ACCC raises concerns about Lendlease’s $1.3bn housing estate sale to Stockland

The competition regulator says the deal in its current form could create issues in three states.

Proposed housing estates in three states are at stake.

The competition regulator has voiced concern about the $1.3bn sale of Lendlease’s local housing unit to a venture led by rival Stockland, delaying the developer’s efforts to sell the business.

The Australian Competition and Consumer Commission said housing markets in key parts of NSW, Queensland and WA could be affected by the planned combination of the development units.

The ACCC said September 12 was a provisional date for its final decision, although this might be changes.

Stockland, however, said it considered “that there are compelling reasons why the proposed acquisition will not lessen competition”.

Lendlease said it would support Stockland in engaging with the ACCC to resolve the issues raised and work with the buyer to complete the proposed sale “as soon as possible”. Its shares were under pressure on Thursday, dropping by 6.5c to $5.62 in early afternoon trade.

The deal may have to be restructured in order to satisfy the competition regulator’s concerns and could leave Lendlease holding on to some estates that it hoped to sell off.

The ACCC is concerned that the proposed acquisition would reduce competition, particularly in four regions – the Illawarra, northwest Perth, Ipswich and Moreton Bay.

Stockland is already the country’s largest listed residential developer and buying the bulk of the Lendlease business would bolster its position.

Lendlease chief Tony Lombardo.

Stockland chief Tarun Gupta.

The deal is considered by both companies to be critical.

Stockland is working on the deal with Thai company Supalai as part of its efforts to expand further in the residential sector, where it has already taken on partners.

For Lendlease, selling the housing estates is crucial in order to get its balance sheet back in shape ahead of the planned return of about $4.5bn of capital from the sale of the bulk of its international operations over coming years.

This task is expected to be difficult to execute as offshore markets where Lendlease plans sell down, such as Britain, Europe and the United States, are at a low point and the competition regulator’s concerns complicate its local strategy.

The ACCC published a statement of issues outlining preliminary competition concerns about Stockland and Supalai’s proposed acquisition of 12 Lendlease housing estates via a joint venture. Lendlease has 16 projects in NSW, Queensland, Victoria, and Western Australia, 12 of which would be sold under the proposed deal.

“We are concerned that the proposed acquisition would remove one of Stockland’s closest and largest competitors in the supply of residential masterplanned community housing lots in four regions – the Illawarra, North West Perth, Ipswich, and Moreton Bay,” ACCC commissioner Liza Carver said.

“The ACCC is concerned that the proposed acquisition may increase Stockland’s incentive to raise the price, delay the supply, or reduce the quality of housing lots in these regions, to the detriment of prospective homeowners.”

Market feedback received by the ACCC indicated that Stockland and Lendlease compete closely as large developers and invest in high-quality amenities, including education, parks, and town centres.

“We are concerned that other developers of masterplanned community projects may not be able to compete sufficiently with Stockland after the acquisition in some regions,” Ms Carver said.

“These preliminary concerns are strongest in the Illawarra region of New South Wales where the proposed acquisition would bring together the two largest masterplanned community projects in an already highly concentrated market.”

The ACCC is considering whether the proposed acquisition may increase the risk of anti-competitive co-ordination by developers in relation to the pricing, supply, and quality of housing estates.

Citi analysts said that areas where issues had been raised likely include five out of the 12 estates being sold – or about 26 per cent of the 27,600 lots included in the deal.

“The delay in sale likely puts downward pressure on Stockland’s fiscal 2025 earnings and also delays capital recovery for Lendlease which is a key upside catalyst,” Citi said.

“That said, given issues have been raised around 26 per cent of the communities being sold, we do believe that the remaining portion of the acquisition will likely go ahead.”

The ACCC said it would take submissions on the issues until July 18.