Gold Coast developer Sunland holds annual meeting at RACV Royal Pines in Benowa, MD Sahba Abedian refutes privatisation talk

A Gold Coast giant has weighed into suggestions the company is preparing to return to private hands. READ THE FULL REPORT

SUNLAND’S managing director has poured cold water on suggestions the company is preparing to delist and return to private hands.

The developer, founded on the Gold Coast in 1983, held its annual meeting at the RACV Royal Pines Resort on Friday.

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It followed the release of a strategic review which looks at the sale of undeveloped sites, completion of current projects by June 2023 and delivery of the net proceeds of asset sales back to shareholders in the form of cash dividends.

This prompted some media outlets to speculate the company was preparing for privatisation.

In recent years Sunland, which is building the luxury high-rise 272 Hedges Avenue in Mermaid Beach, has moved to reduce the number of shares on issue from 320 million to 133 million through share buyback programs.

Aerial shots of Sunland Group's 272 Hedges Ave tower at Mermaid Beach which has reached the halfway point of construction

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Following Friday’s meeting, where all motions were successfully carried, managing director Sahba Abedian said privatisation was “not something that the board will ever consider”.

“The strategy right now … is to pursue this path and distribute the dividends and the capital, however the ultimate decision as to how the company will fare in three years time … the board of directors will need to make that determination at that stage,” he said.

The Sunland strategy is designed to rectify the discrepancy between the share price and net tangible assets per share by returning to shareholders the current net asset value of $2.56 per share by way of dividends and capital payments.

After the strategy’s announcement the share price soared 46 per cent to $1.95.

On Friday it closed up 1.4 per cent at $2.15.

Artist impression of The Lanes shopping centre from Sunland.

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Sunland said it had contracted for sale four assets recently including development land at The Heights in Pimpama and a development site on Marine Pde in Labrador for a total of $31.3 million. It also recently listed the Greenmount hotel in Coolangatta for sale.

The company has 70 per cent of its inventory value under development and has flagged the start of a “limited number” of new projects in the future.

Mr Abedian said the strategic review had been brought to the forefront through the coronavirus pandemic.

“The board of directors has taken the view at this stage that the strategy is one to deliver on the existing assets and start a number of new projects and sell down some inventory that might be surplus,” he said.

“That will crystallise the ability of being able to repay the shareholders the value of the business if the sharemarket is not willing to acknowledge the inherent value.”

Sunland managing director Sahba Abedian. Photo: Richard Gosling

Mr Abedian said the coronavirus had emphasised how the global community was “interconnected”.

“The recognition of that interdependence will drive the prosperity and the wellbeing and the betterment of all.”

The company has flagged it is considering an interim dividend with the first-half results for FY21.

It says the market post-COVID-19 is “sound” due to government stimulus and an increase in sales activity in southeast Queensland, particularly from southern buyers.

The company reported a statutory net profit of $2.4 million in FY20, down from $17.7 million in the previous period.

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THE head of developer Sunland says it is inevitable apartment buildings of the future will need to incorporate shared offices or work spaces as the COVID-19 pandemic changes the way we work for good.

Sunland, which has a number of projects underway on the Gold Coast including 272 Hedges Ave in Mermaid Beach, reported its full-year results this morning.

The company, led by managing director Sahba Abedian, reported a net profit of $2.4 million – 86 per cent lower than the previous result of $17.7 million.

Sunland said the result was impacted by $13.9 million of after-tax adjustments.

Artist impression of the Sky Villas in Sunland's 272 Hedges Ave tower. Picture: Sunland Group

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It said $8.5 million related to scrapping the “obsolete” work done by designers and consultants for its Grace, Mariners Cove, Greenmount and Lanes Retail projects.

Mr Abedian said changes to market demand had meant they were pressing ahead with The Lanes retail project but in a smaller-scale neighbourhood centre format.

He said similarly Greenmount in Coolangatta would be redesigned with a focus on owner-occupiers and downsizers.

“With Greenmount … we are finding that the (luxury) owner-occupier market is outperforming (other markets) and a testament of that has been our development at 272 Hedges Ave,” he said.

“As such we have looked through our portfolio and realigned development proposals to conform with where the market is moving.”

Mr Abedian said Sunland is planning to lodge a development application for a luxury apartment tower the Greenmount Resort site by the end of the year.

Sunland said a further $5.5 million in after tax adjustments related to writing down the net realisable value of its Bushland Beach project and its Labrador tower site on Marine Pde, which it is selling.

The company has been selling off “non-core” assets such as Mariners Cove on The Spit and the Lakeview Retail Centre in Mermaid Waters and focusing on smaller-scale retail and residential apartment building projects with the exception of the Hedges Ave high rise.

Sunland said excluding the after tax adjustments its underlying earnings were $16.4 million.

Revenue was $167.18 million – down 41 per cent – off the back of a 42 per cent drop in the total value of settled sales to $159.8 million.

Mr Abedian said Sunland has managed to release a solid result in challenging market conditions.

Sunland settled 70 luxury apartments at its Marina Concourse project in Benowa during FY20 for a total of $56 million.

At Magnoli Apartments in Palm Beach it settled on 64 units for a total of $45 million. A further 109 are yet to sell.

Sunland said at its flagship Gold Coast project – 272 Hedges Ave – contracts have been signed for 82 of its 98 units representing sales of $188 million.

Mr Abedian said the Gold Coast would benefit from a surge in people working from home.

“This notion of work from home is something that will be with us for many years to come,” he said.

“Naturally as a consequence it is allowing for mobility. People that once lived in concentrated city centres have the opportunity to consider lifestyle choices to new city centres and the Gold Coast will be one of the beneficiaries and we are already seeing it.”

He said this necessitated a rethink of the design of apartment buildings.

“I think it is an inevitable outcome that we will need to ensure that there are spaces that are conducive to positive working environments,” he said.

“So if you are creating a residential apartment (building) consideration be given to shared office or shared working spaces.

“These are things that will naturally emerge.”

The sale of Mariners Cove, which settles on September 1, is expected to contribute $8.1 million to the company’s FY21 profit.

Sunland said the company would declare a special fully-franked dividend of 3 cents per share from this sale.

No interim dividend was declared, however Sunland has announced a final fully-franked dividend of 7 cents per share.

Sunland had $13.1 million in cash at the end of the financial year and $139.9 million in undrawn working capital.

It said the sale of the Lakeview Retail Centre and Ingleside in Sydney had generated $37.9 million and $11.5 million in after tax profit.

Sunland said it achieved a 26 per cent development margin as a return on costs, which exceeded its 20 per cent target.