Sunland Group announces medium-term plan to wind down operations

After a decade of operating below its net tangible asset value, Sunland Group will wind down business operations.

Sahba and Soheil Abedian at the Sunland AGM in 2019. Picture: Tertius Pickard

One of the country's best known luxury developers, Sunland Group, has announced plans to wind down business operations over the next three to five years following the completion of current projects.

The company announced via an ASX on Tuesday plans were in place to complete and sell off its current projects and land banks in order to repay liabilities and shareholders before the company goes private and potentially ceases operations.

Sunland has been operating below its net tangible asset value – which currently sits at an estimated $2.56 per share – for the past 11 years after surviving the 2008 Global Financial Crisis.

The Queensland-based company was founded in 1983 by Iranian businessman Soheil Abedian and Foad Fathi and has since been taken over by Mr Abedian’s son, Sabah Abedian.

Having previously created Gold Coast landmarks such as Q1 and the Palazzo Versace, it had planned to take the hotel brand global but later pulled out of Dubai where it had projects.

Luxury Brisbane CBD residential tower, Abian, won Sunland Group a slew of design and construction awards.

After achieving a share value above $4 in the early to mid-2000s, the company has consistently trended at less than half this amount over the past decade, with the 30 day volume weighted average price over the past 30 days at $1.33. Following the announcement, the share price rose to hit $2.

The younger Mr Abedian, now managing director, said strategy moving forward was a decision not made lightly but ensured the shareholders were rewarded for staying the course.

“This company, the current public company, is repaying all of its obligations and returning all the proceeds from its development and the sale of assets back to shareholders,” Mr Abedian told The Australian.

“So the current entity may not be in existence in three to five years’ time. That‘s potentially one of the implications of the path that we’re taking.”

The strategic plan was devised with external oversight from Morgans.

Sunland has spent the past few years trying to balance the net tangible asset equation through a string of counter-cyclical acquisitions and sales, a reduction in capital and funding requirements and the outsourcing of multistorey construction to third parties.

Share buyback programs have also been implanted over the past decade, which has reduced issued shares from 320m to 133m shares, excluding Treasury shares.

“We tried all various mechanisms but naturally the market hasn't responded to at least bringing the share price to parity with our NTA (net tangible asset),” Mr Abedian said.

“So, the decision now is to enable at least all shareholders to benefit over the course of the next number of years.”

Renders of Sunland Group's proposed project ‘The Lanes’ at Mermaid Waters which may still go ahead subject to pre-commitments.

About 70 per cent of the company’s inventory is currently in development and is planned to be completed over the 2021, 2022 and 2023 financial years. Projects already announced, including The Lanes Retail and Lanes Residences projects at Mermaid Waters and 154 Marine Parade at Coolangatta will forge ahead subject to pre-sale and pre-leasing commitments and capital and debt requirements.

The company is looking to offer shareholders a fully franked dividend payment, with $81m credit balance available at the end of last financial year.

Redundancies have been flagged, with staff to receive full payouts and packages.

Sunland Group’s development inventory is largely centred in south east Queensland, specifically the Gold Coast where the company is headquartered. Current projects include the $250 million residential tower at 272 Hedges Ave, the twin Magnoli Apartments at Palm Beach and the $1.3 billion master planned community The Lakes at Mermaid Waters.

Recent property sales include the Mariners Cove development site at The Spit at a $7m premium for $28m.

In 2009, the developer accused Australian businessmen Matthew Joyce and Marcus Lee, employees of Dubai-based development company Nakheel, of fraud over the botched 2007 purchase of land on the Dubai Waterfront. The accusations were played out in the Supreme Court of Victoria and ultimately ended in December 2013, when Sunland was ordered to pay $6.7 million in legal fees to Joyce and Reed

Former Crown Casino boss James Packer spectacularly stepped away from the Sunland board when the legal action was launched, selling down his 11 per cent stake. It was later revealed Mr Packer had called for the immediate liquidation of the listed Gold Coast developer as a result of investigations