Garda Property Group (ASX: GDF) has offloaded an industrial development on Brisbane’s northside for $114 million, with the investment group indicating the sale de-risks its portfolio as the project is too big to complete on its own in the current market environment.
However, Garda says the sale of the North Lakes industrial subdivision to an undisclosed foreign-owned buyer has been struck at a modest 2.4 per cent discount to the independent value of $116.8 million for the project on completion.
“When fully developed, North Lakes will be one of Queensland’s leading industrial estates and we are disappointed not to be developing it out,” says Garda’s executive chairman Matthew Madsen.
“The scale of this project is simply too large for Garda to deliver in the current environment. This transaction places Garda into a strong financial position.
“Our owners should benefit from any improvement in property markets or broader economic conditions, and we also have scope to be opportunistic in the event of continued weakness.”
The Brisbane-based Garda acquired the 25ha North Lakes site in 2021 for $16 million with the project valued by directors at $95.4 million at the end of June this year.
The property group reported in August that it completed earthworks and began civil works on the industrial state and as part of the sale announced today Garda must spend an additional $11.2 million to complete remaining civil, intersection and road works.
Proceeds from sale of the North Lakes project, which represents about 22 per cent of Garda’s property portfolio, will be used to pay down debt. This includes all of the group’s variable-rate debt, with the deal expected to slash gearing from 36.5 per cent at the end of June this year to about 22 per cent on settlement.
The sale remains subject to a number of conditions, including Foreign Investment Review Board approval and the Moreton Bay Regional Council issuing titles to the subdivided lots. Garda expects these conditions to be met by the fourth quarter of FY25.
While Garda says it remains committed to its “develop-to-own” industrial sector strategy, it is leaning towards the acquisition of existing properties in light of rising construction costs.
The property group plans to issue a one-off special distribution to help securityholders pay the capital gains tax that is expected to arise from the North Lakes sale.
The amount and timing of the distribution will be calculated after settlement and finalisation of the tax position for the relevant financial year.
At the end of FY24, Garda Property Group’s property portfolio was valued at $509 million with 83 per cent of this invested in industrial properties.
When announcing its annual earnings results in August, Garda noted that its securities were trading at a 33 per cent discount to their net tangible asset backing of $1.71 per security. The group particularly noted that the market “barely ascribes value” to the North Lakes project.
Garda Property Group Securities closed almost 8 per cent higher at $1.225 today.
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