McGrath shares are soaring after property developer Aqualand takes a 15% stake

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  • The Aqualand Group is paying $10.7 million for a 15% stake in ASX-listed real estate group McGrath.
  • McGrath says the capital could be used for a “strategic acquisition”.
  • Aqualand and McGrath are also looking at working together on “prestige project” marketing.

Property development and investment group Aqualand Group has made a $10.7 million strategic investment in ASX-listed real estate agent McGrath.

Aqualand, established in Australia in 2014 and has since generated a portfolio of 18 sites with a collective gross development value of $5 billion, will become the second largest shareholder of McGrath with a 15% stake.

At the close, McGrath shares were up 26.4% to $0.43, but still well below the 12 month high of $0.81. Aqualand is buying in at $0.425 a share.

The ASX-listed real estate agency earlier this year cleaned out its board of directors and replaced the CEO, following a slide in earnings, a drop in listings and the departure of some high performing agents.

The company today said the performance for the financial year to June will be at the lower end of the previously provided guidance. Underlying EBITDA is expected to be $5 million but $4 million in one-off costs will bring that down to $1 million.

Under the Aqualand deal, John McGrath, who founded the company, says the addition of a new strategic shareholder in Aqualand, represents a great vote of confidence in the future of McGrath.

“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,” he says.

Proceeds from the placement will be used for general corporate purposes, including business development and potential growth opportunities as they may arise.

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

McGrath and Aqualand have also entered into a strategic relationship to explore opportunities for both groups to work more closely together on prestige project marketing opportunities.

McGrath CEO Geoff Lucas says 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,” he says.

“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 preeminent residential property brand.”

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