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McGrath Limited has revealed that it has closed a significant deal in the market, advancing the high-profile real estate group’s turnaround ambitions substantially and giving it clear water to accelerate its project marketing portfolio.
McGrath Limited has secured a $10.7 million strategic investment from AL Capital Holding Pty Ltd as trustee for the AL Capital No 1 Unit Trust, which is part of the Aqualand Group, by way of a placement in two tranches in accordance with the terms of a subscription agreement.
Under the first tranche, which has now completed, Aqualand has acquired an initial stake of 8.7 per cent in McGrath.
The second tranche, which is conditional on McGrath shareholder approval, will give Aqualand a further interest of 6.3 per cent in McGrath.
The stake achieves strategic commercial alignment between McGrath and Aqualand, with Aqualand entitled to appoint a director to the board.
McGrath and Aqualand Projects Pty Ltd, a member of the Aqualand Group, have also entered into an agreement, under which Aqualand has agreed to grant McGrath the first right to discuss being appointed as an agent for new Aqualand projects expected to come to market in future years, or provide property management services in respect of leased apartments within new projects.
Aqualand retains discretion as to whether or not to appoint McGrath.
Executive director John McGrath remains the largest shareholder.
He said that the move 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.”
McGrath CEO Geoff Lucas said that the deal provides good commercial impetus for the company.
“The Australian real estate market is becoming more sophisticated and relationships and channels are more important than ever before.
“Working closely with a major shareholder like Aqualand, which owns some of the best residential development sites in the country, represents a great opportunity to grow our business in project marketing.”
Mr Lucas said that the capital raised in the placement will allow for strategic acquisition opportunities “over the next couple of years”.
“McGrath is currently in a stabilisation and turnaround program and this transaction and relationship underpin our momentum to return to being Australia’s preeminent residential property brand.”
AL Capital CEO Wayne Mo said that Aqualand was pleased with the deal.
“We have observed McGrath for some time and have developed a positive view of the overall business operation and the capability of the McGrath leadership team.
“We believe McGrath has good potential for future growth and that this growth will only be enhanced by our new strategic relationship.”
Proceeds from the placement will be used for general corporate purposes, including business development and potential growth opportunities as they arise.
The agreement has an initial term of five years, subject to termination rights, and can be renewed for two further terms of three years each by agreement between the parties. In addition to customary termination events, the agreement also terminates on a change of control of McGrath or if John McGrath ceases to have a substantial holding in McGrath and ceases to be actively involved in the management of McGrath.
Aqualand is a leading property development and investment group. It was established in Australia in 2014 and has a portfolio of 18 sites, with a collective gross development value of approximately $5 billion.
