Stockland launches $637m new master-planned community

Stockland has increased its residential footprint with the acquisition of 1.95 hectare site in Melbourne’s northern suburbs.

Stockland comes as the significant new master-planned community in the Wyndham growth corridor west of Melbourne, with an end value of $637 million.

The master-planned community will include around 2500 new homes sites for around 6000 future residents.

The construction of Wyndham community is set to begin in November 2014 with first residents expected to settle in 2016.

Mark Steinert, Stockland chief executive, said the site at Ivanhoe, which has already been designated as a Residential Growth Zone by Banyule City Council, will allow Stockland to make further progress on its strategy to build more medium density and completed homes within its residential development pipeline.

The deals come as Mr Steinert reaffirmed the group was on track to achieve earnings per security growth in the current 2015 year of six per cent to 7.5 per cent above 2014, assuming no material change in market conditions.

In the September quarterly report, Mr Steinert said Stockland benefited from the booming residential market after recording its strongest first quarter results for net deposit inflows, for the past four years.

JP Morgan property analysts said Stockland looks well positioned for this community, with 4837 residential pre-sale contracts and on track for a record 6000 settlements.

Property analysts said they expect strong medium-term earnings per security (EPS) growth underpinned by improving residential volumes and gradually recovering margins.

"The key for Stockland's GP's EPS growth is recovery in the operating margin which was hammered in 2012 and 2013, but is now recovering, targeting improving operating margins to 11 per cent to 13 per cent by 2016 (from 9.1 per cent in 2014)," the analysts said.

"The margin recovery will come from greater volumes, lower overheads per sale, less impaired sales (non profit contributing), and the release of new more profitable projects. The medium term target is for margins to recover to 15 per cent to 16 per cent. We assume a recovery to about 12.5 per cent."

Credit Suisse analysts said despite the inevitable moderation in the housing cycle, they see Stockland's 4 per cent to 6 per cent EPS guidance as conservative and forecast growth of 7 per cent per annum in the years of 2016-2018.

Mr Steinert said the retail division also performed well, at a time when it was starting the next stage of the $222 million transformation of the Wetherill Park mall.

The developer of Brookfield Multiplex, recently “topped out” the roof structure of the first stage of the expanded mall. The first stage is on track to being completed by March 2015.

Mr Steinert said for the quarter, the group's specialty sales were stronger at 2.3 per cent, up 90 basis points from the 1.4 per cent at June, and the strongest result since 2009.

Quarterly sales growth figures were positive for supermarkets up 2.6 per cent but discount department stores were down 0.5 per cent.

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