Property Commercial Earnings season
Stockland ‘dynamically reshapes’
portfolio, sells retirement assets
Michael Bleby Senior reporter
Feb 23, 2022 – 10.32am
Stockland has agreed to sell its retirement living business to acquisition-hungry Swedish
investor EQT Infrastructure [https://www.afr.com/companies/healthcare-and-fitness/eqt-snaps-up-
icon-care-in-2-5-billion-deal-20211119-p59ab6] for $987 million in a deal that allows the local
developer and investor to focus on residential, office and logistics assets.
The jettisoning of the retirement living and new funding partnerships with Mitsubishi
Estate in its land lease business and Ivanhoe Capital to develop its M_Park
[https://www.afr.com/property/commercial/stockland-gets-green-light-to-develop-first-data-centre-
20210607-p57yqv] life sciences and technology precinct in Sydney were key planks of
Stockland’s new strategy and would mean faster development of more productive assets,
chief executive Tarun Gupta said.
“We are dynamically reshaping our portfolio,” Mr Gupta said.
“This is an operating model evolution of Stockland towards higher growth, leveraging
third-party capital and better return-on-invested-capital businesses.”
At a glance | Stockland
Half year 2022 2021 % change
Revenue ($m) 1267 1272.0 −0.4
Pre-tax profit ($m) 850 300.0 183.3
Net profit ($m) 870 303.0 187.1
Interim dividend (¢) 12 11.3 6.2
Date dividend payable February 28
Investors welcomed the changes. Stockland shares closed up 14¢, or 3.5 per cent, at $4.16.
RELATED QUOTES
SGP Stockland
1 year 1 day
5.100
4.500
3.900
Mar 21 Sep 21 Feb 22
Updated: Mar 1, 2022 – 2.58pm. Data is 20
mins delayed.
View SGP related articles
The slew of announcements came as Stockland reported net profit of $805 million, up
from a restated $339 million. It reflected the benefit of $543 million in commercial
property revaluation gains on its retail, workplace and logistics assets.
The company’s preferred measure of earnings, funds from operations, fell 9.3 per cent to
$350 million from a year earlier, due to the timing of residential settlements that it said
would be skewed to the second half.
Settlements fell to 2329 lots in the first half from 3101 a year earlier. A concentration of
NSW projects pushed the operating profit margin up to 18.2 per cent from 17.4 per cent
and meant the full-year operating profit margin would be over 18 per cent.
The company said, however, it expected settlements this year of about 6000 lots, down
from the 6400 settlements it predicted in October, as a result of supply chain disruption
and wet weather in south-east Queensland that had delayed production.
Stockland tightened its per-share FFO guidance for the full year to 35.1-35.6¢ from its
previous range of 34.6-35.6¢.
“This looks like a strong result, with plenty of progress made towards Stockland’s new
strategy focused on developments and capital partnering,” Morgan Stanley analyst
Lauren Berry said.
Under the EQT deal, Stockland will sell its 58 established Retirement Living villages, 10
development projects underway and in planning, along with the associated
management platform to EQT at a 1.9 per cent discount to the portfolio’s December 2021
book value.
“We are confident that EQT will be the right custodian for the residents and employees,
and are well placed to support the continued growth of the high-quality Retirement
Living platform,” Mr Gupta said.
Settlement of the sale to EQT, which in November acquired a majority stake in cancer
care group Icon [https://www.afr.com/street-talk/icon-auction-in-11th-hour-twist-eqt-to-invest-
alongside-goldman-sachs-20211114-p598se] in a deal worth about $2.4 billion, is due in the first
half of FY23.
The plan to sell $2 billion of retirement and retail assets was announced late last year.
[https://www.afr.com/property/commercial/stockland-to-expand-residential-cut-retail-as-it-shifts-
strategy-20211107-p596mw]The creation of a capital partnership with listed Japan real estate
giant Mitsubishi Estate was another part of the new
strategy.
The Australian company has formed with Mitsubishi
Estate Asia the Stockland Residential Rental
Partnership to develop and own land lease communities.
The partnership is initially worth about $500 million
and has the potential for 2000 home sites in six
communities. Tarun Gupta. Dominic Lorrimer
The six communities comprise four acquired in Stockland’s $620 million Halcyon deal
[https://www.afr.com/property/commercial/stockland-has-bigger-plans-in-land-lease-beyond-halcyon-
20210719-p58avu] in July – Greens, B by Halcyon, Rise and Promenade – and two existing
Stockland communities at Nirimba in Sunshine Coast and Berwick, south-east of
Melbourne.
Stockland will retain full ownership of the 1200 home sites within established
communities that it acquired as part of the Halcyon transaction last August.
During its initial five-year investment window, the partnership will have a first right to
acquire an identified pipeline of Stockland sites currently in planning.
Stockland said its land lease development pipeline was forecast to generate gross
development realisations of about $5 billion, of which about $4 billion-worth was
expected to commence construction during the partnership’s five-year initial investment
period.
The partnership will also be open to further acquisitions outside its development
pipeline, Stockland said.
Further partnering
In a further boosting of its capital partnerships, the company said it had paired with
Ivanhoe Cambridge
Ivanhoe Cambridge, the real estate unit of Canadian institutional fund manager Caisse de
dépôt et placement du Québec, will take a 49 per cent stake in the vehicle developing the
commercial property precinct in northern Sydney’s Macquarie Park and which is
currently delivering the 62,500-square-metre Stage One.
RELATED
Stockland to expand residential, cut retail as it shifts strategy
https://www.afr.com/property/commercial/stockland-to-expand-residential-cut-retail-as-it-shifts-
strategy-20211107-p596mw
RELATED
Stockland cranks up residential
https://www.afr.com/chanticleer/stockland-cranks-up-residential-20211108-p596uo
The first stage comprises three commercial buildings with combined net lettable area of
37,146sq m along with a 25,487sq m data centre
[https://www.afr.com/property/commercial/stockland-gets-green-light-to-develop-first-data-centre-
20210607-p57yqv]. Ivanhoe Cambridge will invest on a fund-through basis in stage one.
Stockland has entered into a put and call option with Johnson & Johnson Medical, which
has an office on the site, over an adjacent 4 hectare site that has the potential to
accommodate a further 95,000sq m of NLA across six additional buildings.
Both capital partnerships are subject to Foreign Investment Review Board approval. If
both go to plan they will start adding to revenue from next year.
Stockland declared a distribution of 12¢ per security, up from 11.3¢ a year earlier. Land
lease sales totalled 212 in the first half.
Commercial Property FFO fell 2.8 per cent from a year earlier, despite positive
comparable growth of 2.3 per cent across the portfolio. Higher trading profits were offset
by the impact of non-core retail asset disposals, COVID-related rental abatements and
higher overheads.
The company said 97.5 per cent of contracted gross rent had been collected across its
commercial property portfolio (96.5 per cent in retail-focussed Town Centres, 99.6 per
cent in logistics and 98.9 per cent in workplace.
Michael Bleby covers commercial and residential property, with a focus on housing and finance, construction,
design & architecture. He is based in Melbourne. Connect with Michael on Twitter. Email Michael at
[email protected]
