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Edited Transcript of GMG.AX earnings conference call or presentation 17-Aug-11 11:30pm GMT

Preliminary 2011 Goodman Group Earnings Presentation and Webcast

Sydney, New South Wales Jul 15, 2019 (Thomson StreetEvents) -- Edited Transcript of Goodman Group Pty Ltd earnings conference call or presentation Wednesday, August 17, 2011 at 11:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Gregory Goodman

Goodman Group - Group CEO

* Nick Vrondas

Goodman Group - Group CFO

* Anthony Rozic

Goodman Group - Group COO

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Conference Call Participants

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* Richard Jones

JPMorgan - Analyst

* Paul Checchin

Macquarie Securities - Analyst

* Stephen Rich

Credit Suisse - Analyst

* John Kim

CLSA - Analyst

* Peter Davidson

BTIM - Analyst

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Presentation

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Gregory Goodman, Goodman Group - Group CEO [1]

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Good morning, on the call with me this morning is Nick Vrondas our CFO and welcome to the Goodman Group profit announcement for the June 30 financial year 2010. I'm pleased to announce an operating profit after tax of AUD384 million for the financial year 2010. A fully diluted operating earnings per share of AUD0.0566, up 8% on the last year results. The investment EBIT contributed 64% of earnings, 36% from development and management and we see this moving, certainly in the short term, to 40 to 50% of EBIT and active earnings.

The business is gaining size and scale around the world. Core strategic strengths remain ownership of core industrial assets, selective pre-commitments and pre-sold approach to development activities. We are actively managing third part capital and the global operating platform is providing scale and diversification. Through all that we have prudent capital management and we have actually decreased gearing through for the year to 23%, with also maintaining AUD1.3 billion of liquidity and increasing our debt maturities with the use of the 144a and the US debt markets. This gives us confidence to deliver a financial year 2012 operating profit after tax of AUD460 million, equating to a fully diluted operating EPS of AUD0.06 per share.

Turning to slide six, portfolio occupancy increased to 96%, up from 93% and we leased 1.9 million square metres across the Group and managed fund platform. That came with a revisionary rent of 2.3%, with rents growing around the world in aggregate at 3%. All the internal property management team is working well and they worked very hard for the year to achieve that result.

Moving then to the development slide, we currently, or at 30 June, had work in progress of AUD1.8 billion, that's across 42 projects in 12 countries with a forecast yield of 8.7%, 82% pre committee and 91% pre-sold to funds or third parties during the year. External assets under management increased to AUD14.4 billion and we raised AUD1.8 billion of new third party equity through the year, which was significant. We also forecast significant growth in funds under management over the medium term and certainly we're off to a good start we believe for financial year 2012.

So we grew operating profit, we reduced gearing and we had a very solid ICR at 4.5 times very, very strong cash cover. We established new debt facilities of AUD4.8 billion, with average terms across the Group and management funds of 5.1 years. And also importantly as spoken about before, we diversified our sources of debt, raising AUD900 million in debt capital markets primary in the US. That takes approximately 70% of the Group debt funding into the debt capital markets in the US. We anticipate this ratio actually will grow, certainly over the next 12 months.

Turning to slide eight and turning it over to Nick Vrondas to give you a results update in more detail.

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Nick Vrondas, Goodman Group - Group CFO [2]

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Thanks Greg. Contained within our releases today are our customary disclosures which we have prepared consistently with prior periods. On slide eight we're pleased to report a result today that is slightly above our guidance. But even more pleasingly, we've been able to facilitate the increased development activity and the significant takeover of the former ING Industrial Fund in Australia, and still be able to show improved credit metrics.

Over the year, we've continued to see the evolution of the earnings capacity of our business. We continue to trend towards the levels of activity and earnings we believe we have the capacity to generate. This result has been delivered from a broad base of activities and regions. It has been especially pleasing to see contributions from China and Japan and good growth in Australia, Europe and Hong Kong, with a stable result in New Zealand. We've seen an improvement in the UK contribution, albeit off a low base, but we still believe there remains significantly greater earnings potential there.

Our capital management has been effective, our finds management business has attracted substantial equity resulting in an ability to undertake more development and further deliver our funds at the same time. When this is combined with the reduction in our proportionate share of the funds, we've seen a further reduction in our look through gearing. We've also been able to absorb the recent FX volatility, through our effective hedging strategy.

Turning now to slide nine. Once again the usual detailed reconciliations have been appended to this presentation, but here we have a summary of our P&L. The difference between our operating profit and statutory profit is a combination of the items we usually exclude. The most significant were AUD51 million of positive fair value gains in our properties and a share of those in our funds, AUD66 million of net fair value gains primarily on our FX derivatives. Offset by AUD31 million of fair value losses on our share of funds interest rate derivatives, AUD34 million of fair value adjustments on acquisitions and AUD12 million in share base remuneration which has again been deducted.

In terms of our cash flow statement, we've seen significant increase in the operating cash flows over the year. This has been driven primarily by the increased development activity and in particular the high portion done on a fee for service and fixed price contract basis. A significant portion however, some AUD60 million of the development cash flows, continues to be recorded in the investing and financing cash flows, due to the ownership structure of those assets. You'll find some comments on this in our reconciliations on slide 25 of your pack.

Overall, the result equated to a basic operating EPS of AUD0.057 per security, which translates to AUD0.0566 on a fully diluted basis, which is the measure we're focused on. Greg will provide more details on the operations shortly, but the highlights were positive, like on like rental growth across our investment portfolios, which was in line with our expectations. We continue to grow our management revenues and sustain strong margins and development activities have recovered materially. Our developments are profitable and a divisional ROA has increased to 10%, with further potential to improve as we continue to optimise this part of our business. Our distribution policy has remained in-line with our guidance.

Turning to slide 10 again we note firstly the impact of FX on the translation of our overseas investments into Australian dollars. Underlying this we've seen an increase in our wholly owned investments, driven largely by the Moorabbin acquisition, which was predominantly equity funded. Our fund investing activities were dominated by the IIF takeover, which we were able to accommodate in our capital budget from our retained earnings and because we had a low participation in our other fund equity raising activities.

Our development capital has been stable, despite the significant recovery in activity levels. This has been due to the strength of our capital partnership. It has also meant that we've continued to see the ratio of land to [WIP] reduce as we continue to monetise our sites. As a result, our gearing is down to 23% on balance sheet and 36% on a look through basis. We are now operating comfortably inside our preferred ranges.

We'd like to now spend a moment on or liquidity position, which is summarised on slide 11. Through our significant re-financing activity in the debt capital markets and with our strong banking group, we've been able to maintain our AUD1.3 billion liquidity balance. More importantly though, we've continued to diversify our sources and lengthen our maturity profile. With over two thirds of our debt in debt capital markets, a weighted terms and maturity of over five and a half years and we can fund all our commitments out to June 2015. We are equally focused on the maturing profile and diversity of funding within our managed funds and there we continue to make significant inroads. As a result, we have the balance sheet strength and liquidity to both withstand market volatility and capture opportunities should they arise.

However, we will maintain vigilance and continue to operate prudently as the recent market volatility serves to remind us of the difficulties during the recent financial crises. That's all from me Greg.

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Gregory Goodman, Goodman Group - Group CEO [3]

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Thank you Nick. Returning to slide 13. The property fundamentals remain robust, occupancy as I spoke about earlier was 96%, like on like rental growth at 3% contributions from obviously all the portfolios around the world. The global operating platform is gaining size and scale which is presenting opportunities and operating efficiency, importantly. Investment increasing through size and quality of our development programme is all important in attracting the third party capital which we have been very successful in doing.

Moving to slide 14. On the development front work in progress increased to AUD1.8 billion, prudent low risk strategy focused on pre-sold and pre-committed developments. Prime core assets remain the focus in the open market for major investors around the world. Resulting in the development activities of groups like ourselves being the key activity in sourcing prime investment grade assets and all important in raising capital in a number of different market places.

Moving then on to slide 15, a snapshot of the different areas where we are developing around the world, a few comments on each. Australia and New Zealand look stable, we are in a very powerful position in both markets and we have good opportunities of an infill nature and I think Moorabbin is one of those that is now on the books in Goodman Group in Australia. But we have also other infill opportunities which are important to the growth and the development of those businesses in New Zealand and Australia over the next two to three years, as well as the broadacre sites that we have also.

Then moving to Asia, you have seen China now, or you'll see China certainly in 2012/2013 starting to contribute in a relatively significant way. We have currently on China two million metres of land that is either under our control, becoming under our control or in due diligence. That will give us the opportunity of actually turning out a billion -- one million metres of product over a two year period, which will be about 500,000 metres a year. Which is the target, certainly for the next two years.

Japan, we've decided in Japan to move down the development front rather than buying core assets which we think are pretty keenly priced in Japan at the moment. So we've definitely -- we have a development strategy and effectively we have -- we're in the process of acquiring sites, also establishing a development fund which we'll talk a bit more about, probably next week in fact. But Japan is certainly starting and starting for us well for this financial year.

In Continental Europe we do have size and scale that is increasing and we have a good access to capital, that is debt capital and also equity which makes us a stand out in that market. Effectively Germany and Poland have been good over the last 12 months. We see some opportunities in France for us at the moment as well and certainly the Ford workbook in Europe is looking very strong, and the quality of customers is at the very top end which I know I've spoken to you about before. But the big customers tend to be getting bigger and they are taking opportunities in the dislocations you are seeing around the markets in Asia, Europe and in some extent Australia.

I'm please to say in the UK we're kicking off a couple of new developments this financial year finished Co-Op, effectively last year but we have two or three on the page now and they're moving to commencement over the next few months. So it's pleasing to see that there's activity in the UK and that'll help obviously through 2013 and 2014.

Moving to then slide 16, we are forecasting strong growth in funds under management over the medium term, with the support from capital partners. Capital partners are very, very focused on getting high quality, prime investments around the world. Those investments quite frankly in mini-markets are too expensive to buy on the market. So our ability to develop them and to sensibly price them is obviously a big advantage and that makes Goodman a compelling partner in our major markets around the world.

I think Nick on slide 17 talked about diversification of debt financing at the Goodman level, we're also doing it at the fund level and you'll see in your slide pack and note that GAIF has an inaugural bond issue in Australia and it is rated. We're moving down to rate our European fund, our big European fund and certainly we'll be accessing the debt capital markets for our funds business as well to add that diversity, and prime nature and quality of the assets will allow us to do that. So that is something that we are very focused on.

Moving to slide 20 and just in closing as summary, we've maintained our position as a leading industrial property business and partner and importantly we are a partner in the markets we operate in. And we're gaining size, scale and efficiency which is giving us great confidence in regard to financial year 2012 and then beyond. We also remain prudent in pursuing only prime developments which appropriate margins, we have also passed on some major portfolios that have been for sale around the world because we think they're too expensive. So we're not growing our funds under management for the sake of it, we want to grow it profitably and we want to make sure that our equity is protected as well as our partners around the world. And that is a matter of being very disciplined about how you grow your development book and your funds under management and we're certainly exercising that discipline.

I think then the development and management activities around the Group we've talked about briefly, but we see that contributing up to 50% of EBIT in the short term and that's probably quite frankly financial year 2012. So the active earnings are coming through, we are getting the return on equity moving in the right direction and starting to liberate some of our land assets, certainly in Europe around the UK, which have been, you know, a drag on the performance and regarding return on equity.

Major contributions will come from off-shore, Asia we feel particularly comfortable with our progress but we are working very, very hard and we have some good competitors in those markets as you know. So we are working very hard but we are making in-roads. Europe I think has been the stand out for us over the last 12 months and the projections looking forward look strong, albeit Europe is a low growth environment. But prime assets and good cash yields on the back of very low interest rates in a very compelling reason for capital to get invested if you're covenants are strong, which ours are.

I think that all then sums up to our confidence in confirming financial year 2012 earnings guidance of AUD0.06 fully diluted per security, equating to AUD460 million being driven by our active business. But also around the world, around our investments which we have shown growth in rents this year across the Board of 3% and occupancy rates are rising around the world. So everyone internally at Goodman is working very hard and we're making sure that we do hit our targets and we're moving to, I think, a very prospectively good five year period as far as our business is concerned. That is the end of the presentation, I thank you but I will turn it over to questions from the floor around the callers on the line.

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Questions and Answers

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Operator [1]

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Ladies and gentleman we will now begin the question and answer session. (Operator instructions).

Your first question comes from the line of Richard Jones from JPMorgan, please ask your question.

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Richard Jones, JPMorgan - Analyst [2]

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Good morning, a couple of questions if I may? If there anything to read into the lower fourth quarter development commitments, is that do you think a timing issue or perhaps related to some of the global uncertainty?

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Gregory Goodman, Goodman Group - Group CEO [3]

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No not at all, I think you'll find our first quarter for this year is going to be -- this financial year is going to be very strong. I wouldn't be concerned and we've got a lot of visibility in the development book moving forward and that's why we're confident putting AUD460 million on the page.

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Richard Jones, JPMorgan - Analyst [4]

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Okay and then just in terms of the inventory, there's an impairment that I note that you've taken about AUD15 million, is that UK land or can you just clarify what that's in relation to?

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Nick Vrondas, Goodman Group - Group CFO [5]

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Yes, Richard that's primarily UK land.

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Richard Jones, JPMorgan - Analyst [6]

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Right okay and then one more for you if I may Nick? Just the credit rating, obviously the metrics are all improving, do you kind of have an expectation of where your credit rating may get to, or a target credit rating that you're trying to achieve?

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Nick Vrondas, Goodman Group - Group CFO [7]

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It's a good question Richard, I certainly agree with you in regard to the metrics, we've worked very hard to make sure we get into this zone. Our understanding of how the agencies work would suggest that the sort of metrics we're running at at the moment probably would have us in the strong end of the triple B categories, certainly the mid triple B's. I think the agencies will want to sort of have a look at these results, will want to sort of test our commitment to these metrics and you know, I think there's a good chance that we should be in the mid B's, stable and firming from there.

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Richard Jones, JPMorgan - Analyst [8]

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Yeah, alright cheers, thanks.

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Nick Vrondas, Goodman Group - Group CFO [9]

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Thanks Richard.

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Operator [10]

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The next question comes from the line of Paul Checchin from Macquarie. Please ask your question.

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Paul Checchin, Macquarie Securities - Analyst [11]

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Hi guys, just a quick question on the development front. I notice the proportion and balance sheet developments obviously come back. I can recall over the last six months you guys have been talking about maybe increasing that, is that still on the cards? Is there any intention to do more on balance sheet development as a means of kind of boosting those returns from the development business? Or are you still keen to keep the much greater proportion of it in the lower risk type development activity?

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Gregory Goodman, Goodman Group - Group CEO [12]

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Oh look, we're certainly looking at lower risk. I think you'll see though we have plans for this year and not too far away from some development fund activity, primarily out of one of the Asian markets. It would make sense for us in Japan for example, where we've chosen to go the development route, rather than going down the acquisition of assets which we find difficult to justify the pricing. So I think you'll find that there will be a little bit more balance sheet utilization but we do have a lot of roll off as well. Obviously interlink was rolling off which was very, very lumpy in regard to capital usage, so we're replacing that really over a number of projects running through China and potentially Japan.

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Paul Checchin, Macquarie Securities - Analyst [13]

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And so as that balance sheet gets utilised a little bit more, can your margins keep going any higher? I noticed the second half development margins have shot up and I think Nick, we've spoken in the past about how there's kind of a two half skew because some of the costs get recognised in the first half --

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Gregory Goodman, Goodman Group - Group CEO [14]

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Look, I think around the development we're operating on margins of 15 across the Board return on cost. And we're watching though the underwriting of the exit cap rate very, very closely because we're not getting too bullish about the exits and that's important when we're running the feasibility. So on both sides we're building in a profit and risk margin of 15 and we're not getting bullish on the exits.

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Paul Checchin, Macquarie Securities - Analyst [15]

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Excellent and just a final question if you don't mind? Just in relation to Europe which obviously kind of appears to have the wobbles at the moment at a minimum. You know, kind of risk around the forecasts you're expecting from Europe over the course of the year. Is a lot of the development activity already kind of locked away and you're reasonably confident?

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Gregory Goodman, Goodman Group - Group CEO [16]

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Well what was the first half, what was the wobble? I missed the wobble part.

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Paul Checchin, Macquarie Securities - Analyst [17]

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Just in terms of the outlook for Europe looking a little bit shaky, just generally, import volumes et cetera have kind of come off over the last quarter or two. I'm just wondering in terms of the confidence you've got in your expected developments over the course of 2012.

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Gregory Goodman, Goodman Group - Group CEO [18]

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Yeah it's fair to say we got a very, very big workbook locked in for the year. I think a couple of comments, I think you'll find e-commerce still going very, very strongly in Europe. There's build outs not just of Amazon platforms but others and we're certainly participating in that, which we think is very exciting. That is also an Asian story as well. The other comment is the -- a lot of the big three PLs in the world, logistics operators are in really good shape, the European guys are in really good shape in regards to balance sheet and strength of balance sheet, which is very different to when people went into 2007/08 and through 2009. Corporate balance sheets are good. The big guys are actually doing well, there's a lot of M&A activity in that area.

That means there's rationalization of warehousing, expansion of warehousing and effectively the automotive in Europe stand out. So we've done two or three for automotive, we've got another two or three for automotive and we've actually got some automotive in the UK as well. That is China inspired and it's good business for us. So it's fair to say very top end in Europe, top end customers, top end retailers particularly around food, e-retailing, big stand outs for us and strong workbook.

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Paul Checchin, Macquarie Securities - Analyst [19]

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Fantastic, thank you very much.

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Operator [20]

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The next question comes from the line of Stephen Rich from Credit Suisse. Please ask your question.

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Stephen Rich, Credit Suisse - Analyst [21]

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Hi guys, just a couple of questions this morning. Firstly with respect to -- just going on from Richard's question about the AUD15 million inventory impairment. You've taken a few impairments obviously across that UK land bank and now you're talking about liberating it. Can you just remind us how you've been treating that from a profit perspective?

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Nick Vrondas, Goodman Group - Group CFO [22]

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Yeah so the book value goes in at fair value and then when it's realised it's the difference to the book value.

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Stephen Rich, Credit Suisse - Analyst [23]

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Okay so the spread over the impaired book value?

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Nick Vrondas, Goodman Group - Group CFO [24]

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Correct.

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Stephen Rich, Credit Suisse - Analyst [25]

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Okay.

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Gregory Goodman, Goodman Group - Group CEO [26]

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It's fair to say though, apart from selling land in the UK, the residential which we've been doing and there's a few other sites that will go to residential, which is high better in use and we're booking them at industrial. So there's an imputed margin and we're getting good margins out of that. I think the second thing is it's very hard to get a valuer to test land values in the UK, bearing in mind they're still very bearish in the uptake of new space and they allow three year letting up allowances and things of that nature. So from a valuation point of view, you know, that's one side of the coin.

On the other side of the coin when the developments pop out, and we've got a couple at the moment which are sitting in the books being developed at 20% return on cost, one's an industrial and one's an office park. So I suspect the valuation fraternity in the UK as we know is relatively conservative and you probably will see some abnormal margins coming through that business. We're just negotiating actually selling a block of land and I think it's 50% above book, it might even be -- I've got Anthony Rozic sitting here -- it's 100% above book I think.

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Anthony Rozic, Goodman Group - Group COO [27]

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Yeah close to, yeah.

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Gregory Goodman, Goodman Group - Group CEO [28]

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Close to 100% above book, so we think the values in the UK are looking prospectively good for the future, but probably we've been overly harshly hit. And certainly when I look at the UK business park five year plan, we're talking 13/14% plus total returns on that portfolio, which is going to be a stand out around the world for the next five years or so. In fact from that, really where we're sitting in book at the moment is probably at the low end.

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Anthony Rozic, Goodman Group - Group COO [29]

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I think if I just add it's not that long ago when we were all sort of being pressured to recognise what people then thought was a fair value of those same sites. So I think we've just taken an even handed view there.

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Stephen Rich, Credit Suisse - Analyst [30]

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Okay and just one more question, probably the last time I'll asked this question with respect to the booking of the interlink profit. Can you give us a feel for how much was booked through FY11 and what will be booked through FY12 in your guidance?

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Gregory Goodman, Goodman Group - Group CEO [31]

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No I won't but it's been an appropriate amount. It's -- obviously we'll go through the books over the next three accounting periods and you can assume if you like that it's a smaller amount this year, a bigger amount next year and probably a smaller amount in the third year. I think Nick has the right way to look at it.

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Nick Vrondas, Goodman Group - Group CFO [32]

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Yeah I mean there are, you know, long fold because there are contingencies and risks being provided for them. It depends on how they unfold but it's provided for over a three -- effectively three accounting periods.

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Stephen Rich, Credit Suisse - Analyst [33]

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Okay and just to clarify, when you start with this that's 2011-2013?

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Nick Vrondas, Goodman Group - Group CFO [34]

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Correct.

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Stephen Rich, Credit Suisse - Analyst [35]

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Great, thanks guys.

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Operator [36]

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The next question comes from the line of John Kim from CLSA. Please ask your question.

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John Kim, CLSA - Analyst [37]

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Good morning. Just looking at a development pipeline in Asia, 10 development sites at the end of this period, 800,000 square metres and comparing that versus your third quarter update where you had eight sites and 420,000 square metres in China. So it looks like you almost doubled the size of your developable GOA, I'm just wondering if that's apples to apples or if you really added that much in developments?

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Gregory Goodman, Goodman Group - Group CEO [38]

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No, no we're in major markets in China and we are sticking to the core markets. As you know we're partnered up with CPPIP, very, very large capital source and we are buying land and we're effectively buying land. We've got around 50 people in China now, it's that good business for us and it will be a very, very good contributor to our operating earnings through 2012 and beyond. So that's -- when I mention two million metres, some of that's on book, some of that's with Canadians and our joint venture fund and some of that is perspective working and finalizing DD. But we have a good team, we have a very good political standing in the market in China and we are doing what we said we'd do and that's developing a good quality product which suits the local and the international customer.

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John Kim, CLSA - Analyst [39]

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And would that include development sites in some of your newer markets, like I think it was Chengdu and Chongqing?

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Gregory Goodman, Goodman Group - Group CEO [40]

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Yes that would be a safe assumption.

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John Kim, CLSA - Analyst [41]

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Okay, just one final question on this. Does the 80,000 square metres include interlink or is that separate?

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Gregory Goodman, Goodman Group - Group CEO [42]

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No.

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John Kim, CLSA - Analyst [43]

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Okay. Your decision to move forward with developments in Japan sort of implies that cap rates are still tight in Japan and I know some of your competitors globally have had very high margins on development profits, at least historically. Do your foresee having higher margins than the 15% you see throughout your development portfolio in Japan.

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Gregory Goodman, Goodman Group - Group CEO [44]

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Yes.

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John Kim, CLSA - Analyst [45]

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Okay. And finally there's discussion in the press that you were looking to do some kind of listing in Hong Kong. Can you discuss maybe your thought process as to which entity that would be and the timing of any listing?

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Gregory Goodman, Goodman Group - Group CEO [46]

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Look I think in all things you're looking at capital management, whether it's in regard to raising equity in Hong Kong, doing R&B bonds, so we're looking at the best sources for our business long term. And certainly it's on the page and we'll look at it when we think it's appropriate. We have nothing planned or ready to go at the moment and we'll look at what is the best for our stakeholders, you know, in the long term. But certainly no plans on the books currently that will surprise anybody on the call.

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John Kim, CLSA - Analyst [47]

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And this would be for the Group or for the Hong Kong logistics fund?

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Gregory Goodman, Goodman Group - Group CEO [48]

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It could be Hong Kong logistics fund, it could be Group and it could be something else we might think of along the way. So, look I'd take those things as a management team here that is looking to maximise your value, or the stakeholder's value, and will be certainly in many instances round the world looking at opportunities where we can maximise value. Now if that's in regard to sourcing capital because we think it's the best place to source it long term and it's deep, we'll certainly take those things very seriously and bring them to you when we believe it's the right time to bring them to you.

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John Kim, CLSA - Analyst [49]

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Great, thank you.

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Operator [50]

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The next question comes from the line of Peter Davidson from BTIM. Please ask your question.

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Peter Davidson, BTIM - Analyst [51]

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Good morning Greg and Nick. Look, question about the capital structure of Arlington. If you look on slide 18 there you'll see that gearing's about 50%, pretty short term dead at two years. What's the outlook for equity inflows there, are you happy with the capital structure, does it fit? Are the global guys, you know, the three major pension funds and sovereigns that are your sort of core investors, do they have an appetite for that product?

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Gregory Goodman, Goodman Group - Group CEO [52]

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Pete first thing is the fund is going through a fund extension negotiation. So we will be advising the market shortly, but I think you'll find that there's a view seven year business plan makes sense. There's a seven year business plan that looks at 13% plus returns. Gearing will be skipping down to 42% to 43% pretty quickly. There are now some as you'd know, a pretty strong market in the UK for prime and there's a couple of assets, one a land acquisition actually we just talking about before. But also another large asset that potentially is being sold, gearing will be in the mid to low 40s. I think crystal balling it there'll be an extension from the fund, investors are very comfortable with prospective returns moving forward. And on the debt side, negotiations have already -- batting has already opened and it's fair to say we have a lot of support in Europe and also -- Continental Europe and also the UK from the major banks. We are one group they do want to fund and that is because we're doing a lot with these banks around other debt capital markets as well.

So look, I think it's going to be a stand out return actually on that fund over the next three to five.

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Peter Davidson, BTIM - Analyst [53]

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Okay, thank you.

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Nick Vrondas, Goodman Group - Group CFO [54]

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Pete just one point of clarification, just in relation to the debt maturity profile on ABPP in relation to the C&BS component of it. There is an option to extend that out for two years at our elections, subject to some criteria which we should be able to meet. So we've got a big chunk of that we can punt out to 2014.

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Gregory Goodman, Goodman Group - Group CEO [55]

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Yes, thanks Nick.

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Peter Davidson, BTIM - Analyst [56]

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Okay, alright thank you.

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Operator [57]

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There are no further questions at this time, please continue.

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Gregory Goodman, Goodman Group - Group CEO [58]

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Well I think we're find, why don't we wrap up and I thank everyone very much and look forward to the year ahead.