Stockland, Australia’s biggest diversified property trust, yesterday raised A$400 million ($393 million) in an oversubscribed share sale to fund planned developments and repay debt.
The company sold 103.1 million shares to institutional investors in a fully underwritten placement through UBS AG, it said in a statement to the Australian stock exchange. The shares were priced at A$3.88, a 2.5 percent discount to yesterday’s closing price, it said.
Stockland won’t proceed with a dividend reinvestment plan for its June distribution, it said today. The company last week said a reinvestment plan is “appealing” and may consider a 50 percent underwritten one over the next 12 months. The shares fell 2.8 percent to A$3.87 at the close of trading in Sydney, paring gains this year to 9.6 percent. The benchmark S&P/ASX 200 Index ended the day down 0.3 percent.
At first, the equity raising by Stockland, which is trading at a 14 percent premium to the value of its assets, “may appear rational,” John Kim, head of Australia property research at CLSA Asia-Pacific Markets, wrote in an e-mailed note. Still, “raising equity with no immediate proceeds, in our view, is an effective way to reduce a company’s valuation premium.”
Mark Steinert, who took over as Stockland’s managing director in January, last week said the company will increase its exposure to retail and industrial properties, a partial change from his predecessor Matthew Quinn, who steered the company away from warehouses and offices. The raising will help fund the Sydney-based property trust’s A$1.5 billion of retail developments, as it advances its plan to boost retail properties to as much as 70 percent of its business within five years, from about 47 percent as of Dec. 31, it said.
“The additional funding ensures Stockland has the capacity to implement our recently announced strategy,” Steinert said in the statement. “The proceeds will also be used for the repayment of debt, reducing Stockland’s balance sheet gearing by approximately 3 percent.”