This article is from the Australian Property Journal archive
STOCKLAND is on track to deliver on its full-year guidance as it sees higher pricing and enquiries for homes in its master-planned communities return to pre-COVID levels.
In its quarterly update, the major developer maintained its FY23 settlement targets at about 5,500, with a significant settlement skew to the June quarter, during which 3,000 settlements are expected to complete.
It ended the period with 6,443 contracts on hand at around 12% higher average pricing compared to the first half FY23.
The FY23 development operating profit margin is still expected to be about 26%.
“The master-planned communities business showed continued improvement over the quarter, with 3Q23 net sales of 1,049 and enquiries returning to pre-COVID-19 levels,” said managing director and CEO, Tarun Gupta.
Default rates were up over the quarter, but remain below historical levels.
Gupta said the rate of construction cost escalation continues to moderate as supply chain constraints ease.
“We continue to monitor the financial health of homebuilders and work cooperatively with our builder partners through challenging conditions to mitigate production and delivery risk.”
In its land lease communities, which offers affordable accommodation catering mostly to over-50s, net sales of 50 homes reflected a slowing of releases in order to allow production to catch up with purchaser demand, Gupta said.
Project launches are supporting elevated enquiry levels, demonstrating ongoing demand for land lease community living, he said. Stockland expects to launch seven new communities by the end of FY24, and it has seen high occupancy and rent collection with average rental growth on FY22 at 6.3%. The business had 437 contracts on hand at about 18.2% higher average pricing against the first half.
The FY23 funds from operations (FFO) per security guidance range was maintained at 36.4 to 37.4c on a pre-tax basis, in line with prior guidance provided in August. Tax payable in FY23 is expected to be at the lower end of the guidance range of five to 10% of pre-tax group FFO, with the benefit of some remaining carry forward tax losses.
Distributions per security for the full year is expected to be within target payout ratio of 75% to 85% of FFO.
In its commercial portfolio, Stockland continued to see strength in across its industrial and logistics assets, with releasing spreads of 20.5 on new leases and renewals negotiated over the financial year-to-date, and high occupancy levels of 99.7% and a rent collection rate of 100% over the quarter. It has a $6.4 billion logistics development pipeline. Its $500 million-plus worth of targeted completions are now 92% pre-leased.
Stockland said a majority of workplace portfolio is “currently being positioned for future development”, reflected in portfolio occupancy of 93.9% and weighted average lease expiry of 4.3 years. Construction is progressing at the M_Park Stage 1 project in Sydney’s Macquarie Park, in partnership with Ivanhoé Cambridge, with pre-leasing now at 66%.
Underpinned by a 75% weighted to essentials-based categories, total comparable sales grew by 10.9% for the March quarter comparable specialty sales by 9.0%. Relative to the pre-COVID comparable quarter in 2019, total comparable sales were 17.3% higher.
