Goodman Sees Prospects for A$1.5 Billion New U.S. Projects

Goodman Group, the world’s second-biggest industrial property manager by assets, could spend as much as A$1.5 billion ($1.4 billion) on new developments in the U.S. within the next three years.

Goodman sees opportunities to develop new prime industrial properties on the east and west coasts of the U.S., Chief Executive Officer Greg Goodman said. The company’s $890 million partnership with the Canadian Pension Plan Investment Board in the U.S. has so far invested in three projects in the country, representing 2 percent of the group’s work in progress.

“We’ve got very attractive opportunities, very attractive sites” in the U.S., Goodman said today by telephone. “We’ve got a very good partner in CPPIB and have no plans for any new partners at this time.”

Absorption of warehouse space in the U.S. is at pre-recession levels and rental rates are climbing as tenant requirements for modern space exceed supply, broker Jones Lang LaSalle Inc. said in its first-quarter industrial outlook report.

Goodman Group’s development work in progress grew to A$2.3 billion from A$1.9 billion a year ago, and is on track to expand to A$2.5 billion, driven by increasing volume in Asia and the Americas, the company said today in the release of its full-year earnings. Operating profit climbed 17 percent to A$544 million in the year to June 30 and assets under management jumped 15 percent to A$23 billion.

Goodman Group shares rose 0.4 percent to A$4.80 at the close of trading in Sydney. They’re up 11 percent this year, compared with a 4.3 percent gain in the S&P/ASX 200 A-REIT Index.

Debt Sources

The company raised A$2.8 billion in the year and an additional A$1.2 billion since June, Goodman Group said today. It has A$2.2 billion of uncommitted equity and A$1.6 billion of undrawn debt facilities, it said.

Goodman Group will seek to diversify its sources of debt following an inaugural issuance by its European fund, Chief Financial Officer Nick Vrondas said today. The Goodman European Logistics Fund completed a 550 million euro ($730 million) equity raising and a 500 million euro Eurobond sale, the company said in July.

“At the Goodman Group headstock level, we have no plans” to issue debt, Vrondas said. “But all of the funds, one way or another, over the next couple of years, will be accessing debt capital markets.”

Goodman’s New Zealand fund, its Australia Industrial Fund and the European vehicle, have already accessed debt capital markets, he said.

Investment Partnerships

Goodman Group has investment partnerships with the Abu Dhabi Investment Council in Japan and the Malaysian Employees Provident Fund in Australia, in addition to its tie-up with CPPIB in the U.S. and China. The investors are seeking to capitalize on Goodman’s development capability as demand grows for logistics and industrial assets from both tenants and investors.

Rising freight costs and consumer expectations for shorter delivery times are driving tenant demand for well-located logistics properties, while relatively high yields are behind investor demand, broker Colliers International said in a report last month.

Net income in the year ended June 30 fell to A$161 million from A$408.3 million 12 months earlier on unrealized derivative and foreign-exchange adjustments, the company said. Operating profit in the year to June 30, 2014, will be A$594 million, it said.

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