Chinese-backed developer Aqualand is set to acquire a 15 per cent stake in the ASX-listed McGrath real estate group, taking an initial 8.7 per cent tranche via its subsidiary AL Capital.
The initial $10.7 million cash injection sent shares soaring to 40c by 12 noon. The deal will be split in two tranches, with the second placement of 6.3 per cent subject to McGrath shareholder approval.
The 15 per cent interest will make Aqualand the second largest shareholder in the company next to its founder John McGrath.
Aqualand will be able to appoint a director to the board and has agreed to granting McGrath the first right to discuss appointing an agent for new Aqualand projects, or provide management services.
Aqualand is a subsidiary of Shanghai-based developer Shenglong, which is chaired by the father of Aqualand’s managing director Jim Lin. The company was established in 2014 in Australia and has a collective development value of $5 billion over a portfolio of 18 sites.
The company recently appointed former Mirvac head of residential John Carfi as its chief executive.
Founder John McGrath said that the addition of Aqualand as a major shareholder is a "great vote of confidence" in the company's future.
"Aqualand is one of Australia’s highest quality property development and investment groups and its addition as a major shareholder provides McGrath the opportunity to continue to grow our Project Marketing expertise and develop even stronger ties with the inbound investment.”
The deal is a coup for the embattled real estate agency and its newly-appointed chief executive Geoff Lucas after the company halved its expected profits in March.
"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," Lucas said.
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.”
Earlier this year, Aqualand was selected as part of a consortium to developer the $2 billion final stage of Barangaroo.