Williams Corp divesting development sites
In a recent update on the Williams Corp website, new details have emerged regarding development sites that the company seems to be divesting from.
According to the latest price guidance, Williams Corp is seeking an offer in the range of $55 million to $65 million for its collection of six properties. The portfolio features the prominent 4.8-hectare site at 22 Amyes Road (Hornby, Christchurch), a property that was previously under the ownership of the Gough family. Earlier this year, Williams Corporation announced plans for a 300-home development on this site, which is expected to be the company’s most significant project to date.
This update follows last months Business Desk article detailing the company's struggles with unsold inventory, and investor redemptions.
Related party pre sales
One troubling claim in that article is that a portion of Williams Corp presales are to related parties. I wanted to take a closer look at this claim to see whether the new data provided supported that claim.
Based on an investor report dated 30 September provided by Williams Corp, 11 projects totaling 211 units were due to be completed and ready for settlement between 1 October and 31 December of this year; total number of sales were reported to be 166 as at 30 September 2023.
However when cross referencing those projects against the live inventory list, there appears to still be 81 units available for sale as of Friday. This implies that only 130 units had been sold to non related parties, and perhaps 36 of the contracts are related party contracts.
As an example, the 28 unit development at 49 Te Kanawa Crescent in Auckland reports 21 units sold in the investor report, but the inventory list provides 23 units available for sale (implying only 5 units have sold to unrelated parties).
While it is possible that there is a lag in the reporting of sales, Williams Corp appear to update their inventory regularly, as at todays date the inventory is noted as having last being updated on 3 November 2023. Note also that this is compared to the report date of 31 September, so if anything I would expect the sales from the inventory list to be higher than those in the report. This leaves the possibility that the difference is related party sales contracts.
领英推荐
Cancelling related party pre sales contracts
The company has already noted to investors that they engage in this type of activity. In their August 2023 update, the company notes the following (emphasis added):
Finally, Matthew and Blair continue to monitor their own development purchases, being the largest purchasers of Williams Corporation units to date. They continue to underwrite a range of developments across the country by way of unconditional sales agreements. Given the recent sales performance, some of these underwrites have been cancelled when external unconditional purchasers are secured, such as at Rainey Grove. This continues to be an excellent strategy to provide security to the fund, while also continuing to support on-market sales.
The Rainey Grove Development mentioned in the above quote is currently complete with settlements underway. In the January 2023 Report, when the project was under construction, the Company reported that 25 units were sold (out of 35), however in the most recent report, the Company is reporting only 19 sales.
Another example is the recently completed 18 unit development at 39 Merton Street, the company reported 13 sold properties in January, but now that the property has completed, only 8 are reported as sold.
If Williams Corporation are cancelling related party contracts prior to settlement when there are still unsold units, it is unclear exactly what underwriting benefit is being provided here.
With an estimated 211 units set for completion between 1 October and 31 December 2023, one would expect a cashflow boost coming into the New Year as unit buyers progress to settlement and the balance of purchase prices are received. However with an unknown number of related party sales, it remains to be seen exactly how many of those units will become unsold inventory for Williams Corp.