Brickworks sells M7 Hub stake to venture partner Goodman Group as it sees robust tenant demand
The country’s largest brick manufacturer has offloaded its stake in the Western Sydney estate as it continues to see strong demand for leasing of industrial properties
Australia’s largest brick manufacturer Brickworks will pay down debt after offloading its interest in the M7 Hub in Sydney’s west for $117m to joint venture partner Goodman Group.
The sale will deliver $117m in gross proceeds to Brickworks and represents a discount July 31 book value, marginally higher than the first half of the current fiscal year revaluations to be recorded across the balance of the portfolio.
Brickworks says that the transaction including tax will deliver an estimated $11m profit after tax uplift to the group.
It will give Goodman Group full ownership of the M7 Hub, which borders the M7 Motorway in Eastern Creek, having owned a stake in the half in the Industrial JV Trust set up by both parties.
Brickworks chief executive Lindsay Partridge said the sale of its stake in the multi-unit industrial property came as the group looked to take an active approach to managing its assets.
“Having invested heavily across the Brickworks Group in recent years, including to enable the release of significant additional development land at Oakdale East, we feel that it is prudent to release funds through this sale and reduce our borrowings,” he said.
“Following the sale, we expect group debt to reduce to around $600m, resulting in a conservative gearing level of around 14 per cent.”
The M7 Hub was one of the first sites developed within the Industrial JV Trust and is the smallest of the fully developed estates.
Most of revenue generated by Brickworks comes through its extensive property portfolio instead of its bricks and pavers business. Investment house Soul Pattinson is one of the group’s most significant shareholders.
Mr Partridge said that group expected a development profit of $40m-$50m in the first half of the fiscal year with development activity has continued at Oakdale West Estate, including facilities for Maersk and EBOS, as well as two speculative units.
He added that there continued to be strong lease inquiry for large-sized industrial facilities despite ongoing volatility in the market from rising interest rates and tighter credit conditions.
“Following the strong development progress achieved in the first half and the commencement of the final spec units at Oakdale West, we expect this Estate to be fully built out by the end of the financial year,” he said.
“Given the limited supply of appropriately zoned and approved land in Western Sydney that is available for large-scale industrial development, this is a significant milestone.”
Brickworks has commenced an independent valuation process for its’ Property Trust assets, and that this was expected to result in the average capitalisation rate increasing to 5 per cent.
Mr Partridge said that with limited property transactions, it had replaced traditional valuation methods based on comparable sales for one focused on discounted cashflow.
“We remain confident that structural trends towards e-commerce and the digital economy will continue to drive demand for our prime industrial facilities,” he said.
Shares in Brickworks closed up 0.7 per cent on Friday at $27.47.
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