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Australia's competition watchdog has raised concerns around Lendlease's (ASX: LLC) proposed sale of 12 residential masterplanned communities, claiming it may incentivise one of the joint buyers Stockland (ASX: SGP) to raise prices in the absence of its major competitor in four regions.
Lendlease is currently involved in a huge capital recycling project that is worth more than its own market valuation to free up liquidity, including the sale of 14 of its 16 communities projects for $1.3 billion.
Twelve of those communities are directly referenced in the planned $1 billion-plus sale to a joint venture comprising Stockland and its Thai partner Supalai, but it appears the $1.3 billion claim encapsulates a further two given the agreement also included an option to buy "additional parcels of land for up to $239 million".
Market feedback received by the Australian Competition and Consumer Commission (ACCC) found 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 centres.
"We are concerned that the proposed acquisition would remove one of Stockland’s closest and largest competitors in the supply of residential masterplanned community housing lots in four regions - the Illawarra, North West Perth, Ipswich, and Moreton Bay,” says ACCC Commissioner Liza Carver.
"The ACCC is concerned that the proposed acquisition may increase Stockland’s incentive to raise the price, delay the supply, or reduce the quality of housing lots in these regions, to the detriment of prospective homeowners.
"“We are concerned that other developers of masterplanned community projects may not be able to compete sufficiently with Stockland after the acquisition in some regions."
The ACCC Commissioner says the preliminary concerns are strongest in the Illawarra region of New South Wales where the proposed acquisition would bring together the two largest masterplanned community projects in an already highly concentrated market.
The regulator 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 masterplanned community projects.
The ACCC has not reached a concluded view on any of the issues and invites submissions in response to its Statement of Issues by 18 July 2024.
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