Retail leases and redeveloped assets drive Stockland half year results

Retail leases and redeveloped assets drive Stockland half year results
Retail leases and redeveloped assets drive Stockland half year results

Stockland’s Commercial Property portfolio continued to deliver solid profit, and revaluations produced a net uplift of $124 million for the half year, including gains from several recently redeveloped assets.

Stockland managing director and CEO Mark Steinert cited positive growth from retail leases as a contributor to the uplift.

“We delivered comparable FFO growth of 2.7 per cent and maintained high occupancy across our retail town centres in 1H18.

"We achieved positive growth in rents for both new leases, at +1.4 per cent, and renewals at +2.3 per cent. Following a flat start to the half, retail sales growth for the second quarter of 1H18 improved to 2 per cent.

“Our Retail strategy is focused on increasing services, lifestyle, health, dining and entertainment options to address customer demand and increase the resilience of our centres. We continue to see growth in lifestyle and entertainment tenancies, with comparable moving annual turnover (MAT) growth of 10 per cent in retail services and 2.8 per cent in casual dining and food catering over the half, reflecting the success of our remixing strategy.

“Following the sale of the Corrimal shopping centre, we continue to take a considered approach to non-core asset disposals and remain focused on introducing third party capital across our assets.

This quarter we will place Stockland Highlands on the market and as announced in August 2017 we are aiming to divest $300 million of retail town centres over the next 12 to 18 months, of which approximately $70 million has been completed to date,” Steinert said.

Stockland’s Logistics and Business Parks portfolio once again delivered strong results and a 99 per cent occupancy rate, with the Group on track to continue growing the business.

“The value of our Logistics and Business Parks business has risen around $600 million over the past four years, from $1.5 billion to $2.1 billion, and now represents 14 per cent of our total Group asset value," Steinart said.

"We achieved strong comparable FFO growth of 4.6 per cent for the half with positive leasing results and near-full occupancy.

“We have $176 million worth of projects under construction and an additional development pipeline of over $590 million, targeting 7 per cent FFO yields and centred on the eastern seaboard capital cities.”

Comparable FFO for the period was down 2.8 per cent across Stockland’s office portfolio, largely due to higher vacancies in Perth and ACT, however these assets are progressively being leased. Sydney assets, which represent the majority of the portfolio, performed well this period.

“We continue to assess development opportunities for our Sydney office assets, a number of which have higher and better use options, and will consider divestment opportunities for optimised assets.”

RETIREMENT LIVING

The Retirement Living business continues to be supported by the fundamentals of an ageing population.

However, sales at both existing villages and new developments over the half have been affected by the increased media attention on the sector, which has influenced customer confidence.

Sales over the period were also affected by lower volumes of new development stock due to project timing. During the half we completed 28 development units, compared to 80 in the prior period, resulting in lower development volumes available for reservation.

“The population of over 65s is growing at almost twice the rate of the rest of Australia and we expect market demand in this sector to continue to rise as the population ages," Steinert noted.

"Our repositioning strategy and development pipeline reflects the changing preferences of retirees, and our new contract choices and product offerings will continue to broaden our customer reach.

“At our new developments we continue to see growth in the average price per retirement living unit, at 4.5 per cent for the period, which reflects the quality of our villages. Resident satisfaction levels consistently rate above 84 per cent, and in response to customer preferences we have an increased focus on health and wellbeing, and our services and facilities.”

 

Joel Robinson

Joel Robinson

Joel Robinson is a property journalist based in Sydney. Joel has been writing about the residential real estate market for the last five years, specializing in market trends and the economics and finance behind buying and selling real estate.

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Stockland Financial Results

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