Goodman rosy on China investments

Goodman Group, the world's third largest logistics facilities operator, said it expects to increase its investments in China 500 percent within five years, backed by further support from cornerstone investor China Investment Corp (CIC).

CIC invested A$500 million (3.13 billion yuan) in Goodman Group in August last year for options that could see China's sovereign wealth fund becoming the largest single shareholder of the biggest listed industrial property conglomerate in Australia with an 18.2 percent stake.

Goodman Group is forecasting huge potential growth in China's logistics industry.

"China is a very large market for us," Greg Goodman, chief executive and co-founder of the group, told China Daily in an exclusive interview.

The country's logistics industry grows at an annual pace of around 20 percent annually in recent years in terms of cargo volume, according to information from industrial sources.

Goodman expects its investment in China to reach at least A$3 billion in five years, up from A$500 million currently, implying a five-fold increase, the group revealed.

The group's current property portfolio in China mainly consists of logistics centers. It owns and operates four logistics centers with a total floor area of 270,000 square meters in Shanghai through a joint venture with the Canada Pension Plan Investment Board (CPPIB).

The group also own three sites with a total area of more than 330,000 sq m in regions near Shanghai for future development.

The drive for the group's business expansion in China will come from strong growth in domestic consumption which in turn is supported by an expanding middle class and the huge urbanization process going on in the country, Philip Pearce, Managing Director for Greater China at Goodman Group, told China Daily.

"Huge urbanization is taking place," he said.

In China it is forecast that another 150 million to 300 million people - approximately the population of the entire US - will move to urban centers from rural areas in the country over the next 10 to 20 years, Pearce said.

"It's domestic consumption that will drive our growth," he said.

Aside from its expansion plans for the Chinese market, the group is vigorously expanding globally.

The group currently has an A$10 billion development pipeline around the world, on top of total assets under management of A$17 billion, Goodman revealed.

The huge capital expenditure requirements - coupled with the negative impact of the global financial crisis - has strained the group's coffers.

To bolster its financial strength, the group implemented an A$2 billion recapitalization plan in the second half of last year, which saw CIC becoming the largest contributor of new capital.

CIC provided Goodman with financing worth A$500 million with conversion options exercisable in three years. If fully converted, CIC will own an 18.2 percent stake in Goodman.

The first opportunity for CIC to exercise its options will be in October this year, Greg Goodman revealed.

"We need them and they need us. CIC is very much helping us to focus our business globally," he said in response to a question about the reasoning behind CIC's decision to invest in Goodman Group.

The cash-rich sovereign wealth fund has stepped up the pace of its diversification and expanded its investment portfolio after the global financial tsunami pushed many opportunities onshore, including taking advantage of distressed assets.

The investment in Goodman could prove to be a good deal for CIC at the end of the day as negotiations for the transaction was initiated in the first half of 2009 when global asset markets were still plagued by the global economic downturn.

Goodman Group, with total assets under management worth A$17 billion and over 300 commercial properties under management globally, could also be considered by CIC as a good choice for its diversification drive.

The sovereign wealth fund has extended its reach globally with investments in major financial groups such as Morgan Stanley and Blackstone, as well as investment in major resource groups including Teck Resources Group and Nobel Oil Group.

On the odds of CIC making further investments in the group, Greg Goodman did not give a clear-cut answer but said "CIC will help us with business initiatives and capital".

Under an agreement between the two sides, CIC has an option to participate in future acquisitions by Goodman Group and acquire assets from the later.