Upgrades from the property sector reveal that the pandemic is now delivering good times in the rebound phase after crimping activity for some in 2020 – though Goodman Group rode through the lockdowns with its strong emphasis on logistics and big sheds.
It’s a shortage now of those big warehouses and other logistics hubs that’s giving another kick higher for Goodman’s global revenues and earnings.
This saw Goodman Group upgrade its guidance on Tuesday, a day after Charter Hall, a smaller property investor Australian focused, revealed a solid upgrade as well.
Goodman said Covid-related disruptions were having less impact than expected on its full-year projections.
“In addition, given the strength of our development projects, leasing success and the stronger than expected performance of our Partnerships, the outlook for the new financial year is ahead of previous forecasts,” the group said in a quarterly update issued to the ASX on Tuesday.
This has seen Goodman increase its earnings guidance for the 2021-22 financial year, projecting operating earnings per security growth greater than 15%.
“High utilisation of space, barriers to entry and limited supply in our markets are underpinning occupancy and cash flow growth in our portfolio, with strong rental growth occurring globally,” CEO Greg Goodman said in the statement.
By the end of September, development work in progress was $12.7 billion, up 19% since June.
All regions, especially the United States, are contributing to the new portfolio of new developments.
“Structural changes have accelerated the way we shop and live has evolved and consequently customer demand for high quality locations close to consumers has never been greater,” Mr Goodman said.
“This demand and competition for space is resulting in regional growth, increased development activity, stronger than expected performance from our partnerships, and generally higher levels of profitability across all our business lines.”
Occupancy across the group’s portfolio is 98.4% with 4.2 million square metres leased over the year to September, equating to $563 million of rent each year.
“What we’re seeing is really strong rental growth where there is more demand than supply,” he said.
Goodman Securities jumped more than 5% to end at $23.49, not a bad outcome on a day when the wider market was weaker.
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The logistics boom being enjoyed by Goodman also saw Charter Hall Group forecast a 30% plus surge in earnings for the year which in turn has seen the group upgrade its guidance for the June, 2022 financial year.
The group lifted its its post tax operating earnings a security estimate to 83c a security, up 36% boost over its 2021 earnings per security of 61c.
Charter Hall had issued guidance of 75 cents a security at its AGM, so the new guidance is more than 10% above that.
Charter Hall CEO David Harrison attributed the new guidance to an increase in funds under management (hence more fees), profits from transactions and rising values of the fund’s properties.
“Our total development pipeline has expanded beyond $9 billion as we replenish new sites across industrial and office markets and our committed developments grow through further pre-leased development commencements,” Mr Harrison said in this week’s update.
“This growth from development has complemented the selective stabilised asset acquisitions across all sectors.”
The boom in warehouse and logistics assets in particular has helped improve Charter Hall’s managed portfolio. Rising valuations in two unlisted industrial funds generated performance fees payable at the end of October.
The fund manager booked a 9.6% lift in values, worth $329 million, across $3.4 billion of industrial assets that were valued. Charter Hall expects it may book further performance fees as valuations are completed for more funds and partnerships, including its Long WALE Hardware Partnership and the Charter Hall Prime Industrial Fund. These upgrades were not in the latest guidance.
Nor was expected transactions which are yet to become unconditional. The largest of those is the $1.7 billion deal to buy out ASX-listed pubs landlord ALE Property Group in partnership with the Hostplus fund group.
That transaction will take Charter Hall’s funds under management from $54 billion to $56 billion.
After a 3% gain on Monday in the wake of the announcement, the securities enjoyed a similar performance on Tuesday, rising 3.3% to $18.59.
