GOODMAN Group's deal with Metcash to build a $129 million distribution centre in Sydney's west is seen by brokers as a sign that development is back on the agenda.
Goodman will construct an 82,015-square-metre warehouse for Metcash at the Bungarribee Industrial Estate. It will be the main NSW hub for Metcash's operations.
Funding will be split equally between Goodman and its managed Goodman Australia Industrial Fund (GAIF), joint owners of the Bungarribee Industrial Estate.
Advertisement: Story continues below The Metcash deal signals Goodman is keen to re-enter the project market after it froze development activities during the GFC.
Peter Zuk of Goldman Sachs said the yield on the outlay would be about 8.2 per cent, while the costs include Goodman's development management fees.
''While this does not appear overly high, it does highlight that the landscape remains somewhat challenging/competitive for new developments in Australia,'' Mr Zuk said.
''We estimate Goodman's [funding] commitment ranges from about $50 million to $60 million for the project. We note that the land is not currently held on Goodman's [or GAIF's] balance sheet, with payments for the land on a 'draw-down' basis as and when the land is required. At this stage, it is not clear whether Goodman will retain a 50 per cent ownership stake or whether it will look to sell its share of the site.''
Carolyn Cummins
GMG Price at posting:
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