Stamford Land, which manage a chain of hotels in Australia and New Zealand, announced this evening that they are selling their Dulwich Hill freehold development site for A$ 51 million
The announcement and release can be found here and here.
The free hold site was purchase a year ago for A$ 23 million. The after tax gain is A$ 15.7 million. The NTA of Stamford will increase by SG$1.95 cents per share.
The IRR of this investment is impressive, but what I cannot fathom is that why Stamford is selling this development piece of land a year after purchasing it. From the reports that I see in Sydney, demand does not look like peaking. With the country being an attractive destination for migrants from China, and the popular demand for recent property sales in the city, development should yield a good result.
I don’t think Stamford land will be distributing special dividends from the wording of the announcement. With 2 of their hotels being monetize for development projects, they will need to shore up some cash to make up for the falling exchange difference between Australian dollars and Singapore dollars.
To put this into perspective, this gain is almost equal to the one year interest expense paid out, thus its not an exceptional sum of money.
I am just more curious about the sudden turn of events. Are they seeing some shifting in demand that is not well reported in the papers just like how they see the excessive ship supply prior to the 2007 crisis?
Friday 26th of December 2014
Prop market in Sydney has already peaked this cycle. Most "smart money" prop. investors have been selling this past half year. There is also possibly credit tightening coming soon.
Saturday 27th of December 2014
Hi bk, I took a stance that, if SL is the smart one , then the real estate developer is really stupid to develop the property. That is hard to believe in a peaked market unless that is your interpretation