Sunland spikes 44 per cent on plans to axe debt and give back to shareholders

Sunland spikes 44 per cent on plans to axe debt and give back to shareholders

Property developer Sunland Group (ASX: SDG) has put several of its new developments in Queensland on a tentative backburner, as the company prioritises paying off debts and improving value for shareholders.

The news sent the share price for Sunland, which is led by CEO Sahba Abedian (pictured), up by more than 44 per cent at the time of writing (11:42am AEDT), hitting its highest levels since March 2015. 

The Brisbane-headquartered company highlighted plans to "return to Sunland Group's shareholders current net asset value, where possible, of approximately $2.56 per share".

While it may be some time before we see completion of The Lanes Retail and Lanes Residences (West Village) at Mermaid Waters and the site at 154 Marine Parade Coolangatta, Sunland's conservative and calculated asset management plan could be a winning move in the volatile age of COVID-19.

In its latest statement to the market, Sunland revealed the details of a decade-long risk management strategy involving share buy-back programs, a dividend program, third-party outsourcing for multi-storey builds and capital spend reduction by opting for smaller mid-rise developments.

It seems this risk management strategy that was adopted before the COVID outbreak has now been taken to the next level, as Sunland aims to boost its coffers and give back to its shareholders.

As it turns out, the recent sale of Sunland's Mariner's Cove development site to Chinese developer Ridong was part of this much wider plan to pay off debt and improve share value.

The company says the sale was part of a new cyclical sales and acquisition approach to the management of its portfolio.

This same strategy also resulted in the sale of development land at Ingleside in New South Wales, and The Heights and The Lakes Retail sites in Queensland.

The $65 million offload of these three assets alone was reportedly "in excess of book value" and has assisted in reducing company debt.

Moving forward with its strategy to realise net assets, Sunland expects there will be a limited number of further projects which it will undertake.

The company says around 70 per cent of its inventory value is currently under development and, when completed over the course of the next three financial years, these assets are intended for sale and settlement as quickly as possible.

"The net proceeds from these sales may then become available for distribution," says Sunland.

Around 30 per cent of Sunland's inventory is currently not in development and is still pending approvals and concept designs.

The company intends to sell off this complete portion of inventory "at market price in an orderly fashion".

Sunland says the board engaged an independent external advisor to weigh its options in distributing value from these sales to its shareholders.

After reviewing its options, Sunland has opted for fully franked dividend and capital distributions as the vehicle for returning value to its shareholders.

At the time of writing, SDG shares are trading at $1.91. The previous close was $1.30.

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