Qantas in $500m sale of Mascot land to pay down debt
Qantas is expected to raise more than $500 million through the sale of several major Mascot land holdings covering almost 14 hectares in the heart of South Sydney’s booming industrial precinct.
The airline has owned some of the land since the 1960s and decided to sell following a wide-ranging property review which confirmed the Qantas headquarters will remain in Sydney.
Surplus land holdings and property revenue generating strategies such as sale and leaseback of operating assets were also identified as part of the process.
Qantas has borne the full brunt of COVID-19, posting a $1.47 billion loss in the first six months of this financial year due to border closures.
Revenue for the carrier over the same period fell by almost $6.9 billion when compared with pre-pandemic operations.
Qantas Group chief financial officer Vanessa Hudson said it had been considering the land sales for several months and that the money raised will be used to pay down debt.
“One thing that stood out from the property review we did earlier this year was the amount of undeveloped and underdeveloped land we hold around Mascot,” Ms Hudson said.
“In the current climate we’re obviously looking more closely at what is core and what is non-core, and the reality is that we don’t need this land for any of our long-term strategic goals.”
She said 40 per cent of the land is used for staff car parking in an area where industrial and commercial values have in some cases quadrupled over the past decade.
“Given how Mascot has developed over that time, there’s a lot of value we can unlock by selling it,” said Ms Hudson.
“The proceeds would be used to help us pay down the debt we’ve built up getting through COVID, which in turn means we can start reinvesting sooner in things like new aircraft, things that are core to our business.”
She added: “Recent lockdowns have obviously been a significant setback for us but we’ve been working towards putting this land on the market for several months. It’s been part of our planning for a while.”
Colliers has been advising Qantas on its property strategy and will manage the one-month expressions of interest campaign which starts on August 2.
The portfolio includes the sale and leaseback of the Qantas Mascot distribution centre, which is on 39,000sq m and is expected to fetch at least $165 million on a 10-year lease with options.
There’s a wide variety of other holdings across almost 100,000sq m that have a mix of zoning and are ripe for development either as multi-level industrial facilities or commercial offices.
Qantas will occupy many of the assets for between one to three years and is offering portfolio buyers initial passing lease back rental of $10.5 million.
Michael Crombie from Colliers expects intense interest for the properties, which he claimed would have a potential development end value of $2 billion.
“We’ll offer this for sale in one line, one buyer to take out the whole portfolio or it may be picked up individually,” Mr Crombie said.
Ms Hudson from Qantas cautioned that “whether we sell some or all of it depends on how strong the market response is”.
