This has been a year of strong and sustained performance for Stockland as we continue our disciplined approach to growing asset returns and our customer base, improving our capital strength, and delivering operational excellence.
We have achieved strong results across all of our key metrics in FY16 and I am very pleased that our Commercial Property, Residential and Retirement Living businesses have each made significant contributions to the performance of the Group. This demonstrates that our strategy set in 2013 is working and we are succeeding in positioning our business to capitalise on good market conditions.
Our focus remains squarely on implementing our strategy to deliver sustainable growth and creating inspiring places where people want to live, work, shop, and invest. Our aim is to continue to improve our customer experience and take advantage of new opportunities so that our business is more stable and resilient for the long term.
Commercial Property accounts for around 70% of our assets and remains a key profit driver, delivering comparable growth in funds from operations of 4.5% across the portfolio, with 3.7% in Retail, 3.7% in Logistics and Business Parks, and 9.9% in Office.
Our Retail portfolio performed well, with high occupancy and positive leasing spreads on operating lease deals, and continued sales growth, with total Moving Annual Turnover up 4.6%, driven by 6.0% growth in specialty retail.
We have also made good progress on major redevelopments, completing Harrisdale in Perth and the remodelling of our Pitt Street Mall asset in the Sydney CBD. Wetherill Park in Sydney has achieved practical completion over the majority of stages and is trading well. We have also commenced our $372 million Green Hills redevelopment in New South Wales and progressed a number of small but important projects, including casual dining precincts at Rockhampton in Queensland and Shellharbour in New South Wales. All of these projects have been very well received by customers. Stockland has a future retail development pipeline of $1.0 billion and is targeting stabilised funds from operations yields of 7–8% from this activity.
The good performance in our Logistics and Business Parks portfolio reflected our active asset management, disciplined acquisition strategy and good progress on our $467 million development pipeline.
We executed leases on more than 25% of our portfolio in FY16 and also acquired three new sites in Sydney and Melbourne.
In Office we continue to focus on optimising returns from the portfolio while managing our exposure tactically. The bulk of our assets are located in the improving Sydney market where our assets are fully occupied.
Our Residential business settled a record 6,135 lots in FY16 and achieved significant operating profit growth of 38.8% as well as a lift in return on assets to 19.6% on the core portfolio.
This strong result reflected our repositioning of this business over the last three years to enhance our community creation capabilities and capitalise on supportive market conditions. We have activated a high proportion of our Residential portfolio in key growth corridors and more than 90% of our net funds employed are in projects that are actively selling, up from 60% in FY13. We also broadened our market reach with the introduction of medium density homes and completed homes within a number of our communities, and we are now exploring mixed use apartment opportunities at Merrylands in Sydney.
Our Retirement Living business operating profit was up 19.7% on FY15 reflecting strong sales and active management. Cash return on assets also increased by 50 basis points to 5.8%, reflecting our continuing focus on operational efficiencies and growing our development pipeline.
In FY16 we sold more than 1,000 retirement living homes and apartments, which is a record number of settlements, including the first apartments at Cardinal Freeman in Sydney. We also launched a new village within our Willowdale community in Sydney and we continued to reshape our portfolio, embedding eight South Australian villages acquired in FY15 and selling five relatively small, low return on asset villages in Western Australia in July 2016.
We have maintained our strong balance sheet and A-/stable credit rating, supporting investment in the future growth of our business.
Our disciplined capital management has seen us improve our weighted average cost of debt and increase our average debt maturity. Gearing at the end of FY16 was 23.8%, at the lower end of our 20–30% target range, due to disciplined capital management, the strong and increasing velocity of operating cash flows and growth in the value of our investment portfolio.
Our people remain highly engaged, delivering great outcomes and contributing to a range of initiatives that improve the way we work. Our new Stockland Support Centre, established in June 2015 to outsource some finance and IT functions, is progressing well and providing more flexible and scalable support for our in-house teams. We have also made significant progress improving our Group system capabilities, including the commitment to implement SAP and Salesforce as core systems, with deployment to take place during the next two years.
Stockland has also maintained its leadership in sustainable operations. We have continued our commitment to engage effectively and improve the liveability, convenience and efficiency of our communities and commercial operations, and to continue to reduce our impact on the environment, particularly energy and water efficiency. Recognising these efforts, we were proud to be named the 2015–16 Global Real Estate Industry Leader in the Dow Jones Sustainability Index, the third time we have received this outstanding acknowledgement.
Stockland has been a signatory to the United Nations Global Compact since 2015, and we remain committed to its principles and to promoting the Global Compact where we operate. I am pleased to confirm our continued support of this important initiative.
The low interest rate, moderate population growth environment in Australia is supportive of economic growth and we have set our business on a course that provides us with a positive outlook for FY17, despite a level of uncertainty in macroeconomic conditions.
Our commercial properties are expected to maintain moderate growth in returns and our retail centres remain highly productive. Expected residential lot settlements and retirement living net reservations also remain buoyant for the year ahead.
I am confident in the strategy we are executing and that Stockland is well placed to generate profitable business growth in FY17 and beyond. We have forecast growth in funds from operations per security of 5–7% and distribution growth of 4.1% in FY17, assuming no material change in market conditions.
Managing Director and Chief Executive Officer