This article is from the Australian Property Journal archive
LENDLEASE is facing a $1.3 billion roadblock to its business overhaul plans, with Australia’s consumer watchdog raising concerns over its sale of master-planned communities to Stockland and Thai group Supalai.
The parties have been given until 12th September by the Australian Competition and Consumer Commission (ACCC) to take out communities located in four regions of concern from the proposed transaction, representing five of the 12 assets, or to convince the ACCC otherwise.
“We are concerned that the proposed acquisition would remove one of Stockland’s closest and largest competitors in the supply of residential master-planned community housing lots in four regions – the Illawarra, North West Perth, Ipswich, and Moreton Bay,” said ACCC commissioner Liza Carver said.
“The ACCC is concerned that the proposed acquisition may increase Stockland’s incentive to raise the price, delay the supply, or reduce the quality of housing lots in these regions, to the detriment of prospective homeowners.”
The ACCC had already pushed back the decision on whether to allow the deal to proceed – prompting the Lendlease to slash its core operating profit projections for FY24 by nearly a third – and came back with “preliminary concerns”.
It said assessment of the likely competitive impacts of the proposed acquisition depends, in part, on the ownership arrangements in place for the Stockland Supalai Residential Communities Partnership, as well as Stockland and Supalai’s existing interests in master-planned communities projects in the markets.
Market feedback received indicated that Stockland and Lendlease “compete closely as large developers with strong reputations and the ability to invest in high quality amenities, including education, parks, and town centres”, it said.
“We are concerned that other developers of master-planned community projects may not be able to compete sufficiently with Stockland after the acquisition in some regions,” Carver said.
The concerns are strongest for the Illawarra region, where the deal would bring together the two largest master-planned community projects in an “already highly concentrated market”.
The 12 master-planned communities are located in NSW, Queensland, Victoria and Western Australia and comprise a total of 27,600 housing lots.
“The Stockland Supalai Residential Communities Partnership considers that there are compelling reasons why the proposed acquisition will not lessen competition and will continue to engage with the ACCC to address its preliminary views,” Stockland said.
The company has expected the transaction to be accretive to funds from operations per security from FY25, and flagged the projects presented potential development opportunities in adjacent uses including land lease communities, as well as childcare and healthcare centres.
Lendlease said it would “support Stockland in relation to its engagement with the ACCC to resolve the issues raised and will work with Stockland to complete the proposed transaction as soon as possible”.
It had said the transaction is a “key part of its reweighting of capital to investments, and reduces gearing and realises the value created in these projects”.
Lendlease has been under heavy pressure from shareholders for some time to revamp its business and, in late May announced a $4.5 billion divestment program of its troubled overseas operations, including the $147 million sale of its Asia life sciences real estate interests into a joint venture with Warburg Pincus.
It quickly followed that up with the announcement that it had struck a deal to sell its United States construction business, and this week announced it was selling its US Military Housing business for $480 million.
