Logos-Led Consortium Buying Sydney Airport Site for $594M

Logos Property Group is set to add 13.8 hectares (9.4 acres) to its burgeoning Sydney land bank after the warehouse developer and fund manager announced on Friday that it had led a consortium buying a site near the city’s airport from Qantas Airways for A$802 million ($594 million).

An existing Logos venture backed by the Abu Dhabi Investment Authority (ADIA) has teamed with local pension fund AustralianSuper to purchase the freehold property in Mascot, New South Wales for development into a four-level logistics hub which it estimates will be worth A$2 billion once completed.

“To acquire this site at Mascot is a rare opportunity to further develop a market-leading e-commerce, distribution and commercial hub between Sydney ports and the ultimate distribution destinations in Australia’s main gateway city,” Logos’ head of Australia and New Zealand, Darren Searle said in a statement. “The site is a key freight gateway for the airport and offers unparalleled connectivity as a critical link to supply chains around the country.”

The announcement by Logos, which is controlled by Singapore’s ARA Asset Management, came just three months after the group, with backing from AustralianSuper, Ivanhoe Cambridge, NSW Treasury Corporation and France’s AXA IM Alts added 243 hectares to its portfolio by acquiring the Moorebank Logistics Park in Sydney for A$1.7 billion.

Expanding Sydney Land Bank

“The property represents one of the last available scalable logistics and commercial development sites in the coveted South Sydney market, adding another valuable asset to the portfolios of strategic logistic assets held by Logos, LALV and AustralianSuper,” Logos said.

Logos and ADIA formed the Logos Australia Logistics Venture (LALV) in 2014 to acquire and develop logistics properties in Australia, with the partnership having built a portfolio now worth A$2.7 billion. In 2019 the venture by the Sydney-based developer and the $649 billion sovereign wealth fund agreed to buy a 15.2 hectare site near Sydney from Melbourne-headquartered logistics firm Toll Group for an A$200 million project.

This latest transaction increases Logos’ assets under management in Australia and New Zealand to approximately A$13 billion as the developer and its parent company, ARA Asset Management look set to become part of Hong Kong-listed ESR as early as next month.

ESR had teamed up with Singapore sovereign wealth fund GIC in April to purchase the 1.4 billion square metre Milestone logistics portfolio from Blackstone for $2.9 billion, with the two developers now in position to create one of Australia’s largest industrial land banks.

The manager of Singapore-listed ESR-REIT, which is controlled by ESR, announced on Friday that it plans to recommend to unitholders a plan to merge with ARA-Logos Logistics Trust for S$1.4 billion ($1.04 billion) to create a combined trust which will could have ready access to properties within both the ESR and Logos portfolios.

Connectivity Hub

With ready access to the WestConnex and M5/M8 motorways, as well as the Port Botany container facility, Logos says that its new project should improve connectivity at Sydney airport by developing an e-commerce, distribution and commerce hub linked to key destinations the city and across the nation.

The consortium is also considering creating a dedicated precinct on the site for Qantas, and potentially sealing a follow up deal for another three-hectare (7.4-acre) property adjoining Logos’ new site.

The buyer consortium expects to present more detailed plans for the project upon completion of the transaction, which is anticipated in December 2021.

Growing Partnerships

The airport deal also represents an expansion of Logos’ two-year-old partnership with Australia’s largest superannuation and pension fund.

“Growing AustralianSuper’s investment in major logistics assets that are focussed on the growing demand for e-commerce and distribution hubs close to key infrastructure and population centres will match member needs for strong, sustainable long-term returns,” said Bevan Towning, the pension fund’s head of property.

Before joining with Logos in the Moorebank deal in July, AustralianSuper, which had around $148 billion in assets under management at the end of June this year, had teamed with the developer in 2019 for a 120,000 square metre development project in Auckland, New Zealand.

Logos has also been active finding new partners this year, with the developer announcing last month that it has linked up with Malaysia’s Sime Darby Property to form a $200-million fund that will develop and invest in “build-to-suit to lease or sell” logistics assets in the Klang Valley.

Qantas Hopes to Refuel

For Qantas, the logistics deal provides a cash lifeline as the company moves to recover from more than 18 months of sealed borders and skeletal flight schedules.

Proceeds of the sale will be used to pay off the airline’s mounting liabilities and help it return to its net debt target of A$4.5 billion to A$5.6 billion by the end of next year, after breaching that mark last year with an overall net debt of A$5.9 billion at the end of 2020.

“We’ll use these funds to help pay down debt that we’ve built up during the pandemic,” Alan Joyce, the chief executive officer of Qantas, said in a statement. “The strength of this sale and its impact on our balance sheet means we can get back to investing in core parts of our business sooner.”