The Stockland Corporation Ltd (ASX: SGP) share price is under the spotlight today on acquisition announcement.
Stockland to acquire Halcyon Group
Stockland said that it has entered into binding agreements to acquire Queensland based Halcyon Group’s land lease communities business for $620 million (plus transaction costs and subject to certain adjustments at completion).
The acquisition includes 3,800 sites across 13 land lease communities. Of these, six communities are established, four are in development and three projects are in planning.
Stockland said that it will welcome over 2,500 new customers and a team of over 100 established staff to its portfolio as part of the acquisition.
Management said that the acquisition will add to the net rental profits (FFO – funds from operations) on a per share basis.
Stockland said that it will fund 100% of the acquisition price from existing liquidity, with the first portion to be paid upon the completion of the transaction in mid August 2021 and the balance of $310 million deferred until July 2022.
The business said that its land lease business has “strong” interest from the over-50s demographic looking for low maintenance, secure and active lifestyle options with access to high quality facilities.
Management comments
Stockland Managing Director and CEO Tarun Gupta said: “This acquisition is in line with our stated strategy to grow our land lease communities and will increase the size of our portfolio to 7,800 sites. Land lease communities deliver attractive returns as the demand for high quality, affordable housing solutions grows. This demand is driven by Australia’s aging population and baby boomers reaching retirement age.”
Stockland’s balance sheet
Management said that it has a “strong” balance sheet. Its gearing is estimated to be around 22% at 30 June 2021, this is at the low end of Stockland’s target range of 20% to 30%.
Stockland has liquidity of over $2 billion from “well-diversified sources” and at rates that Stockland deems attractive.
Stockland will release its FY21 results on 20 August 2021.
Final thoughts on the Stockland share price
Stockland is leaning into the changing housing needs of baby boomers with the growth of its land lease communities. This is a tailwind that could continue to grow for sometime. However, eventually the growth in demand from baby boomers will drop away and the demand for this type of community living could decline.
The Stockland share price is down around 1% after the announcement, although so is the ASX 200 (ASX: XJO) as a whole.
