Priorities and performance
|Funds from operations|
($M, unless otherwise stated)
|428||419||2.2% ↑||1.3% ↑|
|152||143||6.2% ↑||6.0% ↑|
|54||59||9.6% ↓||2.0% ↓|
|Total Commercial Property||614||608||0.9% ↑||2.3% ↑|
|Return on assets (ROA)||7.8%||8.1%|
The Retail Town Centre business saw some positive improvements in FY18 with comparable specialty sales up by 4.2 per cent, to $9,378 per square metre and total MAT up by 3.4 per cent with strong growth in resilient categories such as retail services.
Comparable Retail Town Centre FFO growth was 1.3 per cent over the year, impacted by higher outgoings and retail remixing. The overall success of our remixing strategy is beginning to be reflected in higher retail sales growth, which has continued to improve over the year.
This precinct remixing strategy continues to attract more customers into our centres with foot traffic up 2.5 per cent and will help ensure income resilience into the future. Income from growth categories including food, dining, leisure, cinemas and services now represents 41 per cent of our specialty store income.
We continue to focus on improving customer experience to ensure that our Retail Town Centres provide the services and lifestyle options customers are seeking in this changing retail environment.
The $421 million redevelopment and launch of the new Stockland Green Hills (NSW) retail town centre is a prime example of our ability to successfully upgrade and reposition our assets, to future proof them and deliver accretive returns.
Following the official opening of Stockland Green Hills in March this year, total like for like MAT is up 5.7 per cent. The stabilised initial yield on development is estimated to be 7 per cent and the IRR around 12 per cent.
We also completed the $37 million redevelopment of Stockland Wendouree (Vic) in June, targeting an IRR of 13.8 per cent and stabilised FFO yield of 7.2 per cent, and continue on schedule with the first stage of the $86 million Stockland Birtinya greenfield town centre development on the Sunshine Coast, part of our $830 million Oceanside masterplanned community.
The Retail business maintains its focus on creating market leading town centres by providing the services and lifestyle options to enhance the customer experience at our centres. We continue to remix our centres to create leading community and entertainment hubs and maximise trade area market share.
Our retail mix continues to evolve, underpinned by supermarkets, mini majors, food catering, fast casual dining, specialty food, entertainment, targeted apparel, health and services.
We will continue to focus on tailoring our offering to each specific trade area, cultivating retailer relationships and long-term sustainable rent, and invest in industry research and technology to adapt to an evolving retail landscape.
We have completed around $200 million of divestments and are targeting up to an additional $400 million of divestments over the next 12 – 24 months.
We have combined logistics, business parks and office into Workplace and Logistics to simplify our operating structure and increase the focus on growth.
High occupancy was maintained across the logistics portfolio, with a robust leasing performance in Sydney and Melbourne, overall 324,400 square metres of space was leased over the period.
Our workplace assets are largely located in the strongly performing Sydney market. Post balance date, we completed the sale of our non-core Canberra office asset for consideration of $24 million.
Our logistics developments continue to progress very well. The successful delivery of the $77 million Coopers Paddock Logistics Centre in Warwick Farm this period, which is fully leased and saw an 23.7 per cent increase in valuation on completion, reflects the success of our focus on growing this portfolio. This project has achieved an initial yield of 7.3 per cent and is expected to reflect an IRR of 10.7 per cent.
We are focused on executing the $600 million development program on land we control and have lodged a development approval to redevelop Macquarie Technology Park, Sydney, with a masterplan vision for a $500 million state-of-the-art technology hub to cater to workers of the future.
Our focus is on growing and developing a market leading portfolio of logistics and workplace properties to greater than 25 per cent of our total assets. The growth of this portfolio will primarily be through delivery of our existing development pipeline, on land we already control, targeting incremental IRRs of 9 plus per cent and stabilised FFO yields of 7 plus per cent.
We are developing a market leading portfolio of logistics centres by leveraging our existing communities and land, strong tenant relationships and asset management skills to become a scale player in this market.
We will continue to focus on optimising the returns of our workplace portfolio. Our portfolio is now predominantly located in Sydney and we will continue to assess development opportunities.