investor newsletter march 2019 - village building · newsletter march 2019 . 2 3 invest ter april...

THE VILLAGE BUILDING CO. L IMITED(02) 6241 6844 | villagebuilding.com.au

INVESTOR NEWSLETTER

MARCH 2019

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INVESTOR NEWSLETTER APRIL 2019

COMPANY NEWS

The third quarter of this financial year has seen the challenging market conditions of 2018 continue with market sentiment suggesting there is further decline to come. Sydney and Melbourne have experienced unprecedented and unsustainable price growth over the last five years resulting in an inevitable correction - as a part of any normal property cycle. The current downturn is being exacerbated by tighter lending criteria being imposed by the banks stemming from the Banking Royal Commission and media efforts sensationalising the downturn which has a demonstrable effect on buyer psyche and confidence. Other factors are also at play including ongoing political uncertainty and further anxiety around key economic policies such as negative gearing, stamp duty, capital gains tax, and franking credits. Households continue to feel the pressure with higher utility costs and with little to no wage growth, are seeing their wealth decline as house prices fall.

Higher than anticipated price discounts were reflected across most of the Projects in the first quarter of the year. These discounts, in combination with increased holding costs due to extended Project timelines, are reducing profitability on many Projects which will reduce the Internal Rate of Return.

All projects were actively campaigned throughout January to March bringing a marked increased level of enquiry. Conversion to sale remains our key focus, ensuring we are in a strong position to withstand a sustained downturn.

This being said all our syndicated Projects remain profitable.

Project News/Highlights

• It has taken the Company 16 years to get to this vital turning point, but I am excited to advise that we have reached another significant milestone on our South Jerrabomberra development. The construction certificate for stage 1a has been issued and bulk earthworks have commenced. Sales also continue with the first stage of 75 residential housing lots 50% sold. We have received a strong level of interest from builders to participate in our display village and similarly received strong interest from various businesses for our industrial and commercial land in ‘North Tralee’. As a result, we are bringing forward our plans to develop this land.

• Having sold a combined total of 191 across a total of 256 lots in Austral 1 and Austral 2 during the market peak, this Project is in a solid position. Settlements have progressed well in both syndicates with construction of homes underway and buyers moving into their new homes! Settlement has occurred on our purchase of undeveloped land at Austral 3 and plans are being prepared for an anticipated release in May.

• February brought with it the remaining settlements at Westside at Indooroopilly. This Project is now complete and stands as an excellent example of a Village apartment development.

• Argyle Building, Village’s construction arm based in Melbourne, has commenced construction on Stage 5 at Yarraman in Noble Park.

I thank you for your continued support.

Best regards,

Travis Doherty Chief Executive Officer

South Jerrabomberra


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PROJECT UPDATES

Realm — Austral 1 Having sold the majority of this Project at the height of the market, sales remain subdued due to current market conditions. Settlements have completed and only one lot remains for sale. Home construction is well underway with a steady flow of residents moving into the development.

The Summit at Coffs Harbour

Construction is underway for Dress Circle and the associated 16 lots in Stage 8. Completion is anticipated by the end of April. 7 blocks in Stage 8 are currently under contract.

Stage 5 has sold and settled as an englobo parcel of land, with the owner’s intent to construct and sell townhouses. A contract is in place for Stage 11, which is subject to Village carrying out the wall stabilisation works and obtaining DA for five townhouses.

As we approach the later stages of this development, we are continually analysing and looking at options to optimise trading performance.

The Brickworks at Bulli

Construction of the final duplex was completed in early January and registration occurred in March. A sale was secured for the four-bedroom home with settlement occurring in late March. Work is ongoing with multiple prospects on the purchase of the final home.

The Village at Corrimal

The new year launched with our $20K Bonus Summer campaign which saw enquiry increase on average and monthly sales in February double. We have reduced prices in order to secure sales for construction funding requirements. We have now sold 35 apartments and villas representing 53% of products in the Project.

The builders have been progressing well with both buildings basements and ground floor slabs complete. The eastern building first floor slab is poured and the western buildings first floor slab is being formed and due for pouring in the next few weeks.

NSW NSW NSW NSW


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NSW NSW

Realm — Austral 3

Having taken possession of the site in March, the Development Application (DA) consent is anticipated by May 2019 and release to the market will follow soon after. Detailed design of the construction certificate engineering plans is well advanced. Construction is anticipated to commence in July and complete December 2019, with settlements commencing February 2020.

Realm — Austral 2

Austral 2 saw an uplift in project profitability this month due to construction cost savings and an equity disbursement is scheduled for 5 April.

Stage 1 (total 49 lots) has largely settled and approximately 12 homes have commenced construction.

Presales in Stage 2 (total 82 lots) are well advanced and the construction certificate is expected in the next month. The civil contractor tender has closed and the contract will be awarded imminently, with works to commence by May 2019, taking approximately 12 months to complete.

The subdivision for stage 3 (total 31 lots) was registered in January 2019 and settlements commenced in February. There is currently 1 lot remaining to sell.

PROJECT UPDATES (CONT.)

Woodlinks Village at Collingwood Park

Titles for Stage 8, which consists of 35 blocks, have registered and construction is nearing completion. The next phase of clearing at Woodlinks has commenced to make way for construction of Stage 15, which comprises 29 lots.

Enquiry has increased off the back of a refreshed marketing campaign. The main challenge for converting sales remains the tightened lending criteria and ability for potential buyers to access finance.

Overall, 158 blocks have settled, with an additional 17 lots currently under contract.

South Jerrabomberra

Bulk earthworks has commenced on site for Stage 1a comprising of a total of 84 lots with approximately 50% sold and the Construction Certificate issued. The Project Team is currently focussing on working with Queanbeyan Council and the Poplars development for the delivery of the Northern Entry Road which is now partially funded by NSW Government as announced by John Barilaro in late 2018. Further works being completed include gaining approval of the lead infrastructure for water and sewer and also subdivision construction for Stage 1a. A Development Application is being prepared for the community centre which will include materials from the shearing shed to be reused.

A Request for Participation in the South Jerrabomberra Display Village was advertised throughout March. Multiple Submissions were received and these are currently being assessed against the selection criteria.

NSW Q LD


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The Residences

Construction at Curlewis Crescent, Garran is almost complete with the landscaping being finalised. Unit Titles are forecast for receipt by the end of April 2019. The two blocks at Spafford Crescent, Farrer are progressing and both will have roofs completed by mid-March. The site cut has been completed at Rivett Street, Hackett with construction to start mid-March upon receipt of the DA approval. Unit A on both 36 Spafford and 15 Curlewis have sold.

Westside at Indooroopilly

All 119 units in the Westside Indooroopilly development have now settled. The final equity distribution was made in March and we are proud to bring this successful project to a close.

ACT


Trilogy Place at South Morang

Sales are progressing with 14 sales achieved to date, representing 52% of Stage 1. The entry road has commenced construction. The sales team are focused on converting sales for the project with a shopping centre display due to be setup in the neighbouring Westfield Shopping Centre in April. Level 10 has been appointed as the builder for the first 27 homes with Argyle Building to construct the remaining homes when sold.

The Quarters at Weston

After two rounds of initial review, the Environment, Planning and Sustainable Development Directorate (EPSDD) has recently granted permission to lodge a draft DA. The draft DA will now be circulated to Government Agencies for detailed review. The draft DA will establish the road and block layouts for the development under a community title scheme. An additional DA is being prepared for the first 86 terraces. The total yield will be more than 250 dwellings and the mix will be predominantly 2, 3 and 4 bedroom terraces with smaller proportions of land only lots and apartments. Sales are expected to commence in the second half of 2019 subject to the approval process.

ACT VIC

SOLD OUT

Q LD


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Yarraman Village at Noble Park

The first 32 homes which are being constructed by JG King are nearing completion, with settlements expected over the next few months. The next 23 homes are being constructed by Level 10 and will be completed by June 2019. The remaining 41 homes will progressively settle between July and September 2019. Argyle Building has commenced the construction of 29 homes in stage 5.

It is anticipated the final 33 homes will start construction in the middle of 2019. Sales have been slow however the team has been focused on optimising marketing, refining pricing and servicing customers to ensure conversion of the leads to sales. The display on site is open by appointment and the sales team are working with a number of external agents.

VIC


Yarraman Village at Noble Park (VIC)

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Dividend

The Company pays an interim dividend in June each year and a final dividend in December. These dividends are fully franked.

The Board purposely holds the Dividend Reinvestment Plan (DRP) price at 85 cents which represents a discount on the net asset backing per share to encourage participation in the DRP.

The Company benefits by shareholders participating in the DRP as it assists in further strengthening the Company’s ability to take advantage of new development opportunities through an expansion of its capital base. Participation in the DRP is optional and offered to all shareholders thereby providing equal opportunity to maintain proportional interest in the Company.

A copy of the Company’s DRP is available at www.villagebuilding.com.au/invest or at Computershare.

The quarterly dividend for CRPS-2 shares were paid on 29 March 2019.

SHAREHOLDER INFORMATION

INVESTMENT OPPORTUNITIES

VBC Forecast Investor Returns as at 21/03/2019

Project Type Date % of Total

Woodlinks Equity Return 1 30/11/2019 4.17%

Indooroopilly Profit Distribution 4 27/03/2019 9.44%

Austral 1Profit Distribution 3 27/03/2019 17.32%

Profit Distribution 4 30/04/2019 13.20%

Austral 2 Equity Return 1 05/04/2019 6.67%

Noble Park Equity Return 1 30/09/2019 26.25%

Austral 3 Equity Call 2 08/03/2019 (64.86%)

WestonEquity Call 3 31/05/2019 (5.00%)Equity Call 4 30/09/2019 (3.33%)

South JerrabomberraEquity Call 1 15/05/2019 (9.55%)Equity Call 2 30/06/2019 (10.31%)Equity Call 3 30/09/2019 (5.73%)

Note: The above information is indicative only and based on best estimates at the date of issue and is subject to change.

South Jerrabomberra

This new syndicated project at South Jerrabomberra which encompasses the Tralee land holdings and the adjacent Forest and Morrison lands was fully subscribed and investment in this Project was closed on 16 November 2018.

To improve the Company's cash buffer in a subdued market, we have decided to sell down Village’s equity position in the South Jerrabomberra Project from 80% to 65%. Village typically takes a 50% equity position in its syndicated ventures and so this sell down moves Village's equity towards a more normal position. It will be offered firstly to the existing South Jerrabomberra Syndicate Participants and if not fully subscribed will be then opened to the wider Shareholder and Investor Group.

Secured Notes

Secured notes are available for investment and form approximately one third of the Company’s funding structure. These notes assist in reducing the weighted average cost of capital of the Company which currently sits at 8.66%.

Secured notes are only available to sophisticated and professional investors. The notes application document is available on request.

Shares

Ordinary shares can be purchased from the Company at the DRP price of 85 cents per share. Share purchases are subject to Board approval.

For enquiries regarding secured notes, shares or any other investment matter please contact:

Vince Whiteside M 0404 891 150 E [email protected]

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WORK HE ALTH AND SAFET Y

Safety First

Village recognises its opportunity, as a mid-sized national developer, builder and Tourist Park operator, to adapt the Work Health & Safety Legislation across all states providing uniformity and consistency to all our worksites. This truly national approach will lead to improved productivity through our Safety Management System. Village views WH&S not as something we must do, but as a means to empowering our workers to operate in an effective, safe and efficient manner.

The Big Banana Fun Park

A resolute commitment to safety continues with weekly safety inspections by WHS trained staff, monthly management/department supervisor meetings and quarterly audits by an independent WHS Auditor. The induction of new staff and commitment to ongoing staff training remain a high priority as does the comprehensive maintenance programme for park equipment with the aim of minimising incident rates and downtime.

Examples of the initiatives undertaken over the last few months include;

• a complete inspection of the electrical equipment in the Laser Tag gaming area to ensure that everything is safe and compliant;

• the installation of a new ventilation system and upgraded rangehood/fan in the Café to reduce the temperature in the warmer months; and

• the installation of 6 new 2.4m fans in the common area of the Giant Slide and a new fan in the Giant Slide office to reduce the temperature in the warmer months and increase air movement.

STAFF PROFILE

PAUL SCOTELL AROVillage welcomed Paul to the team in January 2019 in the role of WHS Officer.

Paul is originally from Wollongong but has lived and worked in the Canberra Region since 1990.

Paul’s role will see him assisting the Village Housing and Argyle Building Teams in the safe and timely delivery of Projects across all offices.

Paul grew up in Wollongong and Sydney but has also spent six years in Europe where he completed a Diploma in Surveying and Clerk of Works prior to commencing his contracting career in steel fabrication and erection in Port Kembla in 1981.

His contracting and site management skills bought him to Canberra to carry out final metalwork installations to the then New Parliament House and like many interstate workers involved in the Project he decided to relocate his family to the Capital Region because of the superior work, education and lifestyle opportunities presented by Canberra.

Paul’s 38 years in construction has seen its fair share of twists and turns but none more important than the opportunity to utilize his experience in the fields of Quality and Work Health and Safety. His hands-on industry experience and involvement in multiple WHS legislative changes over the past 30 years provides him with a unique perspective for the implementation of effective WHS Strategies in the building industry, including, experience in large residential and infrastructure projects including Coombs and Throsby residential estates and Horse Park Dr Extension. Paul has worked with Calibre Group and as a Safety Consultant to the ACT Government on multi-unit residential developments.

Paul ScotellaroWHS Officer

The Big Banana Fun Park Coffs Harbour NSW

THE VILLAGE BUILDING CO. L IMITED(02) 6241 6844 | villagebuilding.com.au

investor newsletter march 2019 - village building · newsletter march 2019 . 2 3 invest ter april...

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