The Boral Limited (ASX: BLD) share price climbed higher this morning after the Aussie construction company announced a $300 million property deal with Mirvac Limited (ASX: MGR) in Victoria, Australia.
What did Boral announce this morning?
Boral announced that it has entered into a property development management deed with Mirvac in relation to its Scoresby site (Wantirna South) in Victoria.
Under the agreement, Mirvac will manage the urban development of the 171-hectare site over a multi-decade period, including a proposed new housing community and substantial new parklands.
Boral expects to receive approximately $66 million of earnings before interest, tax, depreciation and amortisation (EBITDA) through to FY2026, including a $3 million boost to FY2019 earnings.
Additional significant earnings are projected from the development of Scoresby from FY2027 through to anticipated project completion in 2035.
Boral expects Scoresby to deliver in excess of $300 million of earnings over the life of the project subject to market conditions and parks acquisition overlay from the Victorian Government.
What's going on behind the deal?
The Scoresby site was formerly a manufacturing plant for Boral Bricks in Victoria. Following the divestment of Boral's 40% interest in the Boral CSR Bricks joint venture in 2016, Boral retained its stake in the site.
In FY2019, Boral expects approximately $30 million EBITDA from its Property segment earnings, in line with previous guidance.
Mirvac has had a busy start to the year in terms of deal flow, and recently announced that it has been unable to agree terms to sell its interest in Tucker Box Hotel Trust (which was expected by the end of FY19).
The Mirvac share price has climbed 43.6% higher so far this year on the back of better-than-expected residential housing conditions and the recent RBA rates cuts boosting prospects for those heavily invested in residential property.
Boral currently boasts a market cap of $6.2 billion market cap and is trading at 15.7x earnings, while also offering investors a 5.0% per annum dividend yield to boot.
