Goodman Group

The Business

Goodman operates a hybrid model spanning three businesses: property investment (owning and leasing industrial and logistics assets), fund management (earning fees on $75.2 billion in assets under management, or AUM, held in 23 partnerships with institutional investors), and development (building new warehouses and data centres for those partnerships). The fund management arm is the engine: Goodman co-invests alongside partners, earning management fees and performance fees while deploying relatively little of its own capital. This capital-light structure means $1 of Goodman equity supports roughly $3.30 of total assets under management. Development has shifted decisively toward data centres, which now represent 73% of the $19.8 billion work-in-progress pipeline, up from roughly 30% three years ago. That pivot is the defining strategic bet of the current era.

Recent Performance

Goodman delivered operating earnings per share (OEPS) of 113 cents for FY25, up 12.8% on FY24's 100 cents, which itself grew from 88.4 cents the year prior. That two-year acceleration reflected strong development completions, positive rent reversions across the logistics portfolio, and expanding management fees as AUM grew. The stock has re-rated substantially over the past three years as the data centre narrative gained traction, pushing the price-to-earnings multiple from around 20x to the current 26x. In the first half of FY26, OEPS declined 8.3% half-on-half due to timing skew in development completions, though management reaffirmed full-year guidance for 9% growth.

Outlook

We forecast operating earnings growing from $2,854 million in FY25 to $3,533 million by FY28, a 7.4% compound annual growth rate. That is below the 12.4% rate achieved over the prior five years, reflecting base-effect normalisation as the earnings pool grows larger. Development earnings, the largest segment, grow from $1,339 million to $1,640 million over that period, driven by the conversion of the $14.4 billion data centre pipeline into income-producing assets. Operating margins peak at 81.7% in FY26 before gradually compressing as data centre operational costs scale and performance fees normalise.

Key Risks

The cap rate spread (the gap between property yields and government bond yields, which compensates for property risk) sits at just 8 basis points, versus a historical norm of 100-200 basis points, meaning any bond yield rise could trigger material NTA writedowns. Roughly $8.6 billion of data centre development remains uncommitted, with no specific leases disclosed, creating meaningful speculative exposure. A pullback in hyperscaler capital spending, currently running at $650-700 billion globally, would undermine the demand thesis supporting 73% of the development pipeline.

What to Watch

The thesis-defining event is the FY26 results in August 2026, where data centre pre-commitment rates will either validate or challenge the $8.6 billion of uncommitted work-in-progress.

• Monthly through Q3 2026 RBA rate decisions — changes to the risk-free rate are the single most important variable for the valuation of long-duration property assets like Goodman's portfolio.
• July 2026 Hyperscaler Q2 earnings and capex guidance — a material cut to 2027 capital budgets would challenge the demand assumption underpinning the majority of Goodman's development pipeline.

Company Description

Goodman Group is a stapled security listed on the ASX, combining an industrial property trust with an operating company. It runs three integrated divisions. Property Investment holds a direct portfolio of logistics and industrial assets generating $678 million in FY25 operating earnings, roughly 24% of the group total. The Management division earns fees on $75.2 billion of AUM held across 23 institutional partnerships, contributing $837 million or 29%. Development, the largest segment at $1,339 million and 47% of earnings, builds industrial and data centre facilities primarily for those same partnerships. The three segments are deliberately interconnected: Goodman develops assets, transfers them into partnerships it manages, co-invests alongside institutional capital, and earns fees at each stage of the lifecycle. This integrated model means a single warehouse or data centre generates revenue across all three divisions.

Where the Growth Is

Data centre development dominates the forward pipeline. Of the $19.8 billion in work-in-progress, $14.4 billion (73%) is data centre related, up from approximately 30% three years ago. This structural shift is driven by hyperscaler demand for purpose-built facilities near metro power infrastructure. As the $14 billion pipeline converts over the next three to five years, we estimate it will add $500-800 million in incremental operating earnings through a combination of development margins, management fees on newly created AUM, and co-investment returns. Development currently generates a yield on cost of 8.1%, well above the 5.03% weighted average cap rate on the existing portfolio, meaning each completion creates value at the point of transfer.

Competitive Position

Goodman's moat is physical, not technological. The company has assembled a 6-gigawatt metro power bank across 16 global cities, secured through procurement processes that take three to seven years to complete. No competitor can replicate this position in the near term because metro-grade power capacity is finite and subject to lengthy planning and grid connection approvals. The 30-year land bank, comprising 445 properties accumulated over three decades of urban industrial acquisitions, reinforces this advantage: these sites sit in locations where zoning, transport links, and power access intersect. Together, power and land create a barrier to entry that we estimate will persist for seven to ten years, and which is currently widening as new power procurement becomes more difficult. Goodman holds approximately 5% share of the global industrial and logistics market by AUM, making it a large player but not a monopolist. The competitive advantages require continuous execution to sustain, particularly in data centres where Digital Realty, hyperscaler self-build programmes, and emerging competitors are scaling rapidly.

Management & Capital Discipline

Greg Goodman has led the business for 30 years as founder-CEO. Over that period, operating earnings per share have compounded at 17% annually over the most recent five years. Capital allocation reflects discipline: the 25% payout ratio retains approximately $1.7 billion per year for reinvestment at an estimated 15% incremental return on invested capital (ROIC, the return generated per dollar of new capital deployed). A $4 billion equity raise in 2024 was three times oversubscribed. All employees participate in the long-term incentive programme with six to eleven percent CAGR hurdles and ten-year vesting. One honest observation: management has not disclosed a single specific data centre customer lease despite $8.6 billion of uncommitted work-in-progress and repeated references to "active engagement." That silence, given the scale of speculative commitment, warrants close monitoring.

Financial Position

The balance sheet is a fortress. Look-through gearing (total debt relative to total assets, including partnership-level borrowings) sits at just 4.1%. Liquidity stands at $5.2 billion. Interest coverage is 133 times, meaning operating earnings cover interest expense more than a hundred times over. Net debt at the corporate level is $1.16 billion against $23.8 billion of total equity. This gives Goodman extraordinary flexibility to fund development through downturns without issuing equity or selling assets.