Stockland · ASX:SGP
Stockland — Citi Global Property CEO Conference 2012
30 slides from Stockland's conference presentation, March 2012
Slide 1: 60 years of Stockland
1952-2012 60 years of Stockland Stockland Merrylands, NSW Citi Global Property CEO Conference March 2012 www.stockland.com
Slide 2: Summary
Summary Market conditions remain challenging with credit markets tight, the Australian economy under pressure and tough property markets Strategic focus on short term resilience and future growth: • Affordable products for the mass market segment • Reweighting recurring income from Office and Indust
Slide 3: Business model provides earnings resilience and growth potential
Business model provides earnings resilience and growth potential Strategic Asset weighting How we build resilience • Focus on the broad “mass market” customer segment • Deliver needs based, affordable products • Solid backbone of recurring rental income • Large, capital efficient residential land ba
Slide 4: Capital management strategy balances growth with capital returns
Capital management strategy balances growth with capital returns Conservative balance sheet Diverse debt sources • S&P A- / Stable credit rating Australian bank Distributions European / debt • Diverse funding sources – low bank debt Asian MTNs, $300m, 10% $340m, 11% • Weighted average debt maturity
Slide 5: Commercial Property
67% of Commercial Property Total Assets www.stockland.com
Slide 6: Retail sales growth outperforming the broader market
Retail sales growth outperforming the broader market • Total comparable MAT up 3.5%: Solid retail sales growth - Higher than ABS retail sales data SGP ABS Comparable Absolute • Two thirds of rent comes from specialty shops: MAT growth MAT growth1 - Specialty comparable MAT up 4.3% vs ABS Specialty s
Slide 7: Strong tenant relationships the key to sustainable growth
Strong tenant relationships the key to sustainable growth • Landlord and tenant relationship has never been Renewals are critical for income growth more important: Area Rental Transactions Incentive (sqm) growth - Retailer sales and margins under pressure Lease renewals 102 11,568 6.1% 0% - Rents ar
Slide 8: Reweighting to Retail to capture stronger, less volatile returns
Reweighting to Retail to capture stronger, less volatile returns Through the cycle, Retail assets perform better than 1H12 Return on Cost from stable assets1 Office 12% • Higher returns (Stockland 1H12 Retail Return on 10.0% 10% Cost 10%; Office 7%) 8.3% 8% 7.0% • Less non-recoverable maintenance ca
Slide 9: Creating leading Retail assets in their trade area
Creating leading Retail assets in their trade area Good progress with orderly reweighting Commercial Property NOI weighting towards retail2 • Retail will contribute ~65%2 of Commercial 100% Property NOI by FY14 as developments complete 80% 35% 44% • Will be even higher with further asset sales 53% 6
Slide 10: Major retail developments delivering strong returns
Major retail developments delivering strong returns Completed project performing well Retail development pipeline • Rockhampton (completed mid 2010) expected Completion Est. fully Trade area to achieve 7% comparable FY12 NOI growth Est. Est leased year 1 Est. total SGP total cost Value yield return1
Slide 11: Centres less exposed to discretionary spending and online shopping
Centres less exposed to discretionary spending and online shopping Less exposed to discretionary spending Stockland centres are less exposed to discretionary sales • Our existing centres and future developments are Category rent contribution for Stockland vs super-regional centres1 designed for resi
Slide 12: Residential Communities
23% of Residential Communities Total Assets www.stockland.com
Slide 13: Residential land sales at ~two thirds underlying demand in 2011
Residential land sales at ~two thirds underlying demand in 2011 Underlying demand in Stockland corridors for vacant land sales and actual 2011 demand ~43,000 ~43,000 Not yet entered ~4,000 3 corridors ~5,000 Own land, 2/3 of underlying due not yet active to low point in the Stockland has identified
Slide 14: Market conditions improving for affordable product
Market conditions improving for affordable product Polarisation in market segments Market conditions improving for SGP affordable product • Top end of market still under pressure State 1H12 market 2H12 Commentary • Stockland affordable product segment much conditions outlook for for SGP SGP stronger
Slide 15: Customer leads provide strong indicator for future revenue
Customer leads provide strong indicator for future revenue Customer leads support 2H12 outlook Customer lead volumes improving • Sustained improvement in leads since mid 2011: + 66% - Reflects growing appeal for affordable products 3,500 with strong sustainability credentials 3,000 2,500 • Normally
Slide 16: Own vs. rent gap narrowing substantially
Own vs. rent gap narrowing substantially Delivering affordable product in our corridors enticing new buyers into Stockland product Stockland Package Established Market Gap from Own to Rent (1)-(2) Package (1) Mortgage Median House Mortgage (2) Rental Price3 June 2011 Dec 2011 and Price1 Repayments2
Slide 17: Innovative affordable product underpins strong market share
Innovative affordable product underpins strong market share Delivering affordable solutions Smaller lots enhance price per square metre • Buyers increasingly value conscious: sqm % change over 3 years 600 $469 500 - Stockland house and land packages from under $447 psqm psqm +30% 569sqm $350,000 in
Slide 18: Average lot price and margins holding up, despite lower lot sizes
Average lot price and margins holding up, despite lower lot sizes Steady margins Maintaining affordable lot prices • Average prices holding up despite decline in $ sqm + 3% established house prices 250,000 $206,000 $215,000 $212,000 $205,000 • Margins within target range: 200,000 600 - Expect margin
Slide 19: Focus on capital efficient growth
Focus on capital efficient growth Large and diverse land bank Funds mainly employed in live and impending projects • Large masterplanned communities commencing Number Net Funds within two years: of Lots Employed1 - East Leppington (NSW), Lockerbie (Vic), Live projects 25,700 1.4 ~75% Caloundra South
Slide 20: Retirement Living
9% of Retirement Living Total Assets www.stockland.com
Slide 21: Retirement Living Operating Profit flat but cash metrics growing
Retirement Living Operating Profit flat but cash metrics growing Customer demand robust but prices flat due to Operating profit and cash metrics broader residential market conditions $m • Operating profit impacted by nil price growth in 35 321 10% 1H12 compared to 2% in 1H11, resulting in $16m 30 25
Slide 22: Future growth underpinned by large development pipeline
Future growth underpinned by large development pipeline Strong organic growth through development Development settlement volumes skewed to 2H121 • Pipeline on track to settle >250 units in FY12: 1H12 1H11 New unit settlements 100 76 32% - Production going well - 10 projects in 4 states - Average p
Slide 23: 60 years of Stockland: Chart Pack
1952-2012 60 years of Stockland Stockland Merrylands, NSW Chart Pack March 2012 www.stockland.com
Slide 24: Australia has a fundamental undersupply of housing
Australia has a fundamental undersupply of housing Strong population and declining household size creates underlying Population growth drives underlying demand; market imbalance annual demand for 160,000 dwellings1 continues to widen 500 Population Growth 5 Market Balance2 450 400 Net international
Slide 25: House prices have grown in line with income growth and interest rate movements
House prices have grown in line with income growth and interest rate movements The median house price has historically been in line with income growth and responsive to movements in interest rates Interest rates and inflation structurally lower $600 Median House Price1 18% 16% $500 Standard Variable
Slide 26: Buyers and lenders are responsible
Buyers and lenders are responsible Buyers are seeking affordable product, which has seen household debt levels flat-line Buyers have sustainable debt levels 180% National household debt as proportion of disposable income1 80% Average Loan-to-Value ratio2 (% pa) 160% 75% 140% 70% 120% 65% 100% 60% 80
Slide 27: Stockland's residential product is affordable and caters for the mass market
Stockland’s residential product is affordable and caters for the mass market First home buyers are re-entering market Stockland projects providing more affordable product 70 Dwellings Finance Approvals1 35% Proportion of sub $200k lots sold2 50% 45% 60 30% 41% 40% (#, ‘000 per month) 50 25% 40% 35%
Slide 28: Developing fortress Retail assets – reducing the risk and improving returns
Developing fortress Retail assets – reducing the risk and improving returns Retail return profile is superior over the long term Retail development has higher returns Total Returns1 Income Growth and Capital Gain 40% (Rolling Annual % pa) ~12.5% ~1% Cap rate2 ~10.0% 30% Income ~9.0% ~3% Income growt
Slide 29: Our offering is value and convenience for the mass market
Our offering is value and convenience for the mass market Needs based retail is most resilient Stockland centres predominantly non discretionary Retail Sales Annual Growth to January 20121 Stockland Retail Categories Liquor (% of AIFRS NOI) Pharmaceutical Other Specialised Food Furniture Hardware Sp
Slide 30: Retirement Living – compelling demand drivers and return profile
Retirement Living – compelling demand drivers and return profile +65 population growth will drive a significant increase in retirement 65+ population expected to more than double in next 30 years village demand Australian population aged 65+ years1 2.7% pa CAGR 4.1% pa CAGR Thousands of units Millio