Stockland to build $3.5b logistics hub on Kogarah Golf Club site

Stockland chief executive Tarun Gupta declined to disclose the development cost of the facility, on which construction work is due to begin in 2027, saying only that the development comprising several buildings would cost in the “billions of dollars” and would be staged.

While the developer will fund the project itself initially, as planning progressed, construction contracts were issued and tenants secured – the company has yet to submit a detailed plan for approval – it would bring on capital partners such as KKR and M&G Real Estate, with which it formed separate logistics investment partnerships last year, Gupta said.

“They are the partners we will naturally talk to, but it’s a big project, a multibillion-dollar requirement over time, so we’re very confident a project of this nature will attract very strong institutional capital partner interest,” he told The Australian Financial Review on Monday.

Investors will want clarity on how Stockland will fund the project. The company reported gearing of 27.9 per cent in February, up from 24.1 per cent a year earlier and towards the top of its stated 20-30 per cent target range. In April, Stockland said it expected end-year gearing to move to the midpoint of that range.

“In a gearing range of 20-30 per cent, they’re at 28 per cent and there will be a question mark about how they fund this,” said UBS analyst Tom Bodor.

“If they use third-party funding to deliver the project there is less of a capital allocation towards logistics, however if they use their own balance sheet, it may require asset sales or partnerships elsewhere.”

Commonwealth Bank of Australia is sole underwriter on the project.

“This multi-tranche loan facility demonstrates our ability to structure bespoke solutions driven by client needs, aligning with Stockland’s strategy, while enhancing our exposure to high-quality logistics assets in a strategic location adjacent to Sydney Airport and Port Botany,” CBA’s institutional bank head of real estate George Vallas said.

The five-level warehouses, complemented by retail and other commercial space, will connect to arterial roads M1, M5, M8 as well as the future M6 motorway.

The buildings will only take up about a quarter of the golf course site, with the local Bayside Council developing Pemulwuy Park, a 14-hectare public park, on the rest of the site. It will reopen public access to Cooks River frontage, which has been in private hands with the golf course, with a cycling and walking path.

While Sydney is desperate for urban infill sites on which to develop new homes – and has been looking for more after Australian Turf Club in May voted down a $5 billion sale of Rosehill Racecourse in Parramatta that could have housed 25,000 homes – this site was not suitable for residential development, Gupta said.

“We need housing, but we also need jobs for people to pay for the housing,” he said.

“There will be a big ecosystem of economic activity that will come out of the distribution and the logistics hub that this will create. The site is naturally more suited for that use because of its proximity to major freeways and the road network that’s been built. That’s the best use for this site.”

The logistics facility would generate about 4500 direct and indirect jobs once operating, Gupta said.

The golf club closed in March, selling the site to John Boyd Properties and members of the 97-year-old club, which amalgamated with Liverpool Golf Club, relocated to the renamed Oak Point Golf Club.

There have been previous ideas for developing the site, which sits just across Cooks River from the Sydney Airport tarmac. In 2017, John Boyd Properties proposed relocating the 18-hole course to the other side of the M5 motorway so that the site could be used for housing, The Sydney Morning Herald reported.

“This is a project that will carry a strong legacy and capitalise on Sydney’s growing trade volumes, increased e-commerce activity and demand for sustainable, high-performance logistics assets,” John Boyd Properties director John Boyd said on Monday.

“The proposal is well positioned to attract premium domestic and global tenants, solidifying the precinct’s ambition to set a new benchmark for design and delivery.”

Bayside Council Mayor Edward McDougall said the decision was a positive step forward for the golf club site.

“This proposal represents a fresh chapter for Bayside – one that brings significant job creation and economic opportunity to our city while unlocking the potential of a long-stalled site,” McDougall said.

Stockland shares were little changed, up 1¢ at $5.41 after the announcement.