Stockland, Australia’s biggest housing developer, is weighing a return to apartment development while slowing the disposal of office and industrial properties as new managing director reviews his predecessor’s strategy.
“Infill development is an important part of the future of residential accommodation development in Australia and we certainly see it as a viable business opportunity,” Mark Steinert, who took over as managing director last month, said in a telephone interview. “We’re slowing down the sale of commercial and industrial assets” to maintain the flexibility to keep or grow the business, he said.
Stockland, which began moving away from developing apartments in 2010, focused on residential communities, retirement properties and retail real estate under former managing director Matthew Quinn’s “3-R” strategy. A two-year decline in home prices forced Stockland to post its first loss in seven half-year periods as it wrote down the value of some residential developments.
Stockland’s net loss of A$147.1 million ($152 million) in the six months ended Dec. 31 compared with a profit of A$307.6 million a year ago, according to a regulatory filing today. That was the first half-yearly loss for the Sydney-based company since the six months ended June 2009, according to data compiled by Bloomberg.
Earnings per share in the year to June 30 will be 20 percent to 25 percent lower than the previous 12 months, compared with an earlier forecast for a drop of as much as 15 percent, the company said. The higher-than-expected decline is due to changes in the way Stockland will apply capitalized interest on residential projects from July 1, it said.
The shares jumped 5.2 percent to A$3.66 at the close of trading in Sydney, the biggest increase since August 2011. The benchmark S&P/ASX 200 index rose 0.9 percent.
“Investors may welcome the larger impairment and the decisive action to dispose non-performing projects,” Louise Mylott, executive director for specialist sales at Morgan Stanley, said in an e-mailed note. “The underlying results looked OK and management seems confident that fiscal year 2013 is the worst of the worst.”
Stockland is undertaking a review of its business, and the company’s board is open to a revision of its strategy, Chairman Graham Bradley has said. The review will consider returns and risks of apartment development relative to other businesses, Steinert said today.
Stockland has taken impairments worth A$234 million, A$3 million and A$9 million on 13 residential projects, one apartment site and two industrial land parcels that it plans to sell instead of develop, the company said. It has also taken writedowns on seven residential communities and two apartment projects totaling A$60 million, it said. The impairments have reduced net tangible assets by 14 cents a security to A$3.49 per share, it said.
Underlying profit during the half fell 26 percent to A$255 million, Stockland said. Net operating income was A$28 million in its residential division, A$159 million for the retail unit, A$92 million in its office and industrial properties, and A$12 million in its retirement property business, it said.
The developer expects an improvement in earnings from fiscal year 2014, driven by income from new retail and residential properties, it said. Stockland will pay a distribution of 12 Australian cents a share for the half, unchanged from a year earlier, and 24 cents a share for the full year, it said.
The company agreed to sell an office building in Sydney’s center to Charter Hall Group for A$172.5 million, in line with the building’s June 30 book value, Stockland said in a separate statement today.