Stockland eyes Lendlease unit

There is a national shortage of housing as migration levels increase.

The country’s largest residential developer, Stockland, is understood to have held talks with listed rival Lendlease about an acquisition of at least part of its $1.7bn-plus Australian Communities business.

Lendlease has hired Macquarie Capital for a sale of a 50 per cent stake in the business.

Sources at the Macquarie Australia Conference in Sydney last week said that they believed pension funds had been in discussion about taking a half share.

One source said that they believed Stockland had held discussions with Lendlease some time back, but Lendlease was not keen to sell to a competitor as it would be reluctant to pay management fees.

But there has been some chatter in the market this week that Stockland was looking, although it is unclear whether this is for the stake or the unit as a whole, and the suggestion was it had some fresh interest.

An acquisition would likely gain support in the market – with its chief executive Tarun Gupta receiving backing from his investors, judging by its rising share price, and the thematic of a national shortage of housing with increasing migration levels despite weaker economic conditions.

The National Housing Finance and Investment Corporation last month released research showing a shortage of 106,000 homes by 2027,

Yet some say that Stockland has a large pipeline of 80,000 lots.

The developer could likely replicate the Lendlease communities business itself by acquiring smaller developers rather than writing a large cheque.

At the Macquarie Australia Conference, Mr Gupta sent a strong signal in his presentation that the group’s focus was on buying smaller developers which were on the market as going concerns because they were struggling to obtain funding.

This was particularly the case when it came to land lease communities.

He would not elaborate on inorganic opportunities specifically within its sights.

As reported by The Australian in April, the Lendlease portfolio of 14 land estates is one of the largest in the country with a pipeline of about 45,000 lots and focuses on developing outer suburban masterplanned communities.

The company is also targeting new projects to replenish its pipeline as it is well placed to capitalise on the forces which are expected to spur demand for new homes.

It is developing 29,000 lots in Queensland at localities like Eliot Springs, Springfield, Yarrabilba, Shoreline and the Kinma Valley.

Its 7000 land lots in Victoria include Atherstone, Aurora, Harpley and Aveley and in NSW, the 6100 lots are at Calterwood Valley, Figtree Hill, Jordan Springs, Rouse Hill and Kings Central.

In WA, there are about 1250 land lots at projects including Alkimos Beach and Alkimos Vista.

The deal was being pitched as an opportunity to partner with the country’s premier master planned communities business, which has the capacity to source new projects and to deliver growth in coming years.