Stockland Benefits from Home Builder Surge

19 April 2021

The strength of the residential market is filling the coffers at Stockland as the HomeBuilder policy sucks in home buyer demand.

Record low interest rates, high household savings and demand for high quality residential product has contributed to a strong 3rd Quarter with net land sales of 1,891 lots, up 69% on 3Q20 and clearly their best quarter ever. This record level of sales is unlikely to continue with HomeBuilder applications now closed.

Managing Director and CEO, Mark Steinert, said: “Our third quarter results demonstrate the value of Stockland’s diversified model following the strategic reallocation of capital through an upgraded and upscaled Logistics business, the disposal of non-core retail and retirement village assets, the restocking of high quality residential projects and the rebasing and remixing of our retail portfolio.

“COVIDSafe operational plans remain active across our assets as we continue to protect the health and safety of tenants, customers, contractors and our teams. Importantly as the economic and business environment has improved towards pre-COVID levels, industry support measures such as the Commercial Code of Conduct (Code) and HomeBuilder concluded at the end of the Quarter without emerging evidence of material adverse outcomes,” said Mr Steinert.

Key highlights include:

  • Elevated Residential business enquiries have translated into a strong net sales result of 1,891 lots, up 69% on 3Q20;
  • Forecast Residential settlements for the full year of around 6,300 lots. Supportive conditions including low interest rates, government incentives and credit availability have created new demand which Stockland has been able to meet with activated projects and our ability to scale production quickly. These conditions are forecast to continue for some time, even with the conclusion of HomeBuilder, given the equilibrium of supply and demand in most housing sub-markets we operate in;
  • Improvements in retail trading conditions demonstrating the positive impact of Australia’s pandemic response with sales levels and store openings increasing to around pre-COVID levels;
  • Comparable1 3Q21 total retail sales growth of 3.2% and specialty sales growth of 9.4% demonstrated a continued recovery cycling off COVID lows;
  • Low levels of unresolved arrangements with retail tenants have resulted in outstanding debt continuing to improve towards pre-COVID levels;
  • Workplace and logistics debt collection levels remain close to long term averages;
  • Executed leases financial year to date of over 230,000 square metres in the Logistics business;
  • Strong capital management has supported this high level of activity and has facilitated active restocking in our Communities business with approximately 10,100 new lots acquired in the financial year to date;
  • Our cost structure remains well balanced with the support of a strong centralised procurement function; and
  • Our focus on people and talent as well as accelerating digital and data innovation continued to drive operational excellence.


  • Residential settlements of 1,510 lots, supporting a full year target of around 6,300 lots
  • 1,891 net sales and 4,739 contracts on hand give visibility to strong FY22 Residential settlement volumes
  • Retirement Living established sales of 190 units, up 16.5% on 3Q20
  • First land lease product launched at Aura (QLD) in late February 2021 with 25 sales to date

Sales enquiry levels reached 33,000 in the Quarter, which is approximately 40% above the long term average, as the market shows continuing demand for quality and a preference shifts towards community living.

Low interest rates, credit availability, high household savings and demand for high quality product contributed to an elevated net sales result of 1,891 lots, up 69% on 3Q20. The fact that it is now cheaper for renter to buy (with the Deposit assistance from the Federal Government), record numbers of first home buyers are entering the market.

During the Quarter, the business settled 1,510 lots and had 4,739 contracts on hand at 31 March 2021, with approximately 3,100 lots due to settle in FY22, providing good earnings visibility.

Stockland are well positioned to meet the demand of this upcycle. The 81,000 lot landbank is approximately 70% activated with an 86% skew to the eastern seaboard which is geographically spread across key growth corridors.
The Group are focused on strategic restocking to meet future demand in geographies where they expect supply to be more limited in coming years. In 3Q21, approximately 1,950 lots were acquired, including 900 lots from recent acquisitions in Wantirna (VIC) and Piara Waters (WA).

Retirement Living

The performance of the core retirement village portfolio has continued to improve with established net sales of 190 units reflecting the strongest quarter in over four years.

The Groups first land lease community at Aura, in South East Queensland, was launched in late February 2021 resulting in 25 sales to date. A second land lease community at Minta (VIC) will be launched in June 2021.

Stockland are realigning the retirement village development business to land lease communities with a 3,000 lot development pipeline and further acquisition opportunities currently under consideration along the eastern seaboard. The Group forecast that their annual land lease sales run rate will be close to 300 lots within three years.

Commercial Property

  • Comparable 3Q21 total retail sales growth of 3.2% and specialty sales growth of 9.4%
  • Retail rent collection for the financial year to 14 April 2021, has risen to 94% of billings, net of abatements, (from 87% reported in 1H21)
  • COVID tenant support arrangements are almost complete, with unresolved negotiations representing less than 4% of retail monthly billings
  • Workplace and Logistics maintained solid operational results and has collected 98% of rent, net of abatements
  • $5.9 billion development pipeline is progressing to plan in the Workplace and Logistics portfolios
Retail Town Centres

Improving sales productivity and rent collection and the location of our suburban and non-metro assets with less COVID related disruption has assisted the Group’s recovery from the COVID impacts.

Customer spend per visit has generated higher sales productivity with comparable 3Q21 total sales growth of 3.2% and specialty sales growth of 9.4% demonstrating a continued recovery in sales. Centre occupancy is now at 99.7% and 2H21 leasing spreads are forecast to be in line with 1H21 rental reversions.

During the Quarter, localised restrictions associated with COVID clusters had some minor impact on retail sales, most notably at Balgowlah and Shellharbour in New South Wales, Point Cook in Victoria, and Bull Creek, Riverton, and Baldivis in Western Australia.

Tenants on holdover have reduced to 129 at 31 March 2021 compared to 182 tenants at 31 December 2020. Whilst both the Federal Government’s JobKeeper program and the Code have now concluded, 3Q21 shows improving tenant sales rates and our earnings forecast for the retail business includes provisions for vacancy, let up periods and estimated credit losses commensurate with current market conditions.

In the Quarter we settled the non-core divestments of Traralgon (VIC) for $85 million on 31 March 2021 and The Pines (VIC) for $155 million on 8 January 2021.

Workplace and Logistics

Occupancy levels in the Workplace portfolio increased to 94.1% with the weighted average lease expiry (WALE) of 2.7 years aligned to the anticipated development timeframe of Affinity Place, North Sydney (NSW) and Piccadilly, Sydney (NSW). Development commencements are subject to a continuing review of acceptable financial metrics, leasing pre-commitments and market conditions.

The Logistics portfolio had an occupancy of 97.8% with demand for logistics remaining consistently strong with 230,897 square metres leased in the financial year to date. Stockland notes that the portfolio WALE of 4.6 years typically reflects tenants’ client contract terms, but clearly reflects the tenure that the tenants feel comfortable committing to, so is a reflection of tenant quality.

Stockland continue to progress their $5.9 billion Workplace and Logistics development pipeline. Leasing terms have been agreed for 60% of Stage 1 at M_Park project in Macquarie Park (NSW) and strong land sales have been achieved at Gregory Hills with 89% of land exchanged and at Melbourne Business Park with 45% of Stage 1 land exchanged. At Leppington Business Park (NSW), the Stage 1 built form DA was lodged in January 2021 for 21,400 square metres targeting construction commencement in the third quarter of calendar year 2021.

Debt and liquidity

During the Quarter, Stockland issued $366 million of long-term debt through a 7 year AUD medium term note and a 15 year HKD private placement of $300 million and $66 million (AUD equivalent) respectively. Marginal rates achieved were materially lower than the 31 December 2020 weighted average cost of debt (WACD) and in line with expectations for WACD for FY21 and beyond.

Due to strong 3Q21 cash flows, and the early replacement of long term debt maturing in the second half of calendar 2021, liquidity rose to $2.210 billion at 31 March 2021. Stockland expect that this elevated level of liquidity is expected to decrease as short term facilities, implemented during the COVID pandemic, mature and are not replaced given the business is well capitalised.

FY21 outlook

On 25 February 2021, Stockland re-established FFO and distribution guidance for FY21. The Group continues to target 2H21 FFO per security in the range of 16.3 cents to 16.9 cents delivering FFO per security for FY21 of between 32.5 cents to 33.1 cents, in line with prior guidance. Based on the recent data, the likely outcome is currently trending towards the top end of the range.

Our Views

The pulling forward of demand in the residential sector, which is often attributed to Government policy, is often followed by a period of subdued activity, so in our view, the next 2 quarters are likely to be softer, especially as international borders remain closed.

The balance f the business is not shooting the lights out. The Town Centres are recovering but will continue to feel the structural changes facing the sector.

The Office portfolio strategy is all about the renewal of key assets at Piccadilly and North Sydney and these may struggle to find pre-commitments or be financial viable in a post covid world. Until then, their key assets will continue to lose value as leasing unwind.

The industrial portfolio needs further de-risking with longer WALE tenants. At present the short WALE of the portfolio is a reflection of tenant quality and is therefore more exposed to market fluctuations in rent and tenant requirements.

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