08 November 2021

Media release

Stockland (ASX:SGP) today provided the market with details of its updated strategy which will dynamically reshape its portfolio, accelerate delivery of its core business, scale capital partnerships which in turn will deliver sustainable long term growth.

 

Managing Director and CEO, Tarun Gupta said: “As a leading creator and curator of connected communities, our strategy is designed to build on Stockland’s strong platform and to capitalise on structural long term trends including urbanisation and urban renewal; growth in institutional capital; digital acceleration and the continued momentum in ESG.

 

“Our focus is on using our specialist end to end, multi sector capability to create value at each stage of the real estate life cycle.”

 

Stockland’s strategy is built around three key priorities:

 

  • Dynamically reshape portfolio: Stockland’s ambition is to become Australia’s leading Residential owner and developer. Stockland will reduce its exposure to Retail and Retirement Living and scale  Workplace and Logistics .
  • Accelerate delivery in core business: Stockland will accelerate the delivery of its $33 billion[1] secured development pipeline to deliver around $12 billion[2] of high quality income producing investment assets and strong embedded margins from the approximate $21 billion Masterplanned Communities pipeline. Stockland aim’s to optimise its land bank to highest value uses and leverage cross sector capabilities to generate mixed use opportunities.
  • Scale capital partnerships: Stockland will scale institutional capital partnerships in each sector, improve its return on capital, convert its development pipeline into funds under management and generate new sources of recurring management fees and rental income while maintaining a strong balance sheet position.

     

    Executing on these three strategic priorities will improve the quality of Stockland’s portfolio. This will drive sustainable long term growth underpinned by customer excellence, digital innovation, recognition as a preferred employer and developer of real estate talent and ESG leadership.

     

    Stockland’s strategy is supported by the following indicative five-year targets[3]:

     

  • Grow Residential, Workplace & Logistics from 50% to over 70% of the portfolio
  • Down-weight Retail and Retirement Living from 50% to less than 30% of the portfolio
  • Targeting commencement of development of more than 80% of $12 billion income and fee generating investment asset pipeline within 5 years
  • Target recurring long term average income of 60% of total at 6-9% return on invested capital (ROIC)
  • Target Development long term average income of 40% of total at 14%-18% ROIC
  • Gearing target maintained at 20-30% 
  • Distribution payout policy retained at 75%-85% of FFO

 

Tarun Gupta said: “This strategy builds on our strengths and reweights our business towards sectors underpinned by long term trends and targets third party capital to create new, recurring income streams and drive higher return on capital, while maintaining a strong balance sheet.

 

“We are starting from a position of financial strength with diversified sources of capital, high investment grade credit ratings, strong operating cash flows and a competitive cost of debt.

 

“With key senior appointments already in place, we are moving at pace and with conviction to deliver on our priorities. I am confident we have the right strategy, capabilities and culture to grow Stockland in a way that delivers for all our stakeholders.”



 

[1] Total development pipeline includes projects in early planning stages, projects with planning approval and projects under construction across both Commercial Property and Communities business.

[2] Forecast value on completion.

[3] All forward looking statements are based on current expectations about future events and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from the expectations expressed or implied from such statements.