Stockland town centres cop hefty COVID hitSales of house and land lots and strong leasing in its logistics and workplace portfolio are underpinning Stockland’s momentum.

Stockland town centres cop hefty COVID hit

A quarter of retail tenants in developer Stockland’s town centres are struggling to pay rent as lengthy state lockdowns bite into store sales.

But the $11 billion ASX-listed company’s financial performance remains on track, with the boom in ecommerce and logistics around the country giving the developer a sunny upside.

Stockland is on track to meet its forecasts for fiscal 2022, buoyed by strong land sales and growing demand for its logistics sheds.

About 98 per cent of rent for the first quarter of FY22, was collected across the group’s workplace and logistics businesses. Occupancy in Stockland’s sheds rose to 98.9 per cent after it leased 112,900 square metres across the portfolio.

The group reported in a quarterly update that turnover in speciality sales plunged by 31 per cent over the three months, discount department store sales fell 21 per cent and mini majors were off 11 per cent.

“Negotiations with small to medium enterprise tenants impacted by COVID-19 are underway with the majority expected to be completed by calendar year-end,” the group said.

As a result, the full financial impact of tenants’ rental abatements on funds from operations won’t be felt until the first half of next year.

In contrast, Stockland collected just 75 per cent of the rent due from its retail town centres, places like Point Cook in Melbourne’s west and Wetherill Park on Sydney’s outskirts, over the first three months of the new financial year.

Stockland’s new chief executive Tarun Gupta, who took the reins at the developer in June, said COVID-19 restrictions had taken their toll on the business.

“As we expected, retailer sales across our portfolio have been heavily impacted by lockdowns in NSW and Victoria over the quarter.”

However, Mr Gupta said, it was “pleasing to see the strong rise in vaccination numbers across Australia and the resulting steps being taken to re-open impacted state economies.”

Sales of land lots on Stockland’s house and land estates and strong leasing in its logistics and workplace portfolio are underpinning the group’s momentum.

It reported net lot sales of 1947 despite the federal government’s HomeBuilder program being wound down and construction restrictions from various state lockdowns limiting work on sites.

“Purchaser demand has remained elevated nationally,” it said.

Positioning itself to capture any upside bounce from NSW and Victoria opening up, the developer grabbed 5900 lots to add to its development portfolio, the majority in Western Australia.

Stockland said it would closely monitor any risks to production arising from COVID-19 lockdowns.

“Based on progress to date and the acceleration of construction across our projects, we do not expect any material impact,” it said, although there will be a higher volume of settlements in the months leading up to June next year.

Mr Gupta reaffirmed the company’s guidance of funds from operations per security in the range of 34.6¢ to 35.6¢. The group’s shares closed at $4.61.

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