Real estate company Stockland sold off its Melbourne’s residential community at a hike of 59% on book value. The news sent the share to edge up by 0.813% to last trade at $3.720 on 20 December 2018 but dropped today to $3.670 as at 21 December 2018.
On Thursday, Stockland (ASX: SGP) announced the sale of The Grove, a residential community in Melbourne, to the property group Frasers Property Australia for a consideration of $202.5 million. This sale resulted in a gross profit of $75 million, reflecting a premium of 59% to the book value of the property.
Stockland’s Managing Director and CEO Mark Steinert stated that this sale would strengthen the market position of the company, thereby enabling it to create exemplar master-planned community.
The sale demonstrates that there is a potential value in company’s residential land assets, said Mr. Steinert. Moreover, it outlines the company’s strategy to recycle capital as the expected IRR, i.e., internal rate of return, of the divested assets goes below the company’s investment hurdle rates.
Mr. Steinert stated that along with enhancing the workflow of Stockland, the sale proceeds would provide flexibility to invest in other counter-cyclical residential opportunities with strong risk-adjusted returns above the company’s hurdle rates.
The company plans to reinvest the proceeds of the sale into the securities buyback and logistics development pipeline. Moreover, the gross profit resulting from the sale is reported to be released over Fiscal 2019-2021.
Stockland is positioned as the leading residential community developer in Australia. It holds about 41 active residential communities across the nation’s growth corridors. The property portfolio of Stockland is heavily weighed by the long-standing assets in Victoria with over 11 active residential communities in the State.
Mr. Steinert said Stockland retains a substantial investment in Victoria holding more than 50 assets valued at over $2.5 billion. He added that in the State of Victoria, Stockland has a pipeline of over 24,000 lots, with more than 5,600 lots lying in the western corridor of Melbourne.
In a separate release to ASX, Stockland announced the appointment of Karen Lonergan to the role of Group Executive People and Culture. Ms. Lonergan will reportedly join Stockland on 11 March 2019.
Ms. Lonergan will lead the Human Resource functions of Stockland, reporting directly to the Managing Director and CEO of the Group, Mark Steinert. Ms. Lonergan has a background of leading HR strategy and organization’s management for the recognized ASX listed companies and retail brands including Woolworths Limited, David Jones & Country Road Group, and Qantas.
In today’s trading session, Stockland’s stock last traded at a PE of 8.720 x with a market capitalization of $8.96 billion. Moreover, in the past 12-months, SGP’s stock price has fallen 21.99%, but over the past one month, it has gone up 2.22%.
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