SGP 1.11% $3.57 stockland


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    Sydney - Friday - November 21: (RWE Aust Business News)


    If you are not gobbled up in the property market upheaval, there
    seems to be plenty of opportunities to swallow or purchase a major stake
    in somebody else who is battling to stay afloat.
    Stockland (ASX:SGP), a global property development and investment
    management group, has acquired a 12.7 per cent strategic stake in GPT
    Group (ASX:GPT) at a volume weighted average price (vwap) of $1.07.
    This looks a great deal on the GPT assets while investors should
    also look upon Stockland as an income earner with a current yield of
    13.14 per cent.
    Stockland is close to its lowest price in memory.
    The interest in GPT includes the acquisition of the majority of
    holdings managed by Perennial Investments via cash and the issue of
    Stockland securities.
    Stockland also has an interest in GPT securities through an
    equity swap facility.
    In total, Stockland has an interest in 507.3 million GPT
    securities through:
    * A cash payment of $224.3 million to Perennial Investments for
    195 million GPT securities, to be funded from existing debt facilities;
    * The issue of 51 million Stockland ordinary securities to
    Perennial Investments in exchange for 195 million GPT securities. The
    effective issue price will be the closing price of Stockland securities
    on 11 November of $4.37, for total consideration of $222.9 million; and
    * A $97 million equity swap facility with an investment bank for
    117.3 million GPT securities. This represents an off balance sheet
    The vwap for Stockland's stake represents a 2 per cent premium to
    GPT's closing price on November 11 of $1.05 (securities are presently
    Stockland managing director Matthew Quinn said: "GPT has a
    portfolio of extremely high quality assets, including a number of iconic
    Australian shopping centres and office buildings.
    "The acquisition price of the GPT securities represents good
    value for our security holders and we are pleased that Perennial has
    decided to increase its investment in Stockland through this
    transaction," he said.
    The acquisition of these GPT securities will not have a material
    effect on Stockland's gearing ratio (debt/tangible assets).
    The transaction will have a marginally dilutive impact on FY09.
    EPS was based on GPT's estimated distribution in its recently
    issued PDS for its rights issue.
    Coming up to date Stockland has decided not to proceed with the
    allotment of any applications received due to the current market value of
    its securities remaining below the $5.30 offer price.
    The decision followed the closure of the Stockland stapled
    security purchase plan on November 14.
    It has arisen due to the extreme global market turmoil
    experienced in recent months.
    Application monies will be returned to security holders as soon
    as possible.
    Stockland is one of the largest and most diversified property
    groups in Australia with interests in retail, commercial, industrial,
    residential and retirement living investment and development, and funds
    It currently has total assets in Australia and the United Kingdom
    of over $14.7 billion, market capitalisation of $5.6 billion, and
    reported an operating profit of $674 million for the year June 30.
    At the recent annual meeting, chairman Graham Bradley told
    shareholders that they met at a troubled time in Australian - and world -
    financial markets.
    "It is not an exaggeration to say that the events of the past six
    months are without precedent in my lifetime.
    "The challenging financial market environment has been marked by
    high-profile underperformance and failure by some businesses in our
    sector, and sentiment towards Australian listed property trusts has
    suffered severely as a result.
    "As you know, our share price has not been immune from this
    He said many of the factors contributing to this decline are
    beyond the group's control, but it believes that a strong balance sheet,
    relatively conservative debt levels and a focus on property fundamentals
    rather than financial structuring has helped the group to outperform most
    of its peers.
    "Looking at total shareholder returns - that is share price
    movements plus accumulated distributions and dividends reinvested over
    the last ten years - you can see that we have outperformed our peer
    group, the Australian Real Estate Investment Trust Index, over that
    time," he continued.
    "Many investors here today will have invested with Stockland in
    order to receive growing and reliable distributions year on year.
    "Our distributions to security holders have continually
    increased, with a ten-year compound annual growth of 6.5 per cent and
    growth of 7.7 per cent over five years," Mr Bradley said.


    Stockland's stapled unit price yesterday fell 3c to $3.51.
    Rolling high for the year is $9.38 and low $3.43. Dividend is 46.5c to
    yield 13.14 per cent. Earnings per share 48.4c and price/earnings ratio
    is 7.31. The company has 1.5 billion fully paid stapled securities with a
    market cap of $5.6 billion.
    Mr Quinn told shareholders there was no question that global
    economic and property market conditions during the last year have been
    extremely challenging and don't look like improving in the short term.
    "Now, more than ever, you need a realistic assessment of our
    performance in this environment and our outlook for the future.
    "Last financial year we delivered a solid profit result and
    increased security holder returns.
    "We achieved this result by maintaining our consistent focus on
    property fundamentals and having a conservative balance sheet," Mr Quinn
    During the year to June Stockland simplified its structure by
    merging the retail, office and industrial businesses into one commercial
    property business, led by John Schroder.
    The Commercial Property portfolio comprises 106 retail, office
    and industrial properties across Australia.
    With a total asset value of $8.7 billion, and a development
    pipeline of over $2.8 billion end value, the Commercial business is
    focused on maximising investment returns through delivering organic
    rental growth and developing new investment and trading products.
    The Commercial Property business produced solid results in the
    last financial year with a combined operating profit of $566 million.
    Retail operating profit increased 3.1 per cent to $260 million,
    with comparable rental income growth of 6.7 per cent.
    Retail spending has slowed given the current market conditions
    but the group remains well placed with an active asset management
    approach and low vacancy rates across all retail centres.
    Stockland's Office and Industrial business increased its
    operating profit by 21.5 per cent to $305.9 million, with comparable net
    rental income growth of 5.4 per cent.
    While valuations have fallen across the board and demand for new
    office space has tapered off, Mr Quinn said Stockland has seen a
    significant improvement in tenant retention rates as businesses decide to
    stay put during these turbulent times.
    As well, the decline in new building construction resulting from
    the credit crunch will only increase the demand on existing stock.
    The Residential business, led by Denis Hickey, encompasses
    residential communities, apartments and retirement living.
    The business has about 100 projects across the country, with an
    end value of more than $21 billion.
    It achieved strong results for the financial year and produced an
    operating profit of $326 million - an increase of 19.5 per cent.
    This result included a Residential Communities profit of $273
    million - up 10 per cent on last year at a healthy net margin of 25 per
    The Retirement Living business outperformed expectations,
    delivering a net profit of $41.5 million.
    Mr Quinn said profit from Apartments was below expectations at
    $11 million due to the delay of key projects and soft market conditions.
    The managing director pointed out that Stockland's large
    portfolios include a diverse range of assets which enables it to focus
    its resources for short, medium and long-term returns.
    "What this means in practice is that we delay developments that
    don't suit this environment and focus on those that better match market
    conditions, such as more affordable communities.
    "Since the acquisition of Australian Retirement Communities in
    2007, we have continued to grow Retirement Living as a strong
    complementary business.
    "In July we acquired Rylands - a boutique retirement village
    business with a portfolio that includes two recently completed
    apartment-style retirement villages in Melbourne," he said.
    Since then Stockland has acquired strategic stakes in FKP
    Property Group and a 14.4 per cent stake in retirement village operator
    FKP will undertake a strategic review of its retirement living
    assets which could lead to their separation and Stockland has been
    granted an exclusive dealing period of two months while the review is
    undertaken and a first right of refusal over the assets.
    Mr Quinn told shareholders that these acquisitions are consistent
    with Stockland's strategy of growing its presence in the retirement
    living sector.
    Another key complementary area for Stockland is intermodal
    terminals - large inland ports where freight can be temporarily stored
    and transferred from one mode of transport to another.
    "We currently have one major intermodal terminal operating at
    Yennora in western Sydney, and during the year we also acquired a large
    potential intermodal site at Moorebank in southwest Sydney," he said.
    Stockland strengthened its balance sheet with a $300 million
    share placement earlier this month.
    This capital raising was over-subscribed with strong support from
    both domestic and offshore investors and it reduced the group's gearing
    by around 2.3 per cent.
    The placement will have a mildly negative impact on EPS on a
    fully diluted basis.
    "As we have previously disclosed, we remain on track to achieve
    our guidance of nominal EPS growth in FY09, before allowing for the
    write-down in UK asset values that was announced on October 3, and the
    dilutive impact of the share placement that was announced on October 8,"
    Mr Quinn told shareholders.
    "After taking these two things into account, EPS in FY09 will be
    around 7 per cent lower than the previous financial year."


    Stockland was founded in 1952 and was listed on the Australian
    Stock Exchange in 1957.
    Today Stockland is one of the top 50 ASX-listed companies and one
    of Australia's largest, most diversified property groups.
    Stockland has total assets of over $14.7 billion and operations
    in Australia and the United Kingdom.
    It is Australia's largest residential property developer (100
    projects, $22 billion end value) and a major player in retail (38
    properties, $4 billion book value), office (39 properties, $3.3 billion
    book value) and industrial (29 properties, $1.4 billion book value).
    It also has unlisted property funds with over $900 million in
    assets under management in Australia and $2.5 billion of assets under
    management in the UK/Continental Europe.
    Stockland has a long and proud history, and a well-deserved
    reputation for consistent performance.
    In 2008 the company recorded its 26th consecutive year of profit
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