Stockland · ASX:SGP
Stockland — H1 2020 Earnings Presentation
66 slides from Stockland's earnings presentation, Feb 19, 2020
Slide 1: 1H20 Annexures
1H20 Annexures 19 February 2020 BARINGA, QLD
Slide 2: Agenda
Agenda update Group About Stockland 40 results Financial Group Finance Communities 43 Commercial Property Property Commercial 54 Communities Summary and outlook 74 Research 93 39 1H20 Results Presentation Figures are rounded to nearest million, unless otherwise stated. Percentages are calculated bas
Slide 3: Stockland quick facts
Stockland quick facts Trust – $10.4bn1 Corporation - $4.7bn2 Stockland Shellharbour, NSW Warwick Farm, Sydney Piccadilly Complex, Sydney Highlands, VIC Mernda Retirement Village, VIC Retail Town Centre Logistics Workplace Residential Retirement Living Create market leading Grow and develop Grow prem
Slide 4: Strategic mix
Strategic mix Assets Operating Profit Recurring Target 1H20 1H19 1H20 1H19 Commercial Property 69% 67% 68% 68% Retirement Living 7% 7% 4% 4% Unallocated corporate overheads - - (3)% (4)% Total recurring 70 – 80% 76% 74% 69% 68% Trading Target 1H20 1H19 1H20 1H19 Residential 22% 23% 34% 35% Retiremen
Slide 5: We are well positioned with a diverse portfolio
We are well positioned with a diverse portfolio1,2 Book Value by State WA - $1.0bn | 6% of portfolio QLD - $3.1bn | 20% of portfolio 6 9 3 20 22 13 Commercial Residential Retirement Commercial Residential Retirement SA & ACT - $0.2bn | 1% of portfolio 6% 20% NSW - $8.2bn | 53% of portfolio - 1 12 30
Slide 6: Group Finance Annexure
Group Finance Annexure Artist Impression M_PARK, NSW
Slide 7: Profit summary
Profit summary $m 1H20 1H19 Change Residential Communities EBIT (before interest in COGS) 208 170 22.2% Commercial Property EBIT 301 307 (1.6)% Retirement Living EBIT 20 22 (8.2)% Consolidated segment EBIT 529 499 6.2% Amortisation of lease fees 7 7 (4.3)% Unallocated corporate overheads (27) (32) (
Slide 8: Net interest gap
Net interest gap $m 1H20 1H19 Deferred interest – Residential Interest Deferred Total Interest Deferred Total Interest expense Interest Interest Interest income (1) - (1) (2) - (2) • Non-cash adjustments for unwinding of Interest expense 95 15 110 93 23 116 present value discount on land acquisition
Slide 9: Return on assets, return on equity
Return on assets, return on equity Key metrics CY2019 CY2018 Cash Avg. Cash Cash Avg. Cash Return Return profit ($m) invested ($bn) profit ($m) invested ($bn) Retail Town Centres 412 5.4 7.7% 426 5.5 7.8% Logistics 160 2.1 7.7% 155 2.0 7.8% Workplace 48 0.6 7.7% 50 0.6 7.7% Residential – core 463 2.
Slide 10: Reconciliation between return on equity table values and accounting results
Reconciliation between return on equity table values and accounting results Reconciliation of Group return in ROE calculation to FFO Reconciliation of capital employed in ROE statutory net assets $m CY2019 CY2018 $bn Average for CY2019 Average for CY2018 Cash return 899 793 Group capital employed (n
Slide 11: Cost management
Cost management $m 1H20 1H19 Residential 90 92 • Diligent approach to managing cost across the Group Retirement Living 17 18 • Reduction in unallocated ccorporate costs largely attributable to the business restructure and other savings initiatives Commercial Property 7 9 • Some savings across busine
Slide 12: Long dated, diverse debt
Long dated, diverse debt Long-dated drawn debt maturity profile Committed facilities of $5.2bn Drawn debt of $4.3bn2 (WADM 5.4 years)1 1,000 900 Bank debt, Commercial Bank debt, $200m, 5% Paper 800 $1,050m, 20% $249m, 6% 700 USPP EMTNs, USPP, $2,105m $1,179m, 27% $2,105m, 48% 40% 600 500 Commercial
Slide 13: Cost of debt and hedge profile
Cost of debt and hedge profile Cost of debt for 1H20 $bn Forecast hedge rate3 Debt1 Total debt2 Interest rate 4.0 4.4% Hedged debt $3,632m 84% 3.1% 3.5 4.2% Floating debt $711m 16% 0.2% Total debt $4,343m 3.3% 4.0% 3.0 Margin 0.9% 3.8% 2.5 Fees 0.2% Fixed 3.6% Debt Weighted average cost of debt for
Slide 14: Covenant calculations
Covenant calculations Statutory Gearing Covenant At 31 December 2019 Adjustments $m Balance Sheet $m Balance Sheet $m All lenders have consistent covenants Assets • Financial Indebtedness/Total Ttangible assets (FI/TTA): less than 50% Cash - 245 245 • Interest cover: more than 2:1 (write-downs and p
Slide 15: Balance sheet summary
Balance sheet summary $m 1H20 FY19 Change Cash 245 140 74.7% Real estate related assets - Commercial Property 10,519 10,323 1.9% - Residential 3,3221 3,411 1 (2.6)% - Retirement Living 1,405 1,452 (3.2)% - Other 132 36 266.7% Retirement Living gross-up 2,630 2,585 1.7% Intangible assets2 174 193 (9.
Slide 16: Stockland Corporation income tax reconciliation
Stockland Corporation income tax reconciliation 1H20 1H19 Net profit before tax 516 318 Less: Trust profit and Intergroup eliminations (499) (271) Corporation profit/(loss) before tax B 17 47 Prima facie tax expense @ 30% (5) (14) Tax effect of permanent differences: Non-deductible expenses for the
Slide 17: Commercial Property Annexure
Group Financial results and Commercial Communities Summary update capital management Property and outlook Commercial Property Annexure KEYWEST, VIC
Slide 18: Portfolio weightings
Portfolio weightings Commercial Property Assets by book value $10.4bn1 Retail Town Centres: - $6.6bn Logistics - $2.8bn Workplace - $1.0bn ($6.9bn under management) ($3.1bn under management) ($1.0bn under management) 32 properties | 1,000,232 sqm gla2 29 properties | 1,311,725 sqm gla2,3 6 propertie
Slide 19: Funds from operations
Funds from operations Commercial Property Logistics Workplace Retail Net overhead costs Total $m 1H20 1H19 1H20 1H19 1H20 1H19 1H20 1H19 1H20 1H19 Operating EBIT 701 71 21 18 1831 197 (8) (9) 266 277 Adjust for: Amortisation of fit out incentives 4 3 2 3 27 23 - - 33 29 and lease fees Amortisation o
Slide 20: Average weighted cap rates over time
Average weighted cap rates over time Commercial Property Logistics 9% 8% 7% 8.4% 8.4% 8.3% 8.4% 8.5% 8.3% 8.0% 6% 7.3% 7.0% 6.7% 6.2% 5.7% 5% FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 1H20 Workplace 9% 8% 7% 7.9% 8.0% 7.7% 7.9% 7.9% 7.7% 6% 7.4% 7.0% 6.4% 6.0% 5.8% 5.9% 5% FY09 FY10 FY1
Slide 21: Portfolio capitalisation rates
Portfolio capitalisation rates Retail Town Centres At 30 June 2007 Allocation At 31 December 2019 Allocation Regional 12% Regional 59% Sub-Regional 79% Sub-Regional 34% Neighbourhood and Other 9% Neighbourhood and Other 7% Retail Portfolio 8.0% Neighbourhood and Other Sub-Regional 7.5% Regional 7.0%
Slide 22: Revaluation and book value movement
Revaluation and book value movement Commercial Property Commercial Property book value ($bn) $10.4bn1 0.2 49% (0.6) 0.6 of all properties by value were independently 10.4 valued during 1H20 10.2 30-Jun-19 Acquisitions, devex and capex Revaluations Disposal 31-Dec-19 $m Retail Logistics Workplace Tot
Slide 23: Performance: Logistics
Performance Logistics FFO movements between Occupancy and lease expiry by income1 Assets by book value4 1H19 and 1H20 $m 1H20 1H19 Business Parks Logistics 1 3 (4) $0.9bn $1.9bn Occupancy 98.3% 98.0% WALE 5.4 yrs 5.2 yrs Lease expiry profile1 50% 81 81 40% $2.8bn 30% 20% 10% 0% 1H19 FFO Income Devel
Slide 24: Performance: Workplace
Performance Workplace FFO movements between Occupancy and lease expiry by income1 Assets by location2 1H19 and 1H20 $m 1H20 1H19 Occupancy 94.1% 95.5% Sydney 2 90.8% (3) 3 WALE 3.6 yrs 3.8 yrs Lease expiry profile1 40% 26 $1.0bn3 35% 24 30% 25% 20% 15% 10% 5% Perth 0% 9.2% Vacant FY20 FY21 FY22 FY23
Slide 25: Growing and activating the development pipeline
Growing and activating the development pipeline Workplace & Logistics Completed Active development Planning underway Future wave DA approvals received • Yatala (Stage 2) M_Park Ingleburn • M_Park (Stage 1) and precinct masterplan DA Gregory Hills (Stage 2-4) (Stage 3) approved • Melbourne Business P
Slide 26: Development pipeline
Development pipeline Workplace & Logistics Est. Total Est. Cost to Est. Est. Fully Development Gross lettable Cost spent to Est. Total Status Incremental complete Completion leased year Est. Return3 type area (sqm) date ($m) return4 cost ($m) ($m) date one yield2 1 KeyWest (VIC) Completed Greenfield
Slide 27: Strong sales performance and diversified rental income
Strong sales performance and diversified rental income Retail Town Centres Specialty Sales/sqm1 $13,225 $12,509 $11,311 $11,127 $10,361 $9,961 $9,806 $9,785 $9,569 $9,185 Nowra Caloundra Bundaberg Gladstone Merrylands Townsville Rockhampton Cairns Wetherill Pk Bull Creek Diversified rental income, n
Slide 28: FFO movement
FFO movement Retail Town Centres Retail Town Centre FFO ($m) $209m 3 1H20 FFO ‒ impacted by non- core asset disposals (12) 218 209 1H19 FFO Income Development Net disposals 1H20 FFO 65 1H20 Results Annexure
Slide 29: Redevelopment pipeline focussed on continuous growth categories
Redevelopment pipeline focussed on continuous growth categories Retail Town Centres Community Town Sub-Regional Regional Major Regional DA approvals received Centres • Rockhampton (QLD) • Birtinya Night Quarter (QLD) • Hervey Bay (QLD) • Bull Creek (WA) Under Construction Baringa DA approvals submit
Slide 30: Asset values and FFO by asset: Logistics
Asset values and FFO by asset Logistics Date of last independent Property State Book value ($m) 1H20 val.incr / (decr) ($m) Cap rate 1H20 FFO ($m) valuation Yennora Distribution Centre NSW Dec-2019 524.0 48.0 5.50% 15.9 Optus Centre, Macquarie Park NSW Dec-2019 290.7 51.6 5.00% 8.4 Triniti Business
Slide 31: Asset values and FFO by asset continued
Asset values and FFO by asset continued Logistics Date of last independent Property State Book value ($m) 1H20 val.incr / (decr) ($m) Cap rate 1H20 FFO ($m) valuation Altona Industrial Estate VIC Jun-2019 49.7 - 6.25% 1.6 23 Wonderland Drive, Eastern Creek NSW Dec-2019 49.5 2.3 5.50% 1.4 KeyWest Dis
Slide 32: Asset values and FFO by asset: Workplace
Asset values and FFO by asset Workplace Date of last independent Property State Book value ($m) 1H20 val.Incr / (decr) ($m) Cap rate 1H20 FFO ($m) valuation Piccadilly Complex NSW Jun-2019 626.7 - 5.50% - 5.88% 10.6 601 Pacific Highway NSW Dec-2019 126.0 9.4 6.00% 4.1 Durack Centre WA Dec-2019 95.1
Slide 33: Asset values and FFO by asset: Retail
Asset values and FFO by asset Retail Date of last independent Property State Book value ($m) 1H20 val.incr / (decr) ($m) Cap rate 1H20 FFO ($m) valuation Stockland Green Hills NSW Dec-2019 825.0 6.5 5.50% 23.6 Stockland Shellharbour NSW Dec-2019 740.2 4.6 5.50% 20.3 Stockland Wetherill Park NSW Jun-
Slide 34: Asset values and FFO by asset continued
Asset values and FFO by asset continued Retail Date of last independent 1H20 val.incr / (decr) Property State Book value ($m) Cap rate 1H20 FFO ($m) valuation ($m) Stockland Bundaberg QLD Jun-2019 145.6 - 6.50% 5.0 Stockland Gladstone QLD Dec-2019 134.0 (1.3) 6.75% 4.8 Stockland Nowra NSW Jun-2019 1
Slide 35: Top tenants by income
Top 10 tenants by income Commercial Property Retail Town Centres Logistics Portfolio Workplace Portfolio Rank Tenant Portfolio Tenant Portfolio Tenant Portfolio 1 Woolworths 9.1% OPTUS Administration Pty Ltd 9.2% Stockland Development Pty Ltd 17.4% 2 Wesfarmers 5.9% Toll Transport Pty Ltd 5.0% Jacob
Slide 36: Acquisitions and Disposals
Acquisitions and Disposals Commercial Property Property disposed Asset class Settlement date Disposal value1 $m Tooronga VIC Retail Sep 2019 62.8 Cammeray NSW Retail Oct 2019 39.2 Jesmond NSW Retail Oct 2019 118.0 135 King St & Glasshouse (50%) NSW Workplace and Retail Nov 2019 340.0 11-25 Toll Driv
Slide 37: Communities Annexure
Communities Annexure MINTA, VIC ARTIST’S IMPRESSION
Slide 38: Margins driven by 2H20 skew of Sydney projects
Margins driven by 2H20 skew of Sydney projects Residential Communities Operating profit margin 25.0% Key metrics 1H20 1H19 Change (0.9)% Total lots settled 2,1581 2,460 (12.3)% 20.0% (4.0)% (0.5)% 1.0% Total revenue $779m $658m 18.4% 15.0% - Includes Super lot revenue $176m2 $18m 868.7% 21.6% 10.0%
Slide 39: Development pipeline - major projects
Development pipeline - major projects Residential Communities Anticipated settlements Approximate lot Approx. Remaining State Project State percentage Total project lots FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 sales per annum1 project lots Qld Aura2 20,000 490 17,710# Newport 1,890 190 990# North Sh
Slide 40: Retail sales price
Retail sales price1 Residential Communities 1H20 settlements 1H19 settlements State No. Lots Av. Size per lot sqm Av. Price per lot $k $/sqm No. Lots Av. Size per lot sqm Av. Price per lot $k $/sqm NSW 298 438 412 940 302 380 429 1,130 QLD 537 372 277 746 510 386 266 689 VIC 679 379 292 770 720 410
Slide 41: Lots settled by location
Lots settled by location Residential Communities 3,751 3,418 3,210 3,228 1,123 2,853 705 1,008 852 248 2,460 515 589 524 451 431 2,158 452 353 NSW 348 1,015 361 WA 1,003 1,050 1,094 1,182 897 641 QLD 1,013 1,098 931 830 764 797 803 VIC 1H17 2H17 1H18 2H18 1H19 2H19 1H20 78 1H20 Results Annexure
Slide 42: Net deposits by quarter
Net deposits by quarter Residential Communities Net deposits by buyer 78.3% 79.1% 86.1% 86.5% 75.6% 86.3% 83.9% 83.8% % Owner 80.0% 77.3% Occupier 1,672 1,561 1,535 408 1,337 213 1,293 1,295 1,350 338 1,149 280 175 178 307 Investors 464 567 963 229 464 447 846 Upgraders / 414 505 156 374 136 287 Dow
Slide 43: Leads and enquiry levels
Leads and enquiry levels Residential Communities Lead volumes Majority of our customers are owner occupiers 12,000 Average Monthly Leads Composition of Stockland new leads 75% First Home Buyers Upgraders Retail Investors 10,000 8,000 48% 51% 51% 55% 49% 50% 47% 6,000 43% 43% 41% 36% 31% 4,000 32% 24
Slide 44: Market overview
Market overview Residential Communities 1H20 STOCKLAND SUMMARY CY2020 MARKET OUTLOOK 1H20 settlement volumes Comments on Vacant land Vacant State (% change over 1H19) our settlements in 1H20 sales volumes land prices Comments Market volumes doubled in six months to December 2019 and Volume decre
Slide 45: Providing affordable product
Providing affordable product Residential Communities Stockland pricing relative to local median house and unit price ($) Stockland H&L entry price1 Median house price3 780k 780k 719k 724k 583k 550k 581k 550k 541k 538k 514k 499k 490k 440k 429k 430k 408k 367k 396k 341k Elara Willowdale Aura Pallara Hi
Slide 46: Composition of residential landbank
Composition of residential landbank1 Net funds employed: $2.3bn Book value: $3.3bn Apartments 5% 6% Aura 4% Aura 19% 20% QLD QLD 60% ~51,700 14% lots WA Active 19% Residential WA communities 76% VIC 36% 36% Active within 21% VIC two years ~6,100 lots Active beyond two years 15% NSW2 27% 19% ~15,000
Slide 47: Key communities, located in connected, population growth corridors: Sydney
Key communities, located in connected, population growth corridors1 Sydney Average annual growth 2016 – 2021 by LGA (per annum) Greater than 2% 1.5% - 2% 1% - 1.5% 0.5% - 1% Less than 0.5% 1. State Government Population Projections. 84 1H20 Results Annexure
Slide 48: Key communities, located in connected, population growth corridors: Melbourne
Key communities, located in connected, population growth corridors1 Melbourne Average annual growth 2016 – 2021 by LGA (per annum) Greater than 2% 1.5% - 2% 1% - 1.5% 0.5% - 1% Less than 0.5% 1. State Government Population Projections. 85 1H20 Results Annexure
Slide 49: Key communities, located in connected, population growth corridors: Brisbane, Perth
Key communities, located in connected, population growth corridors1 Brisbane Perth Greater than 2% 1.5% - 2% 1% - 1.5% 0.5% - 1% Less than 0.5% 1. State Government Population Projections. 86 1H20 Results Annexure
Slide 50: Workout contribution and impairment provision balance
Workout contribution and impairment provision balance Residential Communities Residential impairment provision utilisation as at 31 December 2019 Workout contribution to residential ($m) Residential Core Workout1 Total Net decrease in impairment - Lots settled 2,053 105 2,158 Utilisation of provisio
Slide 51: Profit driven by development settlements and village disposals
Profit driven by development settlements and village disposals Retirement Living Key metrics 1H20 1H19 Change Net reservations Retirement Living FFO $17m $20m (13.8)% Occupancy 93.3% 94.1% 800 Cash ROA 4.5% 4.5% 700 Development Established portfolio 421 406 Established Established settlements 265 24
Slide 52: Established portfolio
Established portfolio Retirement Living Net funds employed Portfolio statistics 1H20 1H19 $1,446m $1,567m 66 Established villages 63 65 17 Goodwill 168 Established units 9,271 9,676 154 Revaluation Established units settlements 265 244 318 399 Development Witheld units 6 14 Turnover rate excluding d
Slide 53: Retirement Living: strong demand drivers
Retirement Living: strong demand drivers Compelling demand fundamentals Australian population aged 65+ growing at significantly faster pace than under 65 population 1 Over 65: 2.7% CAGR over next 15 years 3.5% 3.1% Under 65: 2.9% Growth rate 1.3% CAGR over 2.3% next 15 years 1.3% 1.4% 1.3% 1.1% 2011
Slide 54: Development pipeline
Development pipeline Retirement Living Geographically diverse development pipeline Development pipeline breakup 1% Development Pipeline 1H20 Development villages 21 Total development pipeline units 3,485 10% - Greenfield pipeline units 680 26% - Village renewal pipeline units 425 - Land lease units
Slide 55: Retirement Living pipeline
Retirement Living pipeline Construction timeframe Future settlements FY20 FY21 FY22 FY23 FY24+ Completed projects 1H20 completed projects Sub-total 270 Elara Aspire, NSW Affinity, WA Willowdale, NSW Current Calleya Aspire, WA Somerton Park, SA Sub-total 300 Pine Lake, QLD To start within 18 months S
Slide 56: Research Annexure
Research Annexure Stockland
Slide 57: Retail trade environment
Retail trade environment Retail Spend Growth by State (trend)1 Consumer Sentiment trending down through 20192 12% 130 NSW VIC QLD WA Aus 10% 120 8% 110 6% 100 4% 90 2% 0% 80 -2% 70 2010 2012 2014 2016 2018 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Employment growth trending up
Slide 58: Population growth forecast to ease but remain historically high
Population growth forecast to ease but remain historically high AUS population growth QLD and VIC - strong positive interstate migration 1 (Annual year to June)1,2 Annual Rolling Sum (‘000s) 500,000 2.5% 45,000 NSW Vic Qld WA 30,000 450,000 15,000 400,000 Forecast 2.0% 0 Annual Growth Rate (RHS) -15
Slide 59: Dwelling commencements weak, undersupply to grow
Dwelling commencements weak, undersupply to grow Dwelling commencements are down heavily, Dwelling undersupply forecast to grow2 now below long term average on per capita basis1 250 30 Dwelling commencements (LHS) 25 200 20 Long term 150 average 15 100 Dwelling commencements per 1000 people (RHS) 10
Slide 60: National building approvals
National building approvals NSW dwelling approvals1 falling though 2019 VIC unit approvals rising in second half of 2019 4,000 4,000 House: 3,000 -13% below 3,000 House: long term average +14% above Apartment: long term average 2,000 +26% above 2,000 long term average Apartment: +66% above long term
Slide 61: National house and land prices
National house and land prices Price recovery well underway across the country in established markets Land Price per sqm1 Capital City House Prices – Rolling Annual Change2 1400 35% NSW VIC QLD WA Metro Sydney SEQ Perth Melbourne 1200 25% 1000 15% 800 600 5% 400 -5% 200 -15% 0 1997 1999 2001 2003 20
Slide 62: Residential vacancy rates
Residential vacancy rates Rental vacancy rates1 trending up in Sydney, Melbourne, down in Perth 6% 5% 4% Sydney 3% Brisbane Perth Melbourne 2% 1% 0% 2012 2013 2014 2015 2016 2017 2018 2019 1. SQM Research Dec 2019. 99 1H20 Results Annexure
Slide 63: Vacant land market recovering strongly in Sydney and Melbourne
Vacant land market recovering strongly in Sydney and Melbourne1 NSW vacant land sales up 82% in second half of 2019 VIC vacant land sales still below long term average levels Quarterly Sales Quarterly Sales 4,000 7,000 3,500 6,000 3,000 5,000 2,500 4,000 2,000 3,000 1,500 1,000 2,000 500 1,000 0 0 J
Slide 64: Housing finance
Housing finance First home buyer activity historically strong. Strongest recovery in household lending to owner occupiers. Residential Loan Approvals ($m, monthly)1 12,000,000 Investor First Home Buyer Owner Occupier (excl. FHB) 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0 2002 2003 2004 200
Slide 65: Household affordability trends
Household affordability trends Household Debt-to-Asset and Debt-to- Affordability improvement halted in Sydney and Melbourne as Income ratios eased in second half 20191 house prices rise strongly and wage growth remains weak 2 200% 30% 60% Sydney Melbourne Brisbane Perth Debt-to-Income Ratio (LHS) D
Slide 66: Stockland Corporation Limited Important Notice
Stockland Corporation Limited ACN 000 181 733 Stockland Trust Management Limited ACN 001 900 741; AFSL 241190 As responsible entity for Stockland Trust ARSN 092 897 348 LEVEL 25 133 Castlereagh Street SYDNEY NSW 2000 Important Notice While every effort is made to provide accurate and complete inform