This article is from the Australian Property Journal archive
DIVERSIFIED developer Stockland will increase its focus on the residential and industrial sectors after selling its retirement living business to Swedish investor EQT Infrastructure for $987 million.
On a busy day of announcements for the developer, it unveiled an interim statutory profit of $850 million, up from $339 million in the prior corresponding period, helped by $543 million in commercial property revaluation gains – a 5.5% increase on June book values – that it said reflected “improved investor demand for high quality, essentials-based retail assets, strong transactional evidence for high quality Logistics assets, and a broadly stable asset pricing environment for workplace assets”.
Funds from operations was down 9.3% to $350 million and 14.7c as it expects a skew to the second half of the year due to the timing of residential settlements, retirement living non-core village disposal profits and COVID-related tenant assistance. It said 97.5% of gross rent had been collected across its commercial property portfolio to the end of January, dragged down by town centres at 96.5%.
Land lease expansion
The deal with EQT Infrastructure represents a 1.9% discount to Stockland’s book value. EQT will acquire 58 established villages,10 development projects underway and in planning, along with the associated management platform as part of the deal.
Over 300 employees will transfer to EQT with the business.
Stockland has been looking to move away from retirement villages business in favour of land lease communities and late last year revealed it would sell $2 billion of retail and retirement living assets.
Following on from its recent acquisition of Halcyon Group in a $620 million deal, it also announced yesterday a long-term partnership with Japanese giant Mitsubishi Estate Asia that will develop and own land lease communities.
“This partnership will enable us to improve our market position by creating opportunities to scale up our land lease communities business with a high quality capital partner via the delivery of the $4 billion secured development pipeline,” CEO and managing director of Stockland, Tarun Gupta said, adding that the partnership will generate recurring management and rental income and opportunities to deliver ongoing development margins on its land bank.
The initial portfolio of the Stockland Residential Rental Partnership is worth about $500 million and the six initial communities will yield about 2,000 home sites when complete. They consist of four communities in Queensland acquired as part of the Halcyon acquisition and two existing Stockland communities, in Nirimba, Queensland and Melbourne’s Berwick.
In another capital partnership, Stockland has brought in Canadian entity Ivanhoé Cambridge for a 49% stake on the M_Park life sciences and technology precinct in Sydney’s Macquarie Park.
Ivanhoé Cambridge will initially invest on a fund-through basis in the M_Park Trust, which will deliver of the 62,500sqm stage one of the project. Currently under construction, practical completion is expected in FY24 and comprises three commercial buildings with combined net lettable area of 37,146 sqm along with a 25,487 sqm data centre.
The stage is currently 62% pre-leased to tenants including Johnson & Johnson Family of Companies, WiSE Medical and a multinational data centre operator.
“The formation of the capital partnership at M_Park delivers on our strategy to expand our third party capital platform and accelerate the delivery of our $9.1 billion commercial property development pipeline,” Gupta said.
Interim results
Town centres FFO lifted 2.0% to $153 million. Rental abatements reduced FFO by $27 million, up from $8 million. Moving annual turnover lifted 0.4% with lockdowns in New South Wales and Victoria impacting the result.
Logistics FFO lifted 58.2% to $87 million, underpinned by 99.9% occupancy, fixed rental escalations and 5.1% average rental growth on new leases. Across its workplace portfolio, FFO was steady at $56 million. Occupancy was 90.6%.
Stockland has a $3.2 billion logistics development pipeline and a $5.9 billion workplace pipeline.
Residential settlements were down from to 2,329 from 3,101. About 6,000 total settlements are expected this year, down from the 6,400 it previously forecast, due to supply chain disruptions and south-east Queensland’s wet weather.
Contracts on hand lifted 30% to 6,436 with average pricing about 14% above the FY21 average. Prive growth and a greater contribution from NSW projects lifted operating profit margin to 18.2%, and the full-year operating profit margin is now expected to be above 18%.
Stockland tightened its FFO per security to between 35.1 and 35.6c, the upper range of its previous guidance.
