CapitaLand takes Australand stake off the market
In January, CapitaLand, which owns 59 per cent of Australand, revealed that it was looking at divesting the stake as part of a general review of the group's investment strategy.
That was seen as the starter gun for a new round of mergers and acquisitions among the real estate investment trusts, of which none has occurred.
Speculation about potential tie-ups has all been discounted by the REITs, with the managers preferring to focus on their own businesses during a volatile six months.
Many of the REITs' share prices are back to parity, or at only marginal discounts to the net tangible asset values, which is considered the key benchmark for the sector.
Analysts say now would not be a good time for REITs to launch aggressive takeovers when the outlook for the office and retail property leasing markets is not as positive as a year ago. One analyst said the managers needed to restore balance sheets and investor confidence in their longer-term strategies before making moves.
GPT triggered the speculation when chief executive Michael Cameron revealed he was looking at a potential takeover of Australand. Some of Australand's key assets include Building F at Rhodes Corporate Park, where Citigroup has signed a six-year lease over 3500 square metres.
But after months of discussions, which also involved the opening of a data room, no viable buyer came forward, leaving CapitaLand as a long-term shareholder. GPT pulled out of the running in late May.
In a statement released on Monday evening, CapitaLand and Australand directors advised the status quo had been maintained.
"Several indicative proposals were received from various parties for parts and all of the business during the process, which commenced in early 2013. However, no proposal was able to be developed that was superior to business as usual," it said.
"CapitaLand has completed the strategic review of its interest in its subsidiary Australand and concluded that Australand will continue as a key investment."
Australand will unveil its interim results on Wednesday. According to analysts, the result will be the benchmark for the coming reporting season for any impairments in the group's residential division.
Simon Wheatley, the head of REIT research at Goldman Sachs, said he expected Australand's net profit to be $71.5 million, up from $68.2 million in the previous corresponding period.
Australand has confirmed a 10.5¢ interim dividend. The guidance for the full year is 21.5¢ a security.
"We show growth over the first half largely driven by the impact of internal development completions, such as 357 Collins Street, Melbourne, as well as about 2.5 to 3 per cent net operating income growth," Mr Wheatley said.
"We are are forecasting earnings before interest and tax [EBIT] for the residential business of $40.3 million. We will be looking out for any evidence of inventory impairments, and a second-half EBIT skew, based on the timing of residential project settlements and the recognition of sales campaigns.
"Potential downside risk exists given the poor trends evidenced in housing finance and consumer sentiment data, as well as Australand's exposure to the Victorian market.
"For the commercial, industrial and development, much of the focus has stemmed from GPT's unsuccessful bid for this business."
Frequently Asked Questions about this Article…
After an extensive strategic review, CapitaLand concluded it will remain a long‑term shareholder in Australand and will not divest its stake. As a result, Australand is no longer up for sale and the status quo has been maintained.
CapitaLand owns a 59% majority stake in Australand, which is why its decision to stay on the register effectively ended the formal sale process.
Although the potential divestment sparked merger speculation, REIT managers largely discounted tie‑ups and focused on their own businesses amid a volatile six months. Analysts also said it wasn’t an ideal environment for aggressive takeovers given softer office and retail leasing markets and the need to restore balance sheets and investor confidence.
GPT triggered takeover speculation when CEO Michael Cameron expressed interest and discussions — including opening a data room — took place. However, after months of talks GPT pulled out in late May and no viable buyer emerged.
Investors should look for any signs of impairments in the residential division, the timing of residential project settlements (which could create a second‑half EBIT skew), and confirmation of revenue drivers. Analyst Simon Wheatley (Goldman Sachs) expects net profit of about $71.5 million, slightly up on the prior period.
Australand confirmed a 10.5 cent interim dividend and guided to a full‑year dividend of 21.5 cents per security.
The article cites Building F at Rhodes Corporate Park — where Citigroup signed a six‑year lease over 3,500 square metres — and the completion of internal developments such as 357 Collins Street in Melbourne as contributors to growth.
Analysts pointed to downside risk from weak housing finance trends and poor consumer sentiment, plus Australand’s exposure to the Victorian market. They also warned of potential inventory impairments and noted the residential EBIT forecast of about $40.3 million is something to monitor.
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