Qantas nabs $800m in Sydney Airport land sale

Qantas has emerged as one of the biggest winners in the industrial property boom, offloading some of the country’s most valuable land.

The Sydney site being offloaded by Qantas was among the most valuable in the country. Picture: AAP/ Darren Leigh Roberts.

Qantas has emerged as one of the biggest winners from the industrial property boom, reaping $802m from the sale of surplus land next to Sydney Airport from property funds manager Logos.

Under the deal Qantas has entered discussions with Logos about potential future development options for the sites they are acquiring including the creation of a dedicated precinct for the airline as well as the potential sale of an extra three hectares of land adjoining the 13.8 hectares of land being sold.

If an agreement is reached with Logos — which is backed by the Abu Dhabi Investment Authority and AustralianSuper — this has the potential to raise the total value of the deal to more than $1bn.

“We’ll use these funds to help pay down debt that we’ve built up during the pandemic,” said Qantas chief executive Alan Joyce.

“The strength of this sale and its impact on our balance sheet means we can get back to invest in core parts of our business sooner.

“Logos has put forward a number of proposals on how we could unlock further value from our land holdings in Mascot, which we will explore in detail.”

Mr Joyce said there was potential for us to work with Logos on creating a Qantas precinct as part of their redevelopment plans for the site. It could see a new headquarters combined with a relocated training centre and distribution hub, right next to the airport, rather than being spread across different parts of Mascot as they are now.”

Once complete the massive purchase will smash records for industrial property and bolster Qantas as it is well ahead of initial expectations for the site which had been expected to draw bids of more than $500m.

Logos’ blow out bid knocked out a series of rival companies, flagged by The Australian in September, shows both the jump in value of industrial land where new developments can be undertaken and also the powerful role being played by industry super funds.

The Sydney site being offloaded by Qantas was among the most valuable in the country as it adjoins the airport and it was billed by agents Colliers as the country’s best industrial site when it went on the block in July.

Logos is majority-controlled by Singaporean fund manager ARA Asset Management which is itself being taken over by Hong Kong-based ESR.

All up 18 major groups were jockeying to buy Qantas’s 14 hectares of mostly undeveloped land.

The airline benefited as the value in the Mascot land rose, partly on the back of the surrounding area being developed over the past decade.

Qantas undertook the review of the land fronting Coward Street, Kent Road and King Street, Mascot earlier this year. The review revealed there is no need for the airline, which is carrying about $6.4bn in net debt, to develop the five separate parcels, some of which are adjacent to Kingsford Smith Airport and are presently used for staff carparking.

The land parcel is one of the last available scalable logistics and commercial development sites in the much coveted South Sydney market.

The massive purchase boosts Logos‘s assets under management in Australasia to about $13bn and it has already flagged its plans to develop the site into a state of the art, four-level ramp up logistics, e-commerce and last mile logistics hub.

Logos has experience from around Asia where such airport developments are common and says it would lift the local airport once its $2bn-plus project is complete.

Logos confirmed that it was in talks with Qantas about potential future development options for the sites, including the creation of a dedicated precinct for Qantas, and the sale of the additional 3ha of land that adjoins some of the lots being sold

The deal also locks in the country’s biggest superannuation fund AustralianSuper behind Logos, as it is backing the purchase after also supporting its $1.7bn purchase of Sydney’s Moorebank Logistics Park.

AustralianSuper head of property Bevan Towning said the consortium had a long-term redevelopment plan for the site that would transform it into a key logistics hub for customers seeking strategically located next generation logistics facilities.

“This is a great opportunity for AustralianSuper to access an asset with significant growth potential over many years. Opportunities of this size and scale in such sought-after locations are rare,” Mr Towning said.

The property sale was introduced by Neil Murray, Rebecca Ngan and Dwight Hillier of Colliers and was facilitated by the firm‘s Michael Crombie, Gavin Bishop, Trent Gallagher, and Sean Thomson.

The sale includes a long-term, sale and lease back of Qantas’ 21,795sq m distribution centre, and a further three development sites totalling 98,645sq m, immediately adjacent to Sydney Kingsford Smith Airport Precinct.

“The international expressions of interest generated significant domestic and offshore attention and will be noted as the most prominent sales campaigns of 2021, with in excess of $8bn of unsatisfied capital left to place within the Australia industrial sector from the unsuccessful bidders,” Mr Crombie said.

“The campaign attracted insatiable interest from institutional investors and developers recognising the scarcity of replaceable opportunities of genuine scale to redevelop within the tightly held Mascot precinct.”

The campaign drew Australia‘s largest players, including Goodman Group, which has traditionally dominated the South Sydney precinct, and the massive Logos plans for a multi-level logistics and office park development will push it ahead of its rivals in the area.