Strategic stake in FKP goes on the block

By InvestSMART · 14 Aug 2013

By InvestSMART ·
14 Aug 2013

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Stockland is to sell its strategic 14.9 per cent stake in FKP Property, with the cash raised of about $70 million to be used for new developments across the business, including the residential communities.

Stockland bought an initial 5 per cent interest in FKP in 2008 for about $2 a share but, after a series of capital raisings and share consolidations by both companies over the years, Stockland now has about 47.8 million of FKP's 321 million shares on issue, or about 14.9 per cent.

FKP is trading at $1.45 and last week said it was planning to divest its assets to focus on being a "pure play" retirement owner and operator.

Stockland chief executive Mark Steinert, pictured, said that as part of a strategic review of the business it was more cost effective to sell the FKP stake and focus on building his group's own retirement living assets.

He said it was more cost effective to build then sell units in a retirement village, but retain exposure to the management fees of the community centre and the assets.

"This becomes a capital-light model," Mr Steinert said.

"The stake in FKP is no longer classified as a strategic stake. But we are under no time pressure to sell and we will be aware of how we conduct the sale as we don't want to impact negatively on FKP when we sell down."

Mr Steinert ruled out the cash being used for mergers and acquisitions. The group had been touted as possible suitor for Australand.

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Frequently Asked Questions about this Article…

What stake is Stockland selling in FKP Property?

Stockland is selling its strategic 14.9% stake in FKP Property, which equates to about 47.8 million of FKP’s 321 million shares on issue.

How much cash will Stockland raise from selling its FKP stake and what will the money be used for?

Stockland expects to raise roughly $70 million from the sale, and plans to use the cash to fund new developments across the business, including residential communities.

Why is Stockland choosing to sell its strategic stake in FKP Property?

According to Stockland CEO Mark Steinert, a strategic review concluded it is more cost-effective to sell the FKP stake and concentrate on building Stockland’s own retirement living assets rather than retain the equity stake.

How will Stockland change its retirement living strategy after selling the FKP stake?

Stockland plans a more capital-light model: build retirement village units and then sell the units while keeping exposure to management fees from the community centre and related assets, rather than holding the underlying property equity.

Is Stockland under pressure to sell the FKP shares quickly?

No. Mark Steinert said the stake is no longer classified as strategic but Stockland is under no time pressure to sell and will be careful to avoid negatively impacting FKP when it sells down.

Will Stockland use the proceeds from the FKP sale for mergers and acquisitions or to buy Australand?

No. Mr Steinert specifically ruled out using the cash for mergers and acquisitions. Although Stockland has been mentioned as a possible suitor for Australand, the proceeds will not be used for M&A.

What has FKP Property said about its own strategy and how might that relate to Stockland’s decision?

FKP has been trading at $1.45 and recently announced plans to divest assets to become a 'pure play' retirement owner and operator. Stockland said its FKP stake is no longer strategic, which aligns with both companies focusing on core retirement‑related strategies.

How much did Stockland originally pay for its interest in FKP and how did it grow to 14.9%?

Stockland bought an initial 5% interest in FKP in 2008 for about $2 a share. After a series of capital raisings and share consolidations by both companies over the years, Stockland’s holding has grown to roughly 47.8 million shares, or about 14.9%.