Reading International, Inc. (RDI) announced on Friday that it has retained Macquarie Capital Advisors Limited as a financial advisor with respect to the sale of its largest development parcel, Burwood Square, in Melbourne, Australia.
At Reading’s annual meeting Thursday afternoon, CEO James Cotter gave the following additional comments regarding the Burwood property and decision to sell it:
* The large 50.6-Acre site, on Reading’s books for $46.7MM, is one of the company’s largest undeveloped parcels and with Reading's greatest unrealized appreciation. The parcel, purchased in 1996, presently generates NO cash flow (but arguably some cash drain) for Reading.
* Since the Burwood parcel has no mortgages, CEO James Cotter said sizable expected cash sale proceeds would be generated and applied to all or a combination of a) paying down debt, b) developing both of Reading's sizable (but much smaller than Burwood) Moonee Ponds and Auburn projects, and c) buying back stock.
* The Burwood site, originally a rock quarry and zoned industrial, has undergone substantial up-zoning in 2006 and subsequent improvement. It was purchased- almost 15 years ago and is one of the last prime developable sites fairly close to Melbourne's central business district. Reading’s 2006 press release detailing Burwood’s up-zoning can be found here.
* As part of the Reading’s presently approved large mixed-use development plan, commercial office towers, retail and entertainment shopping centers and 1000 residences were to be built over this substantial acreage over multiple years comprising a huge development, upon completion, estimated to be worth AU $1Billion. Link to local council approved master development plan - http://www.whitehorse.vic.gov.au/Burwood-Heights-Activity-Centre-Structure-Plan.html
* Since approval of the master development plan, there has been a substantial additional boom in residential real estate demand such that increasing the residential component on the parcel even further appears to be the highest value use of the property. Hence Reading's decision to sell with Reading possibly seeking to retain option rights to participate in any retail/cinema component of the development.
Disclosure: Long. This author may buy or sell shares at anytime.