat out growth and lack of supply. Asia’s our No. 1 location.”

The company, which managed A$21 billion of properties as of Dec. 31, announced joint ventures in Brazil, North America and Japan in the last three months of 2012, helping push planned developments to more than A$11 billion around the world. The growth of e-commerce and a lack of modern industrial properties will drive demand for space worldwide, broker CBRE Group Inc. said in a report in December.

Goodman raised A$400 million for its entry into Brazil in partnership with Sao Paulo-based developer WTorre Properties SA, and the Canada Pension Plan Investment Board invested $400 million in the North American partnership. The Abu Dhabi Investment Council, a government-controlled fund manager, invested $250 million in the Japanese venture.

‘Bigger Spade’

“Goodman is playing with a much bigger spade than most of its peers, with a strong balance sheet, large and active capital partners, international tenants, and a truly global platform,” Lou Pirenc, Sydney-based analyst at Morgan Stanley, who has an overweight rating on the stock, said in an e-mailed report yesterday. “The market is still underestimating the earnings growth this can deliver.”

The Sydney-based company reported yesterday a 16 percent increase in first-half operating profit as fees from assets under management rose and development revenue improved.

The stock climbed 32 percent in the past year, twice the 16 percent in the S&P/ASX 200 Index.

In Brazil, Goodman will seek capital partners toward the end of 2013 to invest in the completed warehouses, worth $1.1 billion, from the venture with WTorre, he said. In Japan, the company will focus on the $1 billion of developments it’s undertaking with the Abu Dhabi fund and doesn’t intend to invest further there, he said.

Partnering Approach

“Our partnering approach with our big capital partners is still very much alive and well,” Goodman said.

In the U.S., high-quality industrial space accounted for less than 20 percent of all space as of the third quarter of 2012, while in China and Australia, new space were pre-committed or occupied soon after completion, Los Angeles-based CBRE said.

Goodman forecast operating earnings of 32.3 cents a share for the year ending June 30, up 6 percent from the previous year. The company cited rising rental returns, need for space from e-commerce and demand for stable yields from global pension and sovereign wealth funds.

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