Never underestimate the power of new infrastructure (both public and private) to boost adjoining residential property markets!
Courier Mail (Business) – May 26, 2014
QUEENSLAND’S newest boom zone, the Toowoomba region, will now see billions of dollars more investment than anticipated six months ago, with experts predicting it would also spark more merger and acquisition activity locally.
Regional development body, Toowoomba and Surat Basin Enterprise, estimated that more than $11 billion in total development spending was going into the area – almost double estimates put out just six months ago.
“Proposed projects for the region, which include the Melbourne to Brisbane Inland Rail Project and a new Bunnings, totalled more than $5.8 billion, while projects currently underway totalled more than $3.5 billion,” according to the TBSE’s May Development Status Report of the Toowoomba Regional Council Area. “Projects approved and awaiting commencement totalled more than $2.1 billion.”
TBSE chief executive Shane Charles said the real development figure overall was much higher, given the $11B excluded “a vast number of developments under the $2 million construction cost threshold”.
“No other regional city, nor capital city for that matter, will be able to boast the amount of infrastructure development occurring,” Mr Charles said. “We will no doubt become the epicentre of infrastructure. I look forward to seeing some major growth in our region over the coming years.”
With $11B being spent in the Toowoomba and Surat Basin region over next few years, the area’s mostly family-owned companies could soon see a flood of offers, experts predict, and stand to make millions off strategic arrangements, partnerships, and takeovers as more investors’ heads are drawn to Queensland’s southwest.
Brisbane-based Interfinancial Corporate Finance, which has worked on an array of business sales, capital raising, valuations and structuring, expects the billions in development activity to lead to mergers and acquisitions in the region.
Interfinancial associate director Mark Steinhardt told The Courier-Mail that the key challenge for businesses in the region was how to fund enormous rates of growth that were occurring.
“Just normal working capital kind of issues can often cripple a small business. If you’re growing at 50 per cent or more a year, and many (in the Toowoomba region) are, how do you fund that for your receivables, pay staff wages etc, when creditors will only pay you in 40 or 60 days time?”
That same growth was what was attracting investors to commit to a region that “sometimes falls under the radar of companies focused on capital cities”.
“Toowoomba is a hub for much of the production which happens West of Brisbane. In a typical year, over 50 per cent of the goods emanating to and from the Port of Brisbane are from Toowoomba and West,” he said.
“The region supports a range of industries, including agriculture, manufacturing and mining services (amongst others). This makes it less prone to the boom and bust cycles of Queensland’s other major towns.”
As well input costs and reliability for employers was high because the area had a less transient workforce, he said, and the icing on the cake was the range of new projects across multiple industries.
“Now you’ve got big families like the Oswalds and the Wagners in Toowoomba that have really massive businesses and they’re not just working up there but coming down and doing work elsewhere. The good thing is they’ve got that family feel still and have been quietly developing over many decades.”
Major M & A transactions in last 5 years:
$35M – AP Eagers paid for Craig Black Group
$45.1M – Australian Food & Fibre paid for PrimeAg
$4.9M – Tox Free Solutions paid for Absolute Waste Services
$61.7M – ERM Power paid for 50% of Oakey Power Station
$592M – Transfield Services paid for Easternwell
$173M – Boral paid for Wagners Group Construction Materials Assets
$1M – Greencross paid for 49% of Vets Toowoomba
Size of deals not disclosed:
QIC for 25% of Ostwald Construction Materials
United Petroleum for Dalby Bio-Refinery
VTS IT for Downs MicroSystems