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Australand Plans Warehouse Surge to 70% of Investment Assets

Australand Property Group, which today reported a drop in first-half profit, plans to increase investments in industrial properties, where it’s seeing higher demand from both tenants and investors.

The company expects warehouses to make up about 70 percent of its investment properties within five years from half now, Managing Director Bob Johnston said. The real estate trust plans to develop most of the warehouses itself, rather than acquire existing assets, he said.

“As we recycle capital out of developments, that will be put into industrial,” Johnston said in a telephone interview. “Unlike most of our competitors, we have a development platform, so we’re not competing to buy the stuff on the market.”

Australand reported a 9.1 percent jump in earnings before interest and taxes in its investment property business for the six months to June 30 from a year earlier as rents rose. Apart from warehouses, the business includes offices and a half stake in a shopping mall.

Net income fell to A$88.4 million ($82 million) from A$89.7 million a year earlier, as earnings from its residential division slipped 45 percent. The shares fell 1.4 percent to end the day at A$3.45 in Sydney.

Strong demand from tenants combined with limited supply are drawing investors to Sydney’s industrial property market, and leasing activity in Melbourne remains strong despite new developments, Colliers International said in a report this month. Australian property companies, including Stockland, GPT Group and Charter Hall Group, are among those seeking to increase their exposure to industrial properties.

Offshore Buyers

GPT in December made an offer for the investment property and development units of Australand in its quest to own more offices and warehouses. It withdrew the bid in May after failing to agree on a price.

CapitaLand Ltd., the Southeast Asian developer that owns 59 percent of Australand, yesterday said it had completed a review of its stake with a decision to maintain its holding.

Australand’s housing development business, where pre-sales climbed in Sydney even as total sales across Australia fell, is receiving some help from overseas buyers, particularly from China, Rod Fehring, the company’s executive general manager for residential business, said in a conference call today.

Offshore sales in the first half were the best they’ve been since 2000, with foreign buyers preferring Sydney over other cities, Fehring said. Across the country, overseas purchasers accounted for as much as 10 percent of sales during the half, he said.

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