Stockland raises $400 million from institutional investors to grow malls business

Stockland has raised $400 million from institutional investors to help fund the growth of its retail property development business.

Recently appointed managing director Mark Steinert announced a new strategic direction for the A-REIT earlier this month including increasing its exposure to the retail property sector to between 50% to 70% of total assets.

It currently has a portfolio of 41 retail centres (valued at around $5.5 billion)  with plans to increase this to a portfolio worth around $7.5 billion by 2018.

Domestic and offshore nvestors purchased 103.1 million securities at $3.88 each at a 2.5% discount to the May 21 closing price with the placement oversubscribed

“By completing the placement we have raised capital to fund the initiatives highlighted in the strategic review," said Steinert.

“We welcome the confidence investors have shown in Stockland's new strategic direction, as demonstrated by the strong level of support for this placement.

“The proceeds will help fund our $1.5 billion accretive retail development pipeline, with projects in strong trade areas," he said, with yields of between 7% and 8% targeted.

“The $116 million redevelopment of our Hervey Bay Shopping Centre is a good example of our reinvestment strategy as it will reflect a pre-AIFRS (Australian Equivalent of International Financial Reporting Standards) yield of 7.5% and an incremental internal rate of return of 13.8% upon completion.”

The proceeds will also be used for the repayment of debt, reducing Stockland's balance sheet gearing by approximately 3%.

The placement was fully underwritten by UBS AG, Australia Branch.