The proposed sale of Defence Housing Australia’s $10 billion real estate portfolio is likely to be canned in next month’s budget, with federal cabinet deeming any sell-off too difficult because of the complexity of the government business enterprise.
Cabinet recently decided not to sell the agency after ordering a scoping study in last year’s budget with a potential sale in mind, sources said.
The government is expected to announce the decision not to sell DHA in next month’s budget.
DHA controls a multi-billion dollar portfolio of owned and managed housing in most Australian states, which the government announced could be sold off last year, hiring an investment bank to prepare a $2.5 million scoping study into a sale. “DHA was announced in the federal budget as one of the government agencies to be part of a privatisation scoping study,” said DHA managing director, Peter Howman, through a spokeswoman, yesterday.
“Business advisers Lazard have been engaged by the government to conduct the study,” he said. “The government will consider the recommendations of the scoping studies as part of the 2015-16 budget.
“No decision on future ownership options will be made until this time. We are currently continuing business as usual and this includes offering a unique investment product to Australian investors.”
Meanwhile, a spokeswoman for the Department of Finance said the government was considering the recommendations of the scoping study into the future options for Defence Housing Australia.
“No decisions have been made to date on any aspect of the scoping study,” she said. DHA offers investors guaranteed rental income for up to 12 months, which is backed by the Australian government.
According to its 2013-14 annual report, DHA has 18,577 properties under management.
It is also a major residential land developer with more than $1bn committed to housing projects in most capital cities and major regional centres. DHA buys and builds properties with assistance from the private sector and purchases new and established properties as required. On June 30, 2014 DHA’s consolidated entity reported total revenue of $1.155bn up from $1.004bn the previous year. That year it achieved a net profit after tax of $90.1 million against its objective of $84.3m.
DHA said it had most recently been acquiring development sites in the Hunter Valley and Edmondson Park in NSW, as well as sites in Rockingham and Fremantle in Western Australia and sites at Raceview and Ipswich in Queensland.
This article first appeared in The Australian Business Review.