McGrath secure $10.7 million strategic investment from Aqualand

McGrath secure $10.7 million strategic investment from Aqualand
Joel RobinsonDecember 7, 2020

McGrath has secured a strategic equity investment from Aqualand Group, one of Australia’s premier residential property development and investment groups.

The significant stake achieves "strategic commercial alignment" between McGrath and Aqualand, with Aqualand entitled to appoint a director to the board.

Aqualand has also agreed to grant McGrath the first right to discuss being appointed as an agent for new Aqualand projects expected to come to the market in future years, or provide property management services for leased apartments within new projects.

Aqualand was established in Australia in 2014 and has since generated a portfolio of 18 sites, with a collective gross development value of approximately $5 billion. Its project include Blue at Lavender Bay, the residential conversion of an 18 level commercial office building. 

Aqualand, along with Grocon and Scentre Group, were selected earlier this year to deliver the Central Barangaroo precinct. 

Aqualand Australia has former Mirvac head of residential, John Carfi, running its Sydney-focused operations.

Aqualand is also a vested corporate citizen, sponsoring sporting and cultural initiatives such as The Australian Ballet, Sydney Film Festival, Sculpture by the Sea (Bondi), and the Western Sydney Wanderers.

Aqualand has advised McGrath that CEO of AL Capital, Wayne Mo, is their nominee to the board of directors of McGrath. 

The placement of 25,189,880 shares at $0.425 per share will take place in two tranches, with the second tranche of 11,568,042 shares subject to ordinary shareholder approval.

Following completion of both tranches, Aqualand will be the second largest shareholder of McGrath with a 15% relevant interest.

Under the first tranche, which has now completed, Aqualand has acquired an initial stake of 8.7% in McGrath.

The second tranche, which is conditional on McGrath shareholder approval, will give Aqualand a further interest of 6.3% in McGrath.

The agreement has an initial term of five years and can be renewed for two further terms of three years each by agreement between the parties.

The ASX update said the agreement would be terminated 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.

John McGrath who founded the company, remains the largest shareholder and executive director.

He said the partnership showed confidence in McGrath.

“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 developmentand 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 its is an opportunity to grow the business.

“The Australian real estate market is becoming more sophisticated and relationships and channels are more important than ever before," Lucas noted.

"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.

"The capital raised in the placement will also allow us to take advantage of any strategic acquisition opportunities that arise 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 pre- eminent residential property brand.”

AL Capital CEO Wayne Mo said Aqualand is pleased to enter into the strategic relationship with McGrath.

"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.” 

Earlier this year stockbroker Bell Potter called McGrath share's a sell, shortly after it bottomed at a then all time low of 50 cents a share.

The share price plummet and internal divisions on future directions prompted John McGrath to take back over the reigns of the agency.

Joel Robinson

Joel Robinson is a property journalist based in Sydney. Joel has been writing about the residential real estate market for the last five years, specializing in market trends and the economics and finance behind buying and selling real estate.

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