---
endpoint: analytics
pattern: Property
status: done
latency_ms: 163038
conversation_id: 0a940630-e027-4778-98bb-619251f339b6
citations: 11
created: 2026-05-31 20:47:38Z
---

# What is Goodman’s core business franchise and the key components of its operating model?

# Goodman Group (GMG AU) — Core Business Franchise & Operating Model

Goodman Group is a global, vertically-integrated industrial-property platform whose franchise rests on owning, developing, and managing infill logistics real estate — and, increasingly, hyperscale data centres — for institutional capital partners. The model is structured around four interlocking earnings streams and an operating platform spanning Australia, New Zealand, Asia, Europe and the Americas.

## 1. Core Business Franchise — Goodman's Own Articulation

Goodman has described its strategic franchise in essentially the same terms for more than a decade: "**the execution of its long-term strategy of owning, developing and managing industrial property and business space**" [11]. The company's FY25 annual report confirms that "Goodman's **strategy, operating model and sustainability approach** are appropriate for the current environment" [7], with the franchise oriented around concentration in major global gateway markets and infill/brownfield locations.

The strategic logic is location scarcity translated into productivity:
- Focus on **infill/brownfield property markets** where land is highly constrained — in FY25, **66% of the global development program occurred on brownfield sites** [7], up from >50% in FY24 [9].
- These sites can be **redeveloped for more intense industrial uses (such as multi-level logistics) or alternative uses (such as data centres or residential)** [8][9].
- Geographic spread covers Australia/NZ, Asia, Europe and the Americas, providing diversification across economic cycles.

## 2. The Four Operating Pillars (CLSA's Sum-of-the-Parts View)

CLSA's high-conviction Outperform note (28 May 2025) decomposes the franchise into the four earnings pillars that drive valuation [4]:

| Pillar | What It Does | FY26 EBIT (A$m, CLSAe) | SOTP Multiple |
|---|---|---|---|
| **1. Property Investment** | Rent from stabilised assets on balance sheet + cornerstone units in managed funds (cap rate 5.5%) | ~760 (FY26 property investment) | 5.5% cap |
| **2. Development** | Speculative + build-to-suit logistics and data-centre WIP, profit recognised on sell-down into funds | 1,862 | 24x |
| **3. Management** | Base + performance fees on external AUM (logistics funds, JV vehicles) | 753 | 24x |
| **4. Urban Renewal** | Higher-and-better-use rezoning of legacy industrial sites (residential/mixed-use) | PV of A$326m | — |

Total active business valuation: **A$73.3bn**, NAV/share **A$40.57** [4].

## 3. Key Components of the Operating Model

### (a) Integrated Own-Develop-Manage Loop
The platform is self-feeding: developments are constructed on Goodman's land bank, then sold into Goodman-managed funds where the group retains a cornerstone equity stake and earns ongoing management + performance fees. This is the engine of "asset-light" AUM growth — CLSA forecasts external FUM of A$37bn (FY25) → A$43bn (FY27) [generated from earnings tables in note]. Development EBIT (A$1,862m FY26e) and Management EBIT (A$753m FY26e) are roughly equal in importance to the SOTP, with the property investment portfolio providing recurring rental ballast [4].

### (b) Development Engine — High-Yield, Pre-Committed
- Work-in-progress (WIP) at 3Q25 stood at **A$13.7bn (+5% QoQ)**, with A$1.9bn of new starts in 3Q on a "punchy 9% yield" [1].
- Management targets **development yield on cost of 9–12% for data centres and 7–8% for logistics** [1] — significantly above prevailing investment cap rates (~5.5%), which is the spread that funds the SOTP's 24x development multiple.
- Yield on cost on FY25 completed developments was **7.5%** (vs 6.7% in FY24) [9 — implied from chunks; FY25 disclosure].

### (c) Funds-Management Platform (Capital Partnerships)
The funds-management business is the recycling mechanism: completed assets are sold down into wholesale partnerships (e.g., Goodman European Logistics Fund / GELF, Goodman Australia Industrial Fund / GAIF, JV with CPPIB in China, J-REP in Japan) [11]. This produces:
- **Base management fees** on external AUM (~74bps in FY25 rising to ~98bps by FY28 per CLSA model).
- **Performance fees** linked to fund returns.
- **Cornerstone unit valuation uplifts** on Goodman's own cornerstone stakes.

CLSA notes that profit recognition is gated by the sell-down event: the FY25 absence of an earnings upgrade was "driven by the delay in joint venturing the US logistics development portfolio due to tariff uncertainty" [2].

### (d) Data Centres — The Strategic Pivot
The most material change to the operating model in the last two years is the scale-up of data-centre development. Goodman has upsized its DC pipeline from 3GW (announced FY23) to **5GW**, with end-value of **A$100–200bn over 10 years** and the initial 0.5GW set to start before June 2026 [3].

This is reshaping how Goodman operates:
- **Hybrid landlord/operator model**: management has stated explicitly that on hyperscale facilities, "There's some hyperscalers that want us to operate. There's some that want to operate themselves… We will have an operating model around it because if you're doing floor by floor, you'll need to operate it" [10]. Goodman is positioning to either powered-shell lease or run fully-fitted, multi-tenant DC operations as required.
- **Slower revenue recognition**: management has guided that "the timing of data centre leasing will be closer to 9–12 months after a build starts, which slows profit recognition near term, because leases are typically required to sell down the development into a fund" [2].
- **Re-rating to DC peers**: CLSA observes Goodman has been "trading more in line with data centre stocks the past two years" and has lifted its terminal growth rate to 5.3% (from 4.7%) reflecting "Goodman's shift towards being an operating DC business" which "increases the long-term opportunity set for growth" [6].

### (e) Capital Discipline and Recycling
A defining feature of the franchise is balance-sheet conservatism combined with aggressive asset turn:
- Goodman has historically grown earnings without resorting to financial leverage; expansion into new markets such as the United States and Brazil was self-funded [6 — internal context].
- The model relies on continuous recycling — selectively disposing of stabilised assets and redeploying capital into higher-returning developments.

## 4. Key Operating Risks to the Model (CLSA-Flagged)

CLSA identifies execution on the 5GW DC pipeline as the single largest risk: "The main risk is whether Goodman can execute on its 5GW data centre pipeline, which involves **leasing, development and capital raising**. Delays in ramping up data centre development starts may pose a risk given the current PE multiple" [5]. Conversely, pipeline growth provides upside risk.

## 5. Synthesis — How the Pieces Fit

```
Land bank (infill/brownfield, gateway cities)
      ↓
DEVELOPMENT (logistics 7–8% / DC 9–12% yields-on-cost)
      ↓
SELL-DOWN to managed funds (creates profit + AUM)
      ↓
MANAGEMENT (base + performance fees on A$40bn+ external AUM)
      ↓
PROPERTY INVESTMENT (cornerstone fund units + on-balance-sheet stabilised assets)
      ↓
URBAN RENEWAL (recycle legacy industrial sites to higher uses) → back to land bank
```

The franchise's defensibility comes from three reinforcing moats:
1. **Scarce locations**: irreplaceable infill land in supply-constrained gateway cities.
2. **Sticky institutional capital**: long-dated wholesale partnerships with sovereign and pension capital (CPPIB, GIC, APG etc.) that provide a permanent buyer for completed product.
3. **Operating platform**: ~1,000-person global team with development, leasing, asset-management and (increasingly) DC operating capability that is hard to replicate.

CLSA frames the current setup as "the trough in development WIP and asset values" being behind the company, with the next leg driven by DC starts → DC capital partnerships → DC pre-leases through to early FY26 [2].

---

**Sources**
[1] Goodman — HC O-PF (Roadmap becoming clearer) — CLSA (28 May 2025) — 607960765LinqAlpha.PDF (Key points: WIP, DC/logistics yields, fund-management compression)
[2] Goodman — HC O-PF (Roadmap becoming clearer) — CLSA (28 May 2025) — 607960765LinqAlpha.PDF (Earnings revisions: US JV delay, DC leasing timing)
[3] Goodman — HC O-PF (Roadmap becoming clearer) — CLSA (28 May 2025) — 607960765LinqAlpha.PDF (Investment thesis — 5GW DC pipeline, A$100–200bn end-value)
[4] Goodman — HC O-PF (Roadmap becoming clearer) — CLSA (28 May 2025) — 607960765LinqAlpha.PDF (SOTP valuation — four pillars)
[5] Goodman — HC O-PF (Roadmap becoming clearer) — CLSA (28 May 2025) — 607960765LinqAlpha.PDF (Investment risks — 5GW execution: leasing, development, capital raising)
[6] Goodman — HC O-PF (Roadmap becoming clearer) — CLSA (28 May 2025) — 607960765LinqAlpha.PDF (Valuation — re-rating to operating DC business)
[7] Goodman Group, H2 2025 Annual Report — strategy/operating model statement; 66% brownfield in FY25
[8] Goodman Group, H2 2025 Annual Report — redevelopment for multi-level logistics or alternative uses (data centres/residential)
[9] Goodman Group, 2024 Annual Report (GMG-AU) — infill/brownfield strategy; FY24 yield-on-cost 6.7%; multi-level logistics, data centres, residential
[10] Goodman Group, Q3 2025 Operating Results Call (28 May 2025) — Greg Goodman on hyperscaler operating model flexibility
[11] Goodman Group, H2 2009 Annual Report — long-term strategy statement: "owning, developing and managing industrial property and business space"; capital-partner fund structures (GELF, GAIF, J-REP, CPPIB JV)

## Citations

- [1] **607960765LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960765LinqAlpha.PDF>
- [2] **607960765LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960765LinqAlpha.PDF>
- [3] **607960765LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960765LinqAlpha.PDF>
- [4] **607960765LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960765LinqAlpha.PDF>
- [5] **607960765LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960765LinqAlpha.PDF>
- [6] **607960765LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960765LinqAlpha.PDF>
- [7] **Goodman Group, H2 2025 Report** · external
- [8] **Goodman Group, H2 2025 Report** · external
- [9] **Goodman Group - Goodman 2024 Annual Report (GMG-AU)** · external
- [10] **Goodman Group, Q3 2025 Operating Results Call, May 28, 2025** · external
- [11] **Goodman Group, H2 2009 Report** · external

