Stockland · ASX:SGP
Stockland — Deutsche Bank Access Asia Conference 2011
34 slides from Stockland's conference presentation, May 26, 2011
Slide 1: Deutsche Bank Access Asia Conference
Stockland Merrylands, NSW Deutsche Bank Access Asia Conference 23 – 26 May 2011 www.stockland.com
Slide 2: Stockland's integrated model
Stockland’s integrated model 3-R growth strategy - Residential Communities, Retail development and Retirement Living Residential Retail Communities Retirement Living 39 properties 71 projects 58 villages $4.2b funds employed $2.0b funds employed $1.0b funds employed $2.4b pipeline $22b pipeline end
Slide 3: Residential
North Lakes, QLD Residential
Slide 4: Residential Communities – market conditions vary across states
Residential Communities – market conditions vary across states Residential market conditions Private detached house approvals1 • Varied market conditions across the country: 3,800 NSW buyer sentiment strong for affordable product, market trending upwards 3,300 VIC returning to average approval numbe
Slide 5: Residential Communities – strong enquiry but buyers are cautious
Residential Communities – strong enquiry but buyers are cautious • Strong 3Q11 Stockland customer traffic: Stockland customer lead volumes remain strong 1 Seasonality due to Christmas Reflects strategy to deliver affordable packages 2 8,000 relative to established market 6,000 Total lead volumes Sol
Slide 6: Residential Communities – slower 3Q11 but strong contracts on hand
Residential Communities – slower 3Q11 but strong contracts on hand • FY11 lot settlements expected to be slightly higher QLD subdued while other states at long-term averages than 5,236 lots settled1 in FY10: 3,500 3,101 3,169 3,134 2,975 Very strong 1H11 3,000 405 302 351 428 2,500 Deposits slowed i
Slide 7: Residential Communities – affordability is the challenge
Residential Communities – affordability is the challenge… Affordability has improved with wage growth, but will Stockland target the mid-market – not upper end come under further pressure if mortgage rates rise Major capital city property value growth1 Mortgage repayments as % of household income2 1
Slide 8: Product innovation is the opportunity
… product innovation is the opportunity Increasing demand for masterplanned communities • Product flexibility not available in established market • Can respond quickly to customer preferences • Delivers on increasing consumer desire for sense of community Australian houses are larger than other coun
Slide 9: Faster speed to market and improved return on NFE
Faster speed to market and improved return on NFE Large and diverse land bank Land bank comprises mostly active projects 1 • Total land bank of 84,500 lots; $2.0b net funds employed (NFE)1 Active projects (live or commencing next 2 yrs) $1.7b - 39,000 lots • Provides 90% coverage of revenue targets
Slide 10: Retirement Living
The Lakes Estate, VIC Retirement Living
Slide 11: Retirement Living – key growth business as the population ages
Retirement Living – key growth business as the population ages Ageing population makes this a high growth industry Australian population aged 65+ • Estimated 100,000 new units required by 2030 based on 2.7% pa Millions of people CAGR current take up rates, well in excess of current supply: – Current
Slide 12: Retirement Living means active communities, not Aged Care or Nursing Homes
Retirement Living means active communities, not Aged Care or Nursing Homes Independent active communities • Retirement Villages are active communities of 65-85 year old independent residents • Retirement Villages offer only basic nursing services1 Effective retirement living solutions • Residents va
Slide 13: Aevum successfully acquired and integrated
Aevum successfully acquired and integrated Before After Change 3,881 units 7,027 units +81% Portfolio size1 Nearly doubled portfolio 28 villages 58 villages +30 villages National ranking #4 #3 +1 ranking Clear #3 in the market Market share / ~5% ~9% +4% National platform; critical geographic d
Slide 14: The business model delivers trading and recurring income
The business model delivers trading and recurring income Development Established Target 30% of income Target 70% of income Benchmark IRR = 20% (pre-overhead) Benchmark IRR = ~15% (pre-overhead) 1 2 3 4 5 6 7 Choose Acquire Masterplan Initial Resident makes ingoing Build corridors land & design ‘sale
Slide 15: Retirement Living is expected to deliver net cash returns of ~12%pa
Retirement Living is expected to deliver net cash returns of ~12%pa Development • Investment hurdle rate for new village developments 20% • Investment in development is ~35% of total cash funds Wtd Avg employed Pre-overhead unlevered IRR ~17% • Expected average FY12-13 turnover Established ~10% cash
Slide 16: Continuing to make economies of scale efficiencies
Continuing to make economies of scale efficiencies Aevum acquisition moved Stockland down scale Retirement Living scale curve curve (Fixed costs per living unit – established business only) • FY12 fixed costs per unit in the Established $ Per business are expected to be ~20% below the Unit p.a. pre-
Slide 17: Commercial Property
Rockhampton, QLD Commercial Property
Slide 18: Commercial Property strategy: re-weight to Retail and enhance asset quality
Commercial Property strategy: re-weight to Retail and enhance asset quality Retail • Develop larger, higher quality retail assets with strong trading record and in areas of market growth • $4.2b1 of assets, $2.4b development pipeline Office1 • Own and manage a quality portfolio in major office marke
Slide 19: Market fundamentals and asset outperformance underpin retail investment
Market fundamentals and asset outperformance underpin retail investment • Sound retail market fundamentals: National retail demand outstrips supply1 800 24 Population growth supports demand for new 700 23 retail space 600 Supply „000 sqm 22 Population (m) 500 Low unemployment and wages growth underp
Slide 20: Solid 3Q11 retail sales and rental growth
Solid 3Q11 retail sales and rental growth • Continuing to re-weight capital to retail in line with 3-R growth strategy in 3Q11: All major developments on program and budget Acquisition of Hervey Bay shopping centre at 7.5% initial yield with development potential to more than double the existing cen
Slide 21: Good progress with $2.4b retail development pipeline
Good progress with $2.4b retail development pipeline 1H11 completions Retail development pipeline • Rockhampton and Tooronga completed Est. Estimated cost to Estimated fully % total % specialty total complete leased income cost year one leased income ($m) • Rockhampton achieved value uplift of 34% o
Slide 22: Major CBD office markets are recovering
Major CBD office markets are recovering Rents CBD net absorption1 600k • National vacancy has peaked at 8.3%1 500k 400k • Effective rental growth in two consecutive quarters 300k (sqm) 200k reported in most markets 100k 0k • Net absorption in CBD markets totaled 83,700 sqm -100k -200k in Q1 2011, 38
Slide 23: Capital management and summary
Lakewood, Tarneit Skies Retirement NSWVIC Village, Capital management and summary www.stockland.com
Slide 24: Strong balance sheet
Strong balance sheet S&P A- credit rating S&P rating A- / Stable • Provides access to a wide variety of debt sources Drawn debt1 $3.0b Cash on deposit $0.6b Target gearing range 25% - 35% of tangible assets Available undrawn committed debt facilities $0.5b • Currently 20%, up 2% following Aevum acqu
Slide 25: Good progress in delivering 3-R growth strategy
Good progress in delivering 3-R growth strategy Acquiring land above replenishment levels; 19,500 future lots secured Residential Communities in addition to 6,500 lots secured in FY10 Increasing market share in existing and new corridors Nearly doubled portfolio through Aevum acquisition Retir
Slide 26: FY11 EPS guidance maintained, FY12 outlook
FY11 EPS guidance maintained, FY12 outlook FY11 EPS guidance upgraded • On track to achieve upgraded EPS of 31.6 cents per security; 8.5% growth on FY10 • Upgrade reflects stronger Commercial Property NOI growth, accretive contribution from Aevum and higher Retirement Living DMF accrual FY12 outlook
Slide 27: Appendix
Stockland Merrylands, NSW Appendix www.stockland.com
Slide 28: Historical profit summary
Appendix Historical profit summary HALF YEAR FULL YEAR 1H11 FY10 FY09 FY08 FY07 ($m) ($m) ($m) ($m) ($m) Residential EBIT (before interest in COGS) 188 314 233 337 309 Commercial Property EBIT (before interest in COGS)1 264 510 533 555 516 Retirement Living EBIT (before interest in COGS)2 23 39 43 4
Slide 29: Market fundamentals driven by housing undersupply in Australia
Appendix Market fundamentals driven by housing undersupply in Australia Population growth well above housing starts1 Population growth to continue above historical levels2 500 375,000 500,000 Housing Starts - Annualised (LHS) 325,000 450,000 400 2013 forecast 400,000 ~330,000 people 275,000 300 Aver
Slide 30: Strong economic fundamentals support housing market, buyers remain conservative
Appendix Strong economic fundamentals support housing market, buyers remain conservative Cost of finance structurally lower1 18% 18% 16% 16% CPI Inflation (Underlying) Standard Variable Mortgage Rate 14% 14% 12% 12% 10% 10% 8% 8% 6% 6% 4% 4% 2% 2% 0% 0% 1983 1986 1989 1992 1995 1998 2001 2004 2007 2
Slide 31: Mortgage debt sustainability, bank mortgage lending is responsible
Appendix Mortgage debt sustainability, bank mortgage lending is responsible Many households ahead of debt repayments 1 Buyers are taking on less debt Average Loan-To-Value ratio2 80% 75% 70% 65% 60% 55% 50% 45% NSW QLD VIC WA 40% Jun 07 Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 High risk loan
Slide 32: Strong focus on product innovation to meet affordability
Appendix Strong focus on product innovation to meet affordability Package Mortgage Rental Gap to Home Median House Price2 & Price1 Repayments3 Equivalent4 Own vs Rent 3 Bed, 2 Bath Highlands, $338,300 $416pw $340pw +$76pw Craigieburn $312,900 VIC 3 Bed, 2 Bath Glenmore Ridge, $449,000 $509pw $385pw
Slide 33: Retirement Living - Identified development pipeline of circa 3,400 units
Appendix Retirement Living - Identified development pipeline of circa 3,400 units1 Anticipated Settlements State Project Total Remaining Units Units FY11 FY12 FY13 FY14 FY15 FY16 (approx) (approx) Current Active Projects VIC Gowanbrae 190 40 NSW QLD Fig Tree 190 100 QLD VIC Highlands 200 170 QLD Nor
Slide 34: Stockland Corporation Limited disclaimer of liability
Stockland Corporation Limited ACN 000 181 733 Stockland Trust Management Limited ACN 001 900 741 25th Floor 133 Castlereagh Street SYDNEY NSW 2000 DISCLAIMER OF LIABILITY While every effort is made to provide accurate and complete information, Stockland does not warrant or represent that the informa
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