Qantas (ASX:QAN) share price rises after $800 million land sale agreement

The airline’s shares are taking off after it struck a deal to sell surplus property

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The Qantas Airways Limited (ASX: QAN) share price is in the green on Friday morning, trading 3.94% higher to $5.80.

This morning, the national carrier announced it had agreed to sell its surplus land in Mascot, New South Wales to strengthen its balance sheet and pay down debt.

What did Qantas announce?

The Qantas share price is gaining after the airline entered into a binding agreement with a consortium led by LOGOS Property Group, one of Asia Pacific’s leading logistics property groups.

LOGOS will be acquiring 13.8 hectares of land in Mascot for $802 million.

The transaction is subject to some unspecified conditions. However, the vast majority of the lots is expected to settle in the first half of this financial year.

Qantas said it will provide further details on the expected financial benefit of the sale in its half-year results in February 2022.

In addition, Qantas advised it has entered into discussions with LOGOS about potential future development options on the land they are acquiring.

Qantas expects the evaluation of these proposals to be completed in early 2022, with the potential to raise the total value of today’s deal to more than $1 billion.

According to the release, the sale of the largely underdeveloped land follows a three-month period of expressions of interest. During this time, Qantas received 18 bids from a range of Australian and international syndicates.

Qantas ultimately decided “there is no long-term need for Qantas to develop the land, which is largely surplus to its operations”.

The proceeds from the sale will be used to pay off debt.

Management commentary

CEO Alan Joyce commented on the transaction possibly fuelling the Qantas share price today:

We went into this process open-minded about whether we’d sell some, all, or none of this land depending on the response from the market. That response was extremely strong and it has resulted in the sale of all the land.

We’ll use these funds to help pay down debt that we’ve built up during the pandemic. The strength of this sale and its impact on our balance sheet means we can get back to investing in core parts of our business sooner.

Joyce said Qantas could work with LOGOS for additional redevelopment plans.

Beyond the deal we’re announcing today, there’s potential for us to work with LOGOS on creating a Qantas Precinct as part of their redevelopment plans for the site. It could see a new headquarters combined with a relocated training centre and distribution hub, right next to the airport, rather than being spread across different parts of Mascot as they are now.

Qantas share price nears 20-month highs

Qantas and the broader travel industry were quick to re-rate amid hopes international borders could reopen as soon as November.

The Qantas share price is up 30% since late August, trading at similar levels as early March 2020.

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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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