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Australia’s competition watchdog has cleared Stockland Group to proceed with a $1 billion deal to acquire 12 master-planned communities from Lendlease (ASX: LLC) in partnership with Thai multinational Supalai.
However, the deal is subject to a court-enforceable undertaking by Stockland that it sells one of its newest developments, the Forest Reach master-planned community project in the NSW Illawarra region.
“Without the divestment, the proposed acquisition would bring together the two largest master-planned community projects in the already concentrated Illawarra market,” says Dr Philip Williams, commissioner of the Australian Competition and Consumer Commission.
“This could have resulted in increased prices, delayed supply, or reduced quality of housing lots in the Illawarra region, to the detriment of prospective homeowners.”
The approval granted by the ACCC, which raised concerns over the deal in July, will see Stockland and Supalai acquire 12 of Lendlease’s 16 master-planned residential projects in NSW, Queensland, Victoria and Western Australia.
The projects comprise Kinma Valley, Yarrabilba, Springfield Rise and Shoreline in Queensland; Figtree Hill and Calderwood Valley in NSW; Aurora, Atherstone, Harpley and Averley in Victoria; and Alkimos Beach and Alkimos Vista in Western Australia.
The projects comprise a total of about 27,600 lots which are being acquired by the Stockland Residential Communities Partnership, which is 50.1 per cent owned by Stockland with 49.9 per cent held by Supalai.
The ACCC says the sale of Forest Reach by Stockland is necessary after it found that there were few alternative master-planned community projects to constrain Stockland in the Illawarra.
Lendlease’s Calderwood Valley development is just south of Stockland’s Forest Reach development located near Dapto.
The ACCC also says prospective entrants in the area would face additional challenges, including delays in the availability of essential infrastructure such as sewer and water services, which would give Stockland an advantage in this market should it retain both projects.
Stockland has offered the ACCC an undertaking to sell Forest Reach in order to get the $1 billion Lendlease deal over the line.
“The ACCC considers that the divestiture undertaking given by Stockland addresses the competition issues that would arise from Stockland owning both Forest Reach and having an interest in Lendlease’s nearby Calderwood Valley project as a result of the proposed acquisition,” says Williams.
The ACCC says it is also satisfied that the proposed acquisition is “unlikely to cause serious competition concerns in other areas”.
The competition authority has rules that the planned acquisition is not likely to substantially lessen competition in any market, including the supply of residential master-planned community housing in North West Perth, Ipswich and Moreton Bay, where the ACCC says there are sufficient alternative developments available to constrain Stockland and its joint venture.
Once the acquisition of the Lendlease projects is settled, Stockland's landbank will surge to about 95,600 lots, representing a potential increase in settlement volumes of around 2,500 lots annually.
Supalai first entered a strategic partnership with Stockland in 2020 when it committed $52.5 million for half ownership of master-planned community Katalia in Melbourne's north.
Stockland says the transaction is still subject to Foreign Investment Review Board and landowner approvals. The company plans to update the market on its FY25 guidance once these approvals are granted.
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