Lendlease will offload $1.3 billion in housing assets after the Australian Competition and Consumer Commission (ACCC) approved the sale of 12 housing estates to rival Stockland and the Thai-owned Supalai – on the condition that Stockland divest its Illawarra-based Forest Reach estate.
Wood Central understands the deal will turn Australia’s housing development industry upside down. It comes just months after Lendlease—currently developing 16 housing estates in NSW, Queensland, Victoria, and Western Australia—announced that it would be selling out of its international assets and consolidating its operations in the wake of shareholders’ push to go “back to basics.”
Without Stockland’s divestment, “the proposed acquisition would bring together the two largest master-planned community projects in the already concentrated Illawarra market,” according to Phillip Williams, the ACCC commissioner. “This could have resulted in increased prices, delayed supply or reduced quality in housing lots in the Illawarra region, to the detriment of prospective homeowners.”
In December, Lendlease announced plans to offload the 12 estates, including:
- Kinma Valley (in Queensland)
- Yarrabilba (in Queensland)
- Springfield Rise (in Queensland)
- Shoreline (in Queensland)
- Figtree Hill (in New South Wales)
- Calderwood Valley (in New South Wales)
- Aurora (in Victoria)
- Atherstone (in Victoria)
- Harpley (in Victoria)
- Averley (in Victoria)
- Alkimos Beach (in Western Australia)
- Alkimos Vista (in Western Australia)
At the time, it said it had decided to sell its 12 communities so it could prioritise growing other parts of its business. At the time, Stockland claimed that its wider development skills—particularly in the fast-growing land lease sector targeting downsizing baby boomers—would allow it to make more profit than Lendlease could from the master-planned communities.
As it stands, 80% of Australia’s house-and-land development uses structural timber framing. Last year, Wood Central spoke to five of the country’s top “project builders”—many of whom build on Lendlease estates struggling to keep up with the housing supply amid an increasingly tight and difficult lending and materials market.
Should the deal go through as expected, Lendlease will close more than $1.9 billion in sales, putting it within reach of its $2.8 billion 12-month sales target, identified during its infamous May strategy meeting.
This would show strong progress on asset sales to date and set up Lendlease to execute on its strategy. Out of the $2.8 billion targeted, Lendlease currently has a further $900m of assets on the market, and once these are progressed, Lendlease may be in a position to execute on the up to $500m of buybacks.
Suraj Nebhani, a Citi analyst who spoke to the Australian today
In June, Wood Central revealed that the construction giant had sold out 45 of its current, under contract, and pre-construction North American projects—including the US Army’s Privatised Army Lodging (PAL) program —which will now see Consigli develop four hotel developments for the US Army out of cross-laminated timber.
At the same time, Lendlease has committed to developing the world’s tallest timber tower in downtown Sydney after it vowed to help Merricks Capital develop the $1.8 billion 55-storey ‘Halo’ development.
Gersh Investment Partners executive chairman Joseph Gersh, who advised Supalai on the master-plan deal, welcomed the ACCC’s announcement that Stockland and Supalai’s proposed acquisition of the housing estates was unlikely to cause serious competition concerns.
“The transaction is a major milestone in Supalai’s Australian business, potentially taking Supalai’s total investment in Australia to well over $850m across more than 25 projects with leading Australian residential real estate developers,” he said.
- Wood Central has published the ACCC’s formal ruling here.
