The commercial and industrial property company Goodman Group (ASX: GMG) announced an operational update for the first quarter ended 30 September 2015 and reconfirms guidance for FY16.
According to the report the group’s assets under management increased by $2 billion to $32.2 billion because of development completions, favourable currency movements and strong revaluation resulting from cap rate compression and upward revaluation of urban renewal sites. The group leased 0.7 million sqm. over the quarter, representing $83 million of annual rental income.
Development work is in progress across 78 projects and is worth $3.4 billion. The forecasted yield on cost for these projects is 8.7%. The group is also adopting a disciplined approach to development activities, with 69% of all development completions pre-sold and capital recycled into new projects.
According to Goodman’s Group CEO, Greg Goodman said: “We have made a strong start to FY16, with operating performance reflecting the quality of our properties and income in this part of the cycle, by rotating assets and reinvesting in the strength of our development business. Importantly, we are managing our business for the long term, taking a ‘through the cycle’ approach to our planning, to build a first class portfolio.”
The group has reported solid leasing activity in the quarter as it ensures overall portfolio occupancy remained stable at 96%. It has been maintaining this level since 2011. The group states that progress was made in its urban renewal strategy during the quarter as it achieves positive planning outcomes on a number of sites. This strategy has enabled the group to maintain its urban renewal pipeline at approximately 35,000 apartments additional to the initial sale of 10,000 apartment sites.
Goodman also sees strong demand for new developments in continental Europe from third party logistics, e-commerce and retail customers, with volumes increasing to over 800,000 sqm, of which 93% is pre-committed.
The group reconfirms its FY16 outlook at operating earnings per security of 39.4 cents, which is 6% higher than FY15.
Investors reacted well to the announcement as GMG was up 1% in early trade and is trading at $5.80 as of 10:25 AM (AEDT).
Author: Imran Valibhoy
Nov 17, 2015
Since Joining the firm in 2006, Imran has worked on a range of M&A and Capital Market transactions in the natural resources, mining as well as projects in the renewable energy sector. Prior to joining Wise-owl, Imran worked at Euroz Securities in Perth, aiding in the advisory and valuation of companies in the mining and industrial sectors in Australia. Imran has a Masters in Banking & Finance from City University's Class Business School in London and a Bacheloor degree in Commerce from UWA.