On the call today, we have Mr. Greg Goodman, CEO, and Mr. Nick Vrondas, CFO. I would now like to hand the conference over to Mr. Greg Goodman. Please go ahead.
Yeah, thank you very much. And good morning, everyone. Goodman is progressing a range of logistics and data center opportunities as customers increase their capital expenditure on technology and infrastructure. It's driving our development workbook, which sits at $12.4 billion. But is importantly forecast to be greater than $17.5 billion. By June 2026. This is largely due to the significant data center projects we're building in key markets around the world: Sydney, Tokyo. Hong Kong, Paris. Amsterdam, and Los Angeles. Currently, data centers make up 68% of our work in progress. And it's expected to grow to more than 75%. By June. Our sites are predominantly located in supply-constrained metropolitan markets. We are focused on speed to market. Commencing construction, and activating sites to provide delivery certainty for our hyperscaler customers. Over the period, we've advanced planning and site works across projects globally, including commencing infrastructure, grid connections, and groundworks.
This is to enable approximately 500 MW of data center projects, which are activating the first stage of 1.8 GW. We have a flexible design, commercial approach that covers a range of deployment options, from powered shell to fully fitted facilities, which also may include. The operations where required. Goodman has an active regional capital partnering program alongside the development workbook. We're progressing capital partnerships specifically for data centers in Europe. And also Australia. Our logistics customers are focused on significant capital investment in AI and robotic technology to drive automation and productivity gains. We're seeing this particularly with large-scale customers, and as a result. We're likely to continue to see consolidation across the sector into larger, more advanced facilities. In prime locations. The property fundamentals for our logistics portfolio are robust in most of our markets, supported by low vacancy rates, continued positive rental growth, and limited new supply.
The group is also progressing a number of acquisitions of multi-purpose sites. The recent Silicon Valley purchase is a good example where we have data centers sitting alongside warehouse facilities. I'll now hand over to Nick for a few comments.
Yeah, thanks, Greg. Just a couple of things. I just wanted to confirm that the capital management strategy that we outlined in February this year remains the same. The wholly owned data center commencements to June 26, along with those which are already in partnerships, can be funded through to completion of stage one MEP if needed, because we have significant liquidity and very low gearing. And that'll take us through to FY 2028. Our plan, though, is to partner all these developments with institutional investors in our usual way. And this will enable us to advance our development activities and maintain our capital management position in line with our financial risk management policy objectives. We're advancing the pre-development work on these sites that have not yet commenced, which is adding significant value at the moment.
Once we start vertical construction and the new partnerships are formed, we can begin to recognize income. And whilst it's still possible that this begins to occur this half, we're expecting the Australian and European ones in the second half, and the North American one is not planned for FY 2026. And that's all I wanted to add at this stage. Thanks, Greg.
Hey, thanks, Nick. In closing, I'd like to confirm our target to deliver operating EPS growth of 9% for FY 2026, which equates to over 2.6 billion of operating profit. I'm very happy now to go to questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Kane Hannan with Goldman Sachs. Please go ahead.
For questions. Just starting with Garland again, just that second half earnings skew with that development timing. Just a sense of sort of what magnitude of skew you're looking for, whether the first half is tracking much below that high single digit or the 9% growth as a starting point.
Kane, so. Yeah, I think. We're probably talking somewhere in the order of $200 million-$ 300 million. So. Four-year targets, $2.6 milllion. And change in terms of operating profit. First half's in and around a billion. Operating profit is currently what we're expecting.
Yep, that's helpful. And just on the data center side of things, good to see the secured power ticking up. Just talk a little bit about your AI factory sort of strategy, just given what we've been seeing across the globe effectively, just how they fit within your planning, your partnerships, and the like.
Yeah, I don't think we're planning too many factories. We're probably going to be doing some of that infrastructure. I don't think we're a natural owner of it. What you've got on the page today is world-class metro. That's cloud-based. It's right in the hitting zone of the hyperscalers. And negotiations on that 500 MW of space we're producing. And have already started, a lot of it is good. So this is our natural habitat. It's around the big cities of the world. It's the stuff that we need every day. Now, if we do some big campuses around the world, we'll call them out when we do them. There'll be a big announcement and a lot of noise and a lot of gigawatts. But this stuff is really, really valuable. This is the stuff our partners want.
This is the stuff that we want to own a portion of ourselves. And. This is our next 10 years building this stuff for the market, which is your garden variety. Cloud operations, which is what we're all about.
Yeah, awesome. Thanks for asking.
Your next question comes from James Druce with CLSA. Please go ahead.
Yeah, hi, good morning, Greg and Nick. Just looking at the secured power, there's a pretty big jump to 3.4 GW. Can you just talk to the major drivers of that? Is that more Tokyo going into that secured power bucket? And can you provide a bit of color on the delivery of that power please?
Yeah, look, it's just the fact that we've started. Tokyo. So it's just the fact that it started and now it's all locked in and we're moving on. There's nothing really else. To say about that.
Okay. Just an update maybe just on the funds management side. I mean, you are raising some capital across the globe at the moment. Can you provide any color on the progress of that, or you just want to wait until it's done?
The progress is good. I think that's 2026. Discussion, but we're in the process. And I've got to say, if you look at that list, which we provided you on Slide 4, that is some of the top, if not the top, locations outside the U.S. Through Europe in particular. And Tokyo and Australia. They're the top locations around the world for primary cloud data center around those big cities. You can imagine that investors are pretty excited about that.
Okay. And one more, if I may. Do we have a kind of run rate now for industrial development starts? Like starts have been a little bit subdued for a couple of halves now. How do we think about the run rate going forward?
Yeah, look, I think for the rest of 2026. Or going into 2026, I think. We're positioning ourselves around good sites and good pieces of infrastructure for industrial. Some of that industrial will actually coexist with data center. And we're seeing a fair bit of that actually at the moment in the U.S., which we're spending a lot of time on that plan and that strategy particularly. But we have some big inquiries coming through now, which will be more of a. 2027, 2028. And I was chatting to. Steph yesterday, actually. She's the head of industrial for New South Wales. And we've got some big inquiries for Western Sydney. But there's 60,000 m 70,000m, 80,000 m buildings. They've got. It's all about the tech going in them. It's about consolidation. It's about driving productivity. And this is a theme we've been talking about for a while around the world.
That is going to be our main, that's going to be our main menu on that. So consolidation, productivity, big infrastructure going into these. And just as. Also a bit of a shout out to our Tokyo team, we've just finished 130,000 m. In Tokyo. That's now, I think, just gone through 90% leased. And that's been a big effort over the last 12 months. So we are actually leasing big chunks of space around the world. But look to us to be doing the larger, bigger infrastructure plays around industrial, where we're adding in the infrastructure, the power, the things you need. If you want to run fully automated, basically people-less warehouses, dark warehouses, that's the future.
Thank you.
Your next question comes from Simon Chan with Morgan Stanley. Please go ahead.
Hi, good morning, Greg and Nick. I was just wondering, in your prepared remarks, you talked about how much work's being done. How come commencements was only $300 million according to the. Table in Slide 2?
Yeah, Simon. So the starts on the list of projects that we've got on the page there, that's the thick end of the starts for the year. And what we're saying is that they start going vertical either towards the end of this year or into the second half of the financial year. And that's when you're really kicking. I think it's sort of it backs onto James Druce's question. Just what we told everyone, we've been saying for about a year or two now is that we're going through this transition. So firstly in response to market conditions, but secondly, and more importantly, as we've reconsidered and reoriented our available sites, we've been replanning, restrategizing, converting stuff into industrial. So getting the power, getting the planning, getting them ready, converting, sorry, to data centers or more intense use industrial. And that doesn't happen overnight.
So we're going through this transition, and this is why we said that the actual WIP balance may be a little bit volatile, but the general trend is up. And so you will see some very significant commencements through to December and probably more significantly through the second half, through to June. So there's a problem with one quarter of observations. It's kind of a small sample.
I mean, I saw a video recently of the substation going into Frankfurt. So that doesn't warrant, that's not a milestone that triggers WIP?
No, no, no. No, no. So that's kind of land development. The above-ground WIP won't go in until we start going vertical.
Yeah, which means. Yeah, we've inked the contracts. We're buying the land. And the thing is being built as well. And you've got to be careful of what you hear around the market at the moment. There's a lot of comments about data centers in the space globally. There's global exaggeration to the extreme. You need RFS dates. You need to sit down with a hyperscaler and go, "Your first 12 and a half megs is beginning of 2027." If you can't say that, keep your trap shut and don't say anything at all.
Okay, fair enough. Hey, Greg, I think you mentioned at the end about our Europe, Australia, this year, and North America. It's not going to be a 2026 story. What's happening there? Was Vernon ever going to go in, or were you always going to just turf Vernon once you've built it? Because that one would be one of the more advanced ones in terms of, well, it's topped out, right? So what's happening in North America?
Simon, it's Nick. I think. The comment you're referring to, I think, was the one I made around the timing of the. Formation of a partnership, a development partnership.
Yeah, sorry, it was you.
Yeah. So. And the reason for that is we're very advanced stages, or we're in sort of heavy negotiations at the moment as to how we might take that forward. Around and what the design is, who the customer will be, and how it's operated. And so we want to kind of land that first before we start offering. Partners the opportunity to join us in that. So. That's why we're saying we're not expecting it to happen this half. Now, in terms of physical work, if you look, you can see online, I mean, it's topped out. LAX01 is topped out. And now we're going to the next stage. So. We're sort of just fine-tuning the last bits of the design and the operating structure.
Yeah , there's other plots in the area, as you know. And just to add to that, there's some pretty significant sites. We believe we'll be buying in the U.S. over the next six months or so. Now, you've seen one in Palo Alto with some industrial and data center. There's others like that, which fit right into our strategy about creating the infrastructure and the power for these things to happen. So that. San Jose site in Palo Alto is actually a really, really good opportunity for us around light industrial, a couple of data centers as well. That fits into our plan. We've got a number of those in the U.S. at the moment. So we're using balance sheet. We'll use balance sheet. We've got the two partnerships we've created. Until we're ready. And then we'll bring in some capital.
But I think to Nick's point, the focus at the moment is Europe and Australia, which are the thick end of what's on that list we gave you on Slide 4.
Very good. Appreciate the extra disclosure. That's all I've got this morning. Thanks, guys.
Your next question comes from Cody Shield with UBS. Please go ahead.
Good morning, Greg and Nick. Thanks for the time. I just wanted to pick up on some of the comments around those multi-use sites, some of those larger projects. You've spoken in the past about not wanting to mix the industrial and DC risk and return. So what approach would you take to kind of partnering on some of those larger sites?
It's pretty straightforward. You'd cut off the industrial, you'd cut off the data centers. We're doing that at the moment and just have a different investor profile, return profile, and your point risk profile. Capital spend is very different. Timetable to completion is different. Yeah, you split them. There's a couple we're looking at at the moment. Where there might be 100 on the end and there's a few hundred thousand meters of industrial, just you split them.
Yeah, okay, great. Thanks for that.
Your next question comes from Solomon Zhang with JP Morgan. Please go ahead.
Morning, Greg and Nick. I might just follow up on Simon's question just on the data center starts. When you identified the $13 billion of starts, the 500 MW by June 26th, can you confirm how much of that $13 billion is currently in WIP at the moment or has already started?
Yeah, so. I think it's 0.3 or just under 0.3 is in WIP at the moment. And that's principally. Paris. The two. Hong Kong. Projects. And I think that's it.
And.
First building in Tokyo, sorry. Yeah.
Yeah. And in terms of dollars, would that be. About $7 billion of that $13 billion?
Yeah. Yeah.
Okay. So that would sort of assume that your completions run rate, if you get to that $17.5 billion. Is sort of running at that $4 billion mark for 2026?
Yeah, I think it might be a little bit more than that. But yeah, it's roughly in that order, yeah.
Right. And just on the rent growth side of things for hyperscalers, we've seen all the quarterly earnings for the hyperscalers and the huge, I guess, acceleration in the data center development of all their plans, which has been demand-driven. Are you seeing that translate to market rent growth that has been revised up in your underwrites?
Look, I think if you look at the growth rate, just in cloud, forgetting about AI, bear in mind the AI is feeding the whole ecosystem. The. Growth rates in regard to what is required and the amount of supply in our markets. Which are constrained. So if you go through those European markets, we've got on the page, and even Sydney One, to be honest, there's very little supply coming through. So. The dynamic is very much in. It's a good dynamic for us, I'd put it that way.
Right. And maybe just a final one, just on the industrial piece. You've called out that the inbound inquiry from tenants has been improving. But I guess your market rent growth is still outpacing your passing rent growth. When would you anticipate that crossover point. To sort of be reached where it's a bit more of a balanced market and those rent growths are in line with market?
I think you've still got another year or two to work through that. Nick, I think we're still very much unders in. Parts of primary Sydney, but also in the U.S. would be the main areas where we've still got unders working through.
Yeah. Thank you.
Your next question comes from Callum Bramah with Macquarie. Please go ahead.
Morning. Thanks for taking the question. Just a couple. On the capital side. Will you be in a position on both the Australian and the European capital raisers to announce that by February results? And have you got a sense at the moment on the willingness of the existing investors in those funds to take up their pro-rata share of the data center opportunity?
Yeah, the European funds are new, so there's no pro-rata share. And in Australia, it's actually pretty strong around that. But the European partnership, which is the largest, it's a brand new partnership. So there's no pro-rata share.
Yeah. And I don't think we can commit to a February date necessarily because there will be some regulatory issues and what have you. So I'm not sure whether we can get to that.
And just going back to the piece maybe around contracts, etc., just in progress on LA and on Hong Kong. Have you progressed your thinking in Hong Kong about Powered Shell or Fully- Fitted? And just any further colour you can give on. That progress, Vernon, that'd be great.
Yeah. Well, one of the Hong Kong buildings already leased, so that's done. The other one is a shell at this stage, and we're in discussions with customers at the moment about a shell or a build-out. So both. In regard to LAX01, can't say too much because we're in negotiation with customers at the moment. But the plan there is to build the building out. Bearing in mind we have other opportunities in that area. And you can imagine customers are looking at those other opportunities as well. So can't really say a lot about where we are, but we're in negotiation. But as you work through. Paris One, Two, Frankfurt, Amsterdam. Effectively, the same will apply. Japan, same apply. They're all in very, very. Advanced discussions. We're looking at exactly what configurations some of the customers want as well. And those negotiations, those discussions go on.
For months, not weeks, as you'd appreciate, because they are very expensive pieces of infrastructure. And I think look for. Some good clarity on that into 2026. But you've got. Some of the best locations in Europe on the table here, right? So you can imagine. You'd imagine they are pretty hot topics for customers. And down in Australia. As well, and Tokyo, where very hard to get powered sites and ready to go. We're in a really, really good position. But give us through to 2026. Just as with the capital, those will come through. What we're—and I said I think we said this at the full year. It was about. Construction. Was going to be the major. Milestone we want to make sure we've got done by the end of this year. And that means starts. That's what we've put on the page today.
We'll give you, obviously, an update at the half year in regard to where we are with customers in February. And also give you an update on capital. But construction's important. There's a lot of talk about. Who's got what, who can do what. But you really do need to sit down with a customer and have an RFS date. That is you're willing to put your name to because you're signing up to it, right? So we're taking risk out of that by the work we're doing at the moment as we build into. 2026. We then go with contracted clarity in regard to delivery dates with long lead items ordered, and we know where we're going. So that's been the effort over the last six to nine months.
And Greg, would you mind just elaborating on one of the slides? Sorry, I'm just trying to look on the page number. Page four talks to capability to provide operated facilities where required. Is that a relatively new development, or have I just sort of missed it? And can you elaborate on what you're meaning there?
Yeah, yeah. Look, it is not a new development. It's something we've been working on for a year or two now. And fundamentally, if a hyperscaler wants us to operate a building, we will operate it. If they don't want us to operate a building, we won't operate it. Now, where that splits out, where if you look at primarily most of the hyperscalers are not doing own builds in Europe, most of the market is through operators. So in Europe, you'd want a good, strong operating team, which we've put together. And effectively, in the U.S., where a lot of the hyperscalers are doing more of their own operations and they're doing a lot of self-builds, it's a different approach where I spec we're going to operate less in the U.S., more in Europe. And we'll see what happens in Sydney. That could go either way at the moment.
Can I just push my luck for one more? And that's just on the size of the pipeline. You alluded to replenishing there. Have you got a framework of how you think about what the size of the pipeline should be or. What is optimal?
You're talking about industrial or data centers or both?
Data centers, please.
Yeah. Look, we've got a really big. Pipeline, one of the biggest in the world, to be frank. That's real. Once again, forget about the fiction. Let's go to the reality. Reality is, have you got the power? Can you build these? Can you hit 2027? Can you hit 2028? And I think that's really, really important. So we've got a lot of work in front of us. If I was to venture a comment, I suspect there's going to be some more sites in the U.S. put on the books. That is not exclusively data centers, to be quite frank. I think you saw the one in Palo Alto, which has. Been in the press, and we talked a little bit about it today.
There are others like that, which are going to be—we call them dual-purpose sites—where there's going to be the power and the infrastructure, basically to break it down and do both. And I think, once again, going back to Palo Alto is a really good example. I think you'll see more of that in the U.S. You'll see more shells done in the U.S., I think, for data centers. With, once again, hyperscalers operating those and fitting them out when they require them. Then you will see in Europe where the hyperscalers are not doing. Their own builds to the same extent. So yeah, a bit of a different approach where you are. But. We're working through some really good sites around the world at the moment that are good for the long-term future of Goodman. But they are industrial and also data centers. I can say that.
And we're seeing a bigger opportunity now than we have for the last two or three years, I think, as. Developers. Around the world have pulled back on industrial in the main. And effectively, the funding thereof has become a little bit more difficult. And even in the data center space, I'd venture a comment, the amount of leverage required for a lot of the private equity operators to operate under their high-return models is sort of at the extreme end. I'd describe it that way. And effectively, developers, if they don't get a pre-commit on a data center, find very difficult to fund. So there's opportunity around all that if you're a big, sustainable, long-term, relatively low-leverage operator. And I think a lot of the public.
Entities in this data center space, where there's a lot more visibility on what they're doing and their leverage and everything else, I think are very well positioned over the next four or five years as the sustainable arm of the developers and owners of a lot of this, a lot of this product, and better not. Super highly levered, and have probably a more sustainable capital structure. And I think there's been a fair bit of comment about that in the U.S. I think. From some of the big U.S. banks about the concern. Globally about how much leverage is going into the sector. And I think you can make your own observations about that. We're not doing it that way. We're doing it the way we've done it for the last 14, 15 years since the GFC. That everyone sort of forgets about.
But I've got to say, some of the trend lines around leverage. Around data centers in particular. To me, seem extreme.
Thank you.
Your final question comes from Ben Brayshaw with Barrenj oey. Please go ahead.
Good morning, Greg and Nick. Thanks for the additional disclosure on the sites. Could you just comment on the leasing demand for the DCs in Whip and just in relation to the timing of when you expect the customer commitments to come through. Obviously recognizing that Hong Kong 10 is leased?
Yeah. Look, I think we said a bit earlier, that's a 2026. Conversation with the market. But the conversation's going on now. Our major. Program at the moment is the starts. Because until you start them and you've got, like I said, an RFS date, so you know when you can deliver a floor, there's not much point. In signing a deal. So we're working through that at the moment. This is as good as it gets in regard to a European portfolio. I think it's strong in Australia. Japan is very, very, very good. So we've given ourselves every opportunity to do some very, very good business in 2026.
And could you clarify, will there be a balance sheet asset sell down into the European partnership? And could you comment on the quantum of the sell down, please?
Well, I think no, I can't right at this point because there's a number of conversations going on about that right at the moment. But I think the European assets on the page would be a good guess I would have thought.
Okay. Thanks, Greg.
And they are all on the balance sheet 100% at the moment, so to confirm that. Yeah.
Great. Thank you.
There are no further questions at this time. I'll now hand back to Mr. Goodman for closing remarks.
Thank you very much.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.