This article is from the Australian Property Journal archive
STOCKLAND (ASX: SGP) has delivered a statutory profit of $305 million for FY24, after a year of reshaping its portfolio to boast greater weighting to master planned communities and land lease communities.
Stockland’s statutory profit was down from $440 million in FY23, after significant net devaluations of $310 million, compared to devaluations of $250 million in the year prior.
FFO was at $786 million and FFO per security of 22.0 cents, reflecting a 7.2% decline from FY23. AFFO was at $659 million and AFFO per security of 27.7 cents, down 10.1% on FY23. Full year total distribution per security was at 24.6 cents, compared with 26.2 cents in FY23.
Stockland’s NTA were at $4.12 per security, compared with $4.24 per security at 30 June 2023.
“We are pleased to deliver a FY24 result at the top end of our guidance range. A more stable interest rate environment over 2H24 has led to improvements in residential market conditions,” said Tarun Gupta, managing director and CEO at Stockland.
Over the year Stockland completed circa $1.06 billion of MPC acquisitions across 12 projects, circa $210 million in LLC acquisitions across five projects and circa $690 million of non-core town centre asset disposals.
Within the masterplanned Communities (MPC) portfolio there were 5,6377 settlements, above the targeted settlement range of 5,300-5,500 lots, at 23.2% development operating profit margin.
The MPC Development FFO was at $481 million in FY24, up from $464 million in FY23.
“We remain confident in the fundamentals of the residential market as net overseas migration and the labour market remain strong amid a chronic undersupply of new housing product,” said Andrew Whitson, CEO of Development.
“We’re focused on increasing production to expand the supply of housing, including more affordably priced product, in our active corridors. Over FY24, we launched six new communities and we expect to launch up to three new communities from our existing pipeline during FY25.”
With 444 Land Lease Communities (LLC) settlements at 23.0% development operating profit margin. The LLC Development FFO was at $67 million in FY24, up from $58 million in FY23.
“Over FY24 we have seen strong demand for our LLC product, driving increased sales and enquiry levels and supporting price growth on new releases. Improving conditions in the residential market has also been supportive, with demand showing less divergence on a state-by-state level compared with MPC,” added Whitson.
The investment management segment also delivered a strong FY24 result with FFO of $630 million, reflecting 4.5% growth from FY23.
The circa $3.7 billion logistics portfolio delivered an FFO of $168 million over the period, up 20.8% on FY23. The logistics portfolio boasted an occupancy rate by income of 98.2% and saw a net valuation gain of $71 million or 2.1% over the year.
“We continue to focus on capturing positive rental reversion opportunities and maximising the returns from our Logistics development pipeline,” said Kylie O’Connor, CEO of investment management.
The circa $1.7 billion workplace portfolio delivered a FFO of $115 million, up from $108 million in FY23. The workplace portfolio saw a net devaluation of $334 million, down 17.1% from FY23.
Meanwhile, the circa $4.5 billion town centre portfolio saw a FFO of $359 million, down 5.1% on FY23. Occupancy was high across town centres at 99%, while net valuations led to a decline of 0.9% or $46 million.
“The town centres portfolio has delivered strong results in an environment where cost-of-living pressures continue to impact retail performance. While discretionary categories such as apparel, jewellery and homewares continue to see slower sales, essentials categories such as food retailing and catering have been more resilient and delivered positive sales growth over the period,” added O’Connor.
“Stockland’s portfolio is well placed to continue delivering resilient performance through a challenging consumer environment, benefiting from the active repositioning in recent years that has driven solid operating metrics and an over 70% MAT skew to essential-based categories.”
Over FY24, Stockland’s Development FFO was $412 million, down from $445 million in FY23.
Gearing was at 24.1%, with substantial available liquidity of circa $3.1 billion.
Stockland’s weighted average cost of debt was at 5.3% in FY24, with a weighted average debt maturity of 5.2-years and an average fixed hedge ratio of 58%.
Additionally, Stockland had credit ratings of A-/A3 with stable outlook was reaffirmed from S&P and Moody’s respectively.
“Stockland’s results for fiscal 2024 were in line with our expectations. The group’s earnings were weaker, reflecting lower development funds from operations (FFO), higher corporate overheads and increased interest expenses. However, this was partially balanced by a solid performance in its investment management business, with solid like-for-like growth in its commercial property portfolio,” said Mariano Ferreyra, analyst at Moody’s Ratings.
“The lower earnings, higher debt costs and increased debt from development spending and land acquisitions have worsened Stockland’s credit metrics. While the group retains good flexibility within our net leverage and gearing rating thresholds, interest coverage was weaker than expected and has very limited rating headroom. Stockland has a solid balance sheet with relatively elevated levels of cash and equivalents as of June 2024, which will provide some flexibility to fund development activity and acquire Lendlease Group’s master-planned communities with limited debt if regulatory approvals are received.
“We expect Stockland’s to fund its development pipeline prudently, including recycling capital through asset sales and capital partnering, such that its credit profile is maintained. We view its credit metrics will remain within the rating parameters, supported by growing earnings from an expanding portfolio of commercial properties and other recurring income sources, as well as higher residential settlements over time.”
Stockland provided a FY25 FFO per security guidance range of 32.0 to 33.0 cents, with distribution per security expected to be within Stockland’s targeted payout ratio of 75% to 85% of FFO.
