Residential property developer Villa World (ASX: VWL) is ramping up its growth strategy on Australia's east coast "hot spots" with an $80 million capital raising venture.
The Gold Coast-based company, which develops and sells residential land and buildings mostly in Queensland, NSW and Victoria, is looking to grow its inventory and is aiming for Earnings Per Share growth of more than 10 per cent.
The capital raising will fund the company's strategy of adding to its five to six-year project pipeline and adding acquisitions to its targeted growth corridor "hot spots".
"Villa World has been actively restocking our project land bank during the past four years, almost tripling our lot portfolio in that time," managing director and CEO Craig Treasure said.
"With continued sales momentum and strong demand from an increased number of residential projects on the market, the company is poised to step up our growth strategy and capitalise on market opportunities."
Villa World has invested approximately $164 million in land acquisitions this financial year, with an expected yield of more than 2,300 lots.
"We've been targeting east coast capital cities with a particular focus on where our customers want to live and these are well spread," Treasure says.
"We're looking at locations that tick all the boxes with infrastructure and local facilities like parks and schools and we're making it all as affordable as possible for our customers," he says.
Treasure says most of the Villa World's developments are in north Brisbane, Bayside, Logan and Gold Coast in Queensland; in Melbourne the focus is on the south east corridor and the city's north including the Plumpton precinct; and in Sydney the company has targeted the city's south-west and Oran Park in particular.
"We're looking at Greenfields areas and developing residential property in the $420,000 to $500,000 range in Victoria and Queensland, and in Sydney the prices are more like $600,000 and up," Treasure says.
The capital raising will comprise an equity offer which will raise around $20 million through new ordinary shares at an issue price of $2.25 per share, a non-underwritten share purchase plan to eligible shareholders for up to $15,000 worth of shares per shareholder which is expected to raise $10 million and a separate simple corporate bond offer targeting institutional investors and broker firms which aims to raise $50 million.
The 500,000 bonds with a face value of $100 per bond will not be available to the general public.
The simple corporate bond offer (SCB) will make Villa World only the third Australia company to launch such a scheme, after Australian Unity and Peet.
"SCBs will enable Villa World to achieve our current strategic objectives, but also provide ongoing access over three years to go back to the market, with relative simplicity. This will support our ongoing strategy and growth program," Treasure said.
As for Villa World's customer base, which is typically made up of first home buyers, Treasure doesn't believe the potential for rising interest rates will be a major deterrent for future sales.
"Where will interest rates go from here? The general consensus is there will be a small rise at the end of 2017 and maybe a few more in 2018," Treasure says.
"But the real factor for our customers is job confidence. If they feel confident about jobs, which is happening at the moment, then they are motivated and confident in buying houses."
Business News Australia
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