Stockland · ASX:SGP
Stockland — Investor Presentation (June 2007)
33 slides from Stockland's investor presentation, Jun 6, 2007
Slide 1: Stockland Retirement Living
O Stockland Stockland Retirement Living 6% June 2007 ¢ Stockland
Slide 2: Development Division strategic direction
Development Division strategic direction Financial overview Stockland retirement living business Burnside Retirement V Q) Stockland
Slide 3: History of Development Division
History of Development Division * Australia’s largest residential developer — market leader * Consistent profit performance past 7. years * Residential Communities has been the driver whist our Apartments business has been gathering scale 300 74 Lensworth r— 3,000 “en $299 4 m | 250 Taylor Woodrow 2
Slide 4: Development Division Strategic Direction
Development Division Strategic Direction * Continue to focus the Division ona “Product Leadership” strategy * Continue to grow our.core market leading Residential Communities business and evolving Apartments business « Extend into activities that add value/create synergies with core businesses « Div
Slide 5: Drivers of Future Growth
Drivers of Future Growth * Diversified income streams (sources & type) * At various stages of evolution * Scalable model will support growth into.new-areas Residential Communities $14.8bn Development Division Total End Value $18.5 bn New Business Initiatives @ = Established @ Evolving Emerging "As a
Slide 6: Diversified Earnings Base
Diversified Earnings Base * We have the platform in place to achieve a more diversified income base by FY10 EBIT Mix Analysis — Development Division 2% 15% 1% 100% 98%, 65% FY01 FY06 FY10 $48m $239m Target Hicommunities fj Apartments/Mixed Use[_] Retirement Living [[] Integrated Housing Home Mortgag
Slide 7: Retirement Living - Strategic Rationale
Retirement Living - Strategic Rationale +. Extension of our current business «Positive social and sustainability contributions «Annuity based profit streams Retirement Recur sO Strategy | Component — + Vehicle to drive “lifetime” relationships with our customers «.°-Different demand drivers «The abi
Slide 8: Strength of the Retirement Living Sector
Strength of the Retirement Living Sector 1. Growth Sector * Retirement segment 70+ has approximately 1.9 million people « As the baby boomers move into this segment the 70+ population will grow by 146% in the next 25 years * Currently only circa 4% move into Retirement Villages «In addition, if the
Slide 9: Strength of the Retirement Living Sector
Strength of the Retirement Living Sector 2. Fragmented Market « Despite recent consolidation in the sector, the top five operators control less than 35% of the Retirement Living sector « There is no dominant national brand in this sector * The main growth driver is delivering “new” product - Stockla
Slide 10: Strength of the Retirement Living Sector
Strength of the Retirement Living Sector 3. Changing Needs Will Create New Opportunities « Wealthier aging baby boomers will create new segments * Currently, the market is “push” orientated —.move towards a lifestyle driven solution Alternative financial models will evolve Bundoora Retirement Villag
Slide 11: Start-Up Business Plan & ARC Strategic Fit
Start-Up Business Plan & ARC Strategic Fit Consistent with Strategy * The ARC acquisition was consistent with our Retirement Living strategy adopted18 months ago: — Market entry strategy was to focus.on unlocking the Y 3,000+ unit sites within our Residential Communities portfolio — Seek acquisition
Slide 12: Financial Overview
© Stockland Financial Overview
Slide 13: What is a DMF Contract?
What is a DMF Contract? + Developer/operator creates.a “community” village that has residential property and common facilities/services which are exclusive to the resident of the village, ie; ~ community facilities; ~ recreation facilities; and ~ retail, medical, health etc + Developer/operator sell
Slide 14: Sources of Income
Sources of Income There are three sources of income in the Profit & Loss statement under AIFRS Non-Recurring 1. Development Profit - On initial sale (difference between selling price and construction cost) 2. Initial recognition of Deferred Management Fee (DMF) asset - Created on initial sale of uni
Slide 15: AIFRS Profit Recognition v's Cash Receipt
AIFRS Profit Recognition v’s Cash Receipt Development Costs (80 Years 2-9 Year 10 (1) Development Profit - Construction - Initial Sale Price (2) DMF Creation - $100 (initial sale price) compounded @ 3% for 6 years and 4% for 4 years = $140 - DMF contribution @ 3% for 10 years = 30% =$42 - PV of the
Slide 16: Balance Sheet Accounting
Balance Sheet Accounting . The underlying substance of retirement village transactions, consists of two parts: 1. Development profits from producing and selling retirement village units; and 2. Gaining the right to annuity-style deferred management fee (DMF) income. . However, AIFRS additionally req
Slide 17: DMF cashflow effect
DMF cashflow effect * Once a village hits maturity.from its original development then it will provide a constant level of cashflow Working example 200 unit village @ average unit price of $320k 200 x $320k = $64m @ 8.25% (average 12 yr turnover) = $5.28m = §.28m x 30% = $1.58m pa Annuity cashflow pa
Slide 18: How did we acquire ARC
How did we acquire ARC We have valued ARC on the following criteria: {tis important to note that the “value” of the future DMF varies.on the key assumptions of capital growth and Existing Villages discount rate. For this reason, our philosophy is to adopt a - PV of the future DMF’s on existing villa
Slide 19: Financial Outlook for Stockland Retirement Living
Financial Outlook for Stockland Retirement Living * Target is to achieve circa $40m EBIT by FY09 * Target is for Retirement Living to contribute 15% of Development Division earnings by 2010 * Expected split of income over next 3 years: — 60% Development — 40% Recurring + Expect business to be cashfl
Slide 20: Stockland Retirement Living Business
© Stockland Stockland Retirement.Living Business Taylors Hill Retirement Village, VIC
Slide 21: History of ARC
History of ARC ARC were innovators and industry leaders. Move into retirement sector. First commercial “for profit” operator in this space. Knowles integrated housing development — — — _. Wy Le Ha Fe Te i sae MON aga Hy Big: 18 retirement villages and 6 Aged Care facilities developed De 7 . Co Top 5
Slide 22: ARC Retirement Village Business
ARC Retirement Village Business * Acquisition of retirement living business only. * Formed strong strategic partnership with vendors in the aged care sector. lidldddddddddds Stockland Purchased Retained by Vendors 9 Stockland
Slide 23: ARC Retirement Village Business
ARC Retirement Village Business* 2,850 units / homes * 98.5% occupancy * 12 years average tenure * 8.6% average annual turnover + 560 units / homes * 85% complete + Strong sales pipeline * 825 units / homes + Strategic locations “ Strong demographic Village locations are complementary to our Residen
Slide 24: Strategic rationale
Strategic rationale +. Acquisition is in line with existing Retirement Village Strategic Plan + Is the largest private participant in the market *« Is..a-.well run business and will give us an experienced base *---This acquisition places Stockland as one of the top 5 participants in Australia +. Imm
Slide 25: Stockland Retirement Living Business — Structure & People
Stockland Retirement Living Business — Structure & People « Matrix structure is consistent with the successful Stockland Residential Communities and Apartments. model. » * Strong mix of development and retirement capabilities _ General Meneuer , Michael Eggington . | i s | nsw WA _ Regional Mgr hoe
Slide 26: Retirement Living— value add to existing businesses
Retirement Living— value add to existing businesses * Complementary with communities business: * Collaboration with Stockland Retail: loyalty increase the product offer diversity in population keeping extended families together extends yields by higher density card/improve customer mix profile *.. P
Slide 27: Strategy for Growth
Strategy for Growth Goal To be the No 1 or 2 developer/operator in the Retirement Living Sector within 5 years Four Key Areas for Growth 1. Unlock the Stockland pipeline 2. Property Management 3. Asset Management 4. Further M&A ie Retirement Village, VIC Q) Stockland
Slide 28: Strategy for Growth
Strategy for Growth 1.Unlock the Stockland Pipeline « Deliver the organic opportunities within the existing residential communities portfolio (4,000+ lots) « Additional development opportunity via new inventory acquisitions (in collaboration with Communities, Apartments and Retail Divisions) Other g
Slide 29: Strategy for Growth
Strategy for Growth 2. Property Management * Inject Stockland Brand * Leverage marketing synergies with our Residential Communities, Retail and Capital Partners businesses * Leverage Stockland’s community development skill to improve services «Leverage Stockland business systems, procurement and fin
Slide 30: Strategy for Growth
Strategy for Growth 3. Asset Management * Proactively ‘asset manage’ the existing villages to create value through redevelopment — Utilise Stockland’s existing design capability in redeveloping existing villages to unlock greater value — Invest in community facilities to improve amenity and services
Slide 31: Strategy for Growth
Strategy for Growth 4. Future M&A * Pro-active M&A activity to build scale and diversity: — Still fragmented competitor environment — Focus on smaller/private operators — State/localised opportunities
Slide 32: Stockland Development Division is in a strong position
« Stockland Development Division is in a‘strong position — Long track record of sustainable performance — Scale and diversity. of business * Clear strategy for the Retirement sector — Natural extension of our core business — ARC was a logical fit * Strong platform for future growth from Retirement L
Slide 33: Disclaimer
Disclaimer Corporation/ Responsible Entity Stockland Corporation Limited ACN 000 181 733 Stockland Trust Management Limited ACN 001 900 741 25 Floor 133 Castlereagh Street SYDNEY NSW 2000 DISCLAIMER OF LIABILITY While every effort is made to provide accurate and complete information, Stockland does