This article is from the Australian Property Journal archive
RESIDENTIAL developer AVJennings will cop a $17.2 million write-off after the ASX-listed home builder terminated its option at land in Caboolture, north of Brisbane, after rising development and infrastructure costs made its Rocksberg project unworkable.
The company had spent several years progressing the Rocksberg Development Approval (DA) as part of unlocking the option with finalisation expected in late in calendar 2024.
“As the DA process has progressed, material changes from the company’s initial assumptions about what was required to deliver the project emerged. Expected development and infrastructure costs have increased significantly since the option was entered into and have not been matched by increases in forecast revenue,” AV Jennings said in an ASX statement yesterday.
“The extended length of time until meaningful returns could be expected to flow to the company would put significantly greater pressure on the company’s balance sheet than originally contemplated.”
AV Jennings said its management worked closely with the landowner and other key stakeholders to negotiate a restructure of the agreement.
“Unfortunately, agreement has not been able to be reached prior to the next option payment date in May 2024, and as a result the company has decided to terminate its option,” it said.
“As a result of this decision, the company will write off capitalised development expenses of $17.2 million and its lots under control will reduce by 3,500.”
Funding previously earmarked for the Rocksberg project will be redeployed and will result in “significant” additional capital being available for the Company’s other live projects over FY25 and FY26.
“This will be directed to development works including more built form on existing projects and activating the existing pipeline, with the aim of expediting project returns and improvement of the company’s ROE,” AV Jennings said.
The company reported strong lead indicators in the March quarter, and product mix drove settlement values higher despite a dip in volumes.
