WATPAC (ASX: WTP) today announced its entry into an unconditional $8 million contract to sell its Joule development site at Newstead to Tatts Group (ASX: TTS).
Settlement over sale of the property which is located at the heart of the urban renewal precinct in Newstead and Fortitude Valley is scheduled to occur in September.
Watpac chief executive officer Martin Monro says the decision to sell the site forms part of the group’s ongoing strategy to divest property assets to recycle capital back into existing businesses.
“This transaction is an excellent outcome for both parties,” says Monro.
“For Watpac, the sale provides an opportunity to repatriate capital back into existing businesses, which aligns with our stated near term objectives.
“For Tatts Group it is an opportunity to purpose-build a new national headquarters in a prime city-fringe location, with excellent exposure to Breakfast Creek Rd and in close proximity to major transport networks.
“The transaction is a strong endorsement of the now well-established office precinct connecting Newstead and Fortitude Valley and we believe this confidence will continue to attract tenants to the area.”
Watpac’s share price increased almost four per cent from 50 to 52 cents by close of today’s trading, in tune with news of the sale.
Tatts' price rose only .48 per cent to $3.120, from $3.1 at the market's open.
Monro says Watpac successfully eliminated the group’s property debt in June 2013 following the sale of more than $120 million in property assets along Australia’s east coast in the 2013 financial year.
“The transaction is at current book value and while modest impairment was recorded in 2013, it represents market value,” he says.
“We will continue our strategy to divest property assets in 2014 to return capital to existing businesses and further strengthen our financial position.”
Watpac’s rebalanced property portfolio is now valued at less than $90 million and includes Waterloo Stages two, three and four in Newstead, which is also located in the Newstead precinct and adjacent to the group’s head office.
Other properties include the Centra Park Industrial Estate in Coolum on the Sunshine Coast, and retail tenancies at the mixed-use Rue de Chapel development in Melbourne.
Monro says Watpac’s current strategies are aimed at restoring long-term value for shareholders.
“The group’s national contracting operations in construction and mining, and our civil operations in Western Australia, are performing well despite growing competition and tightening margins in the sector.
“We remain focused on strengthening and growing these core businesses consistent with the market conditions,” he says.
The transaction was negotiated by Jones Lang LaSalle national director Seb Turnbull.
Tatts intends to build its new national headquarters on the 3,254 sqm site at 11 Breakfast Creek Rd.
The organisation joins a growing number of national companies establishing permanent operations within the Newstead Riverpark precinct, including Watpac, Energex, Macquarie Bank, Virgin, Fujitsu, Bechtel and Bank of Queensland.
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