Property Portfolio Management

Table of Contents

The Goodman Group.

Overview..

Current Value of the Portfolio.

Diversification of the Property Portfolio.

Risk Management by Specific Vehicle:

Recent Performance and future outlook of the specific vehicle:

Cromwell Direct Property Fund:

Overview:

Current Value of the Trust Fund:

Diversification of the Portfolio:

Risk Management Strategies used:

Recent Performances and Future Outlook:

References.

Overview of The Goodman Group

The Goodman Group, is headquatered in Chaska, Minnesota, having started its operations in 1965, by its CEO Gregory Leith Goodman and the company can be said to be a leader in providing and developing services for the senior people in relation to their living and healthcare communities, residential and commercial buildings (LinkedIn, 2020). An integrated industrial property group, The Goodman Group has expanded its operation throughout Asia, Australia, New Zealand, the UK, as well as Europe. The various activities in which the Goodman Group is involved are, funds management, property investment and management, property services, and property development. Its business profiling includes different aspects of business parks, office parks, industrial estates, and warehouse and distribution centers. It focusses on building and investing in high quality projects in industrial areas, in major cities globally, especially in places where the demand is strong and the transformational changes in those specific places bring about significant opportunities for the Goodman Group (Goodman, 2020a). It has been listed on the ASX on the 2nd of February, 2005 (ASX, 2019). The total amount of assets under the Goodman Group is $51.6 billion. It has more than 1700 customers globally and has an employee base of more than 1000 people. The external assets under the management of the company is around $48 billion. Ever since it merger with the Macquarie Bank Trust in 2000, the group has been able to acquire the position of the largest property portfolio ever listed on the ASX.

Current Value of the Portfolio

Currently, the Goodman Group has a total market share of around $33.46 billion, and holds a share amount of $1.83 billion. Its property portfolio has a current value of around $2.7 billion (Goodman, 2018). According to the report by the Goodman Group in its half-yearly ending in December 2019, it had an operating profit of $530.4 million, which went up around 14.1% on 1H19. The investments earning of the Goodman group went up about 17%, which reflected on the development completions as well as depiected $1 billion investments in its global partnerships in the past 18 months. A high average global occupancy of 98% was maintained. Further, the Assets Under Management went up 15.4% on the 1H19, which meant an amount of $45.7 billion (Goodman, 2020b). The Goodman Group can be said to be working effectively due to its deliberate market positioning as well as strong underlying demand.

Diversification of the Property Portfolio

The Portfolio of the Goodman Group is mainly focused on the industrial sector, namely business and office parks, warehouses, logistical space, and many more. Its customers can be divided into four parts, the Logistical, Properties, E-Retail and Retail. It has a varied number of customers from different parts of the globe, which include DHL, Lindfox, Amazon, BMW, Mazda, Toyota, Westfarmers, Kmart, Tesco, Woolsworth, Alibaba, Grays Online, Corporate Express and many more. These customers are divided according to their preferences and this diversity is done to ensure that the company has not invested all its assets in one company to reduce the risks involved in running a business smoothly. It has adopted a significant business model of “own + develop + manage”, which helps the company to manage its diverse range of clients in a successful manner (Goodman Group, 2018).

Risk Management by Specific Vehicle

Goodman’s Risk Management Policy classifies the Board’s responsibility to generate wealth for the welfare of the company and its stakeholders so as to increase the value for the capital partners of the unlisted and listed investment vehicles. This Policy addresses the risks, which take place due to the company’s core business being, property and investment organization, which further involve the dangers for accountable bodies of achieved asset arrangements (Goodman Group, 2018). The company believes that risks occur due to several reasons such as:

  1. Strategic
  2. Governance
  3. Operational,
  4. Investment, and
  5. Financial

However, to be able to manage the risks, the business requires an experienced team and an effective structure and chain of command to be able to run the business effectively. The following diagram represents the Goodman Group’s risk management structure. This structure characterizes the lines of risk reporting to make sure that the most important risks and actions are properly addressed (Goodman Group, 2018)

To be able to manage the risks, the company has introduced a 7-step process which helps them to have a healthy mode of working. The first step is to establish the context, where both the internal and external limitations are considered when handling and classifying the risk and then set the choice and standards to manage the risk. The second step is to identify the risk, which includes establishing the key elements according to the first step, which must be identified among every risk resource and context. The third step is the analysis of the risk where their significance is to be assessed. The fourth step is the treatment of the risk, where one or more choices have to be selected for addressing and changing the risks, and executing those choices. The fifth step involves, monitoring, reporting and outsourcing, which is the most significant step in overcoming the risks. The sixth step is the Business Continuity Planning (BCP), which helps the company to be prepared for any unexpected business interruption. The last step is the Insurance of the company, which makes sure that the business has a proper range of insurances to protect its people from conditional and uncertain events.

Recent Performance and Future Outlook of The Specific Vehicle

In the Financial Year 2019, the fundamental strength of the company has been $46 billion in its portfolio, as well as its management and development businesses, which are designed in a way that can make advantages of the structural changes taking place in the business. (Goodman, 2019). It has had significant property investments which comprise of, 3.4 million sqm rented which is equal to $48million of its annual income, its portfolio occupancy is upheld at 98%, it has a subjective regular lease expiry of 4.7 years and has a net property income growth of 3.3%. The development and revaluation gains, in 2019, led to a 22% increase in the external assets under management to $43 billion.

Overview of The Cromwell Direct Property Fund

The Cromwell Direct Property fund delivers funds to investors who look for dependable regular circulation from a wide-ranging high-quality profitable assets selection who have inadequate scheduled liquidity (Cromwell Funds Management, 2020). It is an Unlisted Property Fund (UPF), produced by the Cromwell Property Group, and the accountable body for this fund is the Cromwell Funds Management Limited (CFM). It owns a diverse range of portfolio regarding Direct Property and Property Trusts. This fund targets to transport a whole return, after its fees, in surplus of the PCA/IPO Australia Unlisted Retail Property Fund Core Index above a rolling period of 3 years. This company is based out of Adelaide, Brisbane, and was started in the year 2013, with Paul Weightman as the Chairman of the company (Cromwell Funds Management Limited, 2017).

Current Value of the Trust Fund

As per the valuation of the Cromwell Direct Property Fund on 30 June 2020, it holds a total of 7 assets, which stand at a value of $330,150,000. These assets are:

Table 1: Asset Value of Cromwell Direct Property Fund

Property

Valuation 31 December 2019

Valuation 7 April 2020

Valuation 30 June 2020

% Change April to June

Retail Complex Parafield, SA

$29,000,000

$28,120,000

$27,250,000

-3.1%

Bunnings Playford, SA

$33,600,000

$32,800,000

$34,700,000

5.8%

64 Allara Street, ACT

$18,500,000

$17,000,000

$17,500,000

2.9%

433 Boundary Street, Spring Hill, QLD

$48,000,000

$39,500,000

$38,400,000

-2.8%

420 Flinders Street, Townsville, QLD

$64,300,000

$62,700,000

$63,800,000

1.8%

163-175 O’Riordan Street, Mascot, NSW

$113,300,000

$107,300,000

$114,000,000

6.2%

11 Farrer Place, Queanbeyan, ACT

$35,000,000

$34,000,000

$35,500,000

4.4%

Total

$341,700,000

$321,420,000

$330,150,000

2.7%

(Source: Cromwell Funds Management, 2020)

Every asset in the fund, which is directly held, have been independently valued, and as of 30th June 2020, the assets have been vended, but not established. Further, the fund has also gained benefits from the increase in the indirect assets mentioned in the possessions of the Cromwell Riverpark Trust, Cromwell Ipswich City Heart Trust as well as the Cromwell Property Trust (Cromwell Funds Management, 2020).

Diversification of the Portfolio

The current portfolio of the Fund provides diversification to eleven properties and, also provides them with access to a proper income stream, where a portion of the income is expected to be tax deferred. It has a diversified range of portfolios in various places such as, South Australia, Victoria, and Queensland. Four of its assets include direct property which consists of two offices as well as two huge retail outlets. Whereas the other four assets are included with other trusts, which consist of office spaces, which exclude industrial spaces.

Risk Management Strategies used

The CFM aims to manage the risks which are applicable in the business. When the risks increase, it leads to reduced distributions as well as loss of some or entire capital value of a specific investment in the Fund. There are various types of risks which are managed such as Diversification risk, where they invest in smaller amounts, spread investments across different choices in investment, distribute capital across shares among different companies, and dividing money among various investment managers. Property risks can be managed through active property management, strong arrears management processes, hiring professional leasing agents and many more. Disaster and Insurance risks can be managed by maintaining proper insurance covers for all its properties, as well as renewing that cover annually. Through managing risks, the CFM ensures that the business runs smoothly (Cromwell Funds Management Limited, 2017).

Recent Performances and Future Outlook

The recent performance of the Cromwell Direct Property Growth has been changing every year. Cromwell had verified a financial profit of $204.1 million in the year ending 30 June 2018. It further detailed an operating profit of $156.8 million in the year ending on 30 June 2018, in comparison to the operating profit of $152.2 million. The functioning profit per unit for the year 2017, was 8.36 cents, which showed a fall of around 3% over the previous year, that is, 2016, but it was 0.11 cents, that is, 1% above the expectations of the company. The balance sheet of the company is quite sturdy with truncated gearing and an increased obligation sense, along with long WALE as well as upcoming incentives (Cromwell Property Group, 2018).

References for Property Portfolio Management

ASX. 2019. Goodman Group details. [online]. Available at: <https://www.asx.com.au/asx/share-price-research/company/GMG/details> [Accessed 25 August 2020].

Cromwell Funds Management Limited. 2017. Cromwell Direct property fund. Product Disclosure Statement. [online]. Available at: <http://nrfinancial.com.au/document.php?id=479> [Accessed 25 August 2020].

Cromwell Funds Management. 2020. Asset Valuation Update - Cromwell Direct property Fund. [online]. Available at: <https://www.cromwell.com.au/investment-options/cromwell-direct-property-fund/continuous-disclosure-and-updates/cdns/asset-valuation-update-cromwell-direct-property-fund11> [Accessed 25 August 2020].

Cromwell Funds Management. 2020. Cromwell Direct property Fund. [online] Available at: <https://www.cromwell.com.au/investment-options/cromwell-direct-property-fund> [Accessed 25 August 2020].

Cromwell Property Group. 2018. Annual Report 2018. [pdf]. Available at: <https://www.annualreports.com/HostedData/AnnualReportArchive/C/ASX_CMW_2018.pdf> [Accessed 25 August 2020].

Goodman Group. 2018. Risk Management Policy. [online] Available at: <https://www.goodman.com/-/media/Files/Sites/Global/Who-we-are/corporate-governance/Policies/Risk-Management.pdf?la=en&hash=5B72BA0F149E2939474496A8E06BE621064BF90E> [Accessed 25 August 2020]

Goodman. 2018. GMT Valuation adds $110 million to portfolio value. [online] Available at: <https://www.goodman.com/investor-centre/announcements-media/20180328-gmt-valuation-adds--110-million-to-portfolio-value> [Accessed 25 August 2020]

Goodman. 2019. Goodman Group Annual Report 2019. [pdf]. Available at: <https://www.goodman.com/-/media/Files/Sites/Global/Investor-Centre/GMG-Goodman-Group/reports-and-newsletters/Annual-Reports/Goodman-Group-Annual-Report-2019.pdf> [Accessed 25 August 2020]

Goodman. 2020a. Key Facts. [online] Available at: <https://www.goodman.com/who-we-are/key-facts> [Accessed 25 August 2020] 

Goodman. 2020b. Results for the half year ended 31 December 2019. [pdf]. Available at: <https://www.goodman.com/-/media/Files/Sites/Global/Investor-Centre/GMG-Goodman-Group/Presentations-and-Webcasts/2020/GMG-FY20-Half-Year-Results-Presentation.pdf> [Accessed 25 August 2020].

LinkedIn. 2020. The Goodman Group, LLC. [online] Available at: <https://www.linkedin.com/company/the-goodman-group-llc#:~:text=The%20Goodman%20Group%2C%20headquartered%20in,.thegoodmangroup.com%2Fcareers.> [Accessed 25 August 2020]

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