Shares in Perth-based construction and development company Diploma Group have surged on news it will sell its Quest Serviced Apartments in Rockingham and Adelaide Terrace to undisclosed buyers for a combined value of $63.5 million.
The two projects are under construction, with Quest Rockingham to be completed in June while Quest Adelaide Tce is expected to be finished by February next year.
When completed, the two buildings will add 226 rooms to the accommodation market.
“The sale prices are consistent with the group’s valuation expectations for both assets and Diploma expects to realise about $20 million in net proceeds from the sales after the repayment of project specific finance facilities,” Diploma said in a statement.
Both buildings have been preleased to Quest on a long-term basis.
Diploma managing director Nick Di Latte said the proceeds would be used to fund ongoing working capital requirements and new opportunities.
“Once the transactions are completed, Diploma’s cash position will be significantly bolstered by the sales,” Mr Di Latte said.
“In addition, the transactions will provide some earnings visibility into the FY16 financial year where we are expecting to finish four development projects in total with 288 Lord Street in Highgate and Capri in Rockingham also expected to complete.”
The agreements are subject to due diligence, which will be completed by the end of March.
Diploma shares were 17.1 per cent higher at 4.1 cents per share at 10am.
