Stockland Market Update
Stockland have retained their outlook for distribution growth of 4% for FY19 however the slowing residential and retail sectors are presenting challenging signals to future earnings.
Stockland are continuing to target FFO per security growth of 5 - 7% for FY19, assuming no material change in market conditions, underpinned by:
• Residential settlements over 6,000 lots, with mix and townhomes lifting revenue and a profit skew to 2H19, operating profit margins of around 18% in FY19 and 17% over the medium term
• Expect improved Retirement Living returns
• Commercial Property comparable FFO growth of 2 - 3%
• FY19 distribution per security growth of 4%, 27.6 cents , at bottom end of target payout ratio of 75 - 85% of FFO
• Stockland are continuing to pursue capital partners for their Retirement Living business and Retail Town Centres, and progressing their retail centre divestments
4.3% growth in specialty sales to $9,313 per square metre in year to 1Q19, 1.8% for comparable Centres.
Continuing to remix towards growth categories, 40 fewer apparel stores in comparable centres basket, and conversion of specialties to larger formats
Workplace & Logistics
Market sentiment remains positive for Logistics, with tenant demand greatest in Sydney and Melbourne
High tenant retention reflected in strong leasing
Continuing strength in the Sydney CBD and North Sydney commercial markets, where our assets are close to fully occupied
Majority of vacancy in Perth with 6,100 sqm remaining
On track for over 6,000 settlements in FY19, including around 400 Townhomes
Lower net deposits (down 15% on last quarter and 44% from Q3, 2017) reflect moderating market in line with expectations, as lending conditions tighten.
Over 85% of 1Q19 customers are owner occupiers.
Higher net reservations for new projects (up 16% from same quarter last year) reflect timing and quality of development completions
Net reservations for existing units in our established villages are consistent with the comparable period for FY18