Stockland to sell stake in industrial trust as reweighting towards retail continues
Property group Stockland has continued with its plans to reweight the business in favour of retail assets, announcing an agreement to sell its 55% stake in the Moorebank Industrial Property Trust (MIPT) for $123 million.
It will sell its stake in the trust to Qube Logistics, one of the MIPT joint venture partners, with settlement expected before June 30 2012.
According to Goldman Sachs REIT analyst Peter Zuk, the Moorebank site is Stockland's second largest industrial asset (by book value) representing 14.2% of its industrial portfolio.
The proposed industrial sale follows Stockland announcing its purchase of Centro Townsville for $36.5 million earlier this week.
Stockland has also announced it would extend its on-market security buyback to up to 10% of issued capital, “reflecting its commitment to increasing returns through active capital management”.
Stockland CEO of commercial property John Schroder says the sale supports Stockland’s strategy to reweight its commercial property portfolio from office and industrial to higher-returning retail assets.
“While the proposed Moorebank Intermodal terminal remains a key NSW infrastructure project, it is not aligned with our strategy and its sale supports our active capital management program,” he says.
“This brings our total asset sales so far in the 2012 financial year to $918 million – funding we use to improve security holder returns through our security buyback and investing for future growth as well as maintaining low debt.”
Schroder’s comments echo those made by Stockland CEO Matthew Quinn at its interim results briefing last month when he said the property group would continue to sell its commercial and industrial assets and use the proceeds to reinvest in higher-yielding and less volatile retail assets.
Retail assets have generated returns of 10% for Stockland, while industrial assets have generated 8.3% and office assets 7% return.
Following the latest announcement, Quinn says Stockland remains committed to growing its return on equity by selling lower-yielding assets to invest accretively in its own securities and fund future growth.
“Our securities are trading at a level that in our view does not reflect the underlying value of our business nor our strong capital position,” he says.
“With our conservative balance sheet and ongoing asset sales, we are well placed to continue to fund our buyback up to 10% of issued capital while retaining our strong financial position with low gearing and long-dated debt.”
Stockland’s gearing at December 31 2011 was 23%. Taking into consideration the asset sales program and the full cost of the extended buyback, pro forma gearing will remain around this level.
A minimum liquidity buffer of at least $500 million will continue to be maintained.
Stockland announced on August 19 2011 that it would undertake an on-market buyback of up to 5% of its issued capital (119.2 million securities). So far Stockland has bought back 4.75% of securities (113.2 million) at an average price of $3.02.