Lendlease's (ASX:LLC) $1.3 billion "get out of jail" sale of its master-planned retirement villages to a joint venture between Stockland and Supalai is in trouble with the competition regulator. The ACCC has raised concerns about the deal.
The sale, along with the sale earlier this week of Lendlease’s US military housing business, was intended to start a revamp of Lendlease to create a more efficient and smaller company focused on Australia, with a new board and senior management.
Lendlease was facing growing pressure from some shareholders for a shake-up, and the sale of the residential master-planned business was the centerpiece of the new approach.
Now, it is in trouble, with the ACCC expressing concerns in a "statement of issues" document on Thursday. The regulator indicated that rivals in this sector of the property market might not be able to compete on a level playing field, especially in the NSW Illawarra region, south of Sydney.
"Lendlease, Stockland, and Supalai are developers of master-planned community projects. Lendlease has 16 master-planned community projects in NSW, Queensland, Victoria, and Western Australia, 12 of which would be sold under the proposed acquisition.
"We are concerned that the proposed acquisition would remove one of Stockland’s closest and largest competitors in the supply of residential master-planned community housing lots in four regions – the Illawarra, North West Perth, Ipswich, and Moreton Bay," ACCC Commissioner Liza Carver said.
"The ACCC is concerned that the proposed acquisition may increase Stockland’s incentive to raise prices, delay supply, or reduce the quality of housing lots in these regions, to the detriment of prospective homeowners."
The commission said that it had received market feedback indicating that Stockland and Lendlease compete closely as large developers with strong reputations and the ability to invest in high-quality amenities, including education, parks, and town centers.
"We are concerned that other developers of master-planned community projects may not be able to compete sufficiently with Stockland after the acquisition in some regions," Ms. Carver said.
"These preliminary concerns are strongest in the Illawarra region of New South Wales, where the proposed acquisition would bring together the two largest master-planned community projects in an already highly concentrated market."
The ACCC said it is also considering whether the proposed acquisition may increase the risk of anti-competitive coordination by developers in relation to the pricing, supply, and/or quality of master-planned community projects.
The ACCC said it has not reached a concluded view on any of the above issues and is asking for submissions in response to the "statement of issues" by July 18.
The deal could be made palatable for the ACCC by selling off or not buying all 12 projects from Lendlease, but the Illawarra projects are said to be the best of all due to their proximity to the huge Sydney market.
