Stockland have provided a comprehensive update on the 1st quarter of 2021, reporting strong activity in the residential and logistics businesses, but ongoing concerns in the Workspace and Retail Town Centre business where COVID impacts will continue to impact the use of those assets.
Managing Director and CEO, Mark Steinert, said: “Our First Quarter results reflect improving conditions and demonstrate the value of our diversified model. Activity in the Communities business continues at elevated levels due to low interest rates, pent up demand, government stimulus, improved credit availability, customer preferences for master planned communities and the strength of our business.”
Residential
The Groups’ residential business experienced elevated sales and settlements delivering the highest quarterly net sales result in over three years. The achievement of 1,799 net sales reflects the pent up demand, low interest rates, improved credit availability and government stimulus measures.
Andrew Whitson, Group Executive and CEO, Communities, said: “We saw increased buyer activity in all states, except Victoria, with Western Australia and Queensland particularly strong. New South Wales continues to trade well, despite only 10% of our product meeting the criteria for HomeBuilder.”
Due to high demand created by HomeBuilder and limited timeframes for the commencement of construction, some builder partners have reached capacity in their order books for delivery by the required deadlines. This could affect further sales in the next quarter, subject to any extension in
the application timeframes.
1,083 Residential settlements were completed in the First Quarter, and we had 4,261 contracts on hand at 30 September 2020, with around 3,800 contracts due to settle in FY21.
The Retirement Living sector saw a -9% decline in net sales, compared with the prior corresponding period, largely due to continued government restrictions in Victoria. Excluding Victoria, the First Quarter net sales of 159 represents a 15% increase on 1Q20. The Groups’ move into to land lease communities has improved profit and the velocity of capital over the medium term.
Workplace and Logistics
The Workplace and Logistics portfolio had an occupancy of 96.2% by income and a weighted average lease expiry of 5.1 years at 30 September 2020 with demand for logistics remaining consistently strong.
Occupancy levels in Workplace assets also remain steady at 93.4% by income with the weighted average lease expiry of 2.9 years aligned to the planned development timeframe.
There is a preference emerging for more consistency in balancing work between office and home and this may affect absorption of new office space in the medium to long term.
The $5.6 billion Workplace and Logistics development pipeline is progressing. Construction of building one of M_Park project at Macquarie Park (NSW), at an estimated cost of $125 million, is expected to commence in early 2021. Tenant enquiry continues to be strong reflecting the quality of the $1.5 billion development and its location close to transport, amenities
and the new Sydney Metro.
Preparatory work is also well underway for developments at Piccadilly, Sydney (planning proposal lodged in August 2020) and Walker Street, North Sydney (development application expected to be lodged in December 2020).
While minimal capital is required at this point for these developments, Stockland will continue to carefully assess market conditions and will require major pre-commitments before commencing construction.
Retail Town Centres
During the First Quarter, Retail Town Centres experienced a recovery in retail sales levels, foot traffic and store re-openings. Excluding Victoria (which represents 12% of the Retail Town Centre portfolio) and a short term COVID-19 related decline at Wetherill Park (NSW), comparable total
sales growth was 3.6% for the quarter and comparable total specialty sales growth was 1.7%.
Across the Commercial Property portfolio, the Group has increased rent collection rates in the First Quarter compared to 4Q20, with
around 81% of rent collected. While abatements and deferrals will be required in FY21 by some Retail Town Centre tenants, these are already at much lower levels than 4Q20, noting that the Code will now continue to the end of the 2020 calendar year in most jurisdictions.
Louise Mason, Group Executive and CEO, Commercial Property said, “By the end of the First Quarter, the Retail Town Centre business experienced a recovery in retail sales rates, foot traffic and store re-openings. Excluding Victoria, which represents 12% of the total retail portfolio by income, these key portfolio metrics approached pre-COVID-19 levels as Australian consumers returned to shopping centres as part of their regular routines.”
For 1Q21, excluding Victorian centres and a short-term COVID-19 related decline at Wetherill Park (NSW), the portfolio delivered comparable total sales growth of 3.6%, and total speciality sales growth was 1.7%, a material improvement as restrictions ease. By contrast, in April 2020, with restrictions in place, sales growth was significantly negative with a decline to previous corresponding period of 25.1% for total sales and 60.3% for specialty stores. In 1Q21, for the total portfolio comparable total sales delivered growth of 1.0% and comparable specialty sales declined by 4.5%.
Excluding Victoria and a short-term COVID-19 related decline at Wetherill Park (NSW), foot traffic for September 2020 was around 97% of pre-COVID-19 levels, with total portfolio foot traffic around 90% of pre-COVID-19 levels.
Negotiations with tenants impacted by COVID-19 have continued during the First Quarter. Good progress has been made in finalising Code-assessable abatements and deferrals with relevant small and medium enterprise (SME) businesses and non-SME tenants, with around 80% of
negotiations for the FY20 rent concluded. Net rent receivable at 30 June 2020 has been collected in cash. Provisions set aside at 30 June 2020 remain appropriate to cover any remaining risk as we finalise FY20 tenant negotiations and require payment of any balance owing for that year.
Liquidity
Available liquidity remains strong with approximately $1.7 billion cash and committed undrawn bank debt facilities at 30 September 2020. The combination of this strong liquidity position, access to short and long term debt markets, the ability to scale business activity rapidly and ongoing cash
performance, combine to position us well to navigate the remainder of FY21 as disruption from the pandemic continues.
Summary
For the full year to 30 June 2021, due to ongoing uncertainty around the current and future impacts of COVID-19 on the economy, the broader community and business performance, funds from operations and distribution guidance will not be provided until further notice.
Managing Director and CEO, Mark Steinert, said: “The First Quarter result demonstrates the continuing value of the Stockland diversified model. We are focused on supporting our customers, tenants, residents, and our people as Australia manages the disruption caused by this pandemic. We believe the new environment is creating opportunities where the strength of the Stockland brand can be leveraged for the benefit of all our stakeholders and we have seen improving conditions during this quarter.
“We remain focused on creating Australia’s most liveable and sustainable communities and we are proactively ensuring that Stockland can restore business activities safely and efficiently while remaining agile in our execution of strategic priorities and positioning the business for the future.”
said Mr Steinert.
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