This article is from the Australian Property Journal archive
PROPERTY heavyweights Stockland and Lendlease have entered into a $1.3 billion deal that will see Stockland partner up with Thai investor Supalai Pcl and take control of 12 masterplanned communities across the country.
Stockland and Supalai will pay an initial $1.063 billion for active communities, and up to $239 million for additional land parcels. Stockland will hold a 50.1% interest in the Stockland Residential Communities Partnership, with Supalai holding a 49.9% interest.
The masterplanned communities are located in NSW, Queensland, Victoria and Western Australia. They comprise a total of 27,600 housing lots.
“The acquisition represents a step change in the reshaping of our portfolio, and accelerates the execution of our strategy by increasing our capital allocation towards residential sectors while scaling our capital partnership platform and generating new sources of recurring income,” said Stockland managing director and CEO, Tarun Gupta, who left Lendlease to take up the top role.
“SRCP achieves immediate scale with this acquisition, and we are excited to further develop the partnership alongside Supalai.”
The acquisition takes Stockland’s landbank to about 95,600 lots. The projects represent a potential increase in settlement volumes of about 2,500 lots per annum. Stockland had a full-year target of 5,200 to 5,600 settlements.
Stockland CEO, development, Andrew Whitson said, “The fundamentals of the residential market in Australia remain compelling, with ongoing land supply constraints amid strong population growth.
“This acquisition has been secured on attractive terms, with active projects that are well-positioned to ramp up development activity into a potential recovery in the residential cycle.
Stockland expects to receive the full economic entitlement of the acquisition by the fourth quarter of FY24. The transaction is expected to be accretive to Stockland funds from operations per security from FY25.
“The size and scale of the acquired projects also present potential development opportunities in adjacent uses, including land lease communities and community real estate assets such as childcare and healthcare centres,” Whitson said.
Stockland has been making inroads into the land lease communities sector, including the $210 million acquisition of five projects in Queensland from Living Gems Group during 2023.
The deal will be settled over three tranches, in 3Q FY24, 4Q FY24, and 3Q FY25.
“This investment further demonstrates our confidence in the underlying drivers of the market and provides us with exposure to a high quality, well-located portfolio of communities in partnership with one of Australia’s leading residential developers.” Said Supalai chairman and CEO, Prateep Tangmatitham.
Lendlease continues transformational period
For Lendlease the transaction is a key part of its reweighting of capital to investments, and reduces gearing and realises the value created in these projects, it said.
The transaction is expected to realise a circa 20% premium to book value pre-tax, and contribute $130 million to $160 million to FY24 core operating profit after tax. Cash proceeds are anticipated to be broadly equal across FY24 and FY25, with the final instalment due in early Q3 FY25. These proceeds equate to a proforma circa 5% reduction to FY23 group gearing.
Lendlease global CEO Tony Lombardo said, “The $1.3 billion sale of 12 master-planned communities provides Lendlease an opportunity to crystalise the value we have created in these projects”.
“We remain focussed on recycling capital to accelerate our investments-led strategy and to maintain balance sheet flexibility to pursue future opportunities.”
Lendlease shareholders slammed the company with a first strike and protest vote against the re-election of board members last month, after it posted a $232 million full-year loss as it moves through a transformational period.
It said processes for further capital recycling initiatives, including China Senior Living and Australian Retirement Living, remain ongoing.
Lendlease’s market guidance for FY24 remains unchanged with group core operating ROE expected at the lower end of the 8% to 10% range. The group continues to forecast its FY24 gearing at or around the mid-point of the 10% to 20% target range.
Eastern seaboard weighting
Most of the portfolio changing hands is located in Queensland, which accounts for 16,620 lots out of the 27,600, including 10,400 at Yarrabilba. Kinma Valley, Shoreline and Springfield Rise are the other sunshine state communities part of the portfolio.
There are 5,910 lots in Victoria, across Atherstone, Aurora, Averley and Harpley, while there are 4,100 in NSW, at Calderwood Valley and Figtree Hill.
Making up the rest of the portfolio are Western Australia communities Alkimos Beach and Alkimos Vista, totalling 1,100 lots.
