Fund manager Garda more than doubles money on $114m industrial sale

All up the fund manager will have spent just under $51 million (including the cost of the land) on the project after deeming it “simply too large for Garda to develop in the current environment”.

The sale to ESR via its ASX-listed Garda Diversified Property Fund will deliver a gross profit of about $63 million, a profit margin of over 120 per cent.

Proceeds from the $114 million sale will be used by the small-cap REIT to repay all of its variable rate debt, reducing its gearing from 36.5 per cent as of June 30 to about 22 per cent at settlement. This is due to occur next year subject to a number of conditions including FIRB approval.

Garda will also make a one-off special distribution to “assist security holders with the tax associated with the capital gain from the sale of North Lakes”.

According to CBRE’s head of industrial and logistics research, Sass Jalili, land values in Brisbane’s north have appreciated by 38 per cent over the past 12 months, and have more than doubled since the third quarter of 2021.

“The Australian Trade Coast [including Brisbane Airport and the Port of Brisbane] and North precincts are the most land constrained [in SE Queensland] and land values have thus continued to appreciate – currently averaging $748 per sq m and $575 per sq m, respectively,” Ms Jalili said.

Average land values for Brisbane’s North equated to $265 per sq m around the time Garda acquired the North Lakes site.

A look back at Garda ASX filings and presentations show the site has appreciated in leaps and bounds. It had a $20 million valuation in December 2021, was worth $45 million in June 2022, $70 million in May 2023 and $95.4 million in June 2024. It is projected to have estate land value of $116.8million in the first quarter of next year.

“Over the following 24 months [after settlement in June 2021] the Brisbane industrial market experience unprecedented growth in demand for quality and well-located space,” said a spokesperson for Garda.

“With limited land supply available to meet this demand, Brisbane experienced substantial market rent growth. This combined with the compression of cap rates meant developers were willing to pay higher and higher prices for land.

“Add in the project-specific milestone including the achievement of DA approval, operational approvals, and working through the bulk earth and civil works program to deliver… serviced estate quality land, the North Lakes site saw incremental increases in value, year-on-year.”

Phil Pearce, CEO of ESR Australia & New Zealand, said the North Lakes purchase aligned with its vision to grow its presence in the tightly held North Brisbane market.

“The acquisition of the industrial development site at North Lakes in Queensland will enable ESR to continue to expand its footprint in the supply constrained Brisbane market, which is being supported by strong population growth in South East Queensland,” Mr Pearce said.

“The site at North Lakes will be developed into a premium industrial estate, delivering jobs and economic growth to the region as well as supporting the needs of future customers.