Aqualand drops $10.7m into ‘strategic relationship’ with McGrath

Aqualand drops $10.7m into ‘strategic relationship’ with McGrath

22 June 2018

Chinese-based local developer Aqualand will acquire a 15 per cent “strategic” stake in McGrath Estate Agents in the first major win for McGrath’s new chief executive Geoff Lucas.

The Australian Financial Review reports that under the deal, which will make Aqualand the second-biggest shareholder behind founder John McGrath, McGrath agents will be given first rights to discuss being appointed agent for new Aqualand projects or provide project management services on leased apartments within its projects.

The deal with Aqualand has been split into two tranches. In the first, Aqualand has secured an 8.7 per cent stake in McGrath, worth $10.7 million via its subsidiary AL Capital Holding Pty Ltd, as trustee for the AL Capital No 1 Unit Trust, all part of the Aqualand group.

The second tranche, 6.3 per cent, is subject to McGrath shareholder approval.

McGrath and Aqualand Projects Pty Ltd, also a company in the Aqualand group, are parties to the agreement which allows Aqualand to grant McGrath the first right to discuss being appointed as an agent for its projects.

The agreement has an initial term of five years and can be renewed for a further two terms of three years but the agreement terminates on a change of control of McGrath, or if founder John McGrath ceases to own a substantial holding in McGrath and departs from the business.

Mr Lucas said the new capital was “firepower” for the business, which has been stabilising.

“We think in the current environment there are still opportunities for some consolidation … it is appropriate to have some firepower on the balance sheet,” he said.

“The key activity in the business is in recruiting [sales agents] and we are pleased with how is that going.

“But it is a tight environment with days on market increasing and auction clearance rates slowing and a balance of power shifting to buyers. It is a tough operating environment.”

Aqualand, which forged into the Australian market five years ago, building up an empire of about 18 office blocks and development sites, has signalled that it is keen to support McGrath’s recovery.

The developer has also been very active and recently made former Mirvac head of residential John Carfi its new chief executive.

The Australian reported “The addition of a new strategic shareholder in Aqualand, represents a great vote of confidence in the future of McGrath Limited. Aqualand is one of Australia’s highest quality property development and investment groups and its addition as a major shareholder and board representation provides McGrath the opportunity to continue to grow our project marketing expertise and develop even stronger ties with the inbound investment,” Mr McGrath said.

McGrath shares soared on the news, climbing 17.65 per cent in morning trade to 40c.