Qantas selling land near Sydney Airport worth hundreds of millions

Qantas is looking to sell up to 14 hectares of mostly undeveloped land around Sydney Airport worth several hundred million dollars.

The airline has decided there is no long-term need for it to develop the Mascot land, about 40% of which is used for car parking for Qantas employees. The land is also home to its aircraft parts distribution centre, aircraft engine workshop and other facilities.

The portfolio of five properties will be offered for freehold sale or on a leaseback, either individually or in one line, through an international expressions of interest campaign run by Colliers, which described it as a “once-in-a-lifetime opportunity”.

Qantas plans to use the sale proceeds to pay down debt accumulated during the COVID crisis, which hit the aviation industry hard.

A Qantas Group statement on Thursday said some or none of the land may end up being sold depending on the market response, with any sale process expected to be completed before the end of 2021.

Qantas, which completed a review of its national property portfolio in May, said the total value of the 138,000sqm of Mascot land was estimated at several hundred million dollars.

Colliers national director Michael Crombie expected strong competition from investors and developers for the portfolio, which he said had an estimated end value, once fully developed, of about $2 billion.

Qantas said the 138,000sqm of land had a total value estimated at several hundred million dollars. Picture: Supplied by Colliers

Qantas Group chief financial officer Vanessa Hudson said the property review highlighted the amount of undeveloped and underdeveloped land the company held around Mascot.

“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,” Ms Hudson said.

“That said, whether we sell some or all of it depends on how strong the market response is.”

Qantas progressively acquired the land from the late 1960s, when the area around Sydney Airport was largely undeveloped.

“We’ve owned some of this land for more than 50 years and much of it is currently used for car parking,” Ms Hudson said.

“Given how Mascot has developed over that time, there’s a lot of value we can unlock by selling it.

“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.”

Qantas in May said its net debt levels peaked at $6.4 billion in February and were starting to decline, as a sustained rebound in domestic travel demand helped drive the company’s recovery from the impacts of the pandemic.

At the time Qantas said it expected to post a pre-tax loss of more than $2 billion for the 2020/21 financial year, which included significant costs associated with 8500 redundancies and writedowns to the value of aircraft. It will report its annual results in late August.

After its property review, Qantas decided to keep its global headquarters in Mascot with its Jetstar headquarters remaining in Melbourne.

A Colliers team has been working with Qantas for more than a year to review its owned and leased property portfolio.

“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,” Ms Hudson said.

Qantas has been planning to put the land on the market for several months. Picture: Supplied by Colliers

A Colliers statement said the portfolio included a long-term sale and leaseback of Qantas’ 21,795sqm distribution centre on a 38,920sqm prime industrial landholding, on an initial 10-year lease with options.

The portfolio also included multiple allotments of industrial land and business-zoned land totalling almost 100,000sqm in the heart of Mascot, adjacent to the Sydney Airport precinct.

There was an initial net passing leaseback rental of $10.53 million per year, Colliers said.

The Qantas statement said depending on the market response, the airline may look to temporarily lease back some parcels of land while arrangements are made to relocate the work functions.

That would likely coincide with the time required for development approvals for the new owner, it added.

Mr Crombie said it was a once-in-a-lifetime opportunity to acquire a rare, scalable Sydney industrial and commercial portfolio with significant future upside, in the highly sought-after key transport corridor of South Sydney and supported by Australia’s most recognisable brand.

“The development sites totalling 98,645sqm offer an unprecedented opportunity to develop – subject to council approval – a super core, multi-level industrial and logistics estate and institutional-grade, mixed-use development of commanding scale, and become one of the largest industrial landlords within the South Sydney market,” he said.

“Prime-grade institutional investment and development opportunities of this nature are very rarely offered to the market and are highly sought-after.”

The expressions of interest process runs until Wednesday 1 September.