KUALA LUMPUR (May 24): Favelle Favco Bhd said it is spending A$39.8 million (RM123.98 million) to develop two units of single-storey logistic warehouses on its freehold land near Sydney, Australia.

The crane manufacturer said it has entered into an agreement with Australian developer Dexus Property Services Pty Ltd, and Dexus Funds Management Ltd, for the construction as well as the construction financing and tenant sourcing.

The warehouses will have a combined gross lettable area of 14,000 sq m on the 46,839.7 sq m land, said Favelle in a bourse filing on Friday.

It added that the land will be subdivided into two plots, with the first plot measuring 23,453 sq m housing the project and the second plot measuring 23,386.7 sq m continuing to be used by the group for its crane manufacturing business.

The group will pay a development fee of A$39.8 million to Dexus Property for delivering these warehouses on turnkey basis upon achieving practical completion.

Favelle Favco said it will be funded via a combination of internally generated funds and bank borrowings.

Dexus Property will also endeavour to secure tenancy upon completion of the project, said Favelle Favco.

This project will commence in June 2024 and is expected to be completed in the second quarter of 2026.

The expected rental for these two warehouses will be in the range of A$4.1 million to A$4.9 million per year.

“The project shall enable the company to unearth the value of the project land’s strategic location in this prime industrial area to generate rental returns to shareholders,” said Favelle Favco.

The land is described as a freehold industrial land that is “strategically” located between Sydney and the future Western Sydney Airport.

Shares of Favelle Favco, which climbed 27% year-to-date, closed one sen or 0.4% lower at RM2.27, giving the group a market capitalisation of RM534.36 million.