This article is from the Australian Property Journal archive
INDUSTRIAL real estate giant Goodman Group is sharpening its focus on the booming data centres sector, with a growing pipeline that could have an end value of up to $100 billion, as it bested its twice-upgraded full-year operating earnings guidance and forecast more growth in the coming year.
Goodman has been driving the outperformance of A-REITs in 2024, and it posted a 15% increase in FY24 operating profit to nearly $2.05 billion, and operating earnings per security of 107.5c, up 14% – having upgraded its guidance for a second time in FY24 in May to 11%.
Goodman’s forecast FY25 operating earnings per security is 117.2c, up 9%.
Distributions per security in FY24 was 30.0c, which will be maintained.
It recorded a statutory operating loss of $98.9 million after property revaluation movements of $5.1 billion to the negative across the group and its partnerships, with $1.5 billion accounted for the group’s share. Its total portfolio tallies at $78.7 billion, down 3% year-on-year.
Goodman touted its $13.0 billion development pipeline of 80 projects, with a forecast yield on cost of 6.7%. Data centres currently make up 40% of the pipeline and its global power bank has expanded to 5.0 gigawatts across 13 cities.
“We expect data centres to be a major source of growth making up more than 50% of WIP over the next five years,” a Goodman Group spokesperson told Australian Property Journal.
They said that depending on the mix of the final product between powered shell and turnkey, the estimated end value of its current data centre development pipeline could be anywhere between $50 billion and $100 billion.
“The expansion of the digital economy continues at pace. The growth of e-commerce, cloud computing, and adoption of new technologies, including artificial intelligence and machine learning, is creating significant opportunity for Goodman to develop the infrastructure our customers are seeking,” said the group’s CEO, Greg Goodman.
“Our focus has remained on logistics and data centre opportunities in key cities around the world, where barriers to entry are high and supply is limited.”
Goodman expects “significant” data centre commencements in FY25.
“The group continues to optimise returns by orienting the development workbook towards data centres and higher intensity use outcomes.
“Goodman’s strategically located global power bank continues to expand, as it seeks to reposition many of its sites for data centres which are a higher and better use than industrial.
“Located in supply constrained markets that are in high demand for cloud and AI related deployments, the expansion of Goodman’s power bank is on land the group or partnerships own or control.”
The group said “these complex, larger scale and higher value projects” are resulting in the average development period in WIP increasing to 25 months, and the annualised production rate is around $6.4 billion.
“The group is originating a greater proportion of development projects on its balance sheet.”
Management earnings were a key contributor to the positive result, up 62% on FY23 to $776 million, driven by higher performance fees. External assets under management was $70.2 billion, and it raised $1.4 billion of capital from partners.
Income from partnership investments increased 10% primarily due to a $1.2 billion investment into acquisitions and development completions, and the contribution from rental growth offsetting disposals.
“Goodman’s portfolio, which is concentrated on the major consumer markets of the world, is performing well. Occupancy remains high at 98% and rental growth continues delivering 4.9% NPI growth for the year,” the spokesperson told Australian Property Journal.
The reversion to market rents across the portfolio is 24% on average, consistent with FY23.
Goodman leased 2.7 million sqm over the 12 months, equating to $409 million of annual rental property income. The portfolio’s weighted average lease expiry was 5.0 years.
“Goodman is always looking to optimise its portfolio, with a focus on brownfield sites that enable us to provide our customers with logistics and data centre properties that have access to power, are large scale, and hard to replicate. We look to reduce time to market for our customers across the logistics and data centre space,” the Goodman spokesperson told Australian Property Journal.
The group has low gearing at 8.4%, or 22.7% on a look-through basis.
It has $3.8 billion in cash and available lines of credit, with no drawn debt facility maturities until late 2025.
