04 Operational performance
Goodman delivered a strong FY20 result. While the pandemic brought some challenges, it also accelerated key societal changes that are well aligned with Goodman’s existing direction and that of our customers. During the year, customer demand for our well-located industrial properties translated into more development activity, high occupancy, rental growth, increased assets under management and, ultimately, strong returns across our property investment and management businesses.
Work in progress ($bn)
Strong growth in workbook to $6.5 billion
Development activity has been a clear driver of this year’s strong results. Our work in progress reached $6.5 billion and we expect it to exceed $7 billion in the first half of FY21.
We have seen solid margins and pre-leasing activity, while the average lease term of 15.1 years is the longest it’s ever been. We expect these longer leases to continue, as customers choose higher value infill locations and invest more in technology at their facilities.
Our development projects have increased in both scale and value, with the average time for developments in progress increasing to about 17 months. This gives greater visibility over development activities going forward.
Other development highlights include:
- Globally diversified workbook across 46 projects with a forecast yield on cost of 6.5%
- Commencing $4.5 billion in new developments with 79% pre-leased
- Completing development projects worth $2.4 billion with 85% leased.
Assets under management
Development completions and higher valuations drive strong performance
Goodman delivered average total returns of 16.6% to our capital Partners in their respective financial years, continuing the trend of the last five years for double digit returns.
External assets under management grew 12% over FY20 to $48 billion due to development completions and valuation gains resulting from cap rate compression. The impact of COVID-19 further increased demand for industrial and logistics assets, continuing to generate positive revaluations, which grew by $2.9 billion this year.
The Group has invested more than $1.1 billion in its Partnerships over the last two years, including $0.3 billion in FY20. This was mainly to fund development opportunities, as well as incremental acquisitions of properties with redevelopment opportunities over the longer term.
Other management highlights include:
- Management earnings up 9%, enhanced by the positive performance of the Partnerships
- Average Partnership gearing of 19.9%
- Weighted average cap rate compression of 23bps to 4.9% over the year
- $16.3 billion available in equity commitments*, cash and debt.
* Partnership investments are subject to Investment Committee approval.