Ready Media Group’s Rob Langton speaks with Colliers Directors Michael Crombie, Gavin Bishop and Dwight Hillier about the Qantas Investment & Land Portfolio that has recently hit the market. The opportunity presents a once in a lifetime investment and development.
See the full podcast transcript below:
Rob Langton: Following the imminent launch of a major industrial opportunity in Sydney's mascot, we're joined this afternoon by Michael Crombie National Director and Director in charge of the Columbia South Sydney team, Kevin Bishop, Head of Industrial Capital Markets and Dwight Hillier, Managing Director of Valuation and Advisory to discuss the agency's appointment on behalf of Qantas and the details of the enormous 14 Hectare, landholding, as well as the local market dynamics that are guiding asset values across the region. Michael, Gavin, Dwight pleasure to be speaking with you this afternoon, to begin Dwight as I understand it, you've been advising Qantas on its wide ranging property strategy and review over recent months. Talk to me about what this involved in terms of this particular asset and the outcomes that the review found.
Dwight Hillier: Over the past 12 to 18 months the Colliers strategic advisory business via Neil Murray and myself have been working closely with the Qantas team undertaking a detailed review of the leasehold and freehold real estate interests, aligning with the quarters business strategy, it was concluded that there's no long term requirement to develop freehold land at Mascot. Most of the lead surface requirements Qantas will however, retain approximately three hectares of land, which currently accommodates the Dnata catering facility with road access to the airport in a tri-generation plant, it's pretty clear that Qantas remains very focused on its core aviation business.
Rob Langton: I read that Qantas has amassed this land holding over the course of the past 60 or so years, can you take me through the history of this asset and how it's evolved over time to where it is in its current form.
Dwight Hillier: Yeah, that's a really interesting one. It started progressively in the 1960s, acquiring individual lots and aggregating to what we have today. But interestingly enough the land around the Qantas headquarters is still predominately used for car parking so I've never really got fully, I guess you'd say maximized in terms of its potential - around 40% of the land is made up of car parking. It's also home to Qantas' aircraft parts and distribution centre, aircraft jobs and other associated facilities,
Rob Langton: Michael Crombie let's talk about the portfolio itself, talk to me about the opportunities that are for sale the existing leases in place the zoning and overlays that are in place and also the methods and details by which this portfolio will be marketed.
Michael Crombie: This is 100% South Sydney century portfolio, we essentially have four property offerings, all adjoining Qantas drive right next to Sydney Airport. A pretty rare institutional grade Investment and Development offering, we haven't seen anything near this scale in South Sydney, certainly in the last 20 years that I've worked the market, so it does give the buyers, you know, the ability for immediate scale across the 14 or so hectares, so it's gonna be busy four and a half weeks for everybody. The beauty for this campaign is it's being offered to the market in one line but it also allows the buyers will look at individual parcels and bid on individual parcels and Qantas will review those obviously at the close of EOI. So with the four opportunities they're quite varied. The first one which will have a lot of interest from the institutional grade and investment market will be the sale and leaseback of the Qantas distribution centre, which they built in 2005. So that's a 21,795m building, which is just a nice clean super A-grade investment. Outside of that, we've got two industrial land development plays, those two parcels of land again can be sold separately. We've got one just over 26,000m of land and 56,000sqm of land. Those combined will give a buyer in the order of 123,000m of industrial development, which will be interesting to see how they come and work through the highest and best use, because that might be smaller industrial boxes but more than likely in order to maximize that land, and the gross floor area, they'll be doing multi level industrial. The final portion of land that we're selling is a B5 business own land down at 350 King Street, a little bit of a different twist where that will allow hotels, commercial offices and car parking stations and the like, that will give a buyer in the order of 50,000 sqm of GFA. So pretty exciting Rob, but there's something there for everybody,
Rob Langton: Kevin, given the scale of this portfolio in terms of its investment appeal and the redevelopment and repositioning opportunities at play, how do you anticipate the composition of the buyer profile will likely look?
Gavin Bishop: This portfolio is going to attract so much interest globally. the market is really paying a premium for scale. And in this offering has certainly got that, and it's located, you know in arguably the strongest in institutional investment market in the country. So we're going to get interest from all of your domestic REITs, a lot of your offshore groups and you know capital is going to come in across the globe. There will be interest out of Asia, out of Europe and America. The market is really paying a premium for scale. So, we're anticipating, you know, extremely, strong interest, and as Michael touched on, not only is the portfolio being sold on one line we're also selling it individually so you're going to have a lot of your local developers and investors chasing the offering very hard as well.
Rob Langton: Michael reflecting on the broader Sydney South market, what are the key trends you've recorded over the short to medium term in relation to things like tenancy profile your compression shifting land use and so forth?
Michael Crombie: Thanks Rob. I think shifting land use is the most interesting one, where we see in green square there was talk about green square for a long time, it's finally evolved and it's really come to its own. Now that residential has really come in, the new younger workforce in the area is bought in a lot more retail and amenity. So now we're starting to see a real influx for the higher and better use of commercial developments. So from green square, and also especially in particular around mascot station precinct there a lot of sites, a lot of occupiers coming down here saying well, my commercial development in my end use play can be 50% of that of the CBD, so it's really come down to a price point and affordability as people are working more and more from home but people want to be looking at how their money is being spent. Not only that, I think the change of infrastructure, if look at the WestConnex, the M8 access point is literally within 900m meters of the Qantas land portfolio. So we're starting to see a lot of new development because it's just giving real quick speed to access for the surrounding suburbs and of course e-commerce. So that's from a commercial standpoint, and if we're looking at industrial there's been a lot of chat in the papers of light around industrial land use, we are probably one of the most expensive industrial land uses in the country in this Alexandria mascot precinct. So buyers now will be having to maximize that GFA, so there's a real view on multi storey industrial developments. We've seen the strata uses do that over the years, multi level industrial strata, but now the institutions are having a big play at that, and I think that'll be a real differentiator when it comes to the scale of land at this mascot precinct,
Rob Langton: Kevin, in closing, take me through some of Colliers recent sales campaigns that have been brought to market within the region, and what have been some of the key transactions that have taken place during the past 12 months.
Gavin Bishop: Yeah, look, I think we've recently just closed a closure campaign Banksmeadow on behalf of a client of ours Orica where we saw the major development site, which, really reset the records on land values. We achieved considerable interest in that site, just given the rarity of development land within within South Sydney. Another sale that we've been involved in the last 12 months has been the Toyota site in Caringbah. 12.4 hectares of land located in a very land constrained market very similar to mascot, with significant development upside. We sold that on behalf of Toyota for $170.5 million. We attracted global interest plus a lot of the domestic REITs - we were chasing that very hard. So we anticipate a similar buying profile for the Qantas portfolio. And, we’re certainly very excited about the opportunity,
Rob Langton: No doubt about it - a landmark campaign that will no doubt, set the scene moving forward. The Qantas portfolio brought exclusively to market by the team from Colliers, Michael Crombie Gavin Bishop, and Dwight Hillier, thanks so much for your time this afternoon, and look forward to seeing the outcome.