Amid the housing slowdown, as Development giant Stockland comes under pressure to improve its balance sheet it is quietly shopping around one of its best-selling Melbourne residential estates. For a price to be between $150 million to $170 million, the Grove Estate in Tarneit in the city's west, Stockland's $700 million property is up for sale to a select group of buyers.
Since its launch in 2014 with more than two-thirds of these settled, almost 1300 lots in the estate have been sold. Closing on November 15, 2018, a 167-hectare property as the balance of the estate is being offered for sale by ‘invitation only tender’.
To reduce its debt to equity, if it is to fund a $350 million buyback of its securities analysts have noted Stockland needs to sell assets, which currently trade to their net tangible asset backing at a more than 10 percent discount.
Divestment of another $400 million in retail assets over the next two years is also expected alongside the sale of The Grove Estate, Stockland announced this week. On Thursday, Stockland securities fell to $3.71 fell another 2.4 percent. On the sale of The Grove Estate, spokeswoman for Stockland declined to comment, the company is assessing potential opportunities for capital recycling some of its assets.
When the buyback was announced in September, Stockland was rated as a "sell" by UBS analysts Grant McCasker and James Druce. Also, noting that the without asset sales are not far off, Stockland's banking covenants of 45 percent, would increase Stockland's leverage ratio from 36.5 percent to 39 percent.
Within its target range of 20-30 percent, Stockland's stated debt to equity is 22 percent but UBS believes this figure does not reflect the developer's true financial position. For Stockland this week, Morgan Stanley downgraded its 2019-20 earnings forecasts after a steep fall in sales in the first quarter of the current financial year, on the assumption that its settlement numbers will be 6 percent lower in that year compared with the same time last year.
Stockland reiterated its earnings guidance for 2018-19 despite sales sliding in the September quarter and it was still be on track to settle 6000 lots this financial year, CEO Mark Steinert said. In total, the Grove Estate offers 1780 housing lots, 107 hectares of development land as well as a number of super lots for schools, town centers, and medium-density housing.
Satterley Property is among the select group, given the opportunity to tender for the group, which is developing a neighboring estate. Andrew Egan and Frank Nagle and Paul Callanan are the appointed agents for the same.
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