Stockland 3Q24 operational update
Key highlights
• Commercial Property portfolio delivered strong operational metrics over 3Q24, with leasing spreads of 42.0%1 for Logistics and 3.5%2 for Town Centres
• Essentials-based Town Centre portfolio delivered comparable total sales growth of 3.4% and comparable specialty sales growth of 1.3% on an MAT basis3
• Masterplanned Communities (MPC) net sales of 1,242 lots, reflecting continued improvement in sales over the last four quarters
• Land Lease Communities (LLC) net sales of 104 homes, reflecting five new project launches over FY24 yearto-date, and supported by improvements in the established housing market
• Settlement of ~$260m4 of non-core Town Centre disposals over 3Q24
• The ~$1.06bn acquisition of 12 actively trading MPC projects announced in December 2023 progressing through the regulatory approval process with FIRB and ACCC5
• Maintained a disciplined approach to capital management, further strengthening the balance sheet with a A$400m medium-term note issuance for 10.5 years
• Gearing at 30 June 2024 is expected to remain within the top half of the 20-30% target range6
• FY24 pre-tax FFO per security guidance maintained at 34.5 to 35.5 cents, with tax expense expected to be a high single-digit percentage of pre-tax FFO6
• FY24 Distribution per security expected to be within Stockland’s targeted payout ratio range of 75% to 85% of post-tax FFO on a full year basis6 3Q24
Summary
Managing Director and Chief Executive Officer, Tarun Gupta said: “Over 3Q24, Stockland has delivered strong operational performance, while continuing to execute against our strategic priorities.
“Our Commercial Property portfolio has achieved strong results, with leasing spreads accelerating to 42.0%1 in our Logistics portfolio and continued positive leasing spreads of 3.5%2 in our Town Centres portfolio.
The skew towards essential-based categories has positioned our Town Centres portfolio well, delivering +3.4%3 total MAT growth.
“Our Masterplanned Communities business achieved 1,242 net sales, reflecting continued improvement in sales and enquiries over the past few quarters.
In Land Lease Communities, net sales volumes of 104 homes and strong enquiries in 3Q24 reflected the launch of five new communities over the financial year-to-date and support from improvements in the established housing market.” 1
Average rental growth on new leases and renewals negotiated (executed & HoA) in FY24 YTD.
2 Re-leasing spreads for stable portfolio on an annualised basis, FY24 YTD.
3 Comparable basket of assets as per the Shopping Centre Council of Australia (SCCA) guidelines, which excludes assets which have been redeveloped within the past 24 months.
4 Includes Stockland Nowra, NSW, and Stockland Balgowlah, NSW. 5On a 100% basis (Stockland 50.1%, Supalai 49.9%), excluding transaction costs and subject to adjustments at completion, acquired via Stockland Supalai Residential Communities Partnership (SSRCP).
SSRCP may also exercise its right to acquire (at its election) certain additional parcels of land for an additional payment of up to $239m. 6 All forward looking statements, including FY24 earnings guidance, remain subject to no material change in market conditions.
ASX/Media Release Stockland Corporation Ltd | ACN 000 181 733 | Stockland Trust Management Limited | ACN 001 900 741 AFSL 241190 as Responsible Entity for Stockland Trust | ARSN 092 897 348 | ASX: SGP 133 Castlereagh Street Sydney NSW 2000 | T 02 9035 2000 | stockland.com.au
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Commercial Property Logistics
The Logistics portfolio delivered strong operational metrics, achieving re-leasing spreads of 42.0%7 on new leases and renewals while occupancy levels remained high.
Stockland’s current portfolio WALE of 3.5 years8 and expected development completions in well-located markets is positioned to benefit from strong tenant demand and presents opportunities to capture ongoing market rent growth.
Stockland continues to progress its ~$1.1bn9 active Logistics development pipeline.
Workplace Operating metrics across the Workplace portfolio reflects the smaller scale of the portfolio, the majority of the portfolio is currently being positioned for future development.
Over the March 2024 quarter, re-leasing spreads were (1.7)%7 , primarily due to rental reversion at one asset.
Portfolio occupancy of 91.7%8 and WALE of 5.4 years8 reflects the two recently completed buildings at MPark Stage 110 (Macquarie Park, NSW).
Stockland continues to add value while maintaining optionality regarding development opportunities.
Construction is progressing on the final two buildings at MPark Stage 110 .
Town Centres Stockland’s Town Centres portfolio continues to deliver resilient operational performance, underpinned by its >70% weighting (by sales) to essentials-based categories.
Total comparable MAT across the portfolio grew by 3.4%, with comparable MAT specialty sales growth of 1.3%11 .
For the March 2024 quarter, total comparable sales grew by 2.0% and comparable specialty sales grew by 1.7%, demonstrating resilience in a moderating retail environment11 .
Leasing spreads remained positive over the quarter at 3.5%12 (in-line with 3.5% for 1H24) and portfolio occupancy remains high at ~99%13 .
Communities Masterplanned Communities (MPC) Stockland’s MPC business achieved 1,242 net sales in 3Q24 (versus 1,049 sales in 3Q23), reflecting continued improvement over the past four quarters.
Enquiry levels are up strongly over 3Q24, with month-on-month levels stable over the quarter.
Sales volumes are expected to remain around current levels in the near term, with further improvement dependent on the outlook for interest rates and the pace of market recovery in Victoria.
Default and cancellation rates14 are running above historical averages but remain below previous cyclical peak levels.
7 Average rental growth on new leases and renewals negotiated (executed & HoA) in FY24 YTD. Workplace excludes Walker Street Complex and 601 Pacific Highway in NSW.
8 By income. Workplace excludes Walker Street Complex and 601 Pacific Highway in NSW.
9 Forecast end value on completion as at 31 March 2024. Subject to relevant approvals.
10 MPark Capital Partnership with Ivanhoé Cambridge. First two buildings completed during 1H24.
11 Comparable basket of assets as per SCCA guidelines, which excludes assets which have been redeveloped within the past 24 months. 12 Re-leasing spreads for stable portfolio on an annualised basis, FY24 YTD.
13 Occupancy across the stable portfolio, based on signed leases and agreements at 31 March 2024.
14 12-month rolling average default rate vs 10-year average default rate.
ASX/Media Release Stockland Corporation Ltd | ACN 000 181 733 | Stockland Trust Management Limited | ACN 001 900 741 AFSL 241190 as Responsible Entity for Stockland Trust | ARSN 092 897 348 | ASX: SGP 133 Castlereagh Street Sydney NSW 2000 | T 02 9035 2000 | stockland.com.au
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The MPC business ended the period with 5,565 contracts on hand, with FY24 average settlement pricing expected to be 5-10% higher than FY23, reflecting settlement mix.
Stockland’s FY24 target settlement range is tightened to 5,300-5,500 settlements15, with expected development operating profit margin maintained in the low 20%s.
Stockland expects a larger settlement and FFO skew to 2H than in FY23, in line with previous guidance.
Land Lease Communities (LLC) Stockland’s LLC platform delivered net sales of 104 homes (versus 50 homes in 3Q23) and a strong uptick in enquiries over the quarter, reflecting five new project launches over FY24 year-to-date, and supported by improvements in the established housing market.
Stockland’s LLC platform is positioned for further growth and accelerated development activity, with up to 12 communities expected to launch during FY2416 .
As at 31 March 2024, there were 502 contracts on hand at higher average prices versus 1H24 settlements, providing embedded value to the business17 .
For FY24, the LLC business continues to target ~400-450 settlements15 , with development operating profit margin slightly below the long-term target range of 22-27% due to launch costs associated with production ramp-up.
FY24 Outlook and guidance FY24 FFO per security guidance is maintained at a range of 34.5 to 35.5 cents on a pre-tax basis, with tax expense expected to be a high single-digit percentage of pre-tax FFO.
Distribution per security is expected to be within Stockland’s targeted payout ratio of 75 to 85% of post-tax FFO.
Current market conditions remain uncertain.
All forward looking statements, including FY24 earnings guidance, remain subject to no material change in market conditions.
Ends This announcement is authorised for release to the market by Ms Katherine Grace, Stockland’s Company Secretary.
i hold SGP