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Annual Report 2019
9 Focus on
sustainable
returns
ACKNOWLEDGEMENT
OF COUNTRY
Stockland acknowledges the Traditional
Owners and Custodians of the land on
which we work and live within Australia.
We would also like to pay our respects
to their Elders past and present, and
acknowledge the ongoing connection
that Aboriginal and Torres Strait Islander
peoples have with Australia’s land
and waters.
We believe
there is a better
way to live
We shape places that enable a better way
to live every day. More than just a property
developer, since 1952 we have been creating
places to enhance communities and the
way people live.
The Directors of Stockland Corporation Limited (ACN 000 181 733) and the Directors of Stockland Trust Management
Limited (ACN 001 900 741, AFSL 241190), the Responsible Entity of Stockland Trust (ARSN 092 897 348), present their
report together with the Financial report of Stockland and the Financial report of the Trust for the year ended 30 June
2019 and the Independent Auditor’s Report thereon.
The Financial Report of Stockland comprises the consolidated Financial report of Stockland Corporation Limited and
its controlled entities, including Stockland Trust and its controlled entities, (collectively referred to as ‘Stockland’
or ‘Group’). The Financial report of Stockland Trust comprises the consolidated Financial report of the Trust and its
controlled entities (‘Stockland Trust Group’ or ‘the Trust’).
2019 performance
Chairman and Managing Director’s letters
Our business
Strategy and performance
Our strategy
Grow asset returns
Capital strength
Operational excellence
Business risks and our materiality process
Climate-related risks
A better way to deliver shared value
Our approach to sustainability
Shape thriving communities
Optimise and innovate
Enrich our value chain
Governance and remuneration
Our Board and governance
Remuneration report
Financial report
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flow
Notes to the financial statements
Directors’ declaration
Independent auditor’s report
Securityholder information and key dates
Glossary
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This year Stockland’s FY19 Annual Report has
adopted the principles of the International
Integrated Reporting Council’s (IIRC) International
Integrated Reporting Framework to communicate
our financial and non-financial achievements
in one flagship document.
Along with our Financial Report, the FY19 Annual
Report outlines how we have created value for all
our stakeholders to create places
to enhance communities and the way people live.
Additional information about our sustainability
reporting and the methodology used for
sustainability data collection in this report,
including our assurance statement by
Ernst & Young (EY), is available online:
www.stockland.com.au/sustainability.
Affina Town Homes Brightwater, QLD
2019
performance
Funds from operations (FFO)
$897m
Up 4.0% on FY18
FFO per security
37.4c
Up 5.1% on FY18
Distribution per security
27.6c
Up 4.2% on FY18
Distribution payout ratio
74%
Statutory profit per security
13.0c
Down 69.3%
%
Return on equity (ROE)
11.9%
Up 70bp
Community contribution
$7.4m
Net tangible assets per security
$4.04
Down from $4.18 at 30 June 2018
Total real estate assets
$15.2bn
Employee engagement
81%
4 points above the Australian National Norm
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GOOD PROGRESS ON OUR STRATEGIC PRIORITIES
Increased weighting to Workplace
and Logistics to 23 per cent of our
assets, including $99 million of
developments completed and
294 hectares of land secured.
Completed $192 million of our
$350 million buy-back of Stockland
securities to help support the
resilience of securityholder
returns into the future.
Sale of three non-core retirement
living villages for a combined total
of approximately $60 million.
Achieved $505 million of retail
town centre divestments, exceeding
our $400 million target of non-core
retail divestments ahead of the
anticipated timeframe. We will
continue to assess the remainder
of our $500 million non-core
divestments over time in
a disciplined way.
Confirmed a 50 per cent capital
partnership for our $5 billion Aura
mixed use community on the
Sunshine Coast, at a 30 per cent
premium to book value, with
Capital Property Group in July.
Continued focus on customer
satisfaction: Highest level of
retirement living resident
satisfaction since 2009 at 8.6
out of 10, residential communities
resident satisfaction of 93 per cent,
retailer satisfaction of 82.5 per
cent, retail customer satisfaction
of 80 per cent, and Workplace
and Logistics tenant satisfaction
of 84 per cent.
Reduced unallocated corporate
overheads by $5 million to
$61 million, with additional
savings forecast.
4
Stockland Annual Report 2019
5
Year ended 30 June 2019
Letter from
the Chairman
Dear Securityholders,
FY19 has been a challenging year, however I am
pleased to report our overall results are in line with
market expectations. With tougher market conditions,
an evolving regulatory environment and the general
uncertainty that election campaigns bring, a continued
focus on our strategic priorities has guided the business
through the year and I’m pleased to present our progress
in this report.
We have delivered FFO earnings per security growth
of 5.1 per cent over the year, in line with expectations.
Statutory profit was down 69.6 per cent to $311 million
reflecting non-cash adjustments arising from devaluations
in our retail town centre and retirement living portfolios,
a retirement living goodwill write down, mark-to-market
on financial instruments and a tax expense change.
Over the period we have continued to actively reposition
the retail town centre portfolio to respond to ongoing
changes in customer spending habits, with a clear focus
on convenience and experience. Our strategy is focused
on improving future income resilience and the growth
of our portfolio by divesting non-core properties,
ensuring rents are sustainable and remixing tenancies.
During the year, we restructured our business and
leadership team to position us for continued success and
sustainable growth. This has enabled us to realise
efficiencies, leverage expertise and stay ahead of the
curve as customer preferences, innovation, technology
and global trends continue to disrupt the property sector.
Valuing our customers
Confidence in corporate Australia has been tested over
the past year with increased scrutiny on organisations
and their interactions with customers. It is incumbent
on all businesses to engage with customers in an ethical
and considered manner, and this has been and will
always be a priority for Stockland.
Over the past year, the Board and executive team visited
many Stockland assets and projects to understand the
contribution we are making to communities across
Australia and to hear first-hand what customers need
and expect from us.
Our customer focus continues to be one of our points of
difference and helps us stand out from our competitors.
From the Board down, we continue to look at how we
engage with our customers and deliver on our promises
on a day to day basis. When independently polled our
residential customers, workplace and logistics tenants,
and retirement living residents all reported satisfaction
levels around or above 85 per cent, and retail customers
and tenants reported over 80 per cent satisfaction.
A fresh perspective
During 2018, two new board appointees, Melinda Conrad
and Christine O’Reilly, joined us, bringing a wealth of
experience and industry expertise. Ms Conrad has over 25
years’ experience in customer-facing businesses, including
successfully founding and operating her own retail business.
Ms O’Reilly has deep experience in both financial and
operational entities and has held a number of senior
executive roles in diverse industries including CEO and
Director of the GasNet Australia Group and Co-Head of
Unlisted Infrastructure investments at Colonial First State
Global Asset Management.
Earlier this year, we reviewed and updated the Board
charter to reflect the evolving discussion around Board
governance in Australia as well as other key policies in
relation to privacy, whistleblowing, sustainability and
modern slavery.
Managing risk
The Board recognises the importance of building and
fostering a culture of accountability, and every individual
takes responsibility for risks and controls in their area
of authority.
We have focused on building risk-awareness capabilities
including, compulsory training for all employees so we
can work together to recognise risks before they threaten
our business, know how to deal with risk when it does
arise, and learn and become stronger from any impact.
To support our ongoing commitment to managing risk,
we have changed our governance focus to reflect recent
regulatory and market changes.
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With this in mind, we recently appointed Karen Lonergan
as our Group Executive, People and Culture, to extend
the work we commenced following the culture review
we undertook last year.
Fostering innovation
We are actively encouraging and supporting all
employees to innovate, from improving customer
experiences to developing new products. In FY19 we
made good progress, with the launch of LAB-52 and
the Stockland Accelerator, powered by BlueChilli.
I was proud to sponsor the Chairman’s Awards for
Innovation this year, which had over 28 entries. The awards
provide an opportunity for employees to demonstrate how
they have successfully developed a solution to a customer
problem, created a new product or found better ways of
working. I was impressed by the scope and sophistication
of the entries this year, each of them showing a real
passion for delivering new value to our business.
We are trialling the delivery of pre-fabricated townhome
product at a number of our communities. We have also
identified opportunities in our existing portfolio for land
lease communities, designed to attract over 55s, where the
occupant owns the dwelling and enters a lease for the land.
Distribution and outlook
As forecast, our full year distribution was 27.6 cents per
security, representing a payout ratio of 74 per cent of
funds from operations. We forecast flat growth in FFO per
security in FY20, noting that market conditions remain
variable and we are cautious about the pace of recovery
in the residential market. Distributions per security
growth will also be flat, and our distribution payout will
be at the bottom end of our 75-85 per cent target ratio.
Conclusion
Thank you to my Board colleagues, the executive team
and every one of our employees for their ongoing
commitment to excellence. Whenever I visit a Stockland
community, asset or town centre, I feel proud of what
we are creating and delivering for Australians, and I’m
confident we have the right strategy in place to continue
to deliver value for our securityholders.
Thank you for your continued support.
Tom Pockett
Chairman
Our governance framework consists of three lines
of defence:
1. All employees take responsibility for managing risk
2. A Group Risk function monitors the operational
environment and adapts our approach accordingly
3. We conduct regular independent risk assessments.
Throughout the year, regularly meeting with major
investors has given us the opportunity to hear their
concerns and this feedback has been invaluable in
updating our governance framework.
Our changing world
Climate change remains a key concern for Australians,
and we continue to design our communities and invest
in asset upgrades to improve our resilience.
During the January 2019 Townsville floods, our local
employees worked tirelessly to help keep their
community safe. They were able to apply our Cyclone
Management protocols, that clearly set out a process
for proactive management of the crisis, and I’m
extremely proud the team won the award for
“Most Effective Recovery” at the Business Continuity
Institute Australasian Awards, and is now shortlisted
in the global award for the same category.
We continue to set the benchmark for sustainable
development and once again this year we were
recognised as the most sustainable real estate group
in the world in the 2018-2019 Dow Jones Sustainability
Index. We were also named by GRESB as the Global
Sector Leader for listed companies in the category
Diversified – Retail/Office. Stockland is the only
Australian company to have achieved CDP (the
non-profit global environmental disclosure platform)
Climate A-List status every year since 2016 and this
year we were the only Australian property company
on the Climate A-List.
Diversity and inclusion
Last year we achieved a significant milestone, becoming
one of the few companies to achieve gender balance as
defined by the Workplace Gender Equality Agency (WGEA)
across our workforce, at all levels of management.
For the fifth consecutive year, Stockland was named as an
Employer of Choice for Gender Equality for 2018-19; we were
a 2018 national finalist in the Property Council Australia
Diversity Excellence awards; and were recognised as a WGEA
Pay Equity Ambassador, having succeeded in narrowing
the pay gap to a ratio of 98.5 per cent for like roles.
Culture: valuing our people
Our employee survey once again showed extremely
high employee engagement at 81 per cent, confirming
the positive morale, customer focus and sense of care
that we are well-known for.
A particular focus this year is on strengthening our
culture, by leveraging the strengths of our people
across our diverse teams, and ensuring we are working
effectively and efficiently together to deliver on our
purpose of creating a better way to live.
6
Year ended 30 June 2019
7
Stockland Annual Report 2019Securityholder information and key datesGlossary
Letter from the
Managing Director
and CEO
Dear Securityholders,
I am pleased to report that our diversified business has
helped us deliver good results in line with expectations
despite a more challenging year in FY19.
We continue to deliver on our strategic priorities to
improve the quality of our portfolio, upweight workplace
and logistics, reposition our leading town centres around
convenience and experience, and expand capital
partnering. We’ve also achieved good momentum with
our planned retail divestment program with $505 million
divested, exceeding our initial target of $400 million.
We have extended our position as the leading creator
of sustainable communities in Australia, and despite
the challenging residential market, we have realised
higher margins and continued to gain market share
over the year, as customers focus on the strength of
our brand which is built on the quality and liveability
of our communities.
In line with our strategy, we have finalised a 50 per cent
capital partnership for our Aura community on the
Sunshine Coast, at a 30 per cent premium to book value,
with Capital Property Group, a highly regarded partner.
We continue to recycle capital into our workplace and
logistics development pipeline and re-stock our
residential landbank to position us for the future.
We have also completed $192 million of our $350 million
buy-back of Stockland securities to help support the
resilience of securityholder returns into the future.
Delivering returns, positioning
for the future
Funds from operations (FFO) for the group was $897
million for the FY19 period, up 4.0 per cent on FY18 and
representing growth in FFO per security of 5.1 per cent, in
line with expectations. This reflects a strong performance
in our residential and workplace and logistics businesses.
Net tangible assets (NTA) per security was down 3.3 per
cent from 30 June 2018 to $4.04, primarily due to negative
retail town centre and retirement living valuations and
non-cash mark-to-market on our derivatives.
Our Communities business has performed well, with
Residential delivering strong operating profit, up 8 per
cent on FY18. In FY19 we have achieved almost 5,900
residential settlements, with 85 per cent of our buyers
being owner occupiers which is the strongest demand
segment. There has been some improvement in the
market since the federal election in May this year,
however access to credit remains challenging for
many of our customers.
Our Retirement Living FFO was up 5.7 per cent this year
to $56 million, achieved through disciplined execution
of our strategy which has seen solid sales and profit
generation in our new development projects.
Improving the quality of our retirement living portfolio
remains a focus. We sold three non-core villages at
around book value for approximately $60 million earlier
this year, and we continue to leverage our existing
landbank to drive growth through development, with our
development settlements up 53 per cent from FY18. We
have also continued discussions to introduce a capital
partner to this business.
Our residents are our priority and I’m pleased that
we’ve maintained strong customer satisfaction levels,
with the highest level of resident happiness since 2009
at 8.6 out of 10.
We continue to reshape our Commercial Property
business for success. The business delivered comparable
FFO growth up 2.1 per cent across the portfolio, at the
lower end of our forecast, with the high-performing
workplace and logistics markets partially offsetting the
weaker retail sector.
While our retail portfolio has experienced negative rental
reversions associated with remixing around experience
and convenience, our comparable MAT growth per square
metre came in at 2.3 per cent, and core portfolio FFO
growth was positive. Our portfolio improvement strategy
is well underway.
We have continued to actively reposition the retail town
centre portfolio to respond to ongoing changes in
customer spending habits, remixing tenancies to add
growth businesses, rebasing existing rents to ensure
I am also pleased to confirm our continued support
of the United Nations Global Compact with whom we
partner to promote responsible business practices
and sustainable development.
Central to everything we do is our people. Our employee
engagement score of 81 per cent is four points above the
Australian National Norm, and I’m extremely proud that
we have now achieved gender balance (as defined by
WGEA) across our workforce and all levels of management
and the Board.
Outlook
Current market conditions remain mixed, with steady
employment growth, record low interest rates, recent
tax cuts and high investment in infrastructure, but broad
uncertainty driven by reduced credit availability, weak
consumer sentiment and low wages growth.
We expect Retail FFO to stabilise through FY20,
with growth forecast from FY21, as our remixing
and placemaking initiatives enable us to adapt to the
structural changes in the retail sector. We expect
continued growth from our workplace and logistics
portfolio from rental growth and new developments.
Despite an improvement in residential enquiry and the
market bottoming, we expect the market to take some
time to normalise as customers continue to experience
challenges achieving loan approvals. In FY20, we expect
to deliver over 5,000 residential settlements.
Retirement living FFO is forecast to grow moderately
given improving market conditions, our quality service
offering and new development projects.
We remain focused on creating Australia’s most liveable
and sustainable communities, owning and managing
leading retail town centres in strong trade areas and
growing our workplace and logistics portfolio.
My sincere thanks to all of you, our securityholders, and
to our customers, communities and all of our employees.
Mark Steinert
Managing Director
and CEO
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sustainable occupancy costs, upgrading centre amenity
and divesting non-core centres. Retail town centre
devaluations totalled $474 million for the year. Thirty-five
per cent of the devaluations were driven by capitalisation
rate expansion. About half were driven by the softening
of growth rates, and changes to rental income and capital
cost re-forecasting, following the implementation of our
strategy to remix tenancies and renew some leases at
more sustainable levels. The remainder was driven by
increased land taxes and rates.
We continue to invest in our Workplace and Logistics
portfolio and it performed very well over the period,
delivering comparable FFO growth of 10.4 per cent in
Workplace and 3.9 per cent in Logistics. We maintained
occupancy around 96 per cent.
Our logistics business has a clear growth strategy, and
we secured 294 hectares of industrial land, including
Melbourne Business Park in Truganina in Melbourne’s
west, and Gregory Hills in Camden in Sydney’s west,
during the year. Our forward development pipeline for
this business is valued at over $1 billion.
We are progressing development opportunities for
our Sydney workplace assets, including Stockland
Piccadilly in the CBD and 110 Walker Street in North
Sydney, which are well-located for future workplace
and mixed use development.
Financial & capital management
We have maintained a focus on disciplined and active
capital management for this part of the cycle, and we’ve
sustained a robust balance sheet. We have held our
A-/Stable credit rating from Standard and Poor’s for 18
consecutive years and we also hold an A3/Stable credit
rating from Moody’s, which was obtained in August 2017.
Operational excellence
Anticipating future demands, whether that’s from
regulatory requirements or customer trends, is critical to
the success of our business. By fostering innovation we are
positioned to win new customers and continue delivering
communities that help create a better way to live.
Our partnership with BlueChilli for the Accelerator
program has seen 10 property tech start-ups develop their
ideas into commercial products – all of which will have the
potential for positive impacts across many areas of our
business. We will continue to prioritise and invest in
building innovation capabilities and skills within our
organisation through continuous improvement and via
LAB-52, our innovation engine, as we anticipate and
respond to global mega trends and changing customer
expectations.
We are proud to be a global sustainability leader. Since
2006 we have halved our carbon intensity, invested over
$33 million in solar power generation across 20 retail and
logistics centres, and saved over $106 million through
energy efficiency innovations.
8
Year ended 30 June 2019
9
Stockland Annual Report 2019Securityholder information and key datesGlossary
Our business
Stockland is one of the largest diversified property groups in
Australia with $15.2 billion of real estate assets including retail
town centres, workplace and logistics assets, residential and
retirement living communities.
Residential
communities
56
Retail Town
Centres
35
Retirement
Living villages
62
Workplace &
logistics assets
34
How we operate
Australian based Board
1,463 employees
84 families move into our residential
communities every week
400,000+ shoppers
visit our Retail Town Centres every day
11,000+ residents live in our
retirement communities
3,000 Commercial
Property tenants
How we make a difference
We make a worthwhile contribution to communities
across the country by creating leading residential and
retirement communities, retail town centres and
workplace and logistics assets.
Our structure
We are a listed company on the Australian Securities
Exchange. To optimise value to our securityholders
we are structured as a stapled security, a combination
of a unit in Stockland Trust and a share in Stockland
Corporation. This allows us to efficiently undertake
property investment, property management and
property development activities.
Our values
The Stockland CARE values were developed
by our people and guide our actions.
Community
Accountability
Respect
Excellence
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Our point of difference
is community creation
Our annual Liveability Index Survey measures
what matters to our residents, so we can
design our communities based on what they
tell us is important.
The Liveability Index Survey invites feedback
on all aspects of the community – from
quality of built and natural environments, to
how its design supports mental and physical
wellbeing. Years of listening to feedback from
our residents has helped us shape some of
Australia’s most liveable communities, with
93 per cent resident satisfaction across our
communities.
Liveability score
74%
Liveability is being able
to connect with the
community, feeling safe
where I live and enjoying
the open spaces with my
family and friends.
Cathy Stevenson
Willowdale Community
10
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Year ended 30 June 2019Stockland Annual Report 2019Strategy and performanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossary Our strategy
We have a clear strategy to deliver sustainable and growing returns
Our strategy is to maximise returns by developing sustainable communities, owning and managing leading retail town
centres, and growing our workplace and logistics asset base in Sydney, Melbourne and Brisbane. We achieve this by
focusing on our three enduring pillars; grow asset returns, capital strength and operational excellence.
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Grow asset returns
Drive returns in our core businesses by creating liveable,
affordable and connected communities, future proofing
our retail town centres and retirement villages, and
growing our workplace and logistics portfolio.
Capital strength
Actively manage our balance sheet to maintain diverse
funding sources and efficient cost of capital.
PE THRIVIN G
MUNITIES
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GROW ASSET
RETURNS
Maximise
returns through
community
creation
ENRICH OU R
VALUE CHAI N
&
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OPERATIO
EXCELLE
Operational excellence
Improve the way we operate to drive efficiencies,
compliance, sustainability and employee engagement.
Our strategic pillars are strengthened by our
focus on sustainability, which ensures we have
a long-term view of our business and consider
all our stakeholders’ needs. You can read more
about our sustainability approach on page 52.
Underpinning these pillars are a range of strategic priorities we are focused on to achieve our goal
of maximising sustainable and growing returns.
1
2
3
4
Accelerate
improvement in
the quality
of our Retail Town
Centre portfolio
Increase
Workplace
and Logistics
weighting
Enhance our
capability to
drive growth
opportunities
Broaden capital
partnering
initiatives across
all sectors
12
FUTURE PROOFING
OUR RETAIL TOWN CENTRES
Shopping centres are a destination and
the success of our retail portfolio is
based on creating vibrant spaces that
are at the heart of the community.
At Stockland Burleigh Heads we used
customer insights to remix the tenant
offering, introducing new food offerings
in a vibrant outdoor living space, as well
as local artist murals and dog parking.
Retailers who were tenants before
the improvements have experienced
a 47 per cent uplift in sales and these
simple activities have resulted in
specialty sales growth of 4.4 per cent.
Stockland Burleigh Heads, QLD
13
Year ended 30 June 2019Stockland Annual Report 2019IntroductionBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossary
Grow our
asset returns
Communities
RESIDENTIAL
The Residential business delivered a strong operating
profit result in FY19, up 8.0 per cent on the prior year
despite a challenging housing market.
We achieved 5,878 settlements for the year and our
market share increased by three per cent to 15 per cent.
We remain well positioned in the deepest part of the
lending market, with over 85 per cent of our product
sold to owner-occupiers, and we are still seeing strong
demand for house and land packages in affordable,
liveable communities.
During the period, operating profit margin increased
to 19.9 per cent as a result of higher priced Sydney
and Melbourne settlements.
Over the course of the year we made good progress
building our townhomes business to broaden our
customer reach, with 470 settlements recorded and
447 contracts on hand for future year settlements.
We expect continued growth from townhomes in
FY20, as we further develop this product both within
our Communities landbank and on stand-alone sites.
Our strong brand and reputation for quality, liveable
communities underpinned our results in FY19 as
customers looked to purchase from established
companies they can trust.
Our scale enables us to understand what our customers
want and deliver this at a lower cost. This has been
critical in achieving good sales in a weaker environment.
The size, quality and diversity of our landbank
remains one of our key strengths and during the year
we restocked our pipeline with acquisitions at Altona
North and Kalkallo in Melbourne. We continue to focus
on targeted acquisitions in key growth corridors
connected to jobs, transport and schools.
We have seen some improvement in the market since
the federal election in May, with enquiry up over
50 per cent in Sydney and Melbourne. Whilst access
to credit remains challenging for many of our customers,
we expect sales volumes to improve over the course
of the next 12 months and with 3,869 contracts on hand,
we are starting FY20 in a good position.
Strategic priorities
1
2
3
Optimise and grow
our landbank
Broaden our
customer reach
Enhance customer
experience and resident
liveability
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OUR COMPETITIVE ADVANTAGE
RESIDENTIAL SNAPSHOT
Brand
Built around the creation of highly
liveable and sustainable communities.
Scale
Enables us to understand customer
needs and deliver at a lower cost.
Landbank
Skewed towards rail serviced corridors
in Sydney, Melbourne and South East
Queensland.
Operating profit
$362m
Up 8.0% on FY18
Operating profit margin
19.9%
Up from 18.3% in FY18
Return on assets
18.7%
Lots settled
5,878
Contracts on hand
3,869
At 30 June 2019
Willowdale, NSW
Owner occupiers
85%
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Year ended 30 June 2019Stockland Annual Report 2019
RETIREMENT LIVING
Cardinal Freeman, NSW
FFO in our Retirement Living business was up 5.7 per
cent in FY19, at $56 million, driven by a 53 per cent
increase in development settlements and non-core
asset sales. Our established village sales stabilised
in the second half of FY19 through challenging market
conditions.
In FY19 we continued to improve our customer offering
through simpler contracts, improved services and
investment in our villages.
Providing more certainty for our residents through
changes to our contracts is resonating well with
customers. Over 80 per cent of customers chose the
Peace of Mind contract option in FY19, which provides
customers with a known exit value.
Resident satisfaction levels were over 85 per cent in
FY19. This strong result is testament to the customer
experience our employees provide to residents and our
continued investment in improving our villages.
Strategic priorities
We continued to differentiate the customer experience
by providing our residents with access to a range of
services and resident care through our Benefits Plus
program, which we have now implemented nationally.
We also have government approved home care
providers offering services such as meals, mobility
aids and lifestyle products such as travel.
In FY19, three non-core villages were sold at around
book value for approximately $60 million, as we focus on
optimisation of the portfolio and improving overall
returns. We are continuing our discussions to introduce
a capital partner to the business in order to broaden our
capital base and provide a platform for future growth.
There are currently 280 units under construction and
20 retirement living sites in our development pipeline,
including 10 identified land lease communities.
1
2
3
Improve quality
of portfolio
Increase returns through
development pipeline
and capability
Enhance customer
experience and
satisfaction
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RETIREMENT SNAPSHOT
FFO profit
$56m
Up 5.7% on FY18
Development units settled
250
Up 53% on FY18
Cash return on assets
4.5%
Occupancy
93.3%
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Birtinya retirement village, QLD
Year ended 30 June 2019Stockland Annual Report 2019IntroductionBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossary
Commercial Property
RETAIL TOWN CENTRES
Stockland Balgowlah, NSW
In FY19 comparable FFO growth for our retail town
centres was down 0.2 per cent for the year, however
we made good progress on our portfolio improvement
strategy and had high occupancy of over 99 per cent.
We delivered comparable MAT growth of 2.3 per cent and
comparable specialty sales MAT growth of 1.8 per cent.
MAT comparable specialty sales per square metre on an
adjusted moving lettable area basis, rose by 2.5 per cent
to $9,251. This was driven primarily by growth in health
and wellbeing services, mobile phones and food retail.
Our centres remain focused on providing convenient,
everyday shopping for our communities with non-
discretionary spend making up around 70 per cent
of our total sales.
In FY19 we have refined our retail strategy to accelerate
the improvement in the quality of our portfolio,
underpinned by our drivers of community, convenience
and the curation of retail mix and experiences.
We also conducted a disciplined review of our assets
and have redefined the core and non-core retail town
centre portfolio. Core centres have limited competition,
above average population growth, strong employment
fundamentals and the ability to evolve to meet future
customer needs. We divested $5051 million of retail
centres putting us ahead of schedule to exceed our
$400 million target of non-core retail divestments
ahead of the anticipated timeframe.
The retail town centre development pipeline has been
reduced by around 50 per cent, with a focus on smaller
placemaking projects which will redefine customer
experience and convenience.
We have continued to make good progress in remixing our
centres, increasing exposure to the growth categories of
Food and Services while reducing our offering of Apparel
and Jewellery. This reweighting not only improves our
centres’ resilience to online retail, but also achieves
stronger rent per square metre, with our average Food &
Services rent 30 per cent above Apparel and Jewellery.
1 Including exchanged and settled assets from 1 July 2018 to 21 August 2019.
Strategic priorities
1
2
3
Accelerate improvement
in the quality of our Retail
Town Centre Portfolio
Deliver on customer value
proposition: Community,
Curated and Convenience
Drive strategic capital
partnering initiatives
Stockland Birtinya, QLD
Our customer value
proposition
Community
Deep consumer insights inform our strategy
at each centre to meaningfully connect to our
existing customers whilst driving new visitation,
through a diverse range of initiatives that
may include events, classes, markets,
communication, social media, pop-up retail
and play.
Curated
Looking at our current mix and areas of escape
expenditure we capture a variety of retail
initiatives, new ways of driving income and
leveraging mixed-use to transform our assets
into true town centres whilst creating leading
destinations.
Convenience
Ensuring the journey of our shopper is ‘easy’ from
parking the car to using the amenities and being
able to navigate through our centre to achieve
shopping and entertainment needs.
Community
“relevant”
Convenience
“easy”
Curated
“experience”
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RETAIL TOWN CENTRES
SNAPSHOT
FFO
$432m
Up 1.1% on FY18
Comparable FFO growth
(0.2)%
Comparable specialty
sales growth
2.5%
Adjusted lettable area
Portfolio comparable
MAT growth
2.3%
Occupancy
99.3%
18
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Year ended 30 June 2019Stockland Annual Report 2019
WORKPLACE AND LOGISTICS
Ingleburn Logistics Park, NSW
We continue to invest in our workplace portfolio and
it performed very well over the period, delivering
comparable FFO growth of 10.4 per cent with
occupancy of 94.7 per cent.
The logistics market continues to be supported by
ongoing investment in infrastructure supply chain
enhancements and the growth in online retail and
we are actively investing in our logistics development
pipeline, primarily leveraging our existing landbank.
Over the year we completed developments at
Willawong, Ingleburn and Yennora, to the value of
$99 million. Our logistics portfolio value increased by
13.9 per cent to over $2.5 billion and delivered
comparable FFO growth of 3.9 per cent.
We acquired 13 hectares of industrial land at Gregory
Hills in Australia’s fastest growing Local Government
Area, Camden, in Sydney’s west. Melbourne Business
Park remains a key logistics development project, with
a Stage 1 DA for an 87 hectare planned subdivision
lodged with Melton City Council in June 2019.
Our forward development pipeline for the Workplace
and Logistics business is valued at over $2 billion.
We are progressing development planning for our
Sydney office and business park asset opportunities,
including Stockland Piccadilly, 110 Walker Street in North
Sydney and M_Park Business Campus in North Ryde.
Strategic priorities
1
2
Grow and develop a market leading
portfolio to greater than 25 per cent
of total assets, through delivery of
development pipeline on land we control
Optimise the returns of our workplace
portfolio, focusing on Sydney
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WORKPLACE AND
LOGISTICS SNAPSHOT
Logistics FFO
$164m
Comparable growth of 3.9% on FY18
Workplace FFO
$48m
Comparable growth of 10.4% on FY18
Occupancy
96.5%
Completed developments
$99m
Development pipeline
>$2bn
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Triniti Business Park, NSW
Year ended 30 June 2019Stockland Annual Report 2019IntroductionBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossary
Capital
strength
S&P credit rating
A-/Stable
Moody’s credit rating
A3/Stable
Gearing
26.7%
Within target range of 20% – 30%
Weighted average cost of debt
4.4%
Weighted average debt maturity
5.8 years
Distribution payout ratio
74%
Balance sheet
$m
Cash
Real estate related assets
• Commercial property
• Residential
• Retirement living
• Other
Retirement Living Gross-Up
Other financial assets
Other assets
Borrowing
Retirement living resident obligations
Other financial liabilities
Other liabilities
Securities on issue
NTA per security
30 June 2018
30 June 2019
333
10,562
3,432
1,443
37
2,724
294
272
3,938
2,741
196
2,040
140
10,323
3,411
1,452
36
2,585
534
325
4,704
2,597
220
1,650
Change
-57.9%
-2.3%
-0.6%
0.6%
-2.2%
-5.1%
81.4%
20.4%
19.5%
-5.3%
12.2%
-19.0%
2,434,469,276
2,384,351,503
4.18
4.04
-3.3%
Stockland has a prudent approach to capital
management, which provides us with the flexibility
to strategically allocate capital across our diversified
portfolio, in response to changing market cycles.
Our strong balance sheet and capital management
position underpins our investment grade credit ratings
of A-/Stable (S&P) and A3/Stable (Moody’s), and enables
us to continue diversifying our funding sources across
global capital markets on competitive terms and tenors.
We continue to actively manage our debt portfolio,
which has seen weighted average cost of debt decline
from 5.2 per cent in FY18 to 4.4 per cent in FY19. Our
weighted average debt maturity is within our target
range at 5.8 years.
During the period, we secured new long-term debt
totalling A$551 million across both the Australian and
US capital markets at attractive prices and long tenors.
As part of our disciplined approach to managing capital,
we initiated a securities buy-back program of up to
$350 million, completing $192 million, and representing
50.1 million shares at an average discount NTA of
8.3 per cent1. Our gearing level is 26.7 per cent and
we expect to remain within our target range of 20 to 30
per cent in the medium term as we continue to execute
on our strategic priorities.
TARGETS
Strategic capital
partnering across all
sectors
70:30
Recurring/trading assets
>10%
Group return
on equity
Capital allocation
We closely manage our capital to ensure we have the
optimal allocation across our diversified portfolio. Over
the past 12 months, we have decreased our weighting
to Retail Town Centres by 5 per cent and increased our
weighting to Workplace and Logistics by 4 per cent.
Our current allocation of 23 per cent means we are on
track to meet our target exposure of 25 to 35 per cent
in this category in line with our strategy.
1 Based on NTA at 30 June 2018 and 31 December 2018 of $4.18
and $4.19 respectively.
PORTFOLIO ALLOCATION
Communities
Workplace
& Logistics
Retail
Town Centres
Capital
allocation at
30 June 2019
32%
23%
45%
Target capital
allocation
20-30% 25-35% 40-45%
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Year ended 30 June 2019Stockland Annual Report 2019
To drive growth in our business and deliver on our
strategic priorities, we are actively progressing capital
partnering opportunities across all sectors
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Updated debt documentation
Over the period we renegotiated our debt documentation,
updating a number of key terms and conditions to be
consistent with the market and our peers. As a result,
the Total Liability to Total Tangible Assets covenant
has been replaced by Financial Indebtedness to Total
Tangible Assets, and the limit increased to 50 per cent
(from 45 per cent) across all markets making up our
total debt portfolio.
Revaluations
We have taken a prudent approach to revaluing our
Commercial Property assets, completing independent
revaluations on 98 per cent of our portfolio by value
over the last twelve months, and 77 per cent at 30 June
2019, resulting in an overall net valuation decrement of
$199 million for the full year. This included a $275 million
uplift for our workplace and logistics portfolio, and
a $474 million decline in retail town centre valuations.
Thirty-five per cent of the retail devaluations were driven
by capitalisation rate expansion. About half were driven
by the softening of growth rates, and changes to rental
income and capital cost re-forecasting, following the
implementation of our strategy to remix tenancies
and renew some leases at more sustainable levels.
The remainder was driven by increased land taxes
and rates.
We have deliberately focused on changing the tenant
mix in our retail town centres away from apparel
and towards services, lifestyle, health, dining and
entertainment categories, where we see the greatest
potential growth in the future.
Capital partnering
Capital partnerships help strengthen our balance sheet
and enable us to invest in growth opportunities across
our diversified portfolio, including our workplace and
logistics development pipeline and additional residential
community acquisitions.
Post period end, in July 2019, we announced a strategic
capital partnership in our residential portfolio, with
Capital Property Group (CPG) investing a 50 per cent
interest in our largest masterplanned community, Aura
on the Sunshine Coast at a 30 per cent premium to book
value. We are executing on a clear strategy to bring in
capital partners to invest alongside us to deliver
large-scale projects.
Distributions
The dividend and distribution payable for the year ended
30 June 2019, is 27.6 cents per security, up 4.2 per cent
on FY18. The payout ratio is around the lower end of our
target range and in line with FFO growth. This allows us
to both provide capital to the business for further growth
and ensures that our distributions remain closely linked
to the movements in FFO growth.
AURA PARTNERSHIP
In July 2019, we entered into a strategic
capital partnership with Capital Property
Group (CPG) investing a 50 per cent
interest in Aura, one of the largest
masterplanned communities in Australia,
with an end value of $5 billion.
CPG will invest alongside us to continue
the creation of an outstanding new
city on the Sunshine Coast, combining
affordable homes, retail town centres
and business parks alongside best-in-
class schools, child care, sporting
facilities, transport, open space and
community infrastructure.
This capital partnership gives us
additional flexibility to invest in
other counter-cyclical residential
opportunities, as we focus on
re-stocking our national pipeline.
Distribution per security
27.6c
Up 4.2% on FY18
24
Aura, QLD
25
Year ended 30 June 2019Stockland Annual Report 2019IntroductionBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossary
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Operational
excellence
To deliver on our strategy we need to continually improve
the way we operate to drive efficiencies and manage risk
and opportunities effectively over the long-term.
Efficiencies
Innovation
Improving systems
and technology
We continued to focus on improving our technology
and systems in FY19 with the further roll-out of our
Core Systems Program and a Digital Technology uplift.
The introduction of Digital Customer Case Management
in the Core Salesforce system, along with new website
features and social media tools, have improved our
overall customer engagement and responsiveness.
New SAP financial consolidation and reporting tools
were also implemented. The Core Systems Program
continues to progressively release software that
increases business efficiency and our ability to respond
to digital opportunities.
Continued technology improvements are supporting
productivity and the flexibility required in a modern
workplace.
Managing costs
In FY19 we have reduced unallocated corporate
overheads by $5 million, with additional savings
forecast and a commitment to further reducing
our cost base in FY20.
One of the major challenges and opportunities facing
all large corporations is the rate of innovation and its
ability to disrupt growth. We are responding to this
challenge and investing in building the right innovation
capabilities and skills within our organisation.
In 2019 we launched LAB-52, Stockland’s innovation
engine named after our founding year. LAB-52 provides
a collection of tools and processes that enable us to
identify, assess and ultimately deliver value for our
customers and securityholders. In 2019 we reviewed
53 ideas submitted and saw the outcomes of another
40+ initiatives shared via the LAB-52 portal.
In addition to supporting employee innovation, we
have also invested in external ideas and partnerships.
The Stockland Accelerator, powered by BlueChilli,
is a program that identifies, validates, and builds new
PropTech start-ups that can transform our industry
and create better connected communities. Of over
240 applications received, 10 start-ups were selected
for the program, with concepts ranging from AI-powered
indoor farms to a chatbot to streamline facilities
requests. Many of our participating start-ups now
have live pilots, improving the experience of customers
across the business.
STOCKLAND ACCELERATOR
– POD FARMS
The concept for POD Farms came as
renewables expert Christian Collison
contemplated how to turn excess solar
power into a new product. Inspired by
his love of fresh food and nutrition,
Christian devised a method for successful
small-space indoor farming. His test lab
grew micro-greens and leafy greens for
a year before POD Farms was accepted
into the Stockland Accelerator, powered
by BlueChilli.
Now, POD Farms incorporates AI systems
to optimise yields, reduce power and
water, and provides remote control for
modern urban farmers – and transforms
under-utilised spaces in commercial
and industrial assets into productive,
revenue-generating farms. Christian
is currently preparing to pilot his first
commercial facility with Stockland.
POD Farms founder Christian Collison,
sharing his vision at the Stockland
Accelerator Investor Showcase evening.
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Year ended 30 June 2019Stockland Annual Report 2019IntroductionBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossary
Employee engagement
81%
Target 80%
Women in management
45.8%
Maintain 40/40/20 ratio in FY20
Our people who work flexibly
83.2%
Target 80%
Gender pay equity
98.5%
Target 100%
Lost time injury frequency rate
3.2
Our people
The ability to engage and retain our employees is critical
to our overall business performance. Every year we
conduct an externally-facilitated employee survey called
Our Voice to measure employee engagement along with
our key strengths and opportunities for improvement.
We continued to outperform the Australian National Norm
for employee engagement in FY19 with a score of 81 per cent
and we have been recognised as an employer of choice
in the Australian workplace by the Workplace Gender
Equality Agency (WGEA) for the fifth consecutive year.
Strengthening Stockland
We are a purpose-driven organisation with a strong
culture. It is important we continue to build on this robust
foundation and position our organisation to respond to
challenges and opportunities in the future. In FY19 we
conducted a culture review to understand the elements
of our culture we need to improve, and the support we
need to provide employees to deliver on our strategy.
Out of this work we have developed an integrated program
of work across leadership, structure, capability, processes
and systems. The program, called ‘Strengthening
Stockland’, will assist the business to build on our
foundation of collegiality, care, and passion to drive greater
innovation, accountability, and faster decision-making.
Health, wellbeing and safety
We foster a culture where health, safety and wellbeing
are core values and continuous improvement of our
safety performance is part of our normal business
practice. We know stress and anxiety significantly impact
job performance, employee satisfaction and retention.
In FY19 we developed the ‘Ways to Wellbeing’ course
in consultation with the Wellbeing Outfit, to provide
employees with a neuro-scientific understanding
of stress and wellbeing. More than 500 employees,
including Executives and General Managers, have
completed the training since it was launched.
Our wellbeing score (as measured in the annual
employee Our Voice survey) was 75 per cent in FY19,
which is consistent with our FY18 score and three points
above Willis Towers Watson’s Australian National Norm.
Although our lost time injury frequency rate (LTIFR)
increased slightly this year from record lows in previous
years, we continue to report a low average lost day rate,
and we have initiated a number of actions to identify and
address the underlying drivers of the increase.
Diversity and inclusion
We know that we can best respond to our customers’
needs when our people reflect the diversity of the
communities we service and when their different views
and perspectives are valued.
Our Employee Advocacy Groups (EAGs) play an
important role in creating an inclusive workplace and
developing initiatives to drive diversity. Led by a diverse
group of employees across Australia, our four EAGs
are Gender Equity, Flexibility, LGBTI+ and Wellbeing,
and Accessibility & Cultural Inclusion.
In FY19 more than 550 employees completed a LGBTI+
inclusion online training module or face-to-face
program. We also continued to focus on supporting
flexibility through the One Simple Thing program,
improving parental leave return rates and supporting
gender diversity through the Senior Women’s
Sponsorship Program.
Gender equality
Stockland actively encourages gender diversity at all
levels within the organisation. Gender diversity targets
are set by management and regularly reviewed and
endorsed by the Human Resources Committee and the
Board. In 2018, we achieved a significant milestone in
that every level of leadership from Manager through to
our Executive Committee and Board had at least 40 per
cent female representation. Stockland is one of the
few companies that has achieved a gender-balanced
workforce (40/40/20) across all levels of management,
inline with industry best practice.
Our Gender Pay equity ratio is 98.5 per cent and we will
continue to focus on closing this gap between male and
female fixed pay for all like for like roles.
In acknowledgement of our focus on gender equity, we
have been recognised by the Workplace Gender Equity
Agency as an Employer of Choice for Gender Equality for
the past five years and our Managing Director and CEO
is a founding member of the Property Male Champions
of Change group, which focuses on industry-wide
improvements in gender equality.
More detail can be found in our Employee Engagement,
Development, Diversity and Inclusion Deep Dive, available
online at www.stockland.com.au/sustainability/downloads.
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Year ended 30 June 2019Stockland Annual Report 2019
Customer focus
Listening to our customers and delivering initiatives
that respond to their needs is critical to the success
of our business and our reputation.
In October 2018, we launched our new Customer
Promise, providing clarity on what it means for our
employees to be “Customer Crusaders”. The Promise
encourages all employees to consider our commitment
to customers when making everyday business decisions
and a range of actions has been developed to deliver
on our Promise.
Proprietary customer research, satisfaction and
liveability surveys are used to measure our customer
performance and help inform our projects and shape
better communities, town centres and workplaces.
Stockland Exchange is our own online customer
research community made up of shoppers, residents
and prospective residents aged from 18 to over
90 years old. In FY19 Stockland Exchange grew to over
6,000 members and was used to better understand
our customer attitudes and needs on 40 occasions.
In FY19 we exceeded our target of 80 per cent
satisfaction with prospective residents in our residential
communities and we achieved the highest level
of retirement living resident happiness since 2009
(8.6 out of 10). This positive increase in retiree
satisfaction was driven by satisfaction with residents’
home and social life.
In Commercial Property, we exceeded retailer
satisfaction targets with satisfaction at 82.5 per cent
and we achieved 84 per cent satisfaction in Workplace
and Logistics. These results reflect our increased focus
on improving the optimal leasing experience for smaller
retailers and the introduction of a new program called
‘Stockland Listens’ to ensure we spend more time
understanding our tenants’ needs.
‘Stockland Listens’ is also used in our Communities
business to actively seek direct feedback from
customers in sessions attended by a range of employees
to drive a customer-centric culture and understanding.
More detail about our customer targets and initiatives can be
found in our Customer Engagement & Experience Deep Dive, available
online at www.stockland.com.au/sustainability/downloads.
Mernda Retirement Village, VIC
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resident satisfaction
93%
Retirement living
resident happiness
8.6/10
Target 8.25
Retail tenant satisfaction
82.5%
Target 75%
Workplace and logistics
tenant satisfaction
84%
Target 80%
Retail customer satisfaction
80%
Target 80%
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Year ended 30 June 2019Stockland Annual Report 2019IntroductionBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossary
Business risks
and our
materiality
process
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Stockland Merrylands, NSW
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Year ended 30 June 2019Stockland Annual Report 2019IntroductionStrategy and performanceClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossary
Business risks
We adopt a rigorous approach to understanding and proactively
managing the material risks and opportunities we face.
Risks and opportunities
We recognise that making business decisions which
involve calculated risks, and managing these risks within
sensible tolerances is fundamental to creating long-term
value for securityholders and meeting the expectations
of Stockland’s stakeholders.
Stockland’s risk appetite is the degree to which we
are prepared to accept risk in pursuit of our strategic
priorities. The Board has determined that Stockland
will maintain a balanced risk profile so that we remain
a sustainable business and an attractive investment
proposition, in both the short and long terms.
As part of our approach to integrated reporting,
Stockland adopts a rigorous approach to understanding
and proactively managing the material risks and
opportunities we face in our business.
Altrove, NSW
Our materiality process
Stockland has used the materiality definition from the
Integrated Reporting Framework to disclose information
about matters that may substantively affect the
organisation’s ability to create value over the short,
medium, and long term. We identified our FY19 material
matters using the following process:
1. Identify
We identified draft material matters by capturing
internal and external perspectives in line with the
principles of AA1000 and GRI G4. This included:
• Materiality test capturing internal and external
perspectives in line with the principles of AA1000
and GRI G4, including:
• Investor research and engagement
• Customer feedback and insights
• Employee surveys
• Political and regulatory developments
• Industry engagement and advocacy
• Social and mainstream media.
• We also undertook an operational and strategic
risk assessment.
2. Evaluate and prioritise
An integrated reporting materiality workshop was held
with members of the Stockland leadership team to
review the material matters, identify additional relevant
issues, rank issues of greatest significance and prioritise
them based on their ability to affect value. The material
matters were then mapped in terms of their potential
impact on value creation over the short, medium and
long term.
3. Outcomes and disclosure
The following table discloses the final list of material
matters developed and mapped. These have been
reviewed and approved by Stockland’s executive
team and Board. They have also been assured by
Ernst & Young (EY).
SHORT TERM – STRATEGY EXECUTION
Risk and opportunity
How we are responding
Ability to deliver on
our strategic priorities
in challenging market
conditions.
We will continue to deliver sustainable and growing returns by focusing on:
• Accelerating improvement in the quality of our Retail Town Centre portfolio
• Broadening our capital partnering initiatives across the whole portfolio
• Increasing our weighting in Workplace and Logistics
• Enhance our capability to drive growth opportunities.
Increased competition
and changing market
conditions may impact our
opportunities for growth.
To respond to changing market conditions and competition we will:
• Maintain a diversified business model at scale in each sector
• Reinvest in our assets to meet changing customer needs including agile redevelopment of our properties
to capture value add opportunities
• Focus on retaining a strong balance sheet with appropriate gearing
• Use diverse funding sources including capital partnering and asset recycling
• Concentrate on efficiency and cost management
• Maintain a prudent approach to forecasting
• Proactively replenish our land and asset pipelines
• Maintain discipline and agility in our investment decision making
• Include a focus on governance and compliance to provide a stable environment for growth
• Use a rigorous whole-of-business approach informed by detailed research to drive our capital
allocation process
• Support innovative culture to improve our customer experience and identify further growth opportunities.
This is being facilitated through our new digital platform LAB-52, which is designed to assess and accelerate
investment in potential growth areas.
As part of our continued focus on operational efficiency, we continue to drive progress in improving our
systems capabilities. We have introduced a new Customer Relationship Management system, Salesforce
and the Human Resources system SAP SuccessFactors, which have been effective in enhancing the
customer and employee experience. We continue to maintain two-way engagement with employees to
enable a smooth transition, as well as find additional ways to provide ongoing systems enhancements
and use technology to supplement our risk management processes.
To help address affordability we will continue to:
• Partner with government and industry to drive solutions including innovative construction processes
to lower costs
• Provide a broader mix of value for money housing options including house and land packages, completed
housing, medium density and apartments
• Balance the demand from home owners and investors so that our residential communities remain attractive
to future buyers.
Systems enhancements
impact business process
efficiency.
Housing affordability
continues to impact the
dynamics of the Australian
Housing market.
Extreme weather, security
risks and energy price shocks
impact business continuity
and community resilience.
To make our business more resilient we will continue to:
• Train our employees and increase their risk awareness including undertaking regular scenario testing
• Invest in asset upgrades and adapt community design
• Assess and implement wholesale energy strategies and renewable energy installations, to provide
alternative sources of energy to mitigate the risk of price shocks
• Be vigilant in protecting and managing data threats from cyber attacks
• Actively manage our corporate insurance program to provide adequate protection against insurable risks.
Ability to dispose of non-core
Commercial Property assets.
Over the past 12 months we have completed independent valuations of 98 per cent (by value) of the
Commercial Property portfolio and adopted a disciplined approach to the disposal program for individual
non-core assets in consultation with external agents. We have made good progress to date and are on
track to achieve our targets.
Change within the retail
sector impacts rental
growth.
Over the past 10 years, the retail landscape has undergone structural change and seen a convergence
of technological advances, in particular e-commerce, changes in underlying consumer behaviour,
and the entry of new, international retailers. These changes have challenged some of our retailers.
We have been proactive and pre-empted many changes.
We will continue to:
• Focus on experiential retail, health, services and food catering
• Apply our ‘placemaking’ strategy across our assets to create convenient, curated communities that
form the social hub
• Leverage deep customer insights and analytics to inform our tenant re-mixing.
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Year ended 30 June 2019Stockland Annual Report 2019
SHORT TERM – STRATEGY EXECUTION
Risk and opportunity
How we are responding
Regulatory and policy
changes impact our business
and customers.
Increasing expectations
on organisations from the
community.
We will continue to:
• Implement forward-looking practices to remain well positioned for regulatory change. For example, we are
amongst the first Australian corporates to disclose our climate-related risks with our financial reporting,
and we now provide contract choice to provide more certainty for our Retirement Living residents
• Engage with industry and government on policy areas including taxation and planning reform. As part of
our commitment to tax transparency and demonstrating good corporate citizenship, we have adopted the
Australian Federal Government’s Voluntary Tax Transparency Code, which provides a set of principles and
minimum standards to guide medium and large businesses on public disclosure of tax information
• Focus our development activity in areas where governments support growth.
Standards for interaction with customers have been under intense scrutiny in Australia. It is important
that we engage with our customers in an ethical and considered manner.
At Stockland we have prioritised our focus on customer engagement including regular customer surveys,
extra training for our customer-facing employees, and the implementation of a customer feedback
framework with reporting through to our Board and Committees.
Retirement living residents
have high expectations about
value and fairness.
We will continue to:
• Have an open and respectful relationship with our Retirement Living residents, and continue our
commitment to being transparent and up-front about costs associated with living in our retirement villages
• Proactively engage with residents to maintain high satisfaction levels and standards of care
• Focus on health and wellbeing and our approach to care
• Demonstrate industry leadership and work with our peers to lift industry standards
• Review product and contract choice to meet changing customer preference.
LONGER TERM – CHANGING MARKETPLACE
Risk and opportunity
How we are responding
Anticipating changing
customer and community
expectations to meet
future demand.
We will continue to:
• Foster a culture of innovation to identify and take advantage of opportunities to leverage movements
in stakeholder preferences
• Evolve our market-leading product innovation and deepen our customer insights using our proprietary
Liveability Index research, Stockland Exchange (our online research community) and other data sources
• Create sustainable and liveable communities and assets, resilient to changes in climate
• Enhance our design excellence, providing greater functionality and value for money that meet the
demands of Australia’s changing demographics, including an ageing population and more socially
conscious millennials.
Our ability to harness
opportunities arising from
digital disruption.
We will continue to:
• Identify, develop and integrate technological enhancements across our business, including online
residential and retirement living engagement opportunities
Capital market volatility
impacts our ability to
transact and access
suitable capital.
Ability to adapt our operating
model to meet the changing
nature of the workforce.
• Support Stockland retail town centres as thriving communities by delivering quality services and spaces
that are e-enabled.
So that we are able to continue to raise sufficient capital to fund growth, we will continue to:
• Focus on retaining a strong balance sheet at appropriate levels of gearing
• Maintain and increase access to diverse funding sources across global capital markets
• Maintain our prudent capital management policies including a target gearing range of 20 to 30 per cent
• Retain favourable investment grade ratings across multiple credit agencies to demonstrate our strong credit
value proposition
• Regularly update existing and potential debt and equity investors to inform them about the business.
The ability to attract, engage and retain our employees is critical. Physical and organisational boundaries
are becoming increasingly blurred as new technology enables greater workplace flexibility, including
when and where employees work and encouraging creative and adaptive teamwork. We have successfully
deployed Office365, Salesforce and SAP SuccessFactors to improve collaboration and flexible working.
We are focused on how we actively set employees up for success and will continue to:
• Maintain a focus on fostering a positive culture to deliver value to all stakeholders
• Encourage flexible work practices supported by our new collaboration platforms
• Train our senior leaders to be more agile and resilient through Stockland leadership programs
• Provide employees with technology devices that increase their mobility and flexibility and facilitate
improved productivity in a balanced way.
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PARTNERSHIP TO PRODUCE
AGEING AND DIGNITY REPORT
In 2019 Stockland was pleased to partner
with the Committee for Sydney and
not-for-profit organisation, Baptistcare
to produce the ‘Dignity and Choice’ report
which highlighted the challenges in
creating an inclusive future for Sydney’s
ageing population. We contributed
in a number of ways, including hosting
a working group to determine the
challenges to be answered within the
report which included meeting the
housing needs of an ageing population,
transport to keep people socially
connected and healthy, planning
principles for inclusive public spaces,
healthy and active ageing, fostering
social connection and tackling the
dementia challenge
The report was launched amongst an
audience of industry and government
representatives and included a keynote
address from the Hon. John Sidoti MP,
NSW Minister for Sport, Multiculturalism,
Seniors and Veterans. Producing reports
like the ‘Dignity and Choice’ report
helps Stockland to remain on top of
the retirement living market, identify
challenges and continue to provide
high quality, community living for
our residents.
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Year ended 30 June 2019Stockland Annual Report 2019IntroductionStrategy and performanceClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossary
Climate-related
risks
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KEEPING IT SIMPLE
The aim of this text in ‘Keeping it simple’ boxes is to explain more complex sections in plain English. It also aims to
provide explanations and additional disclosures to assist readers’ understanding and interpretation of statements.
Year ended 30 June 2019Stockland Annual Report 2019IntroductionStrategy and performanceBusiness risks and materialityA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossary
Climate-related
Financial Disclosures
This is Stockland’s second full-year disclosure of climate change
issues management in line with the recommendations of the
Financial Stability Board’s Task Force on Climate-related Financial
Disclosures (TCFD).
The TCFD recommendations were published in 2017 with the objective of developing voluntary,
consistent climate-related financial disclosures that would be useful to investors, lenders,
and insurance underwriters in understanding material risks. Further information on the
recommendations is available at www.fsb-tcfd.org.
Stockland has long recognised the risks and
opportunities presented by climate change, and has
responded to these issues by creating and implementing
our Climate Change Action Plan (commenced in 2006)
and detailed Climate Adaptation Strategy (commenced
in 2011). We understand that extreme weather and
other physical climate risks impact our assets and
communities now, and will continue to do so into the
future. We also acknowledge the potential for financial
impacts resulting from carbon emissions regulation,
particularly in the context of Australia’s ratification
of the 2015 Paris Agreement to limit global temperature
increases to below 2ºC. We manage these climate
risks and opportunities by developing and operating
energy-efficient, climate resilient assets and
communities; and through our leadership in the
transition to lower-carbon energy sources at our assets.
Following Stockland’s initial commitment to TCFD
in February 2018, we undertook a detailed climate
scenario analysis in June 2018. This analysis reviewed
the resilience of Stockland’s strategy in relation to the
disclosure of our climate-related physical and transition
risks and opportunities. It also took into account
different climate scenarios in accordance with the
TCFD recommendations. The outcomes of this scenario
analysis form the basis of our strategy and management
of climate-related risks and opportunities, with detail
on the governance, strategy, risk management, and
metrics, targets and results contained in this section.
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Governance
The Board and Board Committees (including
the Risk Committee, Audit Committee,
Sustainability Committee and Human Resources
Committee) provide oversight of our risk
management framework. The Risk Committee
meets at least four times per year and receives
quarterly reports on our enterprise risk register,
which includes climate change as a key risk.
All directors of the Board are members of the
Sustainability Committee, which meets at least
twice per year and considers our approach
to carbon mitigation (including emissions
reduction targets), our methods for building
climate and community resilience, and
emerging climate regulation. More details
on our corporate governance is set out in the
section of this report entitled ‘Governance
and Remuneration’.
Every member of our Executive Committee
has specific responsibilities relating to our
sustainability performance, including targets
and objectives related to climate change risks
and opportunities.
Our Chief Financial Officer chairs our internal
Sustainability Steering Committee, which is
composed of senior management from various
organisational departments including Strategy
and Stakeholder Relations, Project Management
and Procurement, Human Resources, Legal, Risk,
Operations, Development and Sustainability.
The committee meets at least three times
per year and its key responsibilities include:
• Informing our sustainability strategy and
supporting delivery of sustainability targets,
including those related to climate change
mitigation and adaptation
• Investigating and reporting on environmental,
social, and governance risks and opportunities
across our current and planned operations
• Guiding compliance with, and monitoring
of, our environmental and social policies,
guidelines, and agreed initiatives, including
those related to carbon emissions reduction.
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Stockland Wetherill Park, NSW
Year ended 30 June 2019Stockland Annual Report 2019IntroductionStrategy and performanceBusiness risks and materialityA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossary
Strategy
For 13 years, Stockland has been identifying risks and
opportunities related to both the physical impacts
of climate change (physical risk) and a global transition
to lower-carbon energy sources (transition risk).
Our response to these risks and opportunities has
been guided by our Climate Change Action Plan,
our detailed Climate Adaptation Strategy, and our
business unit sustainability strategies.
We recognise that climate-related risks will persist for
the foreseeable future. The precise nature of these risks,
however, is uncertain as it depends on complex factors
such as policy change, technology development, market
forces, and the links between these factors and climatic
conditions. To accommodate this uncertainty, we
incorporate scenario analysis into our climate risk
assessment process to understand how climate-related
risks and opportunities may evolve and impact the
business over time.
In line with the TCFD recommendations, these scenarios
were analysed in detail to explore and understand the
strategic implications of climate-related risks and
opportunities on the resilience of our business.
This process provided a useful mechanism for informing
stakeholders about how we are positioning ourselves
in light of these risks and opportunities.
The outcomes of this scenario analysis highlighted
specific climate-related issues that could have
a material impact on Stockland, relating to both
physical and transition risks.
Physical risks
As an asset owner, manager and developer, we
acknowledge that physical risks associated with climate
change can result in negative financial impacts, such as
increased maintenance costs or decreased revenues
from disrupted operations.
Our scenario analysis identified key physical risks
for Stockland, which include:
• Extreme heat – resulting in issues such as increased
requirements for cooling and areas of respite,
increasing demand on HVAC systems, energy and
water supplies, and increased heat stress events
amongst the community creating a higher demand
for refuge indoors
• Extreme rainfall – resulting in issues such as
increasing local flood events, roof and gutter leakages
and inundation of building and car parks creating
property damage and business interruptions
• Sea level rise – an increase in salt water intrusion
from storm surge resulting in the inundation and
degradation of property structures and accessibility
• Cyclones and storms – resulting in issues such as
decreased roof structure integrity and security of roof
mounted equipment creating property damage and
business interruptions, and increase in demand for
properties to be used as evacuation shelters during
cyclone events
• Bushfires – resulting in issues such as fire damage to
property, accumulation of ash, and smoke penetration
into the building envelope resulting in reduced indoor
air quality and respiratory system issues amongst
customers, tenants and residents.
Stockland’s climate scenario analysis informs our climate strategy
The Intergovernmental Panel on Climate Change (IPCC) Fifth Assessment report (AR5) published in 2014, outlines
a range of Representative Concentration Pathways (RCPs) designed to be ‘representative’ of possible future emissions
and greenhouse gas (GHG) concentration scenarios to the year 2100. The pathways are based on global research and
existing literature and comprise four scenarios: RCP8.5, RCP6.0, RCP4.5 and RCP2.6. Each RCP reflects a different
concentration of global GHG emissions reached by 2100, based on assumptions of different combinations of possible
future economic, technological, demographic, policy, and institutional trajectories.
RCP 8.5 Scenario
RCP 2.6 Scenario
This scenario is broadly considered the ‘business-as-
usual’ scenario in which emissions remain high and global
temperatures rise 3.2 – 5.4°C by the end of the century.
RCP 8.5 is characterised by increasing GHG emissions
driven by a lack of policy changes to reduce emissions.
Stockland uses RCP 8.5 for physical risks to
inform our scenario analysis.
This scenario is most closely aligned with delivering the
Paris Agreement targets. It assumes a drastic reduction
of global emissions as result of sweeping policy and
technology change that results in a global temperature
change of approximately 0.9 – 2.3°C by the end of the
century, minimising (but not eliminating) physical risks
of climate change.
Stockland uses RCP 2.6 for transition risks
to inform our scenario analysis.
Our strategy response to transition risk
In recognition of our capacity to contribute to a
low-carbon future and to mitigate impacts associated
with transition risks, our business has been guided by
emission intensity reduction targets and associated
strategy since 2006. Executing this strategy prioritises
the delivery of energy efficiency enhancements and
renewable energy installations across our portfolio,
such as our industry leading $32 million commitment
to deliver rooftop solar photovoltaic (PV) infrastructure.
It also involves engaging our customers, employees
and industry stakeholders to educate and advocate
for a transition to a low-carbon future.
Opportunities related with this strategy include:
• potential increased value of existing land holdings
resulting from the changing zoning/density
requirements
• increased premium discounts and the introduction
of incentives by the insurance industry
• the transition of the grid to renewable energy sources
and the opportunity to partner with energy producers
to support technological innovation
• enhance brand and reputation by educating
consumers
• the ability to attract capital from organisations
seeking to invest in companies helping the transition
to a low-carbon economy.
Specific detail on how we execute on our strategy and
how it relates to our targets and results is described
throughout the rest of this section.
Our strategy response to physical risks
In recognition of these potential impacts, our strategy
focuses on a commitment to creating climate resilient
assets and communities with a greater ability to endure
severe weather impacts and operate with minimal
disruption. Implementing this strategy involves our
entire value chain, from our development and supply
chain through to operations. We use climate and
community resilience assessments to understand how
to minimise negative impacts and create opportunities
from building and maintaining resilient assets for the
long term, including community preparedness.
Opportunities associated with prioritising the
development of resilient assets include decreased
operational costs (e.g. maintenance, insurance
premiums) and increased revenues from increasing
consumer preferences for climate-resilient products.
Transition risk
We acknowledge that Australia has agreed to the
objective of limiting global warming to below 2°C.
Pursuing this objective implies a general movement
away from fossil fuel energy and increased deployment
of low/zero carbon energy sources and energy-efficient
technology. Our scenario analysis process informs the
business on transition risks for Stockland and how they
may evolve over time, including:
• Policy changes impacting development and
building – including changes in zoning and density
requirements, policies promoting sustainable land
use and changes to the National Construction Code
• Liability – including changes to the insurability
of assets and commercial liability regarding
disclosure of transition and physical risks
• Technology – broad scale changes to the energy
and power network including generation, transmission
and distribution in the transition to renewable
energy sources
• Investment – lending institutions only supporting
borrowers who manage their climate risk and
create low carbon solutions
• Reputation – prioritisation of the transition
to a low-carbon economy by early adopters.
WORKSHOPPING TRANSITION RISK WITH OUR EMPLOYEES
The primary purpose of TCFD is to support efforts aligned with the global transition to a low-carbon economy, including limiting global
temperature rise to below 2°C. In April 2018, Stockland worked with AECOM to hold a Transition Risk Workshop, engaging key stakeholders
across the business to consider what achieving a 2°C future may look for Stockland and for the industry more generally. The outcomes
of this workshop formed part of Stockland’s climate scenario analysis, and also shaped our internal “Vision of the Future.”
Retaining a future focus with a long-term vision to 2050 is essential. This workshop allowed Stockland employees to really think about the
potential outcomes of acting, or not acting, in the transition to a low-carbon economy. Discussions ranged from the opportunities of being
an early adopter in terms of meeting investor and consumer demand, through to how Stockland can attract and retain talent as a climate
leader, and the challenges and benefits of the energy grid shift.
“By 2050 Australia’s energy sector will have undergone widespread and unprecedented transformation... While the scale and pace of
change has been intense, it is not without benefit. We can already see that our air is cleaner. Our places and spaces have become greener.”
– Excerpt from our Vision of the Future, developed in partnership with AECOM.
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Year ended 30 June 2019Stockland Annual Report 2019
Risk management
Approach
Consistent with the adoption of a three lines of defence
risk framework, all areas of the business, including the
Executive Committee, are responsible for managing risk
through the identification, assessment, and treatment of
risks. This includes implementation of risk management
initiatives, active management of risks, and compliance
with appropriate processes, procedures, checklists and
other controls. Teams are also responsible for monitoring
these controls to ensure they remain effective, and
for reporting on risk management achievements or
concerns appropriately. Our Group Risk Officer leads
a team of risk management professionals, responsible
for working with the organisation to deliver outcomes
within our risk management framework.
Leaders from across the business convene annually
for risk workshops to consolidate their understanding
of emerging risks, including climate risks. Business
units analyse and evaluate these risks and consolidate
findings into a risk profile for each business unit and
for the Group. Teams assess asset class portfolios
annually for risks and opportunities, including climate-
related issues.
Climate-related risks and opportunities that may
impact assets are prioritised for action based on:
• Impact on communities and the environment
in which the asset is operating
• Overall potential impact on asset performance
• Financial impact to the business in managing the
risk or opportunity.
Across our portfolio, climate-related risks and
opportunities are prioritised for action based on:
• Geographical areas of highest risk
• Design attributes of the asset which affect
climate resilience
• Climate change scenarios for the medium-
and long-term
• Overall impact on business-wide emissions reductions
• Impact on local communities and environment
(relative to where we operate)
• Overall risk to portfolio value and revenue.
Our approach to risk management is guided by
Australia/New Zealand Risk Management Standard
(AS/NZS ISO 31000:2009), the Australian Securities
Exchange Corporate Governance Principles and
Recommendations and other applicable regulatory
standards. Our Risk Management Framework includes
supporting guidelines, procedures, and tools to help
manage risk consistently across the business. These
include methods for assessing climate and community
resilience across our portfolio.
Managing our physical risks
and opportunities
We include climate and community resilience
assessments in the asset-level risk management
process. These assessments focus on the capacity of
assets and associated communities to withstand severe
weather impacts and minimise any disruption, while
providing support for the local community. Where we
identify a high exposure to extreme weather events,
such as cyclones in North Queensland, we supplement
our resilience assessments with a detailed assessment
of the roof structure and building envelope’s capacity to
withstand cyclonic winds. When considering strategies
to improve the resilience of an asset, we use an
opportunities matrix which looks beyond the traditional
risk matrices based on likelihood and consequence
ratings. For example, we use the opportunities matrix
to identify the value of discretionary climate resilience
initiatives such as shade sails in car parks and cool roof
covenants in residential communities.
In 2019 we updated our climate risk assessment
approach into one centralised tool, ensuring a
systematic, objective, and standardised process for
ongoing climate resilience assessment, management
and reporting. It allows users to understand the climate
exposure of an individual asset, as well as its adaptive
capacity and sensitivities to climate-related risks and
opportunities. It covers both the built aspects of an
asset, including operation and maintenance of buildings
and infrastructure, and considers the community
resilience of tenants, residents and / or customers
dependant upon the asset. Once assessed, asset
adaptation responses will be assigned and tracked
through Stockland’s enterprise risk management
system. This enables Stockland staff to monitor and
evaluate adaptation actions over time, ensuring
proactive design is prioritised from the earliest stages
of development and ongoing asset management.
Collectively, this results in a resource that enhances
our ability to consistently create highly liveable and
sustainable communities.
For assets under development, the management of
climate-related risks and opportunities is integrated
into our project development lifecycle, known as D-Life.
Each stage of the D-Life process requires the delivery
of specific sustainability objectives, including climate-
related risk assessments at defined approval gates.
Stockland Rockhampton, QLD
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CASE STUDY
RESILIENCE IN OUR NORTH QUEENSLAND REGION
In 2011, Stockland commissioned external research
on the key climate risks to which we are exposed, to
form our Climate Adaptation Strategy. This research
highlighted the exposure of our North Queensland
assets to extreme weather events, such as an increase
in the frequency and severity of storms and intense
tropical cyclone activity. Since then, we’ve actively
worked to increase the asset and community
resilience in the region, focusing on initiatives such as:
• Fastening roofing systems and roof-mounted
equipment to improve resilience to cyclonic wind
• Replacing corroded box guttering and installing
additional downpipes and overflows to avoid
stormwater leakage into retail tenancies
• Upgrading air conditioning and electrical equipment
to provide greater reliability and performance
during days of extreme heat
• Replacing ageing roofing materials and specifying
new roofing systems in developments to utilise ‘cool
roof’ technologies to reduce urban heat island effect
and heat loads on plant and equipment
• Improving the design of stormwater drainage
infrastructures to be more resilient to the effects
of intense flooding
• Implementing new business continuity plans and
emergency procedures for assets in regions
vulnerable to cyclones.
We’ve also worked with the Cyclone Testing Station
at James Cook University to complete two cyclonic
wind vulnerability and emergency assessments at our
Retail Town Centres at Bundaberg and Hervey Bay.
These assessments took a detailed look at the roof
structure and envelope to identify vulnerability to
facility damage from cyclonic wind events. As a result,
we haven’t suffered any damage of this type since.
The progress that we’ve made in increasing
regional resilience is having positive outcomes
for both Stockland and the community, including:
• Reduced insurance deductibles for our assets
following Cyclone Marcia in 2015, due to the
completion of cyclone vulnerability and resilience
works on our affected assets
• No roof structure and building envelope damage
suffered by our Retail Town Centres at Bundaberg
and Hervey Bay post-cyclonic wind assessments
• Reduced exposure of assets to climate-related
risks, such as Stockland Rockhampton. Previously
exposed to flooding issues due to the creek bed
location, Stockland Rockhampton remained resilient
during Cyclone Marcia in 2015 with the creek bed
not washing away as it had previously during
similar events.
As of FY19, all Retail Town Centres in Queensland have
now undergone a climate resilience assessment.
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Year ended 30 June 2019Stockland Annual Report 2019IntroductionStrategy and performanceBusiness risks and materialityA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossary
Climate resilience assessment tool
STEP 1
Property
details
STEP 2
Climate
hazards
STEP 3
Risk
assessment
STEP 4
Resilience
rating
STEP 5
Adaptation
responses
Asset details
Current climate hazards
Outstanding
Outstanding resilience
Primary response
Property elements
Future climate hazards
Good
Good resilience
Secondary response
Emergency preparedness
Community profile
Moderate
Normal
Moderate resilience
Normal resilience
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Managing our transition risks
and opportunities
Existing and emerging regulatory requirements related
to climate change are incorporated into overall risk
management and into our risk register as appropriate.
Our Group Risk team is responsible for developing
our risk management framework and adapting it to
accommodate physical and transitionary changes which
may impact our social and environmental performance.
Our Government Relations, Risk, Legal and Sustainability
teams keep the Executive Committee and Board
informed on existing or emerging climate regulation
that may impact on the business.
In response to regulatory and market risks relating to
energy supply and demand, Stockland is committed
to promoting efficient operation of our assets and
increasing our renewable energy capacity. Following
solar installations in FY19, Stockland’s total portfolio
solar capacity is 16.4MW, which could generate
approximately 21,900,000 kWh in renewable energy
annually. This commitment will also help us meet our
net zero carbon targets of net zero carbon emissions
by 2030 across our logistics centres, retirement living
villages and corporate offices, after signing the World
Green Building Council’s Net Zero Carbon Buildings
Commitment.
Managing climate-related transition risks and
opportunities also involves participating in industry-
wide collaborations such as with the Property Council
of Australia and the Green Building Council of Australia,
which focus on how the property industry can lead a
transition to a low-carbon economy. For example, we
have worked with the Green Building Council of Australia
as a strategic supporter of their Carbon Positive
Roadmap for the built environment. The roadmap
establishes the steps required for commercial,
institutional and government buildings, and fit-outs to
decarbonise and contribute to global climate targets.
Total portfolio solar capacity
16.4MW
Renewable energy generated (kWh)
12,958,224
2030 carbon emissions target
Net zero
Across Logistics, Retirement Living and
corporate offices
Metrics, targets, and results
Metrics provided are for the year ending 30 June 2019.
In 2006, in recognition of our capacity to contribute to
a low-carbon future, we began setting targets to reduce
the greenhouse gas (GHG) emissions intensity of our
portfolio. Emissions intensity is an established metric
for evaluating the energy and emissions efficiency of real
estate portfolios, and is calculated by dividing absolute
emissions (kilograms of carbon dioxide equivalent)
by floor area (square metre). Since 2006, we have
achieved a reduction of 57% across our Commercial
Property portfolio. As a result of emissions reduction
initiatives, we have saved over $106 million in avoided
electricity costs over the same timeframe.
Our carbon emissions intensity reductions to date
contribute to our target reduction of 60 per cent by
2025 (2006 baseline). The bar chart below shows the
reduction in carbon emissions intensity across our
Commercial Property (Office, Business Parks, and Retail)
portfolio since FY06. All figures are in kgCO2-e per
square metre (kgCO2-e/sqm).
Commercial Property GHG emissions
intensity (kgCO2-e/sqm)
Renewable energy generated
Solar power
generated (kWh)
Solar PV
capacity
175,374
292,124
1,940,689
2,387,168
3,274,463
12,958,224
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1,360
1,360
2,260
4,360
16,400
17,900 kW
FY14
FY15
FY16
FY17
FY18
FY19
Target FY20
The following chart provides absolute Scope 1 and Scope
2 greenhouse gas emissions totals (in kgCO2-e) since
FY14. Our Residential business constitutes the majority
of our Scope 1 emissions, the levels of which vary each
year in accordance with civil contractor construction
activity. Commercial Property constitutes the majority
of our Scope 2 emissions, which have been decreasing
over time because of our energy efficiency and
renewable energy initiatives.
Total Scope 1 and Scope 2 GHG emissions (kgCO2-e)
FY25 TARGET
FY19
FY18
FY17
FY16
FY15
FY14
FY06
43.6
46.3
52
54.9
58.6
60.7
61.5
FY19
24,230
FY18
25,101
FY17
26,884
FY16
35,036
FY15
26,368
FY14
22,102
70,545
81,745
87,860
89,881
97,763
99,927
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Scope 1
Scope 2
In recognition of the potential for renewable energy
to both mitigate climate risk and provide financial
benefit to our business, we have committed to deliver
a total solar generating capacity of 17.9MW by FY20.
KEEPING IT SIMPLE
Scope 1 emissions are direct emissions from fuels that are
combusted on site, such as gas consumption in our buildings
or natural gas, diesel and petrol from fleet, as well as
refrigerant leakage.
Scope 2 emissions result from the consumption of electricity
only (indirect emissions from fuels combusted off site).
We report our Scope 1 and Scope 2 emissions according to our
operational control boundary under the National Greenhouse
and Energy Reporting Act 2007. Tenant electricity usage is
not included except where we are the tenant. We voluntarily
report select Scope 3 emissions in accordance with the GHG
Protocol Corporate Standard. Our annual sustainability
reporting contains further information on our Scope 1, Scope
2, and Scope 3 emissions.
Our targets and metrics are incorporated into annual
asset-level business planning and reporting procedures.
All staff are required to develop key performance
indicators related to sustainability objectives, which
include climate-related risks and opportunities where
relevant. Performance against these indicators is
included in individual staff remuneration evaluations.
Our sustainability targets and performance metrics
incorporate a broad range of climate-related
risks and opportunities, and the entirety of these
targets and metrics is provided in our sustainability
Deep Dives and Data Packs, available online at
www.stockland.com.au/sustainability/downloads.
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Year ended 30 June 2019Stockland Annual Report 2019
FY19 PRIORITIES
STATUS
FY19 PROGRESS
COMMERCIAL PROPERTY
Complete climate resilience assessments in
operational assets in priority locations across
our portfolio, including our retail town centres at
Stockland Cleveland (QLD), Burleigh Heads (QLD),
and Caloundra (QLD), and Shellharbour (NSW) and
our Logistics assets at Yennora (NSW), Hendra (QLD),
and Port Adelaide (SA).
Achieved
Assessments completed in our Retail
Town Centres and Logistics Distribution
Centres with a focus on completing
assets with exposure in Queensland.
Continue to undertake climate resilience assessments
in future development projects including Whiteman
Edge (WA).
Achieved
Climate Resilience assessments have been completed
on two Retail Town Centre developments – Stockland
Baringa and Stockland Birtinya (QLD) as part of the
Green Star commitments. The Whiteman Edge project
will be assessed when it moves to the next stage
of our D-Life process.
COMMUNITIES
Undertake a formal review of resilience
assessment framework approach against
industry best practice.
RESIDENTIAL
Achieved
A formal review was undertaken as part of the
scope for the development of the Group Climate
Resilience Assessment Tool. This ensured that
the tool is aligned against industry best practice.
Complete climate resilience assessments
on new communities in priority locations that
commence master-planning during FY19.
Achieved
We undertook five assessments in the following
locations: Hope Island (QLD), Paradise Waters (QLD),
Promenade (QLD), Glendalough (WA), and Wellard
(WA) using our newly-developed Group Climate
Resilience Assessment Tool.
RETIREMENT LIVING
Complete two assessments in medium
priority locations as determined through
the national mapping review.
Implement the resilience best practice guidelines
across five low-medium priority villages that have
not had a formal climate and community resilience
assessment completed.
Achieved
In progress
We undertook three assessments using our
newly-developed Group Climate Resilience
Assessment Tool in the following operational villages:
Lourdes (NSW), Belcarra (QLD) and
Affinity (WA).
Two operational villages have been piloted under
the new Tool; Hillsview (SA) and Wamberal Gardens
(NSW). Further assets will be assessed in FY20
with the newly developed Group Climate Resilience
Assessment Tool.
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FUTURE PRIORITIES
Commercial Property and Communities
• Migrate previous resilience assessments
into new Group Assessment Tool for
all business units and update results
in accordance with new scoring
methodology
• Undertake new assessments as
required including new developments
and high priority assets as per national
mapping exercise
• Communicating and building capacity
internally on the use of the new
Group Climate Resilience Assessment
Tool including Risk and National
Operations Team
• Review our Climate Target approach
and establish targets for 2021 and
beyond.
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Hendra Industrial Estate, QLD
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Year ended 30 June 2019Stockland Annual Report 2019IntroductionStrategy and performanceBusiness risks and materialityA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossary
A better way
to deliver
shared value
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Aura, QLD
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Year ended 30 June 2019Stockland Annual Report 2019IntroductionStrategy and performanceBusiness risks and materialityClimate-related risksGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossary
Our approach
to sustainability
As a real estate owner, manager and developer we believe we
have both the opportunity and responsibility to create the right
balance of social, environmental and commercial conditions for
our community, customers and investors now and in the future.
Our sustainability strategy focuses on this opportunity to deliver shared value across a range
of stakeholders with a view towards achieving our vision: To be a great Australian property
company that makes a valuable contribution to our communities and country.
We are committed leaders in sustainability and believe this approach is fundamental to the way
we do business. Our three sustainability pillars are integrated with our business strategy to
ensure we maintain our competitive advantage and deliver shared value to all our stakeholders.
We measure and report on our performance against a range of global sustainability
assessments and standards to ensure we’re continuously setting the benchmark in terms
of leading sustainability disclosure.
FY19 SUSTAINABILITY LEADERSHIP
S e c t o r L e a d e r 2 0 1 8
GRESB
Global Real Estate
Sustainability Benchmark
– Global Sector Leader for
Listed, Diversified – Office/
Retail company, and 25th out
of 874 companies globally.
FRAMEWORKS
DJSI
Ranked most sustainable real
estate company for the 5th
time, and listed on the World
Dow Jones Sustainability
Index for 12 consecutive years.
CDP
Only Australian property
company on the Climate
A List for carbon disclosure
and performance.
Shape thriving
communities
Our focus is on creating robust
communities with strong connections and
opportunities. This supports our growth
as a business, delivering better social,
environmental and economic outcomes
for all our stakeholders.
Optimise & innovate
Innovation is at the core of everything we
do, as we continue to find more efficient
ways to do business, investing in
technologies that support our priorities,
while minimising the impact we have on
the environment.
Enrich our value chain
By creating stable and deep-rooted
relationships, we can protect our supply
chain, manage risk and ensure sustainable
and transparent practices.
Community
connection
Health &
wellbeing
Education
S H A PE THRIVING
C O MMUNITIES
STRENGT H
CAPITAL
Maximise
returns through
community
creation
Stakeholder
engagement
Governance
& risk
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Supply chain
Employees
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OPTIMIS
& INNOV
OPERATIO N A L
EXCELLENC E
DELIVERING SHARE D V A L U E
Waste &
materials
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GRI
We report our sustainability progress in
accordance with the Global Reporting
Initiative (GRI) Comprehensive Sustainability
Reporting Standards, independently
assured Ernst and Young (EY).
Sustainable Development Goals
We contribute to a number of the 17 United
Nations Sustainable Development Goals.
Refer to our Reporting Approach for
details on how we contribute, available
online at www.stockland.com.au/
sustainability/downloads.
UN Global Compact
We are a signatory to the United Nations
Global Compact (UNGC) and support the
10 principles of the Global Compact on
human rights, labour, environment and
anti-corruption.
Biodiversity
Water
management
& quality
Carbon
LBG
We report and verify our community
investment data inline with London
Benchmarking Group (LBG), as managed by
Corporate Citizenship.
TCFD
Climate-related disclosures reported
inline with The Task Force on Climate-
related Financial Disclosures (TCFD)
recommendations.
ASSURANCE
The sustainability reporting content within the Annual Report has been externally assured in accordance with the Australian Standard
for Assurance Engagements (ASAE3000): Assurance Engagements other than Audits and Reviews of Historical Financial Information and
(ASAE 3410): Assurance Engagement on Greenhouse Gas Statements by Ernst & Young (EY).
A copy of EY’s assurance statement is available on our website at www.stockland.com.au/about-stockland/sustainability.
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Year ended 30 June 2019Stockland Annual Report 2019
Shape thriving
communities
Our ability to shape thriving communities is fundamental to our success. Our research clearly
shows that in order for a community to prosper, it needs a focus on health and wellbeing,
strong community connection, and education. At Stockland we have made these elements
a key focus of our strategy.
STRATEGIC PRIORITIES
FY19 PROGRESS
HEALTH AND WELLBEING
Community activities and spaces
that encourage positive physical
and mental health and wellbeing.
Smart design that optimises
accessibility, safety and mobility.
COMMUNITY CONNECTION
76.3% score for Residential community resident Personal Wellbeing Index
(national average is 74.2-76.7%).1
82.5% retirement living resident Personal Wellbeing score
(above the national average of 73-77%).1
7,179kg lost by our Live Life Get Active participants at our Residential
communities.
Activities that foster engagement,
pride and a sense of belonging.
Design that encourages sense of
place and supports recreation and
participation.
$8.3 million invested in community initiatives across Australia in FY19.
$286,000 in grants to 286 local organisations in our communities in FY19.
Community Partnership Impact Tool developed to assess the social
and business value generated by our community partnerships and
programs.
EDUCATION
Programs that support
economic employment within
our communities.
Design that facilitates learning
and education opportunities
for all ages.
e-learning module developed on “Welcoming customers with disability”
in partnership with the Australian Network on Disability and other
industries.
‘Retail Ready’ program developed for Stockland Retail Town Centres
to support local indigenous employment.
Our goal is to create and shape
communities that thrive now
and into the future
OUR COMMUNITY EFFORTS
To achieve our priorities in shaping thriving
communities, our efforts are focused on:
Customer engagement
Maintaining high levels of communication with our
local community so we can be responsive to their
needs. See page 30 (Operational Excellence) for
more information.
Community development
Local community programs, initiatives and
infrastructure that enhance the communities
in and around Stockland assets. This includes
Stockland CARE Foundation Grants.
Community investment
Employee volunteering and giving program and
Stockland CARE Foundation – our charitable trust,
which delivers infrastructure, programs and initiatives
to Australian communities.
1 As measured using Deakin University’s methodology.
Altrove Park, NSW
OUR TARGETS
To help shape thriving communities
we have set meaningful targets
for the future.
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All Stockland Communities
(residential and retirement living)
score above the Australian
average National Wellbeing
Index to FY20.
Achieve consistent Stockland
National Liveability Index scores
of 75% across residential
communities.
Make a meaningful contribution
to community health and
wellbeing, community
connection and education in
partnership with community groups
supported directly by the Stockland
CARE Foundation.
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The value of our
community contribution
In FY19, we invested over $7.4 million through our
community development and community investment
programs, as verified by Corporate Citizenship.
The table below provides an overview of our
community contributions. A further breakdown
of these contributions by category is provided
in our Community Data Pack.
Community contribution category
Community Development
(includes national partnerships, Stockland
CARE Grants, asset-based contributions,
community infrastructure)
Community Investment
(includes workplace giving, in-kind donations,
corporate donations, partnerships,
volunteering and Stockland CARE Foundation)
FY19
$4,840,339
$1,177,423
Management costs1
$1,393,159
Total community contribution
$7,410,921
1 Includes average salaries, costs associated with the development, design
and delivery of Stockland’s sustainability report, costs of running strategic
community programs and training for community employees.
Stockland CARE Foundation
The Stockland CARE Foundation is a charitable trust set
up for the purpose of delivering infrastructure, programs
and initiatives that improve the health, wellbeing and
education of communities in and around our assets.
Established in 2015, the Foundation supports charitable
partners that align with our organisational purpose,
strategy and values. In FY19 our charitable partners,
Redkite and the Touched By Olivia Foundation received
financial and in kind support from the Stockland CARE
Foundation. Over $416,000 was raised for our partners,
helping to deliver four inclusive playspaces (taking our
total to 13) and support 93 Redkite families.
Investing in our communities
In conjunction with our partners, we develop and
deliver social infrastructure and programs to ensure
we enhance the communities in and around our assets.
In FY19, we implemented a total of 1,236 community
development initiatives, ranging from weekly walking
groups with the Heart Foundation, healthy eating and
nutrition programs with Jamie’s Ministry of Food, and
delivering STEAM education programs to primary
school students with the National Theatre for Children.
We expanded our Heart Foundation Walking Groups
across our portfolio and now have 35 active weekly
walking groups. In FY19 1,237 people participated
in walking groups in shopping centres and 244
in retirement villages. Together, these walkers
completed a total of 55,184 walks in FY19.
We also provide infrastructure to support community
connection, such as community centres, hubs and
multi-use and informal spaces. We seek to engage
with residents, community groups and partners
on all projects, so we can have the greatest positive
impact on communities where people live.
Baringa Primary School, Aura QLD
Stockland CARE Grants
More detail can be found in our Community Deep Dive, available
online at www.stockland.com.au/sustainability/downloads.
CASE STUDY
VALUING OUR COMMUNITY
PARTNERSHIPS
Metrics are essential to improving
our operational performance,
but how do you measure the social
value of the initiatives?
This year, Stockland engaged KPMG to
develop a Community Partnership
Impact Tool to assess the social and
business value generated by our
community partnerships and programs.
This builds on the Social Return on
Investment work we undertook in 2017
on our Retirement Living communities.
Using this tool, we were able to measure
the social and business impact of our
current national community programs,
including Live Life Get Active, The Heart
Foundation Walking Groups, Jamie
Oliver’s Ministry of Food, Bowls Australia
and ABCN.
With the Community Partnership Impact
Tool we can now identify the financial
value these programs deliver to the
community and Stockland, by assigning
an indicative dollar value on their impact.
For example, Stockland’s partnership
with Live Life Get Active, now in its
fourth year, creates significant social
value by promoting health and wellbeing
and strengthening community
connection, with over 7,000 participants
in FY18. Using our social impact tool,
we estimate that this has helped
generate $2.4 million dollars in health
and wellbeing benefits, and provided
$2.7 million in social value to the
participants.
Quantifying our social impact helps paint
the picture of our social commitment
to our customers in a tangible way.
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Optimise and innovate
As one of Australia’s largest real estate developers, we’re committed to reducing our impact on the
environment whilst creating resilient assets and communities that cater to our customers’ needs,
now and in the future. We respond to resource constraints and the need to mitigate climate impacts
through smart design, investment in technology and operational efficiencies in our assets and
communities, delivering savings for our business and customers, whilst future-proofing our portfolio.
STRATEGIC PRIORITIES
FY19 PROGRESS
CLIMATE RESILIENCE, ZERO CARBON & ENERGY EFFICIENCY
Reduce emissions.
Invest in renewable energy.
Improve portfolio climate
resilience.
14.7% reduction in carbon intensity of Retail Town Centres from FY18.
1%1 increase in carbon intensity of Workplace and Business Parks from FY18.
12.1MW of solar capacity installed in FY19, bringing our total portfolio
solar capacity to 16.4 MW. We’ve committed to additional solar roll-outs in
FY20, to bring our total solar investment to over $33 million.
BIODIVERSITY
Minimise impact on ecological
communities and protected or
significant species.
Design communities to promote
nature reserves and parklands.
152 hectares of land rehabilitated through rehabilitation activities
at our project sites.
100,000 trees planted at Newport to restore an environmental corridor
and protect the adjacent Ramsar wetlands.
WATER MANAGEMENT & QUALITY
Improve water efficiency
and sustainable sourcing.
Deliver projects that minimise
water use and positively
contribute to local water
catchments.
1%1 increase in water intensity of Retail Town Centres from FY18.
7% reduction in water intensity of Workplace and Business Parks
from FY18.
8% improvement on water consumption compliance for our Residential
portfolio, exceeding our target of exceeding minimum water compliance
standards by five per cent by FY20.
WASTE & MATERIALS MANAGEMENT
Reduce, reuse and recycle waste to
minimise our contribution to landfill.
94% waste diverted for Commercial Property developments seeking
Green Star Design & As Built certifications.
Specify the use of ecologically-
preferable materials.
98% waste diverted from landfill across our Residential developments.
1 The increase in intensity can be attributed to a number of factors including portfolio changes such as divestments, vacancy, billing and metering issues.
See our Sustainability Deep Dive Series for more information, available online at www.stockland.com.au/sustainability/downloads.
We provide business solutions
that better service our
customers while reducing our
impact on the environment.
Focus on renewable energy
We continued our focus on renewable energy in
response to transition risk, installing the largest solar
photovoltaic (PV) system installed on a single rooftop
in Australia, at Green Hills Retail Town Centre.
This reduced our reliance on grid power by over
45 per cent, and reduced grid demand by 30 per cent.
Our investment in PV infrastructure reduces our carbon
emissions and will deliver returns of over 10 per cent
through reduced power costs in the next 10 years.
Stockland Green Hills solar, NSW
More detail can be found in our Sustainability
Deep Dive series, available online at
www.stockland.com.au/sustainability/downloads.
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OUR TARGETS
We intend to continue to optimise
and innovate by challenging
ourselves to do better each year.
To that end we have set some
ambitious new targets for the future.
Climate and energy
60% reduction in carbon emissions
by FY25 in Commercial Property.
All new residential and retirement
living communities to be designed as
10% more energy efficient than
regulatory standards.
Biodiversity
New masterplanned community
developments to have an aggregated
net positive contribution to
biodiversity value by FY20.
Water management and quality
Retail town centres and retirement
living villages to reduce water
intensity by 5%, and all new
residential communities designed
to exceed minimum water efficiency
standards by 5%.
Waste and materials
Divert at least:
• 85% of Retail Town Centre
development waste from landfill.
• 60% of Residential development
waste from landfill.
• 45% of Commercial Property
operational waste from landfill.
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Resilient communities and assets
For over a decade, Stockland has been committed to assessing and managing the physical
and transition risks related to climate change for our assets, communities, and customers.
OUR COMPREHENSIVE APPROACH INVOLVES
1
2
3
Mapping our portfolio
Identifying assets where
climate and community
resilience is a priority
Conducting resilience
assessments with action
plans to improve resilience
where necessary
Following a comprehensive review, in FY19 we updated
our climate risk assessment approach to streamline
our climate and community resilience work into one
centralised tool. This strengthens our approach to
resilience across the Group by embedding resilience
within our enterprise risk management system, and
bolsters our reporting requirements to be consistent
with Task Force on Climate-related Financial
Disclosures (TCFD).
During 2019, climate resilience assessments were
conducted at our Retail Town Centres at Cleveland,
Caloundra, Burleigh Heads and Shellharbour and
Logistics assets at Hendra, Yennora, and Port Adelaide.
The role of ratings
and certifications
We are committed to the continuous optimisation of our
assets and innovation across our portfolio. In doing so,
we obtain ratings and certifications that independently
confirm our sustainability credentials and verify the
sustainability performance of our projects and assets.
Assets that are highly rated are more resource-efficient,
delivering long-term cost savings and a higher return on
investment. They also promote features that enhance
health, wellbeing and positive social impact on an
individual and community level.
More detail can be found in our Climate Resilience
Deep Dive, available online at
www.stockland.com.au/sustainability/downloads
NABERS & GREEN STAR CERTIFICATIONS
ACROSS OUR PORTFOLIO
Rating
4.3 stars
3.4 stars
4.5 stars
3.6 stars
Certification
NABERS
Energy Retail Town Centre portfolio average
NABERS
Water Retail Town Centre portfolio average
NABERS
Energy Workplace and Business Parks
portfolio average
NABERS
Water Workplace and Business Parks
portfolio average
45 centres
Green Star Performance rated
Retail Town Centres, Workplaces
and Business Parks
27 assets
Green Star Design & As Built, Communities
and Retirement Living rated assets
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CASE STUDY
LEADING THE WAY
IN CARBON AND ENERGY
USAGE AND REDUCTION
At Stockland, we are recognised as a
global leader in managing climate
change risk and reducing our carbon
emissions. We are committed to both
transparency and action, and execute
on both to deliver value to our business,
customers, and shareholders.
• Since 2006, we have reduced our
emissions intensity by over 57 per
cent, and saved over $106 million
through energy efficiency initiatives
• We were the first Australian listed
property group, and one of the first
15 organisations globally, to sign the
World Green Building Council’s
(WorldGBC) Net Zero Carbon Buildings
Commitment and commit to the target
of zero net carbon emissions across
our logistics centres, retirement living
villages and corporate offices by 2030
• We were an early adopter of the TCFD
recommendations, demonstrating
active management of climate risks
and our ability to capitalise on climate
opportunities
• In FY19 we installed a further 12.1MW
of solar capacity, bringing our total
portfolio solar capacity to 16.4 MW.
We’ve committed to additional solar
roll-outs in FY20, to bring our total
solar investment to over $33 million
• We are partnering with the Victorian
Government (Sustainability Victoria)
on a two-year program to design, build
and market the first zero net carbon
homes in Australia
• 82 electric vehicle charging stations
have been installed in 24 Retail Town
Centres across the country.
More detail can be found in our Sustainability
Deep Dive series, available online at
www.stockland.com.au/sustainability/downloads.
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Stockland Green Hills, NSW
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Enrich our value chain
Enriching our value chain is about how we manage risks and opportunities in collaboration with
our employees, supply chain, and other key stakeholders. This extends from our governance and
risk management at a corporate level, to every interaction we have with both internal and external
stakeholder groups.
We aim to enhance the value
we create by forming positive
relationships that extend our
capacity to deliver leading
sustainability outcomes.
STRATEGIC PRIORITIES
FY19 PROGRESS
SUPPLY CHAIN MANAGEMENT
Identify and address key
environmental, social and
governance risks in our
supply chain.
Collaborate with our partners to
raise awareness of sustainability
issues and encourage sustainable
procurement.
HUMAN RIGHTS
Sustainability Schedule included in our construction contracts,
targeting environmental impact, material use, community and health
and wellbeing.
$3.6 million procured from Indigenous suppliers since 2014.
Supply Chain Sustainability School contractor learning modules
launched, focusing on Modern Slavery, Human Rights and Sustainable
Procurement.
Identify, assess and implement
responses to human rights related
issues across our business.
Industry supply chain tool developed in partnership with PCA
and members to strengthen property industry approach to human
rights within the supply chain.
Train employees on human rights
considerations and obligations.
194% increase in Australian Workplace Equality Index Score
due to focus on LGBTQI+ diversity practices.
Progress human rights initiatives
across our entire value chain.
Four new inclusive playspaces built in collaboration with
Touched by Olivia.
EMPLOYEE ENGAGEMENT, DEVELOPMENT, DIVERSITY & INCLUSION
Attract and retain high-performing
employees.
Develop authentic, accessible and
performance-focused leaders.
Maintain a diverse and inclusive
workforce.
81% employee engagement score, four points above the Australian
National Norm.1
500 employees took part in our ‘Ways to Wellbeing’ stress and
resilience course to strengthen wellbeing.
83.2% of employees work flexibly.
45.8% of management roles filled by women.
STAKEHOLDER ENGAGEMENT
Develop and maintain strong
relationships through regular
and genuine engagement with
stakeholders.
Stakeholder engagement plans in place or in development
for all active projects.
Engagement framework reviewed to incorporate greater focus on
engagement with Aboriginal and Torres Strait Islander communities.
1 Survey undertaken by Willis Towers Watson.
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Stakeholder engagement
Consultation and engagement with stakeholders is a
core part of our business and plays a key role in shaping
and influencing the design, planning and operation of
our projects. It is vital in terms of maintaining our social
licence in the communities we operate in – something
in which we take a lot of pride.
When developing a masterplan community, engaging
with government and community stakeholders is an
important and often essential requirement of achieving
the planning approval that permits us to develop the
land. More importantly, the feedback we get from this
engagement ensures that the places we create are
designed by the people who will use them. For example,
engaging with local government and our residents at
Elara, in Western Sydney in FY19 has been vital in
finalising the design of the communities riparian corridor
– which when complete will provide a 24 hectare
parkland and become Elara’s central public open space.
OUR TARGETS
Our value chain is important to the
integrity of our business. As such
we are committed to continuous
improvement initiatives to achieve
even better practices and have set
ambitious future targets.
Women in management
Increase women in management
to 50% by 2020.
Employee engagement
Maintain employee engagement
score above 80%.
Stakeholder engagement
Maintain stakeholder engagement
plans for all active development
projects, and deliver stakeholder
engagement workshops to our
employees.
The Pavillion Aspire Elara, NSW
Supply chain
Launch our Sustainability in our
Development Supply Chain guideline.
More detail can be found in our Stakeholder Engagement
Deep Dive, available online at
www.stockland.com.au/sustainability/downloads.
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Supply chain and human
rights management
Enriching our value chain requires a focus on effective
management of our supply chain. Doing so enhances our
long-term business performance, enabling us to identify
and address key environmental, social and governance
risks and opportunities. Every year, we partner with
hundreds of suppliers including construction contractors,
professional consultants, and service providers.
We believe that by building strong, transparent
relationships with our suppliers, we can encourage them
to undertake sustainable procurement practices and
promote effective human rights management across our
entire supply chain. We focus on industry collaboration
and supplier education.
Key focus areas in FY19 included:
• Working with the Property Council of Australia’s
Sustainability Roundtable, helping procure a Modern
Slavery Supplier Engagement Tool to increase supply
chain transparency. The tool delivers a human rights
assurance process to assess suppliers consistently
across 15 member property groups
• Completing our first Innovate Reconciliation Action
Plan (RAP), which includes 58 actions across 16 focus
areas that value and celebrate Australia’s First
Peoples. This includes partnering with WorkStars,
an indigenous recruitment company in South East
to Central Queensland, targeting career opportunities
at our assets
• Working with Supply Chain Sustainability School
to develop education modules for construction
contractors, delivering easily-accessible training
on Stockland’s sustainability principles and
requirements, human rights and modern slavery,
and sustainable procurement.
More detail can be found in our Supply Chain Deep Dive
and Human Rights Deep Dive, available online at
www.stockland.com.au/sustainability/downloads.
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CASE STUDY
RECONCILIATION IN ACTION
In FY19, Stockland took the initiative
to develop a ‘Project RAP’ for two Retail
Town Centre developments on the
Sunshine Coast, Baringa and Birtinya,
working with the local Aboriginal
community (Kabi Kabi peoples) to develop
initiatives that would benefit their community
at both a project and community level.
Utilising existing relationships established
with local Kabi Kabi stakeholders and
Native Title applicants, we engaged an
Aboriginal owned consultancy, Balarinji
to help facilitate authentic engagement
around culture, art, employment, skills,
storytelling and identity. We conducted
workshops and meetings to consult and
develop a range of initiatives that aligned
to Kabi Kabi interests and needs.
Key initiatives undertaken as part
of the Project RAP included:
• Engagement and ideas generation
workshops
• Retail Ready – a five-week Retail Skills
Program for indigenous participants
• Retailer Welcome Pack Gift including
design by local Kabi Kabi artist
• Cultural Awareness Training held with
Stockland project team
• Kabi Kabi Acknowledgement/Welcome
Ceremony held at centre opening event
• RAP Plaque installed in centre public
mall space.
With the development of our next Innovate
RAP for FY20-22 underway, we look to
continue our reconciliation focus on
initiatives regarding health and wellbeing,
education, and community connection to
help shape thriving communities that
respect, value and celebrate Australia’s
First Peoples.
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Opening of Stockland Birtinya, QLD
7 December 2018
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Governance
and
remuneration
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Warwick Farm, NSW
66
Year ended 30 June 2019Stockland Annual Report 2019IntroductionStrategy and performanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossary
Our Board
and governance
The Board is accountable to securityholders and responsible
for demonstrating leadership and oversight so that the operations
of Stockland are effectively managed in a manner that is properly
focused on its economic, social and community objectives.
The Board has overall responsibility for the good governance
of Stockland.
Our Directors
TOM POCKETT
Chairman
Tom Pockett was appointed to the Board on 1 September 2014 and became Non-Executive
Chairman on 26 October 2016. Mr Pockett has extensive experience in both the property and
financial sectors having held a number of senior executive positions including Chief Financial
Officer and Executive Director of Woolworths Limited, Deputy Chief Financial Officer at the
Commonwealth Bank of Australia and several senior finance roles at Lend Lease.
He is the Chairman of Autosports Group Limited and a Director of Insurance Australia
Group Limited.
In addition to his role as the Chair of the Stockland Board, Mr Pockett is Chair of the
Sustainability Committee and a member of the Human Resources Committee.
Mr Pockett is also Chairman of the Stockland CARE Foundation Board.
Qualifications
BComm, FCA
Directorships of other listed entities in last three years
Autosports Group Limited (29 August 2016 to present), Insurance Australia Group
Limited (1 January 2015 to present)
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MARK STEINERT
Managing Director and Chief Executive Officer
Mark Steinert was appointed Managing Director and Chief Executive Officer of Stockland
on 29 January 2013. Mr Steinert was also appointed to the Board on 29 January 2013.
Mr Steinert has over 27 years’ experience in property and financial services including
eight years in direct property primarily with Jones Lang LaSalle and 10 years in listed
real estate with UBS where he held numerous senior roles including Head of Australasian
Equities, Global Head of Research (Equities and Fixed Income) and Global Head of
Product Development and Management for Global Asset Management.
Mr Steinert is a past President and current Director of the Property Council of Australia
and a member of the Property Male Champions of Change.
Mr Steinert is a member of the Sustainability Committee and a Director of Stockland
Capital Partners Limited, the Responsible Entity for Stockland’s unlisted property funds.
Mr Steinert is also a Director of the Stockland CARE Foundation Board.
Qualifications
BAppSc, G Dip App Fin & Inv (Sec Inst), F Fin, AAPI
Directorships of other listed entities in last three years
None
MELINDA CONRAD
Non-Executive Director
Melinda Conrad was appointed to the Board on 18 May 2018. Ms Conrad has more than
25 years of expertise in consumer-related industries, including as a retail entrepreneur
and CEO, and roles at Colgate-Palmolive and Harvard Business School.
Ms Conrad is currently a Director of ASX Limited and Caltex Australia Limited. She is
also a Non-Executive Director of The George Institute for Global Health, The Centre
for Independent Studies, and is a member of the ASIC Director Advisory Panel and the
AICD Corporate Governance Committee.
Ms Conrad is Chair of the Human Resources Committee and a member of the
Sustainability Committee.
Qualifications
BA, MBA, FAICD
Directorships of other listed entities in last three years
The Reject Shop Limited (19 August 2011 to 30 June 2017), OFX Group Limited
(19 September 2013 to 28 September 2018), ASX Limited (1 March 2017 to present),
Caltex Australia Limited (1 March 2017 to present)
BARRY NEIL
Non-Executive Director
Barry Neil was appointed to the Board on 23 October 2007. Mr Neil has over 40 years’
experience in all aspects of property development, both in Australia and overseas.
Mr Neil’s executive career included senior property and investment roles at both Mirvac
and Woolworths Limited and has included the acquisition, development and operation
of landmark developments in multiple asset classes.
Mr Neil is Chairman of Keneco Pty Limited and Bitumen Importers Australia Pty Limited
and a Director of Terrace Tower Group Pty Ltd.
Mr Neil is Chair of Stockland Capital Partners Limited Board, the Responsible Entity for
Stockland’s unlisted funds and a member of the Audit Committee and Sustainability Committee.
Qualifications
BE (Civil)
Directorships of other listed entities in last three years
None
68
69
Year ended 30 June 2019Stockland Annual Report 2019
STEPHEN NEWTON
Non-Executive Director
Stephen Newton was appointed to the Board on 20 June 2016. Mr Newton has extensive
experience across real estate investment, development and management and
infrastructure investment and management. Mr Newton is a Principal of Arcadia Funds
Management Limited, a real estate investment management and capital advisory
business and prior to this, he was the Chief Executive Officer – Asia/Pacific for the real
estate investment management arm of Lend Lease.
Mr Newton is currently a Director of BAI Communications Group, Viva Energy REIT Group
and Sydney Catholic Schools Limited, and Chairman of the Finance Council for the
Catholic Archdiocese of Sydney.
Mr Newton is Chair of the Audit Committee and a member of the Risk Committee and
Sustainability Committee. He is a Director of Stockland Capital Partners Limited, the
Responsible Entity for Stockland’s unlisted funds and Chair of the Stockland Capital
Partners Limited Audit and Risk Committee.
Qualifications
BA (Ec and Acc), M.Com, MICAA, MAICD
Directorships of other listed entities in last three years
Gateway Lifestyle Group (28 April 2015 to 10 October 2018), Viva Energy REIT Group
(10 July 2016 to present)
CHRISTINE O’REILLY
Non-Executive Director
Christine O’Reilly was appointed to the Board on 23 August 2018. Ms O’Reilly’s executive
career included 30 years’ experience in both financial and operational entities both
domestically and offshore. Following an early career in chartered accounting and
investment banking, she has held a number of senior executive roles in diverse industries
including CEO and Director of the GasNet Australia Group and Co-Head of Unlisted
Infrastructure Investments at Colonial First State Global Asset Management.
Ms O’Reilly is currently a Director of CSL Limited, Transurban Limited, Medibank Private
Limited and Baker Heart and Diabetes Institute.
Ms O’Reilly is the Chair of the Risk Committee and a member of the Audit Committee and
Sustainability Committee.
Qualifications
Bbus
Directorships of other listed entities in last three years
CSL Limited (16 February 2011 to present), Transurban Limited (12 April 2012 to present),
Medibank Private Limited (31 March 2014 to present)
CAROL SCHWARTZ AO
Non-Executive Director
Carol Schwartz was appointed to the Board on 1 July 2010. Ms Schwartz is a dynamic
business leader with a career spanning property, the arts, finance, government and
health sectors. A prominent spokesperson on the issues of governance, social enterprise
and women’s leadership, Ms Schwartz is a Director of the Reserve Bank of Australia and
is on the Board of a number of organisations including Qualitas Property Partners. Ms
Schwartz is Chair of Women’s Leadership Institute Australia and in 2016 was inducted
into the Australian Property Hall of Fame.
Ms Schwartz is a member of the Risk Committee, Human Resources Committee and
Sustainability Committee.
Qualifications
BA, LLB, MBA, FAICD
Directorships of other listed entities in last three years
Temple and Webster Group (31 July 2015 to 25 October 2016)
ANDREW STEVENS
Non-Executive Director
Andrew Stevens was appointed to the Board on 1 July 2017. Mr Stevens’ executive
career at Price Waterhouse, PricewaterhouseCoopers and IBM, has provided him with
experience in change management and in business and ICT programme design and
risk evaluation, governance and delivery, and in business transformation and regional/
global expansion.
Mr Stevens is Chairman of the Board of Innovation and Science Australia and the
Chairman of the Data Standards Body for the Consumer Data Right implementation
in Australia. Mr Stevens also serves as a Director of Thorn Group Limited, Western
Sydney Football Club, and the Committee for Economic Development of Australia.
Mr Stevens is a member of the Advisory Executive of the University of NSW School
of Business and the Male Champions of Change. Mr Stevens is a member of the Audit
Committee and the Sustainability Committee.
Qualifications
BComm, MComm, FCA
Directorships of other listed entities in last three years
Thorn Group Limited (1 June 2015 to present), MYOB Group Limited (30 March 2015
to 8 May 2019)
CAROLYN HEWSON AO
Non-Executive Director (Former Director)
Carolyn Hewson was appointed to the Board on 1 March 2009 and retired from the
Board on 24 October 2018. Ms Hewson has over 30 years’ experience in the financial
sector, with extensive financial markets, risk management and investment management
expertise. Ms Hewson is a Director of BHP Group Limited and Infrastructure SA.
She is also an ambassador of Impact 100 South Australia.
During her time with Stockland, Ms Hewson was Chair of the Human Resources
Committee, Chair of the Risk Committee and member of the Sustainability Committee.
Qualifications
BEc (Hons), MA (Ec), FAICD
Directorships of other listed entities in last three years
BHP Group Limited (31 March 2010 to present)
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71
Year ended 30 June 2019Stockland Annual Report 2019
Our Executive Committee
Key management personnel for the purposes
of the Remuneration Report
MARK STEINERT
Managing Director and Chief Executive Officer
Refer to biography on page 69.
KATHERINE GRACE
General Counsel and Company Secretary
Katherine Grace was appointed General Counsel and Company Secretary on 21 August
2014 and has responsibility for Stockland’s legal and risk functions. As the Company
Secretary Ms Grace is directly accountable to the Board, through the Chairman for all
matters relating to governance and the proper functioning of the Board. Ms Grace has
practised as a solicitor for over 15 years with extensive experience in corporate, property,
debt and capital markets transactions working with a wide range of stakeholders
including listed board directors, equity investors, regulators, media and financiers.
Prior to joining Stockland, Ms Grace held roles as General Counsel and Company
Secretary for Westfield Retail Trust and Valad Property Group.
Qualifications
BA (Hons), LLB (Hons), MPP, MAICD
LOUISE MASON
Group Executive & CEO Commercial Property
Louise Mason was appointed Group Executive & CEO Commercial Property on 18 May 2018.
Ms Mason has 28 years’ experience in real estate and is responsible for all aspects of
Stockland’s extensive Commercial Property portfolio of retail town centres, workplace
and logistics assets with a combined value of $10.188 billion as at 30 June 2019.
Prior to joining Stockland, Ms Mason was Chief Operating Officer of AMP Capital Real
Estate. She has also held several senior executive operational and development roles at
AMP in retail, office, and industrial, as well as retail management positions at Lendlease.
Ms Mason is the immediate past President of the NSW Division of the Property Council
of Australia.
Qualifications
BA, LLB (Hons), GAICD
TIERNAN O’ROURKE
Chief Financial Officer
Tiernan O’Rourke was appointed Chief Financial Officer on 8 October 2013. Mr O’Rourke
has more than 25 years’ experience in senior financial, commercial and planning roles
across a range of industry sectors and throughout the Asia Pacific Region, predominantly
focused on Australia and New Zealand.
He was previously Chief Executive of Transfield Services Middle East and Asia Region.
Before that he was the Chief Financial Officer at Transfield Services Limited, with
responsibility for financial strategy and policy, financial and management reporting,
treasury and taxation. Prior to his role at Transfield, Mr O’Rourke was Chief Financial
Officer of Australand Holdings Limited where he played a key role partnering with the
business to transform the strategy and structure of the group. He has also held senior
finance positions at AGL, Westfield, CSR and Brambles. At Westfield Holdings Limited he
held the position of Group Controller – Trusts, responsible for public reporting of
Westfield’s trust vehicles including Westfield Americas Trust and Westfield Trust.
Qualifications
BComm (Hons), MBA, FCA, GAICD
ANDREW WHITSON
Group Executive & CEO Communities
Andrew Whitson was appointed Group Executive & CEO Communities on 1 July 2013.
Mr Whitson oversees Stockland’s 56 Residential Communities with a portfolio of 76,000
lots and an approximate end value of $21.4 billion, and our 62 Retirement Living villages
with a development pipeline of over 3,500 units as at 30 June 2019.
Mr Whitson joined Stockland in early 2008 as Regional Manager for Greater Brisbane
and Far North Queensland. He was appointed General Manager Residential, Victoria
in July 2009 and in November 2012, his role expanded to include New South Wales.
He was Group Executive and CEO of the Residential business in 2013 before his role
was expanded to lead both our Residential and Retirement Living businesses as the
combined Communities function in August 2018.
Andrew is the Chair of the Residential Development Council of Australia and a Director
of the Property Council of Australia and the Green Building Council of Australia.
Qualifications
BE (Civil)
Senior Executives
ROBYN ELLIOTT
Chief Innovation, Marketing and Technology Officer
Robyn Elliott was appointed Chief Innovation, Marketing and Technology Officer on
26 March 2018. Ms Elliott is responsible for innovation, marketing and technology across
the organisation. She has extensive experience managing IT and innovation at large
corporates in Australia, most recently in the role of Chief Information Officer at Fairfax
where she led the customer-centred design and agile development of digital products.
Prior to that, she spent 12 years as Chief Information Officer at Foxtel.
Ms Elliott has completed the Strategy and Innovation Executive Program at MIT and has
an MBA in Technology Management. She has been involved in a number of innovation
initiatives including the Australian Financial Review mobile app, Domain, goodfood,
Traveller and Fairfax Events.
Qualifications
BComm, MBA, Exec. Ed, GAICD
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Year ended 30 June 2019Stockland Annual Report 2019
KAREN LONERGAN
Group Executive, People and Culture
Karen Lonergan joined Stockland as Group Executive, People and Culture on 11 March 2019.
Ms Lonergan has over 25 years’ experience working in senior roles in HR strategy
development, organisational development and transformation and change leadership in
the Transportation, FMCG, and Retail sectors across Australia, Asia, the USA and Europe.
She was previously the Chief People Officer at David Jones and Country Road Group,
after being a People Director at Woolworths Group Limited. Prior to her role at
Woolworths, Ms Lonergan was the Executive Manager, Human Resources for Qantas
International, responsible for the organisation’s global Human Resources function.
Qualifications
Bbus, MM, MAICD, FAHRI
DARREN REHN
Group Executive & Chief Investment Officer
Darren Rehn was appointed Group Executive & Chief Investment Officer on 18 March 2013.
Mr Rehn has over 30 years’ experience in the property sector. He commenced at JLL
undertaking real estate research and valuations, before moving to SGIC working in
property funds management and equity investments.
Prior to Stockland, Mr Rehn spent 16 years in investment banking, leading the premier
Australasian Real Estate teams at UBS and Merrill Lynch where he was involved in many
of the larger Australian real estate initial public offerings, mergers, acquisitions and
capital raisings. He has extensive experience advising boards and senior management
on business development, acquisitions and divestments, and major transactions.
Qualifications
B.App.Sc. (Val)
Former Executives
STEPHEN BULL
Group Executive & CEO Retirement Living
Stephen Bull was Stockland’s Group Executive & CEO Retirement Living from 15 July 2013
to 7 September 2018. Mr Bull departed Stockland in September 2018.
MICHAEL ROSMARIN
Chief Operating Officer
Michael Rosmarin was Stockland’s Chief Operating Officer from 1 July 2013 to
7 September 2018. Mr Rosmarin departed Stockland in September 2018.
SIMON SHAKESHEFF
Group Executive, Strategy, Research and Stakeholder Relations
Simon Shakesheff was Stockland’s Group Executive, Strategy, Research and Stakeholder
Relations from 22 July 2013 to 16 November 2018. Mr Shakesheff departed Stockland
in November 2018.
The following
executives departed
Stockland during
the period:
74
BOARD FOCUS AREAS IN FY19
Stockland’s Board has been actively
engaged in FY19, with Directors
reviewing and approving several
significant transactions to further the
Group’s strategic priorities across each
asset class. The Board has actively
responded to the evolving governance
regime including through the assessment
of findings from the Royal Commission
into Misconduct in the Banking,
Superannuation and Financial Services
Industries, the Fourth Edition of the
ASX Corporate Governance Principles
and Recommendations, and the recent
APRA recommendations on
remuneration.
During FY19 the Board Charter was
reviewed and updated together
with key policies relating to privacy
and whistleblowing. Committee
memberships were also reviewed
following Board renewal, with new
Chairs appointed to both the Risk
Committee and Human Resources
Committee. The Human Resources
Committee and the Board also actively
participated in the evaluation of senior
executive performance in FY19.
As part of the Board’s ongoing
commitment to engage with
stakeholders including employees,
the Board attended meetings, and
toured a range of assets, in New
South Wales and Victoria, met with
securityholders at the October 2018
AGM and held a stakeholder event
in Victoria for Stockland partners and
suppliers. The Chairman also attended
a series of governance meetings with
major investors. Interstate meetings in
Perth and Queensland are scheduled for
the Board and its Committees in FY20.
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Our approach to corporate
governance and risk management
The Board places a high importance on its corporate governance responsibilities and in FY19
was in compliance with all of the recommendations in the ASX Corporate Governance Principles
and Recommendations.
The Board also recognises the importance of building and fostering a risk aware culture, so that
every individual takes responsibility for risks and controls in their area of authority. Stockland also
has a Code of Conduct that applies to all employees and provides clear guidance on how we
expect our people to act, engage and respond to each other and our stakeholders.
Three Lines of Defence
The Board provides overall oversight of Stockland’s risk management framework which is underpinned
by the Three Lines of Defence. Further information on Stockland’s risk management framework
is available at www.stockland.com.au/about-stockland/corporate-governance.
External Audit
Board & Committees
Executive Committee
FIRST LINE OF DEFENCE
Leadership Team
SECOND LINE OF DEFENCE
THIRD LINE OF DEFENCE
Risk, Compliance & Legal Functions
Independent Audit function
FIRST LINE OF DEFENCE
The business and all employees
FIRST LINE OF DEFENCE
SECOND LINE OF DEFENCE
THIRD LINE OF DEFENCE
EXTERNAL AUDIT
The business
and all employees
The business owns its risks
and must ensure there
are controls in place to
appropriately manage the
risk within our risk appetite
Risk, Compliance
and Legal function
Develops risk management
policies, systems, processes
to promote consistent
approach to risk management
and provides independent
review and challenge to
ensure first line controls are
appropriate
Independent Audit function
This function performed by
EY, provides independent
assurance on the effectiveness
and efficiency of our controls
and provides periodic
reporting
Provides regular independent
assessment on the
effectiveness of financial
controls and processes
in relation to the Group’s
financial statements,
governance disclosures and
environmental and social
performance reporting.
Corporate Governance Framework
The roles, responsibilities and accountabilities of the Board, Board Committees and Executive Committee are set out
in the Board and Board Committee charters, which have been summarised below.
Board
Delegation
Accountability
Independence Assurance
• External Audit
• Internal Audit
• Legal or other professional advice
Board Committees
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Human
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Risk
Provide assurance on
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financial statements
Provide assurance on remuneration components
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Audit
Sustainability
The Board
As set out in the Board Charter, the Board is responsible for:
• Overseeing the development and implementation of Stockland’s corporate strategy, operational performance
objectives and management policies with a view to creating sustainable long term value for securityholders
• Overseeing the development and implementation of Stockland’s overall framework of governance, risk management,
internal control and compliance which underpins the integrity of management information systems, financial reporting
and fosters high ethical standards throughout Stockland
• Appointing the Directors (subject to Stockland’s constitution), appointing the Managing Director, approving the
appointment of the Company Secretary and Executive Committee members reporting to the Managing Director
and determining the level of authority delegated to the Managing Director
• Setting Executive remuneration policy, monitoring Executive Committee members’ performance and approving
the performance objectives and remuneration of the Managing Director and his or her direct reports and reviewing
Executive and Board succession planning and Board performance
• Approving and monitoring the annual budget, business plans, financial statements, financial policies and financial
reporting and major capital expenditure, acquisitions and divestitures
• Determining and adopting dividend and distribution policies
• Overseeing compliance with applicable laws and regulations
• Appointing and monitoring the independence of Stockland’s external auditors.
A copy of the Board Charter can be found on our website
www.stockland.com.au/about-stockland/corporate-governance.
The Board has delegated certain responsibilities to standing Committees which operate in accordance
with the Committee Charters approved by the Board.
Day to day management of the business is delegated to the Executive Committee through the Managing Director
and Chief Financial Officer subject to approved authority limits and Board reserved matters.
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77
Year ended 30 June 2019Stockland Annual Report 2019
Board committees
Four permanent Board Committees covering Audit, Risk, Human Resources and Sustainability have been established
to assist in the execution of the Board’s responsibilities.
The Board’s policy is that a majority of the members of each Board Committee are independent Directors.
The Audit Committee, Human Resources Committee and Risk Committee comprise only independent Directors and
the Sustainability Committee is chaired by an independent Director and has a majority of independent Directors.
The Board reviews the composition of each Board Committee periodically, balancing the benefits of rotation with those
of maintaining continuity of experience and knowledge, and to ensure Board Committee members have skills appropriate
to their roles. Committee Chairs provide reports to the Board on key matters and Committee memberships provide for
overlap of membership between the Audit Committee and Risk Committee as well as between the Risk Committee and
Human Resources Committee.
Current members of the Board Committees
Audit Committee
Stephen Newton
Barry Neil
Christine O’Reilly
Andrew Stevens
Human Resources Committee
Melinda Conrad
Tom Pockett
Carol Schwartz
Risk Committee
Christine O’Reilly
Stephen Newton
Carol Schwartz
Sustainability Committee
Tom Pockett
All Directors
The Audit Committee is responsible for the oversight of the integrity of Stockland’s
consolidated financial statements and disclosures, and the maintenance of a sound financial
control environment. The purpose of the Audit Committee is to assist the Board to discharge
its responsibilities for:
• The integrity of Stockland’s financial reports and external audit
• The appropriateness of Stockland’s accounting policies and processes
• The effectiveness of Stockland’s financial reporting controls and procedures
• The effectiveness of Stockland’s internal control environment
• Compliance with Stockland’s Australian Financial Services Licences and Compliance Plans
• Compliance with relevant laws and regulations including any prudential supervision procedures.
The Human Resources Committee incorporates the functions of two board committees
recommended by the ASX Guidelines: a Nominations Committee and a Remuneration
Committee. The purpose of the Human Resources Committee is to consider and make
recommendations to the Board on:
• Tthe size, composition and desired competencies of the Board
• Director independence, performance, remuneration and succession arrangements
• The content of the annual remuneration report and remuneration details contained
within other statutory reports, including financial statements
• Stockland’s policies for employment, performance planning and assessment,
training and development, promotion and people management.
The purpose of the Risk Committee is to assist the Board to discharge its responsibilities
in relation to:
• Assessing the effectiveness of Stockland’s overall risk management framework
• Supporting a prudent and risk aware approach to business decisions across Stockland.
The Risk Committee reviews a wide range of matters relating to non-financial risk including
work, health and safety, building quality, cyber security, insurance and business continuity.
In FY19 the Risk Committee reviewed a number of risk policies including Stockland’s risk
management framework.
The purpose of the Sustainability Committee is to:
• Cconsider the sustainability impacts of Stockland’s business activities including social,
environmental and ethical impacts
• Consider major corporate responsibility and sustainability initiatives and changes in policy
• Approve specific external stakeholder communications
• Approve external sustainability policies
• Approve publicly disclosed targets and policies.
Further information about our Board Committees can be found in the Committee Charters, which are available on our website
www.stockland.com.au/about-stockland/corporate-governance.
Stockland also operates a funds management platform with a separate Board and Committee structure for Stockland Capital
Partners Limited and its unlisted fund. More detail on Stockland Capital Partners Limited is available on our website
www.stockland.com.au/investor-centre/unlisted-property-funds.
Board committee meetings
The number of Board and standing Board Committee meetings held during the financial year that each Director
was eligible to attend, and the number of meetings attended by each Director is set out in the table below:
Scheduled
Board
Audit
Committee
Human Resources
Committee
Sustainability
Committee
Risk
Committee
A
14
14
14
10
14
13
14
14
6
B
14
14
14
10
14
14
14
14
6
A
–
6
6
4
–
–
–
6
–
B
–
6
6
4
–
–
–
6
–
A
5
–
–
–
5
5
–
–
3
B
5
–
–
–
5
5
–
–
3
A
1
2
2
1
2
2
2
2
–
B
2
2
2
2
2
2
2
2
–
A
–
–
4
3
2
5
–
–
–
B
–
–
5
3
2
5
–
–
–
Director
Ms M Conrad
Mr B Neil
Mr S Newton
Ms C O’Reilly1
Mr T Pockett2
Ms C Schwartz
Mr M Steinert
Mr A Stevens
Former Director
Ms C Hewson3
A – Meetings attended / B – Meetings eligible to attend
1 – Ms O’Reilly joined the Board on 23 August 2018.
2 – Mr Pockett attended two Risk Committee meetings as a member of the Committee while a vacancy was being filled in 2018.
Ms O’Reilly joined the Risk Committee in August 2018.
3 – Ms Hewson retired from the Board at the conclusion of the Annual General Meeting on 24 October 2018.
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79
Year ended 30 June 2019Stockland Annual Report 2019
Board effectiveness
Stockland is committed to having a Board whose members have the capacity to act independently
of management, and have the collective skills and diversity of experience necessary to optimise
the long-term financial performance of Stockland so as to deliver long-term sustainable profitable
returns to securityholders.
Board composition
The Board currently comprises one Executive Director and seven Non-Executive Directors.
The membership of the Board is reviewed periodically having regard to the ongoing and evolving
needs of Stockland. The Board considers a number of factors when filling a vacancy including:
Qualifications, skills and experience
The right mix of skills and experience to enable it to deal
with current and emerging risks and opportunities, and
to effectively review and challenge the effectiveness of
management.
Independence
The Board will comprise a majority of non-executive
independent directors and the Chair of the Board must
be an independent director.
Tenure
The Board balances longer-serving directors with a deep
knowledge of Stockland’s business, policies and history,
and newer directors with new perspectives and different
but complementary experience.
Diversity
The Board recognises the benefits of diversity both
across the organisation as well as in relation to Board
composition.
Independence criteria
The Board regularly assesses the independence of each
director in light of the interests that they have disclosed
and such other factors as the Board determines are
appropriate and in FY19 each Non-Executive Director
satisfied the requirements for independence.
The criteria applied to determine whether a director
is independent is set out in the Board Charter available
on our website www.stockland.com.au/about-
stockland/corporate-governance.
Female Non-Executive Directors
43%
Board skills matrix
The Board has identified a range of core skills and experience that will assist the Board collectively to fulfil its
oversight role effectively.
These include:
• Experience with property investment and management
• Property and community development
• Construction and project management
• Retailing and consumer marketing
• Technology (including digital)
• Industrial supply chain logistics
• Funds management
• Banking and finance
• Government and regulatory relations
• Environmental, social and governance matters
• Strategy development
• Significant senior executive experience.
It is also advantageous for some Directors to have experience in the audit and risk management field, capital
management, mergers and acquisitions, people management and executive remuneration. During FY19 the Board
received various presentations and briefings on a range of topics tailored for professional development, key thematics
for Stockland and the ongoing responsibilities of the Board.
The Board believes that it has the right experience and skills currently to oversee the high standard of corporate
governance, integrity and accountability required of a professional and ethical organisation as shown in the
diagram below.
The Board has a process for regularly evaluating its performance. With new Directors joining the Board in FY19 the
regular external evaluation of the Board’s performance has been deferred until late calendar year 2019.
Diversity of Board skills and experience
Governance
Previous Board experience
Strategy
Risk management
Previous property Board experience
37.5%
Property management and investment
Property development
Construction and project management
Retail
Industrial supply chain logistics
Funds management
Banking and finance
Financial management
Capital management
Customer marketing including digital
Technology
Remuneration
Workplace Health & Safety
Sustainability
Mergers and acquisitions
Executive leadership
37.5%
50%
50%
50%
50%
50%
62.5%
62.5%
62.5%
62.5%
62.5%
62.5%
75%
75%
100%
100%
100%
100%
100%
100%
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81
Year ended 30 June 2019Stockland Annual Report 2019
Tenure
As at 30 June 2019, the tenure profile of the Board is shown in the below diagram.
TENURE PROFILE
0-1 year = 1 Director
1-4 years = 2 Directors
4-10 years = 4 Directors
10+ = 1 Director
The Board believes that it is important to maintain a range of director tenures to facilitate orderly Board renewal while
maintaining valuable continuity and corporate knowledge among directors. In FY19 Ms Carolyn Hewson stepped down
from the Board after nine years of service and both Ms Melinda Conrad and Ms Christine O’Reilly joined the Board.
The Human Resources Committee oversees the Director nomination process, and will from time to time engage external
search firms to ensure that a wide range of candidates are considered. Ultimately, the full Board determines who is
invited to fill a casual vacancy after extensive one-on-one and collective interviews with candidates and thorough due
diligence and reference checking. Written agreements setting out the terms of their engagement are entered into for all
Directors and senior executives. Directors coming up for re-election are also reviewed by the Human Resources
Committee and, in the Director’s absence, the Board considers whether to support their re-election. It is the Board’s
policy that Directors offer themselves for re-election only with the agreement of the Board.
Directors’ securityholdings
Particulars of Securities held by Directors are set out in the Remuneration Report that forms part of this report.
No options have been granted to Directors during the period.
No proceedings
No application has been made under section 237 of the Corporations Act 2001 in respect of Stockland, and there
are no proceedings that a person has brought or intervened in on behalf of Stockland under that section.
Our approach to tax
Stockland’s tax strategy is to conduct all its tax affairs in a transparent, equitable and commercially
responsible manner, whilst having full regard to all relevant tax laws, regulations and tax governance
processes, to demonstrate good corporate citizenship.
Consistent with the Board approved low tax risk appetite, Stockland maintains a low tax risk profile
to ensure we remain a sustainable business and an attractive investment proposition, in both the
short and long term.
Tax control and governance policy framework
Stockland maintains a Tax Control and Governance Framework (TCGF), reviewed and approved by the Audit Committee,
which outlines the principles governing Stockland’s tax strategy and risk management policy.
The TCGF is consistent with the guidelines published by the Australian Taxation Office (ATO) regarding tax risk
management and governance processes for large business taxpayers.
We undertake periodic reviews of the TCGF to test the robustness of the design of the framework against ATO
benchmarks and to demonstrate the operating effectiveness of internal controls to stakeholders.
The key principles of the TCGF are summarised as follows:
• A tax strategy that ensures all tax affairs are conducted in a transparent, equitable and commercially responsible
manner, whilst having full regard to all relevant tax laws, regulations and tax governance processes, to demonstrate
good corporate citizenship
• A balanced tax risk appetite that is consistent with the Board approved risk appetite, to ensure Stockland remains
a sustainable business and a reputable and attractive investment proposition
• A commitment to engage and maintain relationships with tax authorities that are open, transparent and co-operative,
consistent with Stockland’s Code of Conduct and Ethical Behaviour policy
• An operating and trading business based in Australia, with no strategic intentions of engaging in any tax planning
involving the use of offshore entities or low-tax jurisdictions.
Voluntary Tax Transparency Code
As part of Stockland’s commitment to tax transparency and demonstrating good corporate citizenship, Stockland has
adopted the Australian Federal Government’s Voluntary Tax Transparency Code (TTC), which provides a set of principles
and minimum standards to guide medium and large businesses on public disclosure of tax information.
Tax disclosures and information
For information and detailed reconciliations of Stockland’s tax expense, effective tax rate and deferred tax balances
please refer to notes 20 and 21 in the Financial Report.
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83
Year ended 30 June 2019Stockland Annual Report 2019
Tax contribution summary
As Australia’s largest diversified property group, which owns, develops and manages commercial property assets,
residential and retirement living communities, Stockland contributes to the Australia economy, through the various
taxes levied at the federal, state and local government level.
In FY19 these taxes totalled more than $252 million, and were either borne by Stockland as a cost of our business
or collected and remitted as part of our broader contribution to the Australian tax system.
The chart below illustrates the types of taxes that contributed to the taxes paid and/or collected and remitted
for the 2019 tax year.
TOTAL TAX CONTRIBUTION
35% Net GST Paid
28% PAYG Withholding
27% State Taxes
(includes Land Tax
and Payroll Taxes)
9.5% Other Duties
and Levies
0.5% Fringe Benefit Tax
Executive confirmations
The Managing Director and the Chief Financial Officer have provided a written statement to the Board that:
1 With regard to the integrity of the financial statements of Stockland Corporation Limited (the “Company”) and its
controlled entities and Stockland Trust (the “Trust”) and its controlled entities for the financial year, being the year
ended 30 June 2019, that having made appropriate enquiries, in our opinion:
a The financial records of the Company and the Trust and of the entities whose financial statements are required to be
included in their respective consolidated financial statements (the consolidated entities) for the financial period,
have been properly maintained in accordance with section 286 of the Corporations Act 2001
b The financial reports of the Company, the Trust and the respective consolidated entities, for the financial period,
being the financial statements and notes thereto, comply with relevant accounting standards in accordance with
section 296 of the Corporations Act 2001 and give a true and fair view of the financial position and performance of
the Company, the Trust and the respective consolidated entities, in accordance with section 297 of the Corporations
Act 2001.
2 With regard to the risk management and internal compliance and control systems of the Company, the Trust and the
respective consolidated entities in operation for the year ended 30 June 2019, that having made appropriate enquiries
to the best of our knowledge and belief:
a The statements made in (1b) above regarding the integrity of the financial reports are founded on a sound system
of risk management and internal compliance and control systems which, in all material respects, implement the
policies which have been adopted by the Board of Directors either directly or through delegation to senior executives
b The risk management and internal compliance and control systems are operating effectively, in all material respects,
based on the risk management model adopted by the Company and Trust
c While these statements are comprehensive in nature, they provide a reasonable but not absolute level of assurance
about risk management and control systems and do not imply a guarantee against adverse events or more volatile
outcomes occurring in the future
d Nothing has come to our attention since 30 June 2019 that would indicate any material change to the statements
made above.
Associates and joint ventures, which the Company and Trust do not control, are not dealt with for the purposes of this
statement, however management confirms that procedures are in place to assess the integrity of the financial
information from these associates and joint ventures for the purposes of consolidating information into the financial
accounts for the Company and the Trust.
Corporate governance statement
Stockland is committed to achieving and demonstrating the highest standards of corporate governance. Stockland
has reviewed its corporate governance practices against the Corporate Governance Principles and Recommendations
(3rd and 4th editions) published by the ASX Corporate Governance Council.
The 2019 corporate governance statement is dated as at 30 June 2019 and reflects the corporate governance practices
in place throughout the 2019 financial year. The 2019 corporate governance statement was approved by the Board on
21 August 2019. A description of Stockland’s current corporate governance practices is set out in Stockland’s corporate
governance statement which can be viewed at www.stockland.com.au/about-stockland/corporate-governance.
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The Terraces, Bokarina Beach, QLD
84
85
Year ended 30 June 2019Stockland Annual Report 2019
Remuneration
Report – audited
The Board is pleased to present this Remuneration Report for
Stockland for the year ended 30 June 2019 (FY19), which forms part
of the Directors’ Report and has been audited in accordance with
section 308(3C) of the Corporations Act 2001. The Remuneration
Report covers Stockland and the Trust.
At Stockland, the Human Resources Committee is responsible for recommending Senior Executive
remuneration policies to the Board for its approval and is charged with reviewing Stockland’s
remuneration policies each year to ensure that they remain fair and competitive when compared with
those of companies of similar size, business mix and complexity in the property industry in Australia.
There were no changes to the remuneration framework during FY19.
We remain committed to an executive remuneration framework that supports Stockland’s objectives
to deliver growth in FFO and total risk-adjusted securityholder returns above the average Australian Real
Estate Investment Trust index, to create quality property assets and to deliver value for our customers.
Stockland Shellharbour, NSW
1. Executive summary
1.1 Strategic priorities
GROW ASSET
RETURNS
OPERATIONAL
EXCELLENCE
CAPITAL
STRENGTH
Strategic priorities
• Accelerate improvement in the quality
of our Retail Town Centre portfolio
Increase Workplace and Logistics weighting
•
• Divest non-core Retirement Living villages
Strategic priorities
• Investing in and deepening
our people’s capabilities
Strategic priorities
• Strategic capital partnerships
across all sectors
• Security buy-back
FY19 outcomes
• On track to exceed $400m retail
non-core divestment target
• Increased weighting of Workplace
and Logistics to 23%
• Divested three non-core Retirement
Living Villages
FY19 outcomes
• Reshaped and aligned Executive
leadership
• Maintained strong employment
engagement above Australian
National Norm
• Focus on evolving strong culture
• Reduced unallocated overheads
by $5 million
FY19 outcomes
• Confirmed strategic capital
partnership at Aura, Sunshine Coast
• Completed $192m of $350m
security buy-back
• Maintained A-/Stable credit rating
FY19 key financials
• Annual growth in funds from
operations of 4% to $897m
• FFO per security of 37.4cps,
growth of 5.1% on FY18
1
Excludes Residential Communities workout projects.
FY19 key financials
• ROE of 11.9%1
• NTA per security of $4.04
• Distribution of 27.6 cps
FY19 key financials
• TSR over 3 years of 13.2%
• CAGR in FFO per security over 3 years
of 6.3%
1.2 What did our executives receive?
• In FY19, there was no increase in the Fixed Pay for the Managing Director as the current level of Fixed Pay remains
appropriate relative to market benchmarks. The Managing Director’s Fixed Pay has remained unchanged since
commencing with Stockland in January 2013. There were also no changes to other Key Management Personnel
(KMP) Fixed Pay.
• Our considered approach to remuneration will continue in FY20 with no increases planned for the Fixed Pay
of the Managing Director or any of our KMP.
• A range of STIs against target was awarded to the Managing Director and KMP this year and awards are set out
in section 3.3. The STIs awarded reflected a mixed performance against the Corporate Balanced Scorecard with
a lower overall STI pool than FY18. As a result, the Managing Director and all Senior Executives were awarded STI
an average of 85.7 per cent of target in FY19. Any individual STI award includes at least one-third (half for Managing
Director) in the form of Stockland securities that vest in future years, subject to continued service by those executives
and to Stockland’s clawback policy.
• In relation to the LTI awards, the three year FFO per security Compound Annual Growth Rate (CAGR) of 6.3 per cent
was above the minimum vesting threshold of 4.75 per cent set in FY17. Accordingly 94.2 per cent of the FFO per security
component of the FY17 LTI award has vested. TSR over the three year performance period of 13.2 per cent was below
the performance benchmark (a weighted index compromising of property companies from the ASX AREIT 200 index
excluding Stockland) of 49.8 per cent and accordingly none of the TSR component of the FY17 LTI awards has vested.
These combined outcomes resulted in the vesting of 47.1 per cent of FY17 LTI awards.
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87
Year ended 30 June 2019Stockland Annual Report 2019
2. Remuneration Framework
2.1 Framework
Stockland’s remuneration policies are framed around several key principles, including:
• Fixed Pay should be fair, competitive and regularly benchmarked against market practice. Fixed Pay includes salary,
superannuation and other employee benefits. Annual reviews of Fixed Pay take into account each individual’s skills and
experience relevant to their roles, internal and external benchmarks and the importance of a considered approach to pay.
• A significant portion of executive remuneration should be ‘at risk’; that is awarded only if clear performance criteria
set in advance are achieved
• ‘At risk’ or variable pay should be aligned to securityholder interests
• Variable pay as a portion of total remuneration should be higher for more senior executives
• STIs must be affordable and funded from annual earnings
• Individual STI awards are dependent on Stockland, business unit and individual performance measures based on the
Corporate Balanced Scorecard approach which the Board uses to set financial and non-financial Key Performance
Indicators (KPIs) that are aligned to overall business strategy and key priorities
• A portion of performance based pay for Executives should be awarded as Stockland securities with deferred vesting
with any above target performance for Senior Executives awarded fully as securities
• Vesting of LTI should be dependent on exceeding long term performance hurdles
• LTI should not only help motivate and retain Senior Executives but also build a sense of ownership of business
performance that benefits all stakeholders
• Remuneration policies and decisions must reflect adherence to Stockland’s values and Code of Conduct
as well as prudent risk and capital management considerations
• Unvested equity awards should be forfeited if employees resign during the applicable vesting period and should
be subject to a broadly framed clawback policy that gives the Board discretion to adjust or forfeit these awards
in certain circumstances
• The Board retains the right to apply discretion over remuneration decisions taking into account both financial
and non-financial outcomes.
2.2 Remuneration mix
We reviewed our remuneration mix during the year and determined no changes needed to be made in FY19. The number
of LTI rights awarded is based on the Volume Weighted Average Price of Stockland securities for the 10 working days post
30 June (face value methodology), which is consistent with the approach for determining the number of Deferred STI awards.
Variable pay (STI and LTI) is a key component of remuneration for our Senior Executives. Generally, Stockland’s Senior
Executives have a greater proportion of remuneration at risk than their counterparts in comparable property companies.
MANAGING DIRECTOR & CEO
OTHER SENIOR EXECUTIVES
25% Fixed Pay
12.5% Cash STI
12.5% Deferred ST
50% LTI
k
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K – 67%
33% Fixed Pay
19% Cash STI
9% Deferred ST
39% LTI
k
s
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A
A
T
R
IS
K – 75%
88
The table below provides a summary of Stockland’s framework and how each component is determined.
Principles and philosophy
Remuneration component
Measure
At Risk Weighting
Fixed Remuneration should be
fair, competitive and regularly
benchmarked to relevant
market levels
Fixed Pay (FP)
Salary and other benefits (including
statutory superannuation)
External benchmarking based on
surveys sourced from a number of
organisations including AON Hewitt,
Avdiev and PwC
A significant portion of remuneration
should be ‘at risk’ and fairly reward
executives if pre-set objectives
and hurdles are achieved and/
or exceeded and build a sense of
business ownership and alignment
that benefits all securityholders
interests
Short term Incentive (STI)
50% awarded as cash for
performance up to target for
Managing Director and CEO
(two-thirds as cash for other
Senior Executives)
50% awarded in deferred securities
for performance up to target for
Managing Director & CEO (one-third
for Senior Executives) and
100% awarded as deferred
securities for any performance
above target
Any deferred securities vest equally
subject to continued service after
1 and 2 years
Long Term Incentive (LTI)
Delivered as Performance Rights
measured against performance
hurdles over a three year
performance period
Any rights then convert to deferred
securities if performance hurdles
are exceeded which vest equally
subject to continued service after
three and four years
The number of LTI rights granted
is based on the face value of
Stockland’s securities at the time
of the grant
Values, Risk and Reputation
The Board may apply discretion
to adjust STI outcomes upwards or
downwards including to zero where
appropriate
The Board can apply clawback on
unvested deferred STI and/or LTI to
adjust or forfeit these awards
Minimum securityholding
Target 100% of FP
(Managing Director
and CEO)
80 – 90% of FP
(Other Senior
Executives)
Maximum 150%
of Target
Depends on company and
individual performance reflecting
progress against a Balanced
Scorecard of Key Performance
Indicators (KPIs) based on:
• Business/Financial outcomes
• Customer/Stakeholder and
Sustainability performance
• Leadership and People
Management
• Operational Excellence and Risk
Management
Managing Director
and CEO
200% of FP
Other Senior
Executives 120%
of FP
Funds From Operations (FFO)
Three year CAGR in FFO per security
with maximum vesting if CAGR is 5%
or more above the applicable target
(50% weighting)
and
Total Shareholder Return (TSR)
Based on a composite index
reflecting A-REIT 200 competitors
with maximum vesting occurring
if Stockland’s TSR is 10% or more
above this index (50% weighting)
Our competitor index excludes
Stockland and includes six A-REIT
200 large caps equally weighted
at 13.33% each (Dexus, Goodman,
GPT, Mirvac, Scentre and Vicinity)
and eight A-REIT 200 smaller caps
equally weighted at 2.5% (Abacus,
BWP Trust, Charter Hall Group,
Charter Hall Retail REIT, Cromwell
Property, Growthpoint, National
Storage REIT and Shopping Centres
Australasia Property Group)
The Managing Director and CEO
is required to maintain a minimum
holding of Stockland securities
equivalent to at least two times
fixed pay (one times
fixed pay for other Senior
Executives) for any securities
granted after 1 July 2010
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89
Year ended 30 June 2019Stockland Annual Report 2019
3. Remuneration outcomes
3.1 Financial performance over the past five years
Underlying profit, FFO, EPS and other key financial performance measures over the last five years are set out below.
Underlying profit1 ($M)
FFO2 ($M)
AFFO3 ($M)
Statutory profit ($M)
Security price as at 30 June ($)4
Distributions/Dividends per security (cents)
Payout Ratio
Securities bought back and cancelled ($M)5
Underlying EPS (cents)
FFO per security (cents)
AFFO per security (cents)
Statutory EPS (cents)
Stockland TSR – 1 year (%)
A-REIT 200 TSR (excluding SGP) – 1 year (%)
Tailored index TSR6
FY15
608
657
531
903
4.10
24.0
86%
–
25.9
28.0
22.6
38.5
12.3
24.2
–
FY16
FY17
660
740
624
889
4.71
24.5
79%
–
27.8
31.1
26.3
37.4
16.4
21.1
–
696
802
687
1,195
4.38
25.5
77%
–
29.0
33.4
28.6
49.8
7.1
(6.7)
–
FY18
731
863
756
1,025
3.97
26.5
75%
–
30.2
35.6
31.2
42.3
(7.0)
11.5
7.2
FY19
757
897
780
311
4.17
27.6
74%
192
31.5
37.4
32.5
13.0
13.9
20.0
27.0
1
2
Underlying profit was the non-IFRS performance measure used in determining the non-TSR component of LTI remuneration for periods up to and including
30 June 2016.
FFO is a non-IFRS measure that replaced underlying profit as Stockland’s primary reporting measure from FY17. This change recognises the importance
of FFO in managing our business and the use of FFO as a comparable performance measurement tool in the Australian property industry. The reconciliation
of FFO to statutory profit is provided in the Financial Report. Performance against this benchmark is set out in section 3.4.
AFFO is stated exclusive of derivative close out costs and inclusive of Commercial Property and Retirement Living maintenance capex.
3
4 FY14 Closing security price was $3.88.
5 The securities were bought back on market.
6
Tailored AREIT 200 index comprised of six large companies forming 80% and eight smaller companies forming 20% as detailed in section 2.2. Measured from
FY17 as a LTI hurdle.
3.2 Fixed pay
We review Senior Executives’ Fixed Pay each year against independently-provided external data sources and market
benchmarks from a group of ASX50 companies and larger property companies, ensuring that our Fixed Pay remains
competitive with companies of comparable size and complexity in our industry.
For the 2019 financial year, Fixed Pay did not increase for our Managing Director and CEO or the Senior Executives.
3.3 STI
STI rewards the annual progress towards long-term objectives. All permanent employees employed at 30 June of the
applicable financial year and who have greater than three months service are eligible to be considered for a STI award.
STI pool
The STI Pool is determined by the Board’s assessment of performance against the Corporate Balanced Scorecard,
which is shown below for FY19.
Corporate Balanced Scorecard FY19
Strategic
priority
KPI
BUSINESS AND FINANCIAL PERFORMANCE (60%)
Group and business unit performance
Commentary
Overall rating
Group performance
• Funds from Operations (FFO) per security
• FFO per security growth was 5.1% to 37.4 cps
• ROE was 11.5%1
guidance of 5.0 – 7.0%
• Return on Equity1 (ROE) of 11.3 – 11.8%
FFO at lower end
of target range
ROE within target
range
• Business Performance
• Operating Business financial performance
in line with plan
• Maintain conservative debt profile and remain
within policy limits for gearing, interest cover,
asset mix, credit rating and debt profile
• Credit rating maintain A- rating
• Debt maturity profile >5 years
• Liquidity buffer 10% above committed and
undrawn facilities
• Gearing within range 20 – 30%
Business unit financial performance was mixed:
• Commercial Property FFO of $623 million was
up on FY18 and overall in line with forecast with
Retail below and Workplace and Logistics above
• Residential Operating Profit of $362 million
was up on FY18 and above forecast
• Retirement Living profit of $56 million was
up on with FY18 but below forecast
Within target range
Upper end of target
range
Below target range
• Average Debt Maturity was above 5 years
• Credit Rating and liquidity buffer maintained with
gearing and interest cover all within guidelines
• Debt documentation and covenants updated
and all covenants satisfied
Within target range
• Deliver against Key Business Priorities
• Mixed progress against our key business and
strategic priorities with most priorities met
Lower end of target
range
1
Including Residential workout projects. ROE was 11.9% excluding these projects.
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91
Year ended 30 June 2019Stockland Annual Report 2019
Corporate Balanced Scorecard FY19
Strategic
priority
KPI
CUSTOMER AND ORGANISATIONAL PERFORMANCE (40%)
Customer and stakeholder
Commentary
Overall rating
• Achieve independent customer satisfaction
• The customer satisfaction scores were generally
Within target range
ratings goals for each business unit
at or above target
• Commercial Property was above target
• Residential outcomes variable against targets
• Retirement Living was above
People management
• Achieve employee engagement target – 80%
• Employee engagement score was 81%
• Increase female participation across all levels
of management
• Women in management was 45.8%
• Women in senior management was 42.0%
• 37.0% of General Managers were females
• 50% of Senior Executives were females
Upper end of target
range
Within target range
• Progress longer term diversity and
inclusiveness objectives
• Good progress made including being recognised
as an Employer of Choice for Gender Equality
over nine consecutive years (five with WGEA)
Upper end of target
range
• 83.2% of employees having a flexible
work arrangement
Operational excellence, sustainability & risk management
• Continued Process Improvement and
• Over 1% of FFO due to new innovation
Within target range
enhanced innovation
• Embed sustainable business practices
• Recognised as the leading Global Real Estate
Above target range
and make good progress against environment
improvement goals
company in DJSI Sustainability Survey
• Continued strong progress across our GHG and
other sustainability targets
• Ensure strong risk compliance and safety
• Continued embedding of three lines of defence
Within target
management practices
risk framework
• Ongoing focus on contractor and employee
safety management practices
The maximum approved STI pool for all employees in FY19 was $28.7 million of which a maximum $6.6 million
(or 20 per cent of the pool) is proposed to be awarded in Stockland securities with deferred vesting and is subject
to the risk of forfeiture until vesting dates at the end of FY20 and FY21.
$m
Underlying profit
FFO
Cash STI1
DSTI
STI pool
1
Includes applicable superannuation.
FY15
608
657
24.0
9.0
33.0
FY16
660
740
28.1
8.9
37.0
FY17
696
802
28.4
9.5
37.9
FY18
731
863
26.6
6.6
33.2
FY19
757
897
22.1
6.6
28.7
STI outcomes – Managing Director and CEO and other KMP
The table below sets out the STI awards for FY19. STI incentives are awarded in both cash and Stockland securities with
deferred vesting. For amounts up to the Target STI awarded, the Managing Director and CEO receives one-half of STI in
cash and one-half in deferred securities and Senior Executives receive two-thirds of STI in cash and one-third in deferred
securities. Any STI above target is awarded as securities with deferred vesting. Half of the deferred STI securities vest
12 months after award with the remaining half vesting 24 months after award, provided employment continues to the
applicable vesting date.
Target STI
(as % of
Fixed Pay)
Maximum
STI
(as % of
Fixed Pay)
STI
Awarded
(as % of
Target)
STI
Awarded
(as % of
Maximum
STI)
STI paid in cash1
STI deferred
into equity2
DSTIs
granted3
Managing Director
Mark Steinert
Other KMP
Katherine Grace
Louise Mason
Tiernan O’Rourke
Andrew Whitson
Former Senior Executives
Stephen Bull4
%
100
80
90
80
90
90
%
150
120
135
120
135
135
%
80
94
87
86
91
49
%
$
%
$
%
$
53
600,000
50
600,000
50
134,145
63
58
58
61
301,333
392,000
403,333
408,667
67
67
67
67
150,667
196,000
201,667
204,333
33
62,000
100
–
33
33
33
33
–
33,686
43,821
45,088
45,684
–
1 The portion of STI awarded for the FY19 performance year, which is paid as cash.
2 The portion of STI awarded for FY19 performance that is deferred into Stockland securities that will vest over the next two years.
3
The number of securities granted for deferred STI is based on the Volume Weighted Average Price for the 10 business days after 30 June 2019.
This price was $4.4728.
4 Ceased employment 7 September 2018. 100% of STI paid in cash.
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93
Year ended 30 June 2019Stockland Annual Report 2019
3.4 LTI
Our LTI plan aims to align executive remuneration with securityholder returns and help retain our key talent. LTI awards
are issued as performance rights granted under the Stockland Performance Rights Plan. Half of the LTI allocated to
Senior Executives is linked to Stockland’s performance against underlying FFO growth targets, with the remaining half
linked to a TSR performance hurdle. The tables below show Stockland’s performance against the respective FFO and
TSR performance hurdles for the three years to 30 June 2019.
Target/
benchmark
performance
Actual
performance
Out/(Under)
performance
%
Vested
Weight
Vesting
outcome
4.75%
6.3%
1.6%
94.2%
50%
47.1%
Hurdle
FFO per security for FY17 – 19
Compound Average
Growth Rate1
TSR for FY17 – 19
3.5 Executive remuneration for FY19
Executives received a mix of remuneration during FY19 including Fixed Pay, STI awarded as cash and deferred securities
and LTI awarded as performance rights.
The table below outlines the cash remuneration that was received in relation to FY19 which includes Fixed Pay and the
non-deferred portion of any FY19 STI. The table also includes the value of DSTI awards from FY17 and FY18 that vested
during FY19 and LTI awards from FY17 that vested during FY19. This information differs from that provided in the
remuneration for KMP set out in section 3.5(b) which was calculated in accordance with statutory rules
and applicable Accounting Standards.
A. Actual remuneration received or realised
STI
awarded
and received
as cash2
Fixed
pay1
Total Cash
payments
in relation
to financial
year
Previous
years’ DSTI
that were
realised3
Previous
years’ LTI
that were
realised3
Total
Remuneration
(received and/
or realised)
Awards
which
lapsed
or were
forfeited4
Relative TSR FY17 – FY192
49.8%
13.2%
(36.6%)
–%
50%
Vesting
–%
47.1%
$
Executive Director
1 For LTI awards made in FY17 and future years, the performance benchmark is growth in FFO per security.
2 Benchmark based on ASX AREIT 200 Index excluding Stockland. For LTI awards made in FY17 and future years, the TSR performance benchmark is a tailored
index comprised of six large companies forming 80 per cent and eight smaller companies forming 20 per cent.
LTI awarded for FY19
The performance rights that were awarded to the Managing Director and CEO and other Senior Executives under the
Performance Rights Plan in FY19 are outlined in the table below. These awards are subject to a three year performance
period (FY19 – FY21) with the awards measured against two performance hurdles: Relative TSR and FFO per security
growth. As advised at the Annual General Meetings held in October 2018, the maximum vesting hurdle based on the
Compound Annual Growth Rate for FFO per security for LTI awards granted during FY19 was 6.0 per cent (42.4 cps) for the
three years from 1 July 2018 to 30 June 2021, with the threshold or minimum vesting hurdle being 4.25 per cent (40.3 cps).
$
Grant date
Vesting date1
LTIs Granted2
Fair value per LTI
Fair Value of LTI3
Executive Director
Mark Steinert
27/10/2018
27/10/2018
30/06/2021
30/06/2022
Senior Executives Other KMP4
Katherine Grace
Louise Mason
Tiernan O’Rourke
Andrew Whitson
27/09/2018
27/09/2018
27/09/2018
27/09/2018
27/09/2018
27/09/2018
27/09/2018
27/09/2018
30/06/2021
30/06/2022
30/06/2021
30/06/2022
30/06/2021
30/06/2022
30/06/2021
30/06/2022
370,362
370,361
740,723
88,887
88,887
177,774
111,109
111,108
222,217
129,627
129,626
259,253
111,109
111,108
222,217
1.31
1.31
1.61
1.61
1.61
1.61
1.61
1.61
1.61
1.61
486,100
486,099
972,199
142,886
142,886
285,772
178,608
178,606
357,214
208,376
208,374
416,750
178,608
178,606
357,214
1
Vesting date refers to the date at which the performance and service conditions are met. The rights convert to securities subject to the three year performance period
to 30 June 2020. Any rights that convert to securities then vest at the dates shown. The securities remain in holding lock until the 10th anniversary of the grant date
except at Board discretion. The rights issued have an expiry date that is the later of the date of announcement of the FY21 results and 31 August 2021.
2 The number of rights granted is based on the Volume Weighted Average Price for the 10 business days after 30 June 2018. The price was $4.0501.
3 Fair value is determined using a Monte Carlo simulation (TSR hurdle) and the Black-Scholes option pricing model (FFO hurdle). Details of the assumptions made
in determining fair value are discussed in note 19 of the financial statements.
4 Stephen Bull was not eligible for LTI awards during the year.
Mark Steinert
2019
1,500,000
600,000
2,100,000
961,640
1,156,550
4,218,190
1,600,521
2018
1,500,000
702,000
2,202,000
1,014,208
1,326,726
4,542,934
1,711,320
Managing
Director and CEO
Other KMP
Katherine Grace
2019
600,000
301,333
901,333
208,246
243,482
1,353,061
347,436
General Counsel
and Company
Secretary
Louise Mason5
Group Executive
and CEO,
Commercial
Property
Tiernan
O’Rourke
Chief Financial
Officer
2018
600,000
320,000
920,000
198,286
266,141
1,384,427
342,266
2019
2018
750,000
392,000
1,142,000
154,444
75,000
–
75,000
–
–
–
1,296,444
75,000
–
–
2019
875,000
403,333
1,278,333
293,714
399,315
1,971,362
557,846
2018
875,000
420,000
1,295,000
314,229
451,345
2,060,574
581,847
Andrew Whitson
2019
750,000
408,667
1,158,667
428,622
346,965
1,934,254
480,163
2018
750,000
450,000
1,200,000
379,846
382,831
1,962,677
513,396
Group Executive
and CEO,
Stockland
Communities
1 Fixed Pay includes salary, superannuation and salary sacrificed items.
2
For Mark Steinert this is 50 per cent (two thirds for Senior Executives) of his STI awards. The remaining 50 per cent of his STI (one third for Senior Executives) was deferred
in Stockland securities which vests over two years following the performance year, 50 per cent after year 1 and 50 per cent after year 2 subject to continued employment.
3 This represents the value of all prior years’ deferred STI and LTI that vested during FY19 using the 30 June 2019 closing security price of $4.17.
4
The value shown represents the value of any previous years’ equity awards that lapsed or were forfeited during the financial year. The FY19 values are based
on the closing 30 June 2019 security price of $4.17 (FY18: $3.97).
5 Louise Mason was appointed 4 June 2018.
94
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4. Non-Executive Director Remuneration
4.1 Directors’ fees
Stockland’s remuneration policy for Non-Executive Directors aims to ensure Stockland can attract and retain suitably
skilled, experienced and committed individuals to serve on the Board and remunerate them appropriately for their time
and expertise and for their responsibilities and liabilities as public company directors.
The Human Resources Committee is responsible for reviewing and recommending to the Board any changes to Board
and Committee remuneration, taking into account the size and scope of Stockland’s activities, the responsibilities and
liabilities of directors and the demands placed upon them. In developing its recommendations, the Committee may take
advice from external consultants.
With the exception of the Chairman, Non-Executive Directors receive additional fees for their work on Board committees.
Where the Board establishes a special purpose Board Committee, Committee members may receive a fee in line with
those paid for existing Board committees. Non-Executive Directors do not receive performance-related remuneration
or termination benefits other than accumulated superannuation.
In FY19, there were no changes in the base fees for the Chairman, Non-Executive Directors or any of the Board Committees.
In FY20, in line with our considered approach to remuneration, there will be no changes in the base fees for the Chairman
and Non-Executive Directors or for Board committee fees.
Stockland Board
Chairman
Non-Executive Director
Stockland Board Committees
Audit
Risk
Human Resources
SCPL Board
Chairman
Non-Executive Director
Independent Non-Executive Director1
SCPL Board Committees
Audit and Risk
FY20
FY19
$500,000
$500,000
$175,000
$175,000
$40,000
$20,000
$35,000
$17,500
$35,000
$17,500
$32,700
$32,700
$30,000
$15,260
$8,720
$40,000
$20,000
$35,000
$17,500
$35,000
$17,500
$32,700
$32,700
$30,000
$15,260
$8,720
Chair
Member
Chair
Member
Chair
Member
Chair
Member
1 Independent Non-Executive Directors of SCPL are those who are not on the Stockland Board.
Total remuneration available to Non-Executive Directors is approved by securityholders and is currently $2,500,000
(including superannuation payments) as approved at the 2007 Annual General Meeting. No increase in the total fee pool
is proposed for FY20.
Total fees of $1,903,476 (76 per cent of the approved limit) were paid to Non-Executive Directors in FY19. This amount was
5.7 per cent higher than the total fees paid in FY18 due to the timing of new Non-Executive Directors being appointed and
the retirement of former Non-Executive Directors. There were no changes to the base fees for Non-Executive Directors
and Chairman or the respective Board Committees.
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97
Year ended 30 June 2019Stockland Annual Report 2019
The nature and amount of each element of remuneration for each Non-Executive Director is detailed below:
$
Non-Executive Directors
Tom Pockett
Melinda Conrad2
Barry Neil
Stephen Newton
Christine O’Reilly3
Carol Schwartz
Andrew Stevens
Former Non-Executive Directors
Carolyn Hewson4
Nora Scheinkestel5
Consolidated remuneration
Short-term
Post-employment
Board and
Committee Fees
Non-monetary
benefits
Superannuation
contributions
Total1
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
479,469
479,951
202,725
19,266
207,945
207,945
260,718
243,985
170,110
–
205,699
191,781
178,082
178,082
60,452
191,781
–
157,534
1,765,200
1,670,325
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
20,531
20,049
19,259
1,830
19,755
19,755
20,531
20,049
16,160
–
19,379
18,219
16,918
16,918
5,743
18,219
–
14,966
138,276
130,005
500,000
500,000
221,984
21,096
227,700
227,700
281,249
264,034
186,270
–
225,078
210,000
195,000
195,000
66,195
210,000
–
172,500
1,903,476
1,800,330
1
The fees for each Director are paid on a total cost basis, which includes any applicable compulsory superannuation (the amount of superannuation included
in the total fees will vary depending on the timing of payments and in line with applicable legislation).
2 Melinda Conrad was appointed on 18 May 2018.
3 Christine O’Reilly was appointed on 23 August 2018.
4 Carolyn Hewson retired 24 October 2018.
5 Nora Scheinkestel retired 20 March 2018.
4.2 Directors’ securityholdings
To align our Directors with securityholder interests, the Board believes that Directors should hold a meaningful
number of Stockland securities. Each Non-Executive Director is required to acquire 40,000 securities within three years
of commencing as a Non-Executive Director. This minimum equates to approximately one year’s base Board fees.
The relevant interest of each Director in Stockland securities, as notified by the Directors to the ASX in accordance
with S205G(1) of the Corporations Act 2001, at the date of this Report are as follows:
Non-Executive Directors
Tom Pockett
Melinda Conrad1
Barry Neil
Stephen Newton
Christine O’Reilly2
Carol Schwartz
Andrew Stevens
Executive Director
Mark Steinert3
Stockland
2019
40,000
60,000
76,718
40,000
50,000
40,000
20,000
2018
40,000
–
76,718
40,000
50,000
40,000
20,000
3,162,815
2,654,856
1 Melinda Conrad was appointed 18 May 2018.
2 Christine O’Reilly was appointed 23 August 2018.
3
Includes vested DSTI securities and vested LTI rights held by the Executive Director. Excludes unvested DSTI and LTI rights as detailed in section 5.3
of this Report.
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99
Year ended 30 June 2019Stockland Annual Report 2019
5. Other remuneration information
5.1 Remuneration governance
The Human Resources Committee assists the Board to exercise sound governance of its responsibility for the
appointment, performance and remuneration of the Managing Director and CEO and Senior Executives.
The Committee also oversees all employment and remuneration policies to ensure that, at all levels in the organisation,
fairness and balance are maintained between reward, cost and value to Stockland whilst also reflecting risk and
compliance performance assisted by the Audit and Risk Committees.
The Committee approves the remuneration framework for all employees, including risk and financial control personnel
and employees whose total remuneration includes a significant variable component.
The Committee comprises of three independent Non-Executive Directors: Melinda Conrad (Chair), Carol Schwartz and
Tom Pockett. The Committee commenced FY19 with four independent Non-Executive Directors with Ms Melinda Conrad
replacing Ms Carolyn Hewson as Chair of the Committee following Ms Hewson’s retirement as a Non-Executive Director
in October 2018.
The roles and responsibilities of the Committee are outlined in the Committee’s charter, which is available on
Stockland’s website at www.stockland.com.au/about-stockland/corporate-governance.
5.3 Stockland equity held by key management personnel
The table below outlines the number of vested and ordinary holdings (personal) and unvested equity (DSTI and LTI)
held by the Managing Director, other KMP and Non-Executive Directors as at the end of FY19. This table highlights the
direct exposure that each KMP has to the Stockland security price.
$
Non-Executive Directors
Holding1
Balance
1 July 2018
Acquired/
(Disposed)
or Granted
Equity
Incentives
that lapsed
Equity
Incentives
that vested2
Balance
30 June
2019
Maximum
value
yet to vest3
Mark Steinert
Securities
2,654,856
–
317,274
134,145
–
–
507,959
3,162,815
–
(230,609)
220,810
467,000
1,509,244
740,723
(383,818)
(277,350)
1,588,799
1,913,689
DSTI
LTI
Senior Executives
Katherine Grace
Securities
DSTI
LTI
Louise Mason
Securities
DSTI
LTI
204,418
70,309
342,327
–
74,073
–
–
(51,200)
33,686
177,774
–
43,821
222,217
–
(83,318)
–
–
–
108,328
(49,939)
(58,389)
37,037
(37,037)
–
Non-Executive Directors
Tom Pockett
Melinda Conrad
Barry Neil
Stephen Newton
Christine O’Reilly
Carol Schwartz
Andrew Stevens
Securities
40,000
–
Securities
Securities
Securities
Securities
Securities
Securities
–
60,000
76,718
40,000
–
–
–
50,000
40,000
20,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
40,000
60,000
76,718
40,000
50,000
40,000
20,000
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261,546
54,056
378,394
37,037
80,857
222,217
461,201
71,013
556,079
391,425
91,362
–
115,389
489,993
–
50,000
309,384
–
152,639
719,591
–
180,861
616,794
–
–
–
–
–
–
–
5.2 Use of remuneration consultants during the year
Stockland seeks relevant benchmarking and commentary on a number of remuneration issues from a variety of
consultants including EY. Stockland also subscribes to a number of independent salary and remuneration surveys,
including property sector specific surveys run by AON Hewitt, Avdiev and PwC. During FY19, no remuneration
recommendations in relation to key management personnel, as defined by Division 1 of Part 1.2 of Chapter 1 of the
Corporations Act 2001, were made by these or other consultants.
DSTI
LTI
Andrew Whitson
Securities
DSTI
LTI
96,360
526,361
397,543
148,465
452,774
45,088
–
(70,435)
259,253
(133,776)
–
(192,110)
(95,759)
185,992
–
(102,787)
45,684
222,217
(115,147)
(83,205)
476,639
Tiernan O’Rourke
Securities
482,607
–
(187,600)
166,194
1
The DSTI awards are subject to either one or two years of continued service, and vest once this condition has been met, and are forfeited only if employment ceases.
No DSTI awards were forfeited during the year.
2 The LTI that have vested at 30 June 2019 are yet to be exercised and converted to securities.
3
The maximum value of the LTI and DSTI yet to vest has been determined as the amount of the fair value of the rights that is yet to be expensed over the
remaining vesting period. The minimum value of LTI and DSTI yet to vest is nil, as the securities are subject to performance hurdles being met and the risk
of forfeiture until vesting dates.
100
101
Year ended 30 June 2019Stockland Annual Report 2019
5.4 Senior Executives’ employment and termination
arrangements
The Managing Director and CEO and other Senior Executives are on rolling contracts until notice of termination is given
by either Stockland or the Senior Executive. The notice period for the Managing Director and CEO and other Senior
Executives is six and three months, respectively. In appropriate circumstances, payment may be made in lieu of notice.
Where Stockland initiates termination, including mutually agreed resignation, the Senior Executive would receive
a termination payment of up to 12 months’ Fixed Pay (including applicable notice) and be considered for an
STI award based on performance pro-rated for that proportion of the year they were employed.
Where the termination occurs as a result of misconduct or a serious or persistent breach of contract (termination for
cause), Stockland may terminate employment immediately without notice, payment in lieu of notice or any other
termination payment.
In cases of termination for cause or resignation, all unvested employee securities or rights lapse. In other circumstances,
the Board has the discretion to adjust the vesting conditions. Typically, this discretion is applied as outlined below.
Death or Total and
Permanent Disablement
For termination
other than for cause
or resignation
Full vesting of any unvested equity awards.
For unvested DSTI, full vesting in the year of termination.
For LTI, unvested rights are vested pro rata based on service to the date of termination. Any applicable
pro rata hurdled rights remain subject to the applicable performance hurdles over the full performance
period. Any applicable restricted rights vest on 30 June in the year of termination. Other unvested LTI
awards are forfeited.
5.5 Key management personnel
Individuals who were KMPs of Stockland at any time during the financial year are as follows:
Non-Executive Directors
Mr Tom Pockett
Ms Melinda Conrad
Ms Carolyn Hewson
(retired 24 October 2018)
Mr Barry Neil
Mr Stephen Newton
Ms Christine O’Reilly
(joined 23 August 2018)
Ms Carol Schwartz
Mr Andrew Stevens
Executive Director
Mr Mark Steinert
Managing Director and Chief Executive Officer
Senior Executives
Ms Katherine Grace
Group Executive and General Counsel and Company Secretary
Ms Louise Mason
Group Executive and CEO Commercial Property
Mr Tiernan O’Rourke
Group Executive and Chief Financial Officer
Mr Andrew Whitson
Group Executive and CEO Stockland Communities
Former Senior Executives
Mr Stephen Bull
CEO Retirement Living (ceased employment 7 September 2018)
Towards the end of FY18 a review was undertaken of the composition and structure of Stockland’s Executive
Committee with the subsequent changes taking effect from 1 July 2018. The outcomes of this review led to the
combining of the Residential and Retirement Living business units into a new Stockland Communities business unit
led by Andrew Whitson (with Stephen Bull departing Stockland in September 2018 following a period of transition).
In addition, the review resulted in the streamlining of Senior Executive participation in operational meeting and
decision-making. Ms Robyn Elliott and Mr Darren Rehn remain employed by Stockland as members of the
Executive Committee, but are no longer considered as KMP for the purposes of this report.
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102
103
Year ended 30 June 2019Stockland Annual Report 2019
Additional general information
Indemnities and insurance of officers and auditor
Since the end of the prior year, the Group has not indemnified or agreed to indemnify any person who is or has been
an officer or an auditor of Stockland against any liability.
Since the end of the prior year, the Group has paid insurance premiums in respect of Directors’ and Officers’ liability
insurance contracts, for Directors, Company Secretaries and other Officers. Such insurance contracts insure against
certain liabilities (subject to specified exclusions) for persons who are or have been Directors, Company Secretaries
or other Officers of Stockland.
Premiums are also paid for Fidelity insurance and Professional Indemnity insurance policies to cover certain risks
for a broad range of employees, including Directors and Senior Executives.
Non-audit services
During the financial year the Group’s auditor, PwC, provided certain other services to the Group in addition to their
statutory duties as auditor.
The Board has considered the non-audit services provided during the financial year by the auditor and is satisfied that
the provision of those services is compatible with, and did not compromise, the auditor independence requirements
of the Corporations Act 2001 for the following reasons:
• The non-audit services were for taxation, regulatory, other advisory and assurance-related work closely linked
to the Group’s audit, and none of this work created any conflicts with the auditor’s statutory responsibilities
• The Audit Committee resolved that the provision of non-audit services during the financial year by PwC as auditor
is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001
• The Board’s own review conducted in conjunction with the Audit Committee, having regard to the Board policy set out
in this Report, concluded that it is satisfied the non-audit services did not impact the integrity and objectivity of the
auditor; and the declaration of independence provided by PwC, as auditor of Stockland.
Details of the amounts paid to the auditor of the Group, PwC, and its related practices for audit and non-audit services
provided during the financial year are set out in note 33 of the accompanying financial statements.
Lead Auditor’s Independence Declaration under section 307C of the Corporations Act 2001
The external auditor’s independence declaration is set out on page 105 and forms part of the Directors’ Report for the
year ended 30 June 2019.
Rounding off
Stockland is an entity of the kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191 and in accordance with that Instrument, amounts in the Financial Report and Directors’ Report have been
rounded to the nearest million dollars, unless otherwise stated.
Signed in accordance with a resolution of the Directors:
Tom Pockett
Chairman
Dated at Sydney, 21 August 2019
Mark Steinert
Managing Director
104
Lead Auditor’s Independence Declaration
Under section 307C of the Corporations Act 2001.
Auditor’s Independence Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of Stockland Corporation Limited and Stockland Trust for the year ended
As lead auditor for the audit of Stockland Corporation Limited and Stockland Trust for the year ended
30 June 2019, I declare that to the best of my knowledge and belief, there have been:
30 June 2019, I declare that to the best of my knowledge and belief, there have been:
Auditor’s Independence Declaration
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
As lead auditor for the audit of Stockland Corporation Limited and Stockland Trust for the year ended
30 June 2019, I declare that to the best of my knowledge and belief, there have been:
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Stockland Corporation Limited and the entities it controlled during the
This declaration is in respect of Stockland Corporation Limited and the entities it controlled during the
year and Stockland Trust and the entities it controlled during the year.
year and Stockland Trust and the entities it controlled during the year.
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
relation to the audit; and
relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Stockland Corporation Limited and the entities it controlled during the
year and Stockland Trust and the entities it controlled during the year.
Scott Hadfield
Scott Hadfield
Partner
Partner
PricewaterhouseCoopers
PricewaterhouseCoopers
Scott Hadfield
Partner
PricewaterhouseCoopers
Sydney
Sydney
21 August 2019
21 August 2019
Sydney
21 August 2019
PricewaterhouseCoopers, ABN 52 780 433 757
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
Liability limited by a scheme approved under Professional Standards Legislation.
Liability limited by a scheme approved under Professional Standards Legislation.
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
105
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Year ended 30 June 2019Stockland Annual Report 2019
Financial
report
Bokarina Beach, QLD
106
107
Stockland Annual Report 2019Year ended 30 June 2019IntroductionStrategy and performanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossary Consolidated statement of comprehensive income
Consolidated balance sheet
Year ended 30 June
$M
Revenue
Cost of property developments sold:
• land and development
• capitalised interest
• utilisation of provision for impairment of inventories
Investment property expenses
Share of profits of equity-accounted investments
Management, administration, marketing and selling expenses
Net change in fair value of:
• Commercial Property investment properties
• Retirement Living investment properties
• Retirement Living resident obligations
Impairment of Retirement Living goodwill
Net reversal of impairment of inventories
Net gain/(loss) on other financial assets
Net gain/(loss) on sale of other non-current assets
Finance income
Finance expense
Net gain/(loss) on financial instruments
Profit before tax
Income tax benefit/(expense)
Profit after tax
Items that are or may be reclassified to profit or loss, net of tax
Available for sale financial assets – net change in fair value
Available for sale financial assets – reclassified to profit or loss
Cash flow hedges – net change in fair value of effective portion
Cash flow hedges – reclassified to profit or loss
Other comprehensive income
Total comprehensive income
Basic earnings per share (cents)
Diluted earnings per share (cents)
Stockland
Trust
Note
1
2019
2,768
2018
2,775
2019
790
(1,252)
(1,263)
(93)
24
(270)
75
(332)
(228)
(72)
19
(38)
1
–
(21)
4
(87)
(140)
358
(47)
311
–
–
(5)
(1)
(6)
305
13.0
13.0
(106)
30
(264)
69
(318)
96
59
(73)
–
–
26
16
3
(77)
(7)
966
59
1,025
2
(17)
23
(1)
7
1,032
42.3
42.2
–
–
–
(260)
56
(42)
(236)
–
–
–
–
–
(21)
284
(189)
(140)
242
–
242
–
–
(5)
(1)
(6)
236
10.1
10.1
6
22
7
8
8
11
6
13
13
13
20
3
3
2018
781
–
–
–
(252)
69
(38)
68
–
–
–
–
(1)
16
268
(192)
(7)
712
–
712
–
–
23
(1)
22
734
29.4
29.3
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
As at 30 June
$M
Cash and cash equivalents
Receivables
Inventories
Other financial assets
Other assets
Non-current assets held for sale
Current assets
Receivables
Inventories
Investment properties – Commercial Property
Investment properties – Retirement Living
Equity-accounted investments
Other financial assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Other assets
Non-current assets
Assets
Payables
Borrowings
Retirement Living resident obligations
Development provisions
Other financial liabilities
Other liabilities
Current liabilities
Payables
Borrowings
Retirement Living resident obligations
Development provisions
Other financial liabilities
Other liabilities
Non-current liabilities
Liabilities
Net assets
Issued capital
Reserves
Retained earnings/undistributed income
Securityholders’ equity
Note
14
9
6
16
12
9
6
7
8
22
16
11
21
10
15
8
6
16
10
15
8
6
16
19
Stockland
Trust
2018
2019
2018
2019
140
208
1,005
9
95
1,457
171
1,628
94
2,500
9,145
3,990
612
525
57
193
40
215
17,371
18,999
696
343
333
98
715
12
103
1,261
65
1,326
99
2,750
9,563
4,120
613
282
53
194
88
203
17,965
19,291
810
240
2,496
2,577
343
2
68
3,948
147
4,361
101
370
218
26
5,223
9,171
9,828
8,657
91
1,080
9,828
567
33
107
4,334
173
3,698
164
356
163
27
4,581
8,915
10,376
8,850
101
1,425
10,376
63
41
–
9
81
194
171
365
215
22
–
12
80
329
22
351
3,580
3,363
–
–
9,133
9,487
–
620
515
–
–
–
217
14,065
14,430
455
343
–
–
2
29
829
–
–
595
272
–
–
–
207
13,924
14,275
462
240
–
–
33
43
778
–
4,361
3,698
–
–
218
–
4,579
5,408
9,022
7,359
88
1,575
9,022
–
–
163
–
3,861
4,639
9,636
7,538
98
2,000
9,636
108
109
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 Consolidated statements of changes in equity
Attributable to securityholders of Stockland
Attributable to securityholders of Trust
Other reserves
Note
Issued
capital
Executive
remuneration
Cash flow
hedge
Fair value
hedge
Retained
earnings
Equity
$M
Balance at 1 July 2017
Profit for the year
Other comprehensive income, net of tax
Total comprehensive income
Dividends and distributions
Securities issued under DRP
Expense relating to Security Plans, net of tax
Acquisition of treasury securities
Securities vested under Security Plans
Securities lapsed under Security Plans
Other movements
Balance at 30 June 2018
4
19
31
19
19
Adoption of new accounting standards
35
Balance at 1 July 2018
Profit for the year
Other comprehensive income, net of tax
Total comprehensive income
Dividends and distributions
Expense relating to Security Plans, net of tax
Acquisition of treasury securities
Securities vested under Security Plans
Securities lapsed under Security Plans
Securities buy-back
Other movements
Balance at 30 June 2019
4
31
19
19
19
8,790
–
–
–
–
67
–
(20)
13
–
60
8,850
–
8,850
–
–
–
–
–
(15)
14
–
(192)
(193)
8,657
40
–
–
–
–
–
15
–
(13)
(1)
1
41
–
41
–
–
–
–
12
–
(14)
(2)
–
(4)
37
38
–
22
22
–
–
–
–
–
–
–
60
–
60
–
(6)
(6)
–
–
–
–
–
–
–
54
15
–
(15)
(15)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,044
1,025
–
1,025
(645)
–
–
–
–
1
9,927
1,025
7
1,032
(645)
67
15
(20)
–
–
(644)
(583)
1,425
10,376
3
3
1,428
10,379
311
–
311
311
(6)
305
(661)
(661)
–
–
–
2
–
(659)
12
(15)
–
–
(192)
(856)
1,080
9,828
$M
Balance at 1 July 2017
Profit for the year
Other comprehensive income, net of tax
Total comprehensive income
Dividends and distributions
Securities issued under DRP
Expense relating to Security Plans, net of tax
Acquisition of treasury securities
Securities vested under Security Plans
Transfer of lapsed securities under Security Plans
Other movements
Balance at 30 June 2018
Adoption of new accounting standards
Balance at 1 July 2018
Profit for the year
Other comprehensive income, net of tax
Total comprehensive income
Dividends and distributions
Expense relating to Security Plans, net of tax
Acquisition of treasury securities
Securities vested under Security Plans
Securities lapsed under Security Plans
Securities buy-back
Other movements
Balance at 30 June 2019
Other reserves
Note
Issued
capital
Executive
remuneration
Cash
flow hedge
Undistributed
income
Equity
7,480
–
–
–
–
64
–
(19)
13
–
58
7,538
–
7,538
–
–
–
–
–
(15)
14
–
(178)
(179)
7,359
4
19
31
19
19
35
4
31
19
19
19
37
–
–
–
–
–
15
–
(13)
(1)
1
38
–
38
–
–
–
–
12
–
(14)
(2)
–
(4)
34
38
–
22
22
–
–
–
–
–
–
–
60
–
60
–
(6)
(6)
–
–
–
–
–
–
–
1,932
9,487
712
–
712
712
22
734
(645)
(645)
–
–
–
–
1
(644)
2,000
(8)
64
15
(19)
–
–
(585)
9,636
(8)
1,992
9,628
242
–
242
242
(6)
236
(661)
(661)
–
–
–
2
–
12
(15)
–
–
(178)
(659)
(842)
54
1,575
9,022
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
110
111
Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 Consolidated statement of cash flow
Notes to the financial statements
Year ended 30 June
$M
Receipts in the course of operations (including GST)
Payments in the course of operations (including GST)
Payments for land
Distributions received from equity-accounted investments
Receipts from Retirement Living residents
Payments to Retirement Living residents, net of DMF
Interest received
Interest paid
Net cash flows from operating activities
27
Proceeds from sale of investment properties
Payments for and development of investment properties:
• Commercial Property
• Retirement Living
Payments for plant and equipment and software
Proceeds from sale of/capital returns from investments
Payments for investments (including equity-accounted)
Distributions received from other entities
Loans to related entities
Net cash flows from investing activities
On-market buy-back
Payment for treasury securities under Security Plans
Proceeds from borrowings
Repayment of borrowings
Payments for derivatives and financial instruments
Dividends and distributions paid (net of DRP)
Net cash flows from financing activities
Net movement in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
19
19
27
27
4
Stockland
Trust
Note
2019
2,797
(1,805)
2018
3,055
(1,785)
(496)
30
272
(150)
3
(201)
728
278
(463)
(213)
(58)
29
–
1
–
(426)
–
(20)
2,510
(576)
51
295
(172)
4
(200)
394
329
(290)
(149)
(51)
25
(2)
1
–
(137)
(192)
(15)
2,426
(1,969)
(2,136)
(1,969)
(47)
(653)
(450)
(193)
333
140
–
(561)
(207)
95
238
333
(47)
(653)
(436)
(152)
215
63
2019
906
(430)
–
32
–
–
284
(200)
592
260
2018
917
(415)
–
30
–
–
268
(201)
599
260
(338)
(464)
–
–
–
(2)
1
(229)
(308)
(178)
(15)
2,426
–
–
–
–
1
(92)
(295)
–
(19)
2,510
(2,136)
–
(561)
(206)
98
117
215
Contents
Basis of preparation
Group performance
114
116
Taxation
156
20. Income tax .....................................................................156
21. Deferred tax .................................................................... 157
1. Revenue ............................................................................ 116
2. Operating segments ........................................................ 118
Group structure
158
3. EPS ....................................................................................121
22. Equity-accounted investments ......................................158
4. Dividends and distributions .............................................122
23. Other arrangements ......................................................159
5. Events subsequent to the end of the year ........................122
24. Controlled entities ........................................................ 160
Operating assets and liabilities
123
6. Inventories ....................................................................... 123
7. Commercial properties ....................................................126
25. Deed of Cross Guarantee ...............................................163
26. Parent entity disclosures ...............................................164
Other items
165
8. Retirement Living ............................................................. 133
27. Notes to the consolidated statement of cash flow ........165
9. Receivables ...................................................................... 137
28. Contingent liabilities ......................................................166
10. Payables ......................................................................... 137
29. Commitments ................................................................166
11. Intangible assets .............................................................138
30. Related party disclosures ..............................................167
12. Non-current assets held for sale ....................................139
31. Personnel expenses ........................................................168
Capital structure and financing costs
140
32. Key management personnel disclosures .......................168
33. Auditor’s remuneration ..................................................169
13. Net financing costs ....................................................... 140
34. Accounting policies ........................................................169
14. Cash and cash equivalents ............................................. 141
35. Changes in accounting policies .......................................171
15. Borrowings ...................................................................... 141
16. Other financial assets and liabilities ...............................144
17. Fair value hierarchy .........................................................146
18. Financial risk factors .......................................................148
19. Issued capital .................................................................153
The above consolidated statement of cash flow should be read in conjunction with the accompanying notes.
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Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 Basis of preparation
IN THIS SECTION
This section sets out the basis upon which the Group’s financial statements are prepared as a whole. Specific accounting policies are
described in the section to which they relate.
A glossary containing acronyms and defined terms is included at the back of this Report.
Stockland represents the consolidation of Stockland Corporation Limited and its controlled entities and Stockland Trust and its controlled
entities. Stockland Corporation Limited and Stockland Trust were both incorporated or formed and are domiciled in Australia.
Stockland is structured as a stapled entity: a combination of a share in Stockland Corporation and a unit in Stockland Trust that are together
traded as one security on the Australian Securities Exchange. The constitutions of Stockland Corporation Limited and Stockland Trust provide
that, for so long as the two entities remain jointly quoted, the number of shares in Stockland Corporation Limited and the number of units in
Stockland Trust shall be equal and that the shareholders and unitholders be identical. The stapling arrangement will cease upon the earlier
of either the winding up of Stockland Corporation Limited or Stockland Trust or either entity terminating the stapling arrangement.
The Financial Report as at and for the year ended 30 June 2019.
BASIS OF PREPARATION
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued
by the Australian Accounting Standards Board and the Corporations Act 2001. Stockland Corporation Limited and Stockland Trust are both for-
profit entities for the purpose of preparing the financial statements.
As permitted by Class Order 13/1050, issued by ASIC, these financial statements are combined financial statements that present the financial
statements and accompanying notes of both Stockland and Trust.
The financial statements are presented in Australian dollars, which is Stockland Corporation Limited’s and Stockland Trust’s functional currency
and the functional currency of the majority of Stockland and Trust’s subsidiaries.
Historical cost convention
The financial statements have been prepared on a going concern basis using historical cost conventions, except for investment properties
(including non-current assets held for sale), derivative financial instruments, certain financial assets and liabilities which are stated at their
fair value.
Compliance with International Financial Reporting Standards
The financial statements of both Stockland and Trust also comply with International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board.
New and amended Accounting Standards
Stockland has adopted AASB 9 Financial Instruments and AASB 15 Revenue from Contracts with Customers on 1 July 2018. AASB 9 addresses the
recognition, classification and measurement of financial assets and liabilities; derecognition of financial instruments; impairment of assets; and
hedge accounting. AASB 15 contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a
point in time and over time.
There have been no significant changes to the group’s financial performance and position as a result of the adoption of the new and amended
accounting standards and interpretations.
The impact of the adoption of these standards is disclosed in note 35.
Rounding
In accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, amounts in the Financial Report have
been rounded to the nearest million dollars, unless otherwise stated.
Net current asset deficiency position
Stockland and the Trust generated positive cash flows from operations of $394 million and $592 million respectively during the year. Undrawn
bank facilities of $745 million (refer to note 15) are also available should they need to be drawn. In addition, Stockland and the Trust have the
ability to refinance their existing external borrowings and raise new external debt if required. Based on the cash flow forecast for the next twelve
months, Stockland and the Trust will be able to pay their debts as and when they become due and payable. Accordingly, the financial statements
have been prepared on a going concern basis.
Stockland and the Trust have prima facie net current assets deficiencies of $2,320 million and $464 million respectively at 30 June 2019
(2018: Stockland $3,008 million, Trust $427 million).
STOCKLAND
In relation to Stockland, a number of liabilities are classified as current under Accounting Standards that are not expected to result in actual net
cash outflows within the next twelve months (in particular Retirement Living resident obligations). Similarly, some assets held as non-current
will generate cash income in the next twelve months (including Retirement Living DMF included within Retirement Living investment properties,
development work in progress and vacant stock).
Furthermore, current inventories are held on the balance sheet at the lower of cost and net realisable value, whereas most of these are expected
to generate cash inflows above the carrying value.
In relation to current Retirement Living resident obligations for existing residents (2019: $2,490 million; 2018: $2,567 million), approximately 6%
(2018: 7%) of residents are estimated to depart their dwelling each year and therefore it is not expected that the majority of the obligations to
residents will fall due within one year. In the vast majority of transactions involving the turnover of units, the resident obligations will be repaid
from receipts from incoming residents. However, resident obligations are classified as current under the definitions in the Accounting Standards
as there is no unconditional contractual right to defer settlement for at least twelve months (residents may give notice of their intention to
vacate their unit with immediate effect). In contrast, the corresponding Retirement Living assets are classified as non-current under the
Accounting Standards as the majority are not expected to be realised within twelve months.
TRUST
The deficiency in the Trust primarily arises due to the intergroup loan receivable from the Company which is classified as a non-current asset.
SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS
The Group makes estimates and assumptions concerning the future. The estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying amount of assets and liabilities within the next financial year are discussed in this Financial Report.
Estimates and judgements are continually evaluated and are based on historical experience as adjusted for current market conditions and other
factors, including expectations of future events that are believed to be reasonable under the circumstances.
Assumptions underlying management’s estimates of fair value and recoverability are:
• Inventories – assumptions underlying net realisable value and profit margin recognition and Whole of Life (WOL) accounting – Note 6
• Commercial properties – assumptions underlying fair value – Note 7
• Retirement Living – assumptions underlying fair value – Note 8
• Goodwill – assumptions underlying recoverable value – Note 11
• Software – assumptions underlying recoverable value – Note 11
• Derivatives – assumptions underlying fair value – Note 16
• Valuation of security based payments – assumptions underlying fair value – Note 19
• Tax losses – assumptions underlying recognition and recoverability – Note 21
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Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 Group performance
IN THIS SECTION
This section explains the results and performance of the Group. It provides additional information about those individual line items in the
financial statements that the Directors consider most relevant in the context of the operations of the Group, including analysis of the result
for the period by reference to key areas such as revenue and results by operating segment.
1. REVENUE
Year ended 30 June 2019
$M
Rental income1
Outgoings recoveries2
Rent from investment properties
Property development sales3
DMF revenue1
Other revenue
Revenue
Amortisation of lease incentives
Straight-lining of lease revenue
Unrealised DMF revenue1
Segment revenue
Year ended 30 June 2018
$M
Rental income1
Outgoings recoveries2
Rent from investment properties
Property development sales3
DMF revenue1
Other revenue
Revenue
Amortisation of lease incentives
Straight-lining of lease revenue
Unrealised DMF revenue1
Segment revenue
Residential
Retirement
Living
Communities
sub-total
Commercial
Property
Other
Stockland
Trust
–
–
–
1,819
–
10
1,829
–
–
–
1,829
1
–
1
45
99
–
145
–
–
(26)
119
1
–
1
1,864
99
10
1,974
–
–
(26)
1,948
703
80
783
–
–
10
793
71
(3)
–
861
–
–
–
–
–
1
1
–
–
–
1
704
80
784
1,864
99
21
704
80
784
–
–
6
2,768
790
71
(3)
(26)
2,810
Residential
Retirement
Living
Communities
sub-total
Commercial
Property
Other
Stockland
Trust
–
–
–
1,830
–
8
1,838
–
–
–
1,838
–
–
–
16
107
–
123
–
–
(31)
92
–
–
–
1,846
107
8
1,961
–
–
(31)
1,930
700
80
780
22
–
11
813
62
(5)
–
870
–
–
–
–
–
1
1
–
–
–
1
700
80
780
1,868
107
20
696
80
776
–
–
5
2,775
781
62
(5)
(31)
2,801
1
Commercial Property rental income and Retirement Living DMF revenue continue to meet the definition of a lease arrangement and fall outside the scope of AASB 15
and is therefore accounted for in accordance with AASB 117 Leases.
2 Revenue related to outgoing recoveries is recognised under AASB 15 over time in the accounting period in which the performance obligations are met.
3 Property development sales revenue is recognised under AASB 15 at a point in time when control of the asset passes to the customer.
Rent from investment properties includes $4 million (2018: $5 million) contingent rents billed to tenants. Contingent rents are derived from the
tenants’ revenues and represent 1% (2018: 1%) of gross lease income.
Refer to note 2 for disclosures related to Stockland reportable segments.
A. Disaggregation of revenue from property development sales
Residential revenue from property development by major product and geographical area is disaggregated as follows:
Year ended 30 June 2019
$M
Residential community
Apartments
Medium density development
Property development sales
Year ended 30 June 2018
$M
Residential community
Apartments
Medium density development
Property development sales
NSW
476
–
159
635
NSW
498
–
112
610
QLD
468
40
30
538
QLD
553
–
34
587
VIC
468
–
24
492
VIC
407
–
30
437
WA
147
–
7
154
WA
189
–
7
196
Residential
1,559
40
220
1,819
Residential
1,647
–
183
1,830
PROPERTY DEVELOPMENT SALES
Revenue from land and property sales is recognised when control over the property has been transferred to the customer. The properties have
generally no alternative use for the Group due to contractual restrictions. However, an enforceable right to payment does not arise until legal
title, and therefore control of the asset, has passed to the customer. Therefore, revenue is recognised at a point in time when legal title, and
therefore control of the asset, has passed to the customer.
RENT FROM INVESTMENT PROPERTIES
Rent from investment properties includes lease revenue and outgoings recoveries associated with general building and tenancy operation from
lessees in accordance with specific clauses within lease agreements.
Lease revenue is recognised on a straight-line basis over the lease term, net of any incentives.
Outgoing recoveries are typically invoiced monthly based on an annual estimate. The consideration for the current month is typically due on
the first day of the month. Revenue related to outgoings recoveries is recognised over time as the estimated costs are consumed by the tenant.
Should any adjustment be required based on actual costs incurred, this is recognised in the balance sheet within the same reporting period and
billed annually.
DEFERRED MANAGEMENT FEE (DMF) REVENUE
The DMF is recognised over the tenancy period and includes both fixed fees recognised on a straight-line basis and contingent fees recognised
when earned.
The DMF calculated on the entry price of the unit is recognised each period; however, fees are only realised in cash at the end of the
residents tenure.
The DMF calculated on the exit price of the unit is recognised and realised in cash at the end of the resident’s tenure.
DIVIDENDS AND DISTRIBUTIONS
Revenue from dividends and distributions are recognised in profit or loss on the date they are declared by the relevant entity but are only
recognised in the statement of cash flows upon receipt.
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Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 2. OPERATING SEGMENTS
STOCKLAND
Stockland has four reportable segments, as listed below:
• Commercial Property – invests in, develops and manages retail town centres, logistics and workplace properties;
• Residential – delivers a range of masterplanned and mixed use residential communities in growth areas and townhouses and apartments in
general metropolitan areas;
• Retirement Living – designs, develops and manages communities for over 55s and retirees; and
• Other – dividends/distributions from strategic investments and other items which are not able to be classified within any of the other defined
segments.
Together, Residential and Retirement Living represent Stockland’s Communities business.
Measurement of segment results
FFO is a non-IFRS measure that is designed to present, in the opinion of the Chief Operating Decision Maker (CODM), the results from ongoing
operating activities in a way that appropriately reflects the Group’s underlying performance. FFO is the primary basis on which dividends and
distributions are determined and together with expected capital returns and AFFO impacts, reflects the way the business is managed and
how the CODM assesses the performance of the Group. It excludes costs of a capital nature and profit or loss made from realised transactions
occurring infrequently and those that are outside the course of Stockland’s core ongoing business activities. FFO also excludes income tax items
that do not represent cash payments.
A reconciliation from FFO to profit after tax is presented in note 2.B.
AFFO is an alternative, secondary, non-IFRS measure used by the CODM to assist in the assessment of the underlying performance of the Group.
AFFO is calculated by deducting maintenance capital expenditure and incentive and leasing costs from FFO.
There is no customer who accounts for more than 10% of the gross revenues of Stockland.
TRUST
The Trust has one reportable segment in which it operates, being Commercial Property. Therefore no separate segment note has been prepared.
The CODM monitors the performance of the Trust in a manner consistent with that of the financial statements. Refer to the consolidated
statement of comprehensive income for the segment financial performance and the consolidated balance sheet for the total assets and
liabilities.
There is no customer who accounts for more than 10% of the gross revenues of the Trust.
A. FFO and AFFO
The contribution of each reportable segment to FFO and AFFO may be summarised as follows:
Year ended 30 June 2019
$M
Segment revenue1,2
Segment EBIT1,2
Amortisation of lease fees
Interest expense in cost of sales
Segment FFO3
Finance income
Finance expense
Unallocated corporate and other expenses
FFO
Maintenance capital expenditure4
Incentives and leasing costs5
AFFO
Year ended 30 June 2018
$M
Segment revenue1,2
Segment EBIT1,2
Amortisation of lease fees
Interest expense in cost of sales
Segment FFO3
Finance income
Finance expense
Unallocated corporate and other expenses
FFO
Maintenance capital expenditure4
Incentives and leasing costs5
AFFO
Residential
Retirement
Living
Communities
sub-total
Commercial
Property
Other
Stockland
1,829
455
–
(93)
362
119
62
–
(6)
56
1,948
517
–
(99)
418
861
607
16
–
623
1
–
–
–
–
2,810
1,124
16
(99)
1,041
4
(87)
(61)
897
(47)
(70)
780
Residential
Retirement
Living
Communities
sub-total
Commercial
Property
Others
Stockland
1,838
435
–
(99)
336
92
56
–
(3)
53
1,930
491
–
(102)
389
870
607
14
(7)
614
1
–
–
–
–
2,801
1,098
14
(109)
1,003
3
(77)
(66)
863
(51)
(56)
756
1
Commercial Property segment revenue and EBIT adds back $71 million (2018: $62 million) of amortisation of leases incentives and excludes $3 million (2018: $5 million)
of straight-line rent adjustments.
2 Retirement Living segment revenue and EBIT exclude $26 million (2018: $31 million) of unrealised DMF revenue.
3 Commercial property segment FFO includes share of profits from equity-accounted investments of $30 million (2018: $29 million).
4 Maintenance capital expenditure includes $9 million (2018: $7 million) of Retirement Living maintenance capital expenditure.
5 Excludes centres under development.
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Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 B. Reconciliation of FFO to profit after tax
FFO excludes adjustments such as unrealised fair value gains/losses, realised transactions occurring infrequently and those that are outside the
course of our core ongoing business activities.
3. EPS
KEEPING IT SIMPLE
EPS is the amount of post-tax profit attributable to each security.
Basic EPS is calculated as statutory profit for the year divided by the weighted average number of securities outstanding. This is highly
variable as it includes unrealised fair value movements in investment properties and financial instruments.
Diluted EPS adjusts the basic EPS for the dilutive effect of any instruments, such as Security Plan rights, that could be converted into
securities.
Basic FFO per security is disclosed in note 4 and more directly reflects underlying income performance of the portfolio.
A. Basic and diluted EPS
Year ended 30 June
$M
Basic EPS
Diluted EPS
B. Earnings used in calculating earnings per share
Year ended 30 June
$M
Profit attributable to securityholders
Stockland
Trust
2019
13.0
13.0
2018
42.3
42.2
2019
10.1
10.1
2018
29.4
29.3
Stockland
Trust
2019
311
2018
1,025
2019
242
2018
712
C. Weighted average number of securities used as the denominator
Year ended 30 June
Shares
Stockland and Trust
2019
2018
Weighted average number of securities used in calculating basic EPS
2,400,974,898
2,424,182,812
Effect of rights and securities granted under Security Plans
3,154,024
5,371,202
Weighted average number of securities used in calculating diluted EPS
2,404,128,922
2,429,554,014
Rights and securities granted under Security Plans are only included in diluted earnings per security where Stockland is meeting performance
hurdles for contingently issuable security based payment rights.
Year ended 30 June ($M)
FFO
Adjust for:
Amortisation of lease incentives and lease fees
Straight-line rent
Net unrealised change in fair value of Commercial investment properties
Net unrealised change in fair value of Retirement Living investment properties & obligation
Unrealised DMF Revenue
Net gain/(loss) on financial instruments
Net gain/(loss) other financial assets
Net gain/(loss) on sale of other non-current assets
Net reversal of impairment of inventories
Impairment of Retirement Living goodwill
Restructuring cost
Income tax – non-cash
Profit after tax
Footnote
A
B
C
D
2019
897
(87)
3
(202)
(76)
26
(140)
–
(21)
1
(38)
(5)
(47)
311
2018
863
(76)
5
133
(25)
31
(7)
26
16
–
–
–
59
1,025
A Includes Stockland’s share of revaluation relating to properties held through joint ventures (2019: $24 million gain; 2018: $40 million gain).
B Reversal of write down of carrying value of Residential projects.
C Write-down of goodwill associated with historic Retirement Living acquisitions.
D One-off restructuring cost associated with the significant Executive reorganisation this year to improve operational efficiencies and position the business for
sustainable growth in the future.
C. Balance sheet by operating segment
Year ended 30 June 2019
$M
Real estate related assets1,2
Other assets
Assets
Retirement Living resident obligations
Borrowings
Other liabilities
Liabilities
Net assets/(liabilities)
Year ended 30 June 2018
$M
Real estate related assets1,2
Other assets
Assets
Retirement Living resident obligations
Borrowings
Other liabilities
Liabilities
Net assets/(liabilities)
Residential
Retirement
Living
Communities
sub-total
Commercial
Property Unallocated
Stockland
3,411
164
3,575
–
–
951
951
2,624
4,037
85
4,122
2,597
–
20
2,617
1,505
7,448
249
7,697
2,597
–
971
3,568
4,129
10,323
57
10,380
–
–
157
157
36
886
922
–
4,704
742
5,446
10,223
(4,524)
17,807
1,192
18,999
2,597
4,704
1,870
9,171
9,828
Residential
Retirement
Living
Communities
sub-total
Commercial
Property Unallocated
Stockland
3,432
102
3,534
–
–
1,385
1,385
2,149
4,167
93
4,260
2,741
–
11
2,752
1,508
7,599
195
7,794
2,741
–
1,396
4,137
3,657
10,562
46
10,608
–
–
148
148
10,460
37
852
889
–
3,938
692
4,630
(3,741)
18,198
1,093
19,291
2,741
3,938
2,236
8,915
10,376
Includes non-current assets held for sale, inventories, investment properties, equity-accounted investments and certain other assets.
1
2 Includes equity-accounted investments of $612 million (2018: $588 million) in Commercial Property and $nil (2018: $25 million) in Residential.
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STOCKLAND CORPORATION LIMITED
There was no dividend from Stockland Corporation Limited during the current or the previous financial year.
The dividend franking account balance as at 30 June 2019 is $14 million based on a 30% tax rate (2018: $14 million).
TRUST
For the current year, the interim and final distributions are paid solely out of the Trust and therefore the franking percentage is not relevant,
as the Trust is not subject to tax.
Trust
Date of payment
Cents per security
Amount ($M)
Non attributable (%)
2019
2018
Interim distribution
28 February 2019
28 February 2018
Final distribution
30 August 2019
31 August 2018
Total distribution
2019
13.5
14.1
27.6
2018
2019
2018
13.0
13.5
26.5
325
336
661
316
329
645
2019
21.9
28.4
2018
21.9
21.9
The non-attributable component represents the amount distributed in excess of the Stockland Trust’s taxable income (disregarding any Capital
Gains Tax discount applied to any capital gains derived by Stockland Trust in the year).
BASIS FOR DISTRIBUTION
Stockland’s distribution policy is to pay the higher of 100 per cent of Trust taxable income or 75 – 85 per cent of FFO over time.
The payout ratio for the current and comparative periods may be summarised as follows:
Year ended 30 June
$M
FFO1
Weighted average number of securities used in calculating basic EPS
FFO per security
Distribution per security for the year
Payout ratio
Note
2
3
4
2019
897
2018
863
2,400,974,898
2,424,182,812
37.4
27.6
74%
35.6
26.5
75%
1 FFO is a non-IFRS measure. A reconciliation from FFO to statutory profit is presented in note 2 and the statutory EPS disclosure is provided in note 3.
For FY19, payout ratio is marginally below target range mainly due to changes in weighted average number of securities.
5. EVENTS SUBSEQUENT TO THE END OF THE YEAR
STOCKLAND AND TRUST
On 4 July 2019, Stockland announced a capital partnership agreement for its Aura project with Capital Property Group (CPG). CPG has invested
a 50 per cent interest in the project at approximately 30 per cent premium to book value.
The Aura project, which is located in the Sunshine Coast, comprises a total of 12,697 remaining lots of which 226 have been sold (not settled).
The project also includes medium/high density residential super lots for up to 4,000 units, approximately 136.5 ha of business parks, retail
centre sites and educational sites. Following completion, the project will be accounted for as a joint operation. Accordingly Stockland will
recognise in its financial statements its share of the assets, liabilities, revenue and expense of this joint arrangement.
Subsequent to the end of the year, contracts were also exchanged for the following transactions:
• sale of Stockland Cammeray, Cammeray NSW for a gross consideration1 of $39 million;
• sale of Stockland Jesmond, Newcastle NSW for a gross consideration1 of $118 million;
• sale of the Group's 50% interest in the The King Trust for a gross consideration1 of $340 million; and
• acquisition of the remaining 50% Stockland Piccadilly, 133-145 Castlereagh Street, Sydney NSW for a gross consideration1 of $347 million.
Other than disclosed elsewhere in this report, there has not arisen in the interval between the end of the current financial year and the date
of this report any item, transaction or event of a material or unusual nature, likely, in the opinion of the Directors, to affect significantly the
operations, the results of operations, or the state of the affairs in future years of Stockland and the Trust.
1 Consideration before completion adjustments such as committed capital expenditures, incentives, rental guarantees and/or net working capital.
Operating assets and liabilities
IN THIS SECTION
This section shows the real estate and other operating assets used to generate the Group’s trading performance and the liabilities incurred
as a result.
6. INVENTORIES
KEEPING IT SIMPLE
Whole of Life (WOL)
A Whole of Life (WOL) methodology is applied to calculate the margin percentage over the life of each project. All costs, including those
costs spent to date and those forecast in the future, are allocated proportionally in line with net revenue for each lot to achieve a WOL
margin percentage. The WOL margin percentage and therefore allocation of costs can change as revenue and costs forecast are updated
to reflect market conditions not previously forecasted, and as projects proceed towards completion.
The determination of the WOL margin percentage requires significant judgement in estimating future revenues and costs. The WOL margin
percentages are regularly reviewed and updated in our project forecasts across the reporting period to ensure these estimates reflect
market conditions through the cycle.
30 June
$M
Cost of acquisition
Development and other costs
Interest capitalised
Impairment provision
Finished development stock held for sale1
Cost of acquisition
Development and other costs
Interest capitalised
Impairment provision
Residential communities
Cost of acquisition
Development and other costs
Interest capitalised
Impairment provision
Apartments
Cost of acquisition
Development and other costs
Interest capitalised
Impairment provision
Logistics
Cost of acquisition
Development and other costs
Interest capitalised
Impairment provision
Aspire villages
Development work in progress
Inventories
Stockland
2019
2018
Current
Non-current
Total
Current
Non-current
Total
95
291
37
(12)
411
354
137
93
(21)
563
10
6
1
–
17
5
1
1
–
7
2
5
–
–
7
–
–
–
–
–
95
291
37
(12)
411
1,665
2,019
486
290
(107)
2,334
101
4
1
–
106
54
6
1
(9)
52
3
5
–
–
8
623
383
(128)
2,897
111
10
2
–
123
59
7
2
(9)
59
5
10
–
–
15
594
1,005
2,500
3,094
2,500
3,505
38
115
21
(2)
172
326
156
49
(16)
515
–
–
–
–
–
10
–
1
–
11
4
12
1
–
17
543
715
–
–
–
–
–
1,957
475
350
(147)
2,635
65
10
1
–
76
19
4
1
(9)
15
7
16
1
–
24
38
115
21
(2)
172
2,283
631
399
(163)
3,150
65
10
1
–
76
29
4
2
(9)
26
11
28
2
–
41
2,750
2,750
3,293
3,465
1
Mainly comprises residential communities. Current finished development stock held for sale includes Logistics projects of $3 million (2018: $2 million) and Aspire
villages of $30 million (2018: $5 million). No apartments are included in finished development stock held for sale (2018: $nil).
122
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Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 The following impairment provisions are included in the inventories balance with movements for the year recognised in the profit or loss:
ALLOCATION OF INVENTORIES TO COST OF SALES
$M
Balance at 1 July 2018
Amounts utilised
Reversal of provisions previously recognised
Additional provisions created
Balance at 30 June 2019
DEVELOPMENT COST PROVISIONS
Residential
Communities
Apartments
Logistics Aspire villages
Total
165
(24)
(5)
4
140
–
–
–
–
–
9
–
–
–
9
–
–
–
–
–
These provisions are recorded as a separate liability on the balance sheet with a corresponding asset in inventories:
30 June
$M
2019
Current
Non-current
Development costs provision
343
370
2018
Total
713
Current
Non-current
567
356
Balance at 1 July 2018
Additional provisions
Amounts utilised
Balance at 30 June 2019
174
(24)
(5)
4
149
Total
923
$M
923
422
(632)
713
A Whole of Life (WOL) methodology is applied to calculate the margin percentage for each project. All costs, including those costs spent to
date and those forecast in the future, are allocated proportionally in line with net revenue for each lot to achieve a WOL margin percentage.
The WOL margin percentage and therefore allocation of costs can change as revenue and cost forecasts are updated to reflect changing market
conditions not previously forecasted, and as projects proceed towards completion.
IMPAIRMENT PROVISION
The net realisable value of inventories is the estimated selling price in the ordinary course of business less estimated costs of completion and
costs to sell. Net realisable value is based on the most reliable evidence available at the time of the amount the inventories are expected to be
realised (using estimates such as revenue escalations) and the estimate of total costs (including costs to complete). These estimates take into
consideration fluctuations of price or cost directly relating to events occurring after the end of the period to the extent that such events confirm
conditions existing at the end of the period. This is an area of accounting estimation and judgement for the Group.
Each reporting period, key estimates are reviewed including the costs of completion, dates of completion and revenue escalations. For the year
ended 30 June 2019, a net impairment reversal of $1 million was recognised (2018: $nil) as a result of this review.
DEVELOPMENT COST PROVISIONS
The development cost provisions relate to obligated future costs. They are determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
Properties held for development and resale are stated at the lower of cost and net realisable value. Cost includes the costs of acquisition,
development and holding costs such as borrowing costs, rates and taxes. Holding costs incurred after completion of development activities
are expensed. Inventory is classified as current if it is expected to be settled within 12 months or otherwise classified as non-current.
COST OF ACQUISITION
The cost of acquisition comprises the purchase price of the land, including land under option, along with any direct costs incurred as part of the
acquisition including legal, valuation and stamp duty costs.
The payments for land of $576 million (2018: $496 million) reported in the cash flow statements are in respect of land that will be developed
in the short term as well as long term.
LAND UNDER OPTIONS
Stockland has a number of arrangements with third parties primarily relating to the purchase of land on capital efficient terms, through call or
put and call option arrangements.
Where the arrangement uses call options only, the decision to proceed with a purchase is controlled by Stockland. A future obligation under a
call option is only triggered if Stockland exercises the option. No asset or liability for the land under option is recognised on the balance sheet
until the option has been exercised. The call option is not disclosed as a capital commitment as there is no commitment to purchase until the
option is exercised.
Where the arrangement includes both put and call options and the put option requires Stockland to purchase the land at the discretion
of the seller, it creates a present obligation once the option is exercised by the holder. If Stockland also presently exhibits control over the
future economic benefits of the asset such as via a presently exercisable call option or physical control of the asset, the land is recognised in
inventories with a corresponding liability recognised in provisions for development costs at the exercise price of the option.
For both put and call options, any costs incurred in relation to the options including option fees are included in inventories.
DEVELOPMENT AND OTHER COSTS
Cost includes variable and fixed costs directly related to specific contracts, costs related to general contract activity which can be allocated
to specific projects on a reasonable basis, and other costs specifically chargeable under the contract including under rectification provisions.
INTEREST CAPITALISED
Financing costs on qualifying assets are also included in the cost of inventories. Finance costs were capitalised at interest rates ranging from
4.0 to 5.0% during the financial year (2018: 5.0 to 5.6%).
124
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Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 7. COMMERCIAL PROPERTIES
As at 30 June
$M
Retail Town Centres
Logistics
Workplace
Retirement Living1
Capital works in progress and sundry properties
Book value of commercial properties
Less amounts classified as:
• costs to complete provision
• property, plant and equipment
• non-current assets held for sale
Stockland
Trust
2019
2018
2019
6,726
7,282
6,724
2018
7,233
2,537
2,229
2,537
2,229
891
20
190
867
10
208
925
–
133
871
–
111
10,364
10,596
10,319
10,444
(42)
(43)
(171)
–
(42)
–
(43)
(65)
(171)
(22)
–
–
• other assets (including lease incentives and fees)
• other assets (including lease incentives and fees) attributable to equity-accounted investments
• other receivables (straight-lining of rental income)
• other receivables (straight-lining rental income) attributable to equity-accounted investments
Investment properties (including Stockland’s share of investment properties held by
equity-accounted investments)
(273)
(263)
(280)
(270)
(5)
(74)
(10)
(6)
(72)
(11)
(5)
(77)
(10)
(6)
(75)
(11)
9,746
10,136
9,734
10,060
Less: Stockland’s share of investment properties held by equity-accounted investments
(601)
(573)
(601)
(573)
Investment properties
9,145
9,563
9,133
9,487
1
The investment property balance at 30 June 2019 includes $20 million of healthcare and childcare centre commercial properties held by the Retirement Living
business (2018: $10 million) to be leased to tenants under commercial leases.
NET CARRYING VALUE MOVEMENTS
$M
Balance at 1 July
Acquisitions
Expenditure capitalised
Transfers to non-current assets held for sale
Transfers to inventories
Disposals
Net change in fair value
Balance at 30 June
Stockland
Trust
2019
2018
2019
9,563
9,285
9,487
2018
9,186
7
415
(22)
–
7
421
(64)
(10)
10
309
(171)
–
(172)
(266)
(167)
96
(236)
68
9,145
9,563
9,133
9,487
17
260
(171)
(29)
(267)
(228)
Stockland
$M
Directly owned
Stockland Green Hills, East Maitland NSW
Stockland Shellharbour, Shellharbour NSW1
Stockland Wetherill Park, Western Sydney NSW
Stockland Merrylands, Merrylands NSW
Stockland Rockhampton, Rockhampton QLD
Stockland Glendale, Newcastle NSW
Stockland Point Cook, Point Cook VIC
Stockland Burleigh Heads, Burleigh Heads QLD2
Stockland Baldivis, Baldivis WA
Stockland Cairns, Cairns QLD
Stockland Hervey Bay, Hervey Bay QLD
Stockland Townsville, Townsville QLD (50%)2, 3
Stockland The Pines, Doncaster East VIC
Stockland Wendouree, Wendouree VIC
Stockland Forster, Forster NSW
Stockland Balgowlah, Balgowlah NSW
Stockland Baulkham Hills, Baulkham Hills NSW
Stockland Bundaberg, Bundaberg QLD
Stockland Gladstone, Gladstone QLD
Stockland Caloundra, Caloundra QLD4
Stockland Jesmond, Newcastle NSW
Stockland Nowra, Nowra NSW
Stockland Traralgon, Traralgon VIC
Stockland Bull Creek, Bull Creek WA
Stockland Birtinya, QLD2
Stockland Tooronga, Tooronga VIC5
Stockland Harrisdale Complex, Harrisdale WA
Shellharbour Retail Park, Shellharbour NSW
Stockland Cammeray, Cammeray NSW
North Shore Townsville, Townsville QLD
Stockland Townsville Kingsvale Sunvale, Aitkenvale QLD (50%)3, 9
Dec-18
Stockland Cleveland, Cleveland QLD6
Stockland Kensington, Kensington QLD6
Stockland Bathurst, Bathurst NSW6
Stockland Highlands, Craigieburn VIC6, 7
Woolworths Toowong, Toowong QLD8
Owned through equity-accounted investments
–
–
–
–
–
Independent
valuation
Independent valuers’
capitalisation rate %
Book value
Date
$M
2019
2018
2019
2018
Jun-19
Jun-19
Jun-19
Jun-19
Jun-19
Jun-19
Jun-19
Jun-19
Jun-19
Jun-19
Jun-19
Jun-19
Dec-18
Dec-18
Jun-19
Jun-19
Jun-19
Jun-19
Jun-19
Dec-18
Jun-19
Jun-19
Dec-18
Jun-19
Jun-19
Jun-18
Dec-18
Jun-19
Jun-19
Jun-19
820
727
722
573
359
330
238
5.50
5.50
5.25
5.50
6.00
6.00
6.50
5.75
5.50
5.25
5.50
6.00
5.75
6.25
191
6.50 – 7.00
6.50 – 7.00
190
183
185
183
180
180
177
154
151
146
130
132
118
121
95
88
69
62
58
65
38
17
5
–
–
–
–
–
6.25
6.50
6.50
5.88
6.50
6.50
5.75 – 6.50
5.75 – 6.50
6.25
6.50
6.25
6.00
6.50
6.50
6.75
6.25
7.50
6.50
7.00
6.75
6.00 – 6.25
6.00
6.50
7.00
6.75
7.00
5.75
–
–
–
–
–
6.00
6.50
6.25
5.50
6.00
6.50
6.75
5.75
7.00
6.00
6.50
6.50
–
6.00
6.25
7.00
6.00
6.50
–
6.00
6.25
6.75
6.00
n/a
821
727
722
573
359
330
238
191
190
183
185
183
185
181
177
154
151
146
130
110
118
121
96
88
67
62
57
65
38
17
2
–
–
–
–
–
807
776
768
578
383
339
254
215
204
194
189
191
184
182
173
170
160
151
137
146
140
130
102
99
–
62
57
56
49
20
2
120
31
98
43
6
126
127
Stockland Riverton, Riverton WA (50%)
Dec-18
62
6.50
6.25
Retail Town Centres10
Independent valuation excludes the adjacent property owned by Stockland.
1
2 A range of cap rates is disclosed for a complex comprising of a number of properties.
3 Stockland’s share of this property is held through a direct interest in the asset.
4 Stockland South, Caloundra QLD was sold during the period.
5 Asset held for sale at year end.
6 Property was disposed of during the period.
7 Property is not held by the Trust.
8 Asset has been reclassified to inventories.
9 Independent valuation based on 100% ownership.
10 Totals may not add due to rounding.
62
6,726
66
7,282
Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 Stockland
$M
Directly owned
Yennora Distribution Centre, Yennora NSW
Triniti Business Park, North Ryde NSW
Ingleburn Logistics Park, Ingleburn NSW
60-66 Waterloo Road, Macquarie Park NSW1
Brooklyn Distribution Centre, Brooklyn VIC
Hendra Distribution Centre, Brisbane QLD
Coopers Paddock, Warwick Farm NSW
Mulgrave Corporate Park, Mulgrave VIC
Port Adelaide Distribution Centre, Port Adelaide SA2
Forrester Distribution Centre, St Marys NSW
Granville Industrial Estate, Granville NSW1
Oakleigh Industrial Estate, Oakleigh South VIC
Somerton Distribution Centre, Somerton VIC1
Macquarie Technology Business Park, Macquarie Park NSW1
Balcatta Distribution Centre, Balcatta WA
Altona Distribution Centre, Altona VIC1, 3
16 Giffnock Avenue, Macquarie Park NSW
Altona Industrial Estate, Altona VIC
23 Wonderland Drive, Eastern Creek NSW
Willawong Industrial Estate, QLD
72-76 Cherry Lane, Laverton North VIC
Wetherill Park Distribution Centre, Wetherill Park NSW
Smeg Distribution Centre, Botany NSW
Erskine Park, Erskine Park NSW
40 Scanlon Drive, Epping VIC2
Export Distribution Centre, Brisbane Airport QLD4
M1 Yatala Enterprise Park, Yatala QLD
Owned through equity-accounted investments
Independent
valuation
Independent valuers’
capitalisation rate %
Book value
Date
$M
2019
2018
2019
2018
Jun-19
Dec-18
Dec-18
Dec-18
Jun-19
Jun-19
Dec-18
Dec-18
Dec-18
Dec-18
Dec-18
Dec-18
Jun-19
Jun-18
Dec-18
Dec-18
Jun-19
Jun-19
Jun-19
Jun-19
Dec-18
Jun-19
Dec-18
Dec-18
Jun-19
Jun-19
Jun-18
Jun-18
475
212
184
6.00
6.00
6.00
6.50
6.50
6.50
117
6.00 – 6.37
6.25 – 6.75
122
114
102
93
80
76
73
68
63
59
56
59
64
50
47
38
33
33
32
28
12
6
6
6.00
7.00
6.00
7.00
10.00
7.00
6.75
7.50
5.75
7.00
9.25
6.75
6.25 – 6.75
6.50 – 7.00
6.00
6.25
7.00
6.75 – 7.25
6.63 – 7.50
6.63 – 7.50
7.00
6.75
6.00
6.25 – 7.25
7.00
6.00
6.00
7.00
6.00
6.00
5.00
5.00
6.00
11.00
n/a
6.75
7.50
6.25
–
6.50
6.50
5.50
5.75
7.00
11.20
n/a
475
212
184
116
122
114
99
95
78
76
74
67
63
59
56
59
64
50
47
38
33
33
32
28
13
7
6
402
198
104
107
106
98
97
94
85
81
67
62
62
59
55
55
55
37
42
–
32
29
28
24
10
7
6
Optus Centre, Macquarie Park NSW (51%)
Jun-19
240
6.00
6.50
Logistics5
1 A range of cap rates are disclosed for a complex comprising of a number of properties.
2 Asset held for sale at year end.
3 Includes 11-25 Toll Drive transferred to asset held for sale at year end.
4 Property is a leasehold property.
5 Totals may not add due to rounding.
240
2,537
230
2,229
Stockland
$M
Directly owned
Independent
valuation
Independent valuers’
capitalisation rate %
Book value
Date
$M
2019
2018
2019
2018
Stockland Piccadilly, 133-145 Castlereagh Street,
Jun-19
342
5.25 – 6.00
5.50 – 6.00
309
280
Sydney NSW (50%)1, 2, 3, 4, 5
601 Pacific Highway, St Leonards NSW
Durack Centre, 263 Adelaide Terrace, Perth WA1,2
110 Walker Street, North Sydney NSW
40 Cameron Avenue, Belconnen ACT2, 6
80-88 Jephson Street, Toowong QLD6, 7
23-29 High Street, Toowong QLD6, 7
Owned through equity-accounted investments
Dec-18
Jun-19
Dec-18
–
–
–
119
108
45
–
–
–
6.00
7.75 – 8.25
5.75
–
–
–
6.50
8.00
6.25
11.75
6.50 – 8.00
6.50 – 8.00
135 King Street, Sydney NSW (50%)1, 4
Dec-18
313
4.00 – 5.00
4.00 – 5.00
Workplace8
117
108
45
–
–
–
313
891
103
108
37
22
17
7
295
867
1 A range of cap rates is disclosed for a complex comprising of a number of properties.
2 Property is a leasehold property.
3 Stockland’s share of this property is held through a direct interest in the asset.
4 Book value includes the retail component of the property.
5 The book value excludes the revaluation relating to the area occupied by Stockland. This owner-occupied area is classified as property, plant and equipment and is
recognised at historical cost.
6 Property was disposed of during the period.
7 Property is not held by the Trust.
8 Totals may not add due to rounding.
INVESTMENT PROPERTIES
Commercial properties comprise investment interests in land and buildings including integral plant and equipment held for the purpose of
producing rental income, capital appreciation, or both.
Commercial properties are initially recognised at cost including any acquisition costs and subsequently stated at fair value at each balance date.
Fair value is based on the latest independent valuation adjusted for capital expenditure and capitalisation and amortisation of lease incentives
since the date of the independent valuation report. Any gain or loss arising from a change in fair value is recognised in the profit or loss in the
period. The valuation of Commercial properties is a key area of accounting estimation and judgement for the Group.
Commercial properties under development are classified as investment properties and stated at fair value at each balance date. Fair value
is assessed with reference to reliable estimates of future cash flows, status of the development and the associated risk profile. Finance costs
incurred on properties undergoing development or redevelopment are included in the cost of the development.
As at 30 June 2019, the fair value for commercial properties in development has been assessed by the Directors after considering the latest
valuations and subsequent capital works-in-progress. An independent valuation of the property will be undertaken upon completion of
the works.
A property interest under an operating lease is classified and accounted for as an investment property on a property-by-property basis
when Stockland holds it to earn rentals or for capital appreciation or both. Any such property interest under a financing lease classified as an
investment property is carried at fair value.
SUBSEQUENT COSTS
Stockland recognises in the carrying amount of an investment property the cost of replacing part of that investment property if it is probable
that the future economic benefits embodied within the item will flow to Stockland and the cost can be measured reliably. All other costs are
recognised in the profit or loss as an expense as incurred.
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Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 LEASE INCENTIVES
Key inputs used to measure fair value for commercial properties are:
Lease incentives provided by Stockland to lessees, and rental guarantees which may be received by Stockland from third parties (arising
from the acquisition of investment properties) are included in the measurement of fair value of investment property and are treated as
separate assets. Such assets are amortised over the respective periods to which the lease incentives and rental guarantees apply using a
straight-line basis.
If an investment property becomes owner-occupied, it is reclassified as property, plant and equipment and its fair value at the date of
reclassification becomes its cost for accounting purposes.
DISPOSAL OF REVALUED ASSETS
The gain or loss on disposal of revalued assets is calculated as the difference between the carrying amount of the asset at the time of disposal
and the net proceeds on disposal and is recognised in the profit or loss in the year of disposal.
FAIR VALUE MEASUREMENT, VALUATION TECHNIQUES AND INPUTS
The adopted valuations (both internal and external) for investment properties in the Retail Town Centres, Logistics and Workplace portfolios
are a combination of the valuations determined using the Discounted Cash Flow (DCF) method and the income capitalisation method.
The adopted value of properties in the properties under development portfolio is based on an internal tolerance check performed by the
Directors at each reporting date. The tolerance check takes into account the expected cost of completion, the stage of completion, the risk
associated with the project, expected underlying income and applying the income capitalisation method.
The following table shows the valuation techniques used in measuring the fair value of commercial properties excluding assets held for sale,
as well as significant unobservable inputs used.
Class
of property
Retail Town
Centres
Fair value
hierarchy
Valuation
technique
Level 3
DCF and income
capitalisation
method
Inputs used to measure
2019
2018
Net market rent (per sqm p.a.)
$193 – 736
$197 – 794
10 year average specialty market rental growth
2.3 – 3.8%
3.1 – 3.9%
Adopted capitalisation rate
Adopted terminal yield
Adopted discount rate
4.0 – 7.5%
4.0 – 7.0%
4.3 – 7.8%
4.3 – 7.8%
6.3 – 8.0%
6.8 – 8.3%
Logistics
Level 3
DCF and income
capitalisation
method
Net market rent (per sqm p.a.)
$54 – 465
$54 – 456
10 year average market rental growth
2.4 – 4.0%
2.4 – 3.9%
Adopted capitalisation rate
5.0 – 10.3%
5.5 – 11.2%
Adopted terminal yield
Adopted discount rate
5.25 – 13.1%
5.5 – 13.7%
6.75 – 9.5%
7.0 – 9.5%
Workplace
Level 3
DCF and income
capitalisation
method
Net market rent (per sqm p.a.)
$389 – 947
$364 – 889
10 year average market rental growth
3.0 – 3.9%
2.7 – 4.0%
Adopted capitalisation rate
Adopted terminal yield
Adopted discount rate
5.0 – 8.1%
5.0 – 8.0%
5.4 – 8.3%
5.4 – 8.5%
6.6 – 8.4%
6.6 – 7.5%
Properties under
development
Level 3
Income
capitalisation
method
Net market rent (per sqm p.a.)
$78 – 429
$96 – 731
Adopted capitalisation rate
6.25 – 6.5%
5.5 – 7%
Item
DCF method
Description
Under the DCF method, a property’s fair value is estimated using explicit assumptions regarding the
benefits and liabilities of ownership over the asset’s life including an exit or terminal value. The DCF
method involves the projection of a series of cash flows on a real property interest. To this projected
cash flow series, an appropriate, market-derived discount rate is applied to establish the present value
of the income stream associated with the real property.
Income capitalisation method
This method involves assessing the total net market income receivable from the property and
capitalising this in perpetuity to derive a capital value, with allowances for capital expenditure
reversions.
Net market rent
10 year average specialty
market rental growth
10 year average market
rental growth
Adopted capitalisation rate
Adopted terminal yield
Adopted discount rate
VALUATION PROCESS
A net market rent is the estimated amount for which a property or space within a property should lease
between a willing lessor and a willing lessee on appropriate lease terms in an arm’s length transaction,
after proper marketing and wherein the parties have each acted knowledgeably, prudently and without
compulsion. In a net rent, the owner recovers outgoings from the tenant on a pro-rata basis (where
applicable).
An average of a 10 year period of forecast annual percentage growth rates in Retail specialty tenancy
rents. Specialty tenants are those tenancies with a gross lettable area of less than 400 square metres
(excludes ATMs and kiosks).
The expected annual rate of change in market rent over a 10 year forecast period in alignment with
expected market movements.
The rate at which net market income is capitalised to determine the value of a property. The rate is
determined with regards to market evidence and the prior external valuation.
The capitalisation rate used to convert income into an indication of the anticipated value of the property
at the end of the holding period when carrying out the DCF method. The rate is determined with regards
to market evidence and the prior external valuation.
The rate of return used to convert a monetary sum, payable or receivable in the future, into present
value. It reflects the opportunity cost of capital, that is, the rate of return the capital can earn if put to
other uses having similar risk. The rate is determined with regards to market evidence and the prior
external valuation.
The Commercial Property valuation team are responsible for managing the bi-annual valuation process across Stockland’s balance sheet
investment portfolio. The aim of the valuation process is to ensure that assets are held at fair value in Stockland’s accounts and facilitate
compliance with applicable regulations (for example the Corporations Act 2001 and ASIC regulations) and the STML Responsible Entity
Constitution and Compliance Plan.
Stockland’s external valuations are performed by independent professionally qualified valuers who hold a recognised relevant professional
qualification and have specialised expertise in the investment properties valued. Internal tolerance checks have been performed by Stockland’s
internal valuers who hold recognised relevant professional qualifications.
INTERNAL TOLERANCE CHECK
An internal tolerance check is performed every six months with the exception of those properties being independently valued during the
current reporting period. Stockland’s internal valuers perform tolerance checks by utilising the information from a combination of asset plans
and forecasting tools prepared by the asset management teams. For the Retail Town Centres, Workplace and Logistics classes, appropriate
capitalisation rates, terminal yields and discount rates based on comparable market evidence and recent external valuation parameters are
used to produce a capitalisation and DCF valuation. The internal tolerance check is generally weighted equally between the capitalisation value
(50% weighting) and the DCF valuation (50% weighting).
The current book value, which is the value per the asset’s most recent external valuation plus any capital expenditure since the valuation date,
is compared to the internal tolerance check.
• If the internal tolerance check is within 5.0% of the current book value, then the current book value is retained, and judgement is taken that
this remains the fair value of the property.
• If the internal tolerance check varies by more than 5.0% to the current book value (higher or lower), then an external independent valuation
will be undertaken and adopted after assessment by the Commercial Property valuation team to provide an appropriate level of evidence to
support fair value.
The internal tolerance checks are reviewed by Commercial Property senior management who recommend the adopted valuation to the Audit
Committee and Board in accordance with Stockland’s internal valuation protocol above.
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project completion based on the income capitalisation method. During the development period, fair value is assessed by reference to the value
of the property when complete, less deductions for costs required to complete the project and appropriate adjustments for profit and risk.
The fair value is compared to the current book value.
• If the internal tolerance check is within 5.0% of the current book value, then the current book value is retained, and judgement is taken that
this remains the fair value of the property under development.
• If the internal tolerance check varies by more than 5.0% to the current book value (higher or lower), then an internal valuation will be adopted
with an external valuation obtained on completion of the development.
EXTERNAL VALUATIONS
The STML Responsible Entity Compliance Plan requires that each asset in the portfolio must be valued by an independent external valuer at least
once every three years.
In practice, assets are generally independently valued more than once every three years primarily as a result of:
• A variation between book value and internal tolerance check. Refer to the internal tolerance check section on the previous page.
• The asset is undergoing major development or significant capital expenditure on a property.
• An opportunity to undertake a valuation in line with a joint owners’ valuation.
• Ensuring an appropriate cross-section of assets are externally assessed at each reporting period.
SENSITIVITY INFORMATION
Significant input
Net market rent
10 year specialty market rental growth
10 year average market rental growth
Adopted capitalisation rate
Adopted terminal yield
Adopted discount rate
Impact on fair value of
an increase in input
Impact on fair value of
a decrease in input
Increase
Increase
Increase
Decrease
Decrease
Decrease
Decrease
Decrease
Decrease
Increase
Increase
Increase
Generally, a change in the assumption made for the adopted capitalisation rate is accompanied by a directionally similar change in the adopted
terminal yield. The adopted capitalisation rate forms part of the income capitalisation approach and the adopted terminal yield forms part of the
DCF method.
When calculating the income capitalisation approach, the net market rent has a strong interrelationship with the adopted capitalisation rate
given the methodology involves assessing the total net market income receivable from the property and capitalising this in perpetuity to derive
a capital value. In theory, an increase in the net market rent and an increase (softening) in the adopted capitalisation rate could potentially offset
the impact to the fair value. The same can be said for a decrease in the net market rent and a decrease (tightening) in the adopted capitalisation
rate. A directionally opposite change in the net market rent and the adopted capitalisation rate could potentially magnify the impact to the
fair value.
When assessing a DCF valuation, the adopted discount rate and adopted terminal yield have a strong interrelationship in deriving a fair value
given the discount rate will determine the rate in which the terminal value is discounted to the present value.
In theory, an increase (softening) in the adopted discount rate and a decrease (tightening) in the adopted terminal yield could potentially offset
the impact to the fair value. The same can be said for a decrease (tightening) in the discount rate and an increase (softening) in the adopted
terminal yield. A directionally similar change in the adopted discount rate and the adopted terminal yield could potentially magnify the impact
to the fair value.
NON-CANCELLABLE OPERATING LEASE RECEIVABLE FROM INVESTMENT PROPERTY TENANTS
Annual rent receivable by the Group under current leases from tenants is from property held by the Commercial Property business.
Non-cancellable operating lease receivable not recognised in the financial statements at balance date:
As at 30 June
$M
Within one year
Later than one year but not later than five years
Later than five years
Non-cancellable operating lease receivable
Stockland
Trust
2019
650
1,665
912
3,227
2018
638
1,693
1,034
3,365
2019
652
1,677
912
3,241
2018
639
1,706
1,026
3,371
8. RETIREMENT LIVING
KEEPING IT SIMPLE
Stockland offers a range of independent living Retirement Living products to best meet the needs of the Group’s customers. Customers
have a choice of dwelling type and contractual arrangement, depending on their individual preferences, personal circumstances, and the
services and support that they require.
Historically, all Retirement Living contracts were under the deferred management fee (DMF) model which allows residents to access the
full lifestyle offering of a village today and pay for this when they leave the village. Each state has extensive laws and regulations which are
designed to protect resident interests which Stockland complies with. Generally, DMF contracts are affordable as they sell at a lower price
than the non-retirement freehold properties in the area. In 2017, Stockland broadened its offering by launching a non-DMF village product
called Aspire villages offering freehold title rather than a DMF.
DMF contracts
Retirement Living residents lend Stockland an amount equivalent to the value of the dwelling in exchange for a lease to reside in the village
and to access community facilities, which are Stockland owned and maintained for as long as the resident wants. Stockland records this
loan as a resident obligation liability.
During the resident’s tenure, Stockland earns DMF revenue which is calculated based on the individual resident contract and depends on
the dwelling type, location and specific terms within the agreement. The contract will specify the DMF rate charged each year, and the
maximum DMF that will be charged across the life of the contract. The DMF provides customers with the ability to free up equity (usually
from the sale of their previous home), giving them extra capital that they can access to fund their retirement lifestyle.
The DMF for an individual resident contract covers the right to reside in the dwelling and the resident’s share of up-front capital costs of
building the common infrastructure of the village, which typically includes amenities such as a pool, bowling green and community hall,
and allows the resident to pay for these at the end of their tenancy, instead of the start. DMF revenue is included in the Retirement Living
FFO when Stockland receives the accumulated DMF in cash after a resident leaves and either a new resident enters the dwelling, or when
it is withheld under an approved investment proposal for development.
The contracts determine how Stockland and the resident will share any net capital gain or loss when the dwelling is re-leased to the
next resident. This can range from 0 - 100%; for the majority of existing contracts the capital gain or loss and refurbishment costs are
shared equally.
The Retirement Living segment result also includes the settled development margin associated with new villages and village expansions
or redevelopments. This margin represents the unit price realised on first lease less the cost of development and is recognised in FFO on
settlement of a newly developed unit.
Unrealised fair value gains or losses from revaluations of investment property and resident obligations are excluded from FFO.
Contract choices
Stockland continues to improve the Groups’ customer offer with Benefits Plus home care partnerships and our current up-front contract
choices, ‘Capital Share’ and ‘Peace of Mind’, which caps the DMF and secures the exit value for incoming residents.
The Capital Share contract offers the opportunity to offset the resident’s DMF by paying the resident 50% of any capital gain earned after
deducting 50% of any capital expenditures, when the home is resold or after a maximum of eighteen months after the resident leaves the
village. DMF is calculated at 5% per annum, capped at 35%.
The Peace of Mind contract offers certainty by ensuring the residents know what exit repayment will be when they leave the village.
It also guarantees that they will be repaid after a maximum of six months from their departure even if their unit hasn’t yet been sold.
DMF is calculated at 5% per annum, capped at 25%.
Non-DMF product (Aspire villages)
Under these agreements, residents purchase their dwelling outright. There is no DMF associated with these sales as the dwelling is no
longer owned or maintained by Stockland. Stockland recognises profit based on property development sales revenue net of associated
cost of property development sold.
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Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 NET CARRYING VALUE
As at 30 June
$M
Operating villages
Villages under development
Retirement Living investment properties
Existing resident obligations
Net carrying value of Retirement Living villages
Net carrying value movement during the year
Balance at 1 July
Expenditure capitalised
Cash received on first sales
Realised investment properties fair value movement
Unrealised investment properties fair value movement
Retirement Living resident obligations fair value movement
Other movements
Balance at 30 June
A. Investment properties
Stockland
2019
3,623
367
3,990
2018
3,756
364
4,120
(2,585)
(2,724)
1,405
1,396
1,396
143
(114)
23
(95)
19
33
1,208
249
(73)
15
44
(73)
26
The DCF methodology uses unobservable inputs and these are further explained below:
Item
DCF method
Discount rate
20 year growth rate
Description
Under the DCF method, an asset or liability’s fair value is estimated using explicit assumptions regarding
the benefits and liabilities of ownership over the asset’s life including an exit or terminal value. The DCF
method involves the projection of a series of cash flows the property asset will generate. To this projected
cash flow series, an appropriate, market-derived discount rate is applied to establish the present value of
the income stream associated with the real property.
The rate of return used to convert a monetary sum, payable or receivable in the future, into present
value. It reflects the opportunity cost of capital, that is, the rate of return the capital can earn if put to
other uses having similar risk. The rate is determined with regards to market evidence and the external
valuations performed.
This represents the rate that the unit is expected to increase in value by over 20 years. It is determined
on the basis of the historical performance of the property, available sector and industry benchmarks,
available CPI forecasts and the external valuations performed.
Average length of stay of
existing and future residents
Assumptions on future resident gender and entry age based upon analysis of historical entrant profiles
are used to estimate average length of stay.
Current market value
Market values are generally reviewed semi-annually by the sales and operational teams in light of external
valuation performed and market and approved by the National Sales Manager and CEO Communities.
Renovation/Reinstatement
cost
The cost that is required to maintain the independent living units and serviced apartments to the
appropriate condition.
1,405
1,396
Renovation recoupment
The percentage of renovation costs that will be recouped from the residents based on contractual terms.
Retirement Living investment properties comprise retirement villages (both operating villages and villages under development) held to earn
revenue and capital appreciation over the long-term. Retirement villages comprise Independent Living Units, Serviced Apartments, community
facilities and integral plant and equipment.
DISPOSALS
During the year, Stockland disposed of three villages in Victoria for proceeds of $60 million, payable over two instalment in FY19 and FY20.
During the prior year, Stockland disposed of one village in Victoria for proceeds of $5 million.
FAIR VALUE MEASUREMENT, VALUATION TECHNIQUES AND INPUTS
The fair value of Retirement Living investment properties (including villages under development) is the value of the Retirement Living assets and
the future cash flows associated with the contracts. Changes in fair value of investment properties are recognised in profit or loss.
The fair value is determined by the Directors using a DCF methodology. The valuation of Retirement Living investment properties and resident
obligations is a key area of accounting estimation and judgement for the Group.
Both the investment properties and resident obligations are considered to be level 3 in the fair value Hierarchy.
The following table shows the valuation techniques used in measuring the fair value of Retirement Living investment properties excluding assets
held for sale, as well as significant unobservable inputs used.
The following significant unobservable inputs are used to measure the fair value of the investment properties:
Inputs used to measure fair value
2019
2018
Discount rate1
Average 20 year growth rate
Average length of stay of existing and future residents
Current market value of unit
Renovation/Reinstatement cost
Renovation recoupment
12.5 – 14.75% (Average: 13.0%)
12.5 – 14.75% (Average: 13.0%)
3.3%
11 years
3.1%
10.9 years
$0.1 – 2.2 million
$0.1 – 2.2 million
$3 – 75k
0 – 100%
$5 – 90k
0 – 100%
1 Discount rate includes a premium to allow for future village-wide capital expenditure.
VALUATION PROCESS
The Retirement Living finance team are responsible for managing the bi-annual DMF valuation process across Stockland’s Retirement Living
portfolio. The aim of the DMF valuation process is to confirm that assets are held at fair value on Stockland’s balance sheet.
ESTABLISHED VILLAGES
Internal valuations are completed every six months using valuation models with reference to external market data. An independent
professionally qualified valuer who holds a recognised relevant professional qualification and has specialised expertise in the investment
properties valued provides assurance on the key assumptions used. The most recent independent assessment was obtained at 30 April 2019.
Independent investment property valuations are also obtained from time to time. The Directors have considered the changes in market and
village specific conditions since the independent assessment and valuations were obtained in their estimate of fair value at reporting date.
VILLAGES UNDER CONSTRUCTION
Villages under construction are carried at fair value. There are two elements to the value of villages under construction: the value of land and
other development expenditure and the value of discounted future DMF revenue. The land and other development expenditure is made up of
costs incurred to date plus a development margin. Development margin is recognised on a percentage of completion basis and is based on an
internally certified level of completion of the stage. The DMF asset is recognised on a percentage of completion basis.
Units are transferred from villages under construction to established villages once they have been leased for the first time. This transfer is at the
cost of the unit plus development profit recognised during construction.
SENSITIVITY INFORMATION
Significant input
Discount rate
20 year growth rate
Average length of stay of existing and future residents1
Current market value of unit
Renovation cost
Renovation recoupment
Impact on fair value of
an increase in input
Impact on fair value of
a decrease in input
Decrease
Increase
Decrease
Increase
Decrease
Increase
Increase
Decrease
Increase
Decrease
Increase
Decrease
1 This is dependent on the length of stay as the majority of contracts have maximum DMF periods.
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Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 B. Resident obligations
Resident obligations represent the net amount owed by Stockland to current and former residents. Resident obligations are non-interest bearing
and movements are recognised at fair value through profit or loss as the Retirement Living portfolio is measured and assessed by Stockland on a
net basis.
CURRENT RESIDENT OBLIGATIONS
Based on actuarial turnover calculations, approximately 6% (2018: 7%) of residents are estimated to depart their dwelling each year and
therefore it is not expected that the full obligation to residents will fall due within one year. In the vast majority of cases, the resident obligations
are able to be repaid from receipts from incoming residents.
Accounting Standards require that resident obligations are classified as current, unless Stockland has an unconditional contractual right to
defer settlement for at least 12 months, because residents have the right to terminate their occupancy contract with immediate effect.
NON-CURRENT RESIDENT OBLIGATIONS
The non-current obligation relates to certain legacy contracts that give Stockland a right to defer settlement for up to eight years.
As at 30 June
$M
Existing resident obligation
Former resident obligation
Resident obligation
2019
Current
Non-current
2,490
6
2,496
95
6
101
Stockland
Total
2,585
12
2,597
2018
Current
Non-current
2,567
10
2,577
157
7
164
Total
2,724
17
2,741
FAIR VALUE MEASUREMENT, VALUATION TECHNIQUES AND INPUTS
The fair value of the resident obligations is the amount payable on demand to residents and comprises the initial loan amount plus the resident’s
share of any net capital gains or losses in accordance with their contracts less DMF earned to date. Changes in fair value of resident obligations
are recognised in profit or loss.
Inputs used in relation to the resident obligations are identical to those used for Investment Properties. Refer above for a detailed description of
the inputs used.
VALUATION PROCESS
It is impractical to have the resident obligations valued externally, therefore these are valued every six months by the Directors as described
above. Key assumptions used in these valuations are externally reviewed and assessed for reasonableness each reporting period.
SENSITIVITY INFORMATION
As the resident obligations are a financial liability, a quantitative sensitivity analysis has been disclosed. Sensitivity of the resident obligations to
changes in the assumptions are shown below:
Increase/(decrease) in resident obligations
Increase in input
Decrease in input
9. RECEIVABLES
As at 30 June
$M
Trade receivables
Allowance for expected credit loss
Net trade receivables
Straight-lining of rental income
Other receivables
Current receivables
Straight-lining of rental income
Other receivables
Receivables due from related companies
Allowance for expected credit loss1
Non-current receivables
Stockland
Trust
2019
2018
2019
2018
104
(2)
102
7
99
208
67
27
–
–
94
44
(1)
43
1
54
98
71
28
–
–
99
9
(2)
7
7
27
41
70
–
2
(1)
1
1
20
22
75
–
3,518
(8)
3,580
3,288
–
3,363
1
The Trust has applied the expected credit losses impairment model to its unsecured intergroup loan receivable from Stockland Corporation Limited which is repayable in
2023 following the application of AASB9. While there has been no history of defaults, and the loan is considered to be low credit risk, an impairment provision determined
as twelve months expected credit losses has been recorded at balance date. This loan eliminates on consolidation so there is no impact on Stockland.
Receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method, less any
allowance under the expected credit loss model.
10. PAYABLES
As at 30 June
$M
Trade payables and accruals
Land purchases
Distributions payable
GST payable/(receivable)
Current payables
Land purchases
Non-current payables
Stockland
Trust
Note
2019
2018
4
281
69
336
10
696
147
147
273
157
329
51
810
173
173
2019
120
–
336
(1)
455
–
–
2018
134
–
329
(1)
462
–
–
Significant input
Current market value
Change in assumption
10%
2019
163
2018
177
2019
(163)
2018
(177)
Trade and other payables are initially recognised at fair value less transaction costs and subsequently carried at amortised cost.
The carrying values of receivables and payables at balance date represent a reasonable approximation of their fair value.
For the majority of existing contracts, the resident shares net capital gains or losses with Stockland upon exit; therefore, current market value is
the only input that significantly impacts the fair value of the resident obligation.
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Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 11. INTANGIBLE ASSETS
DEVELOPMENT PIPELINE
Future development cash flows are based on formal budgets approved by management expected to commence in the next five year period
and future development pipeline assumptions. The cash flows incorporate projections for development costs, selling price and associated DMF
for the Retirement Living Communities in the development pipeline.
Future cash flows are discounted at 15.0% (2018: 15.0%). Cash flows beyond the five year period have been determined by applying a growth
rate of 3.4% p.a. (2018: 3.5% p.a.). The growth rate applied does not exceed the long-term average rate for the Australian Retirement Living
property market.
Management believe that due to the extended time it takes to develop a village and the general long-term nature of Retirement Living
Communities, where Stockland has the ability to manage assets over that extended period, it is reasonable to use a cash flow period of greater
than five years.
SOFTWARE
Software is stated at cost less accumulated amortisation and impairment losses. Amounts incurred in design and testing of software are
capitalised, including employee costs and an appropriate part of directly attributable overhead costs, where the software will generate probable
future economic benefits. This is a key area of accounting estimation and judgement for the Group.
Costs associated with maintaining software are recognised as an expense as incurred.
All software is currently amortised based on the straight-line method and using rates between 10 – 100% (2018: 10 – 33%) from the point at
which the asset is ready for use. Amortisation is recognised in profit or loss. The range of amortisation rates has been updated to reflect new
enterprise resource planning software, a part of which commenced amortisation during the year.
The residual value, the useful life and the amortisation method applied to an asset are reviewed at least annually.
12. NON-CURRENT ASSETS HELD FOR SALE
As at 30 June
$M
Investment properties transferred from Commercial Property
Non-current assets held for sale
Stockland
Trust
2019
2018
2019
2018
171
171
65
65
171
171
22
22
Investment properties held for sale at 30 June 2019 include Stockland Tooronga, Tooronga VIC, 40 Scanlon Drive, Epping VIC, Toll Drive, Altona
VIC and Port Adelaide Distribution Centre, Port Adelaide SA. Contracts for the sale of the properties have been exchanged after reporting date.
During the current year, Stockland completed the sale of Stockland Highlands, Craigieburn VIC and 40 Cameron Avenue, Belconnen ACT, which
were classified as non-current assets held for sale at 30 June 2018.
Investment properties are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than
through continuing use. This condition is met only when the sale is highly probable and the asset is available for immediate sale in its present
condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year
from the date of classification.
Investment properties held for sale remain measured at fair value in accordance with the policy presented in note 7.
As at 30 June
$M
Goodwill
Software
2019
Under
development
Stockland
2018
Total Goodwill
Software
Under
development
Total
Gross carrying amount
Opening balance
Additions
Retirements/disposals1
Transfer
Closing balance
Accumulated amortisation
and impairment
Opening balance
Retirements/disposals1
Amortisation
Impairment
Closing balance
117
–
–
–
117
(41)
–
–
(38)
(79)
113
–
(79)
19
53
(85)
79
(13)
–
(19)
90
54
–
(23)
121
–
–
–
–
–
320
54
(79)
(4)
291
(126)
79
(13)
(38)
(98)
117
–
–
–
117
97
–
–
16
113
(41)
(77)
–
–
–
–
(8)
–
(41)
(85)
60
46
–
(16)
90
–
–
–
–
–
274
46
–
–
320
(118)
–
(8)
–
(126)
Intangible assets
38
34
121
193
76
28
90
194
1 The net impact of these retirements and disposals on the intangible assets carrying value is $nil as these assets were fully depreciated.
GOODWILL
Goodwill represents the excess of the cost of an acquisition over the fair value of Stockland’s share of the net identifiable assets of the acquired
subsidiary at the date of acquisition.
Goodwill that has an indefinite useful life is not subject to amortisation and is tested annually for impairment, or more frequently if events or
changes in circumstances indicate that they might be impaired. An impairment loss is recognised for the amount by which the asset’s carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. The
determination of the recoverability of goodwill is an area of accounting estimation and judgement for the Group.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which goodwill is monitored for internal management
purposes and allocated to cash-generating units (CGU). The allocation is made to each CGU or groups of CGUs that are expected to benefit from
the business combination in which the goodwill arose, identified according to operating segments.
Goodwill arose on the acquisition of the Retirement Living division of Australian Retirement Communities on 28 February 2007 and the
acquisition of Aevum Limited on 31 October 2010.
IMPAIRMENT TEST
An impairment of goodwill of $38 million was recognised in the current year (2018: $nil) primarily driven by a reduction in future development
pipeline.
The goodwill impairment test is based upon the value in use method using cash flow projections for Retirement Living unrecognised
development profits. Unrecognised development profits comprises of cash flows from both the development pipeline and deferred repayment
contracts which are considered to benefit from the acquisitions.
At year-end, the recoverable amount of the CGU was $406 million which is equivalent to the book value of the Retirement Living development
business. Following the impairment recognised in the Retirement Living development business CGU, the recoverable amount is equal to the
carrying amount. Therefore, any adverse movement in a key assumption would lead to further impairment.
DEFERRED REPAYMENT (DR) CONTRACTS
The Australian Retirement Communities portfolio acquired in 2007 included a number of Deferred Revenue (“DR”) contracts. These DR
contracts were entered into prior to the Stockland acquisition at a wholesale price on development, and therefore were expected to result
in higher conversion profit upon next settlement when they are priced at retail value and converted to Stockland target contracts.
The cash flows are discounted over their forecast maturity at 13.0% (2018: 13.0%) and cash flows beyond the five year period have been
determined by applying a growth rate of 3.1% p.a. (2018: 3.1% p.a.). The growth rate applied does not exceed the long-term average rate for
the Australian retirement living property market.
138
139
Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 Capital structure and financing costs
IN THIS SECTION
This section outlines how the Group manages its capital structure and related financing costs, including its balance sheet liquidity and
access to capital markets.
The Board determines the appropriate capital structure of the Group; specifically, how much is raised from securityholders (equity) and
how much is borrowed from financial institutions and capital markets (debt), in order to finance the Group’s activities both now and in
the future.
The Board considers the Group’s capital structure and its dividend and distribution policy at least twice a year ahead of announcing
results, in the context of its ability to continue as a going concern, to execute the strategy and to deliver its business plan. During the year
Stockland’s credit rating remained unchanged at A-/stable and A3/stable by S&P and Moody’s respectively. The Board continued to monitor
the Group’s capital structure through its gearing ratio and maintains a capital structure to minimise the cost of capital. The Group has a
stated target gearing ratio range of 20% to 30%.
In addition, the Group is exposed to changes in interest rates on its net borrowings and to changes in foreign exchange rates on its foreign
currency transactions and net assets. In accordance with risk management policies, the Group uses derivatives to appropriately hedge
these underlying exposures.
13. NET FINANCING COSTS
KEEPING IT SIMPLE
This note details the interest income generated on the Group’s cash and other financial assets and the interest expense incurred on
borrowings and other financial assets and liabilities. The presentation of the net financing costs in this note reflects income and expenses
according to the classification of the financial instruments.
Fair value movements reflect the change in fair value of the Group’s derivative instruments between the later of inception or 1 July 2018 and
30 June 2019. The fair value at year end is not necessarily the same as the settlement value at maturity.
Interest income is recognised in profit or loss as it accrues using the effective interest method.
Finance expense include interest payable on short-term and long-term borrowings calculated using the effective interest method and payments
on derivatives.
Borrowing costs are expensed as incurred except to the extent that they are directly attributable to the acquisition, construction or production
of a qualifying asset such as investment properties or inventories. Qualifying assets are assets that necessarily take a substantial period of time
to reach the stage of their intended use or sale.
In these circumstances, borrowing costs are capitalised to the cost of the assets whilst in active development until the assets are ready for
their intended use or sale. Total interest capitalised must not exceed the net interest expense in any period. Project carrying values, including
all capitalised interest attributable to projects, must continue to be recoverable based on the latest project feasibilities. In the event that
development is suspended for an extended period of time or the decision is taken to dispose of the asset, the capitalisation of borrowing costs
is also suspended.
The rate at which interest has been capitalised to qualifying assets is disclosed in note 6.
Where funds are borrowed generally, borrowing costs are capitalised using a weighted average capitalisation rate applied to the expenditures
on the asset excluding specific borrowings.
The accounting policy and fair value of derivatives are discussed in note 16 and 17.
14. CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash balances and at call deposits. Bank overdrafts that are repayable on demand and form an integral
part of Stockland’s cash management are included as a component of cash and cash equivalents for the purpose of the consolidated statement
of cash flow. As at 30 June 2019, Stockland does not have any bank overdrafts.
Included in the cash and cash equivalents balance of $140 million is $55 million (2018: $92 million) in cash that is relating to joint ventures and/or
held to satisfy real estate and financial services licensing requirements, and is not immediately available for use by the Group.
15. BORROWINGS
KEEPING IT SIMPLE
Stockland
Trust
The interest expense on these instruments are shown in note 13.
The Trust borrows money from financial institutions and debt investors in the form of bonds, bank debt and other financial instruments.
The Trust’s bonds generally have fixed interest rates and are for a fixed term.
2019
2018
–
3
3
2019
282
2
284
2018
266
2
268
Interest-bearing loans and borrowings are recognised initially at fair value less attributable transaction costs and subsequently are stated at
amortised cost. Any difference between amortised cost and redemption value is recognised in profit or loss over the period of the borrowings
using the effective interest method. However, where an effective fair value hedge is in place, borrowings are stated at the carrying amount
adjusted for changes of fair value of the hedged risk. The changes are recognised in profit and loss.
(202)
(192)
(202)
The table below shows the fair value of each of these instruments measured at level 2 in the fair value hierarchy. Fair value reflects the principal
amount and remaining duration of these notes based on current market interest rates and conditions at balance date.
Net financing costs can be analysed as follows:
Year ended 30 June
$M
Interest income from related parties
Interest income from other parties
Finance income
Interest expense relating to borrowings
Interest paid or payable on other financial liabilities at amortised cost
Less: interest capitalised to inventories
Less: interest capitalised to investment properties
Finance expense
Gain/(loss) on net change in fair value of derivatives
Gain/(loss) on net change in fair value of borrowings
Net gain/(loss) on fair value hedges
Gain/(loss) on foreign exchange movements
Gain/(loss) on fair value movements
Net gain/(loss) on debt and derivatives
Net gain/(loss) on financial instruments
–
4
4
(192)
(40)
136
9
(87)
233
(240)
(7)
(12)
(121)
(133)
(140)
(34)
142
17
(77)
(24)
12
(12)
(19)
24
5
(7)
–
–
3
–
–
10
(189)
(192)
233
(239)
(6)
(13)
(121)
(134)
(140)
(24)
12
(12)
(19)
24
5
(7)
The interest expense relating to borrowings includes $62 million (2018: $67 million) related to interest on financial liabilities carried at amortised
cost, and not designated in a fair value hedge relationship.
As at 30 June
$M
2019
Offshore medium term notes
Domestic medium term notes
Bank debt facilities
Borrowings
2018
Offshore medium term notes
Domestic medium term notes
Bank debt facilities
Borrowings
Stockland and Trust
Carrying value
Note
Current
Non-current
Total
Fair value
A
B
C
A
B
C
78
150
115
343
240
–
–
240
3,694
607
60
4,361
3,141
557
–
3,698
3,772
757
175
4,704
3,381
557
–
3,938
4,215
801
175
5,191
3,728
595
–
4,323
140
141
Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 The difference of $487 million (2018: $385 million) between the carrying amount and fair value of the foreign and domestic medium term notes is
due to notes being carried at amortised cost under AASB 9 while the fair value represents the amount required to replicate at balance date the
principal and duration of these notes based on current market interest rates and conditions.
A. Offshore medium term notes
US PRIVATE PLACEMENT
The Trust has issued fixed coupon notes in the US private placement market. Generally, notes are issued in United States dollars (USD) and
converted back to Australian dollars (AUD or $) principal and AUD floating coupons through CCIRS.
During the current year, the Trust repaid USD 176 million ($269 million) of notes in October 2018 and issued USD 250 million ($351 million)
in April 2019.
The fair value of the US private placements as at 30 June 2019 is $2,816 million (2018: $2,412 million). Details of the offshore medium term notes
on issue in the US private placement market are set out below:
Face value1
Carrying amount
Stockland and Trust
$M
Maturity date
October 2018
July 2019
July 2020
September 2021
June 2022
August 2022
August 2024
August 2025
December 2025
August 2026
June 2027
August 2027
January 2028
August 2028
February 2029
April 2029
January 2030
August 2030
April 2031
August 2031
January 2033
May 2034
Total
Fixed
rate coupon
Floating CCIRS2
2019
6.01%
0.73% - 0.65%
5.19% 0.85% - 0.83%
5.24% 0.87% - 0.86%
4.32% 2.44% - 2.48%
6.15%
1.00%
3.99 / 6.80%
2.93% - 3.08%
4.14%
3.75%
5.09%
3.09%
6.28%
3.85%
3.63%
2.99%
1.62%
–
–
0.87%
1.63%
1.65%
3.19 / 4.35%
2.23% / -
4.67%
1.40%
3.81%
1.75% - 1.78%
3.73 / 4.42%
1.75% - 1.78%
4.00%
1.69%
3.91%
1.84% - 1.86%
3.34%
2.27%
3.88 / 4.66%
1.90% - 1.91%
4.01%
1.91%
–
71
90
176
28
105
50
157
100
200
20
131
47
139
141
162
106
72
162
59
133
28
2018
269
71
90
176
28
105
50
157
100
200
20
131
47
139
141
0
106
72
0
59
133
0
2,177
2,094
2019
–
78
100
267
41
101
50
181
100
217
32
154
55
143
204
170
117
87
172
61
139
31
2,500
(11)
2,489
2018
240
75
96
246
39
98
46
162
100
188
31
135
48
131
180
0
108
75
0
52
134
0
2,184
(6)
2,178
Less attributable transaction costs
US private placement
1 Face value of the notes in AUD after the effect of the CCIRS. Thus also representing 100% of the notional amount of the CCIRS.
2 Variable interest rate margin above the 90 day bank bill rate. The 90 day bank bill rate as at 30 June 2019 was 1.2046% (2018: 2.1105%). The majority of the CCIRS
is in a designated hedge relationship.
ASIAN AND EUROPEAN PRIVATE PLACEMENT
The Trust has issued medium term notes in the Asian and European capital markets with face values of Hong Kong dollars (HKD) 470 million
($62 million), HKD 400 million ($55 million), HKD 540 million ($100 million), HKD 300 million ($51 million), Euros (EUR) 300 million ($433 million)
and EUR 300 million ($478 million).
All notes are issued at a fixed coupon payable in either HKD or EUR and converted back to AUD floating coupons through CCIRS.
The fair value of all the notes on issue as at 30 June 2019 is $1,399 million (2018: $1,316 million). Details of the offshore medium term notes on
issue in the Asian and European private placement market are set out below:
$M
CCIRS
Face value1
Carrying amount
Stockland and Trust
Maturity date
Fixed rate coupon
Type
1.50%
3.37%
Floating
Floating
4.00%
Floating
Rate2
1.48%
1.89%
1.62%
3.38%
1.63%
3.70%
Fixed
4.90%
Floating
Floating
1.70%
1.53%
November 2021
May 2025
October 2025
January 2026
April 2026
May 2028
Total
Less attributable transaction costs
Asian and European private placement
2019
433
62
55
100
478
51
2018
433
62
55
100
478
51
1,179
1,179
2019
446
86
80
99
519
60
1,290
(7)
1,283
2018
446
77
71
84
480
52
1,210
(7)
1,203
Face value of the notes in Australian dollars after the effect of the CCIRS. Thus also representing 100% of the notional amount of the CCIRS.
1
2 Variable interest rate margin above the 90 day bank bill rate. The 90 day bank bill rate as at 30 June 2019 was 1.2046% (2018: 2.1105%). All of the CCIRS are in a
designated hedge relationship.
B. Domestic medium term notes
Domestic Medium term notes have been issued at either face value or at a discount to face value and are carried at amortised cost. The discount
is amortised to finance costs over the term of the notes. The medium term notes are issued on either fixed or floating interest rate terms.
During the current year, the Trust issued medium term notes with a face value of $200 million. The fair value of all the notes on issue as at
30 June 2019 is $801 million (2018: $595 million). Details of unsecured domestic medium term notes on issue are set out below:
$M
Maturity date
September 2019
November 2020
November 2022
March 2024
Total
Less attributable transaction costs
Domestic medium term notes
C. Bank debt facilities
Stockland and Trust
Fixed rate coupon
2019
2018
5.50%
8.25%
4.50%
3.30%
150
160
250
200
760
(3)
757
150
160
250
0
560
(3)
557
The bank debt facilities are unsecured and held at amortised cost. Details of maturity dates, excluding bank guarantee facilities are set out below:
$M
Maturity date
December 2018
July 2019
August 2019
December 2019
July 2021
January 2021
January 2022
February 2022
November 2022
Bank facilities
Stockland and Trust
2019
2018
Utilised
Limit
Utilised
–
–
15
100
60
–
–
–
–
175
–
–
120
200
100
–
250
150
100
920
–
–
–
–
–
–
–
–
–
–
Limit
100
100
120
100
–
250
–
150
100
920
142
143
Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 16. OTHER FINANCIAL ASSETS AND LIABILITIES
KEEPING IT SIMPLE
Investments in other financial assets are managed in accordance with the Group’s documented risk policy. Based on the nature of
the asset and its purpose, movements in the fair value of other financial assets are recognised either through profit or loss or other
comprehensive income.
Stockland
Trust
Other
financial assets
Other
financial liabilities
Other
financial assets
Other
financial liabilities
2019
2018
2019
2019
2018
2019
2018
(29)
–
(4)
(33)
(25)
(38)
–
–
–
(2)
(2)
–
(14)
–
–
8
1
9
355
81
43
28
18
–
12
–
12
156
66
25
17
18
–
12
–
12
156
66
25
17
8
–
8
1
9
355
81
43
28
8
515
2018
(29)
–
(4)
(33)
(25)
(38)
–
–
–
(2)
(2)
–
(14)
–
(204)
(100)
–
–
(204)
(100)
–
–
As at 30 June
$M
Fair value hedges
CCIRS – through profit or loss
Interest rate derivatives – through profit or loss
Current
Fair value hedges
Cash flow hedges
CCIRS – through profit or loss
Interest rate derivatives – through profit or loss
Other
Non-current
DERIVATIVE FINANCIAL INSTRUMENTS
KEEPING IT SIMPLE
A derivative is a type of financial instrument typically used to manage the underlying risk. A derivative’s value changes over time in response
to underlying variables such as exchange rates or interest rates and is entered into for a fixed period. A hedge is where a derivative is used
to manage the underlying exposures. The Group uses derivatives to manage exposure to foreign exchange and interest rate risk.
Stockland holds a number of derivative instruments including interest rate swaps, foreign exchange contracts and CCIRS.
Derivative financial instruments are recognised initially at fair value and re-measured at each balance date. The valuation of derivatives is an area
of accounting estimation and judgement for the Group.
Third party valuations are used to determine the fair value of Stockland’s derivatives. The valuation techniques use inputs such as interest rate
yield curves and currency prices/yields, volatilities of underlying instruments and correlations between inputs.
The fair value of interest rate swaps is the estimated amount that Stockland would receive or pay to transfer or realise the swap at the reporting
date, taking into account current interest rates and the current creditworthiness of each counterparties.
The fair value of forward foreign exchange contracts is determined by using the difference between the contract exchange rate and the quoted
forward exchange rate at the reporting date.
The gain or loss on re-measurement to fair value is recognised in profit or loss. However, where derivatives qualify for hedge accounting,
recognition of any resultant gain or loss depends on the nature of the item being hedged.
Stockland enters into ISDA Master Agreements with its derivative counterparties. Under the terms of these arrangements, where certain credit
events occur, the net position owing/receivable to a single counterparty in relation to all outstanding derivatives with that counterparty, will be
taken as owing/receivable and all the relevant arrangements terminated. As Stockland does not presently have a legally enforceable right of set-
off, these amounts have not been offset in the balance sheet. In the event a credit event occurred, the ISDA Master Agreement would have the
effect of netting, allowing a reduction to derivative assets and derivative liabilities of the same amount of $195 million (2018: $136 million).
DERIVATIVES THAT QUALIFY FOR HEDGE ACCOUNTING
Stockland uses a limited number of derivative financial instruments to hedge its exposure to fluctuations in interest and foreign exchange rates.
At the inception of the transaction, Stockland designates and documents these derivative instruments into a hedging relationship with the
hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions.
Stockland documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives used in hedging transactions
have been and will continue to be highly effective in offsetting changes in fair value or cash flows of hedged items.
A fair value hedge is a hedge of the exposure to changes in fair value of an asset or liability that is attributable to a particular risk.
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss, together with any
changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.
Hedge accounting is discontinued when the hedging instrument matures or is sold, terminated or exercised, or until such time where the
hedging relationship ceases to meet the qualifying criteria. Any adjustment between the carrying amount and the face value of a hedged
financial instrument is amortised to profit or loss using the effective interest rate method. Amortisation begins when the hedged item ceases
to be adjusted for changes in its fair value attributable to the risk being hedged.
525
282
(218)
(163)
272
(218)
(163)
FAIR VALUE HEDGE
Stockland manages its exposure to financial market risks as part of its operations through the use of derivatives.
CASH FLOW HEDGE
Stockland’s treasury policy requires:
• all contractual or committed foreign exchanges payments or receipts to be fully hedged back to Australian dollar unless the exposure is
immaterial in nature.; and
• interest rate risk exposures to be managed to operate within a fixed hedge ratio of:
• 45 to 55% on debt due to mature within 5 years; and
• 30 to 40% on debt maturing in more than five years.
Deviation from these benchmarks at any point in time requires approval from the CFO and/or Audit Committee.
Stockland assesses whether the derivative designated in each hedging relationship is expected to be and has been effective in offsetting
changes in cash flows of the hedged item using the hypothetical derivative method.
In these hedge relationships, the main sources of ineffectiveness are:
• the effect of the counterparty and Stockland’s own credit risk on the fair value of the swaps, which is not reflected in the fair value of the
hedged item; and
• changes in interest rates will impact the fair value of the Australian dollar margin and implied foreign currency margin respectively.
In order to qualify for hedge accounting, prospective hedge effectiveness testing must meet all of the following criteria:
• an economic relationship exists between the hedged item and hedging instrument;
• the effect of credit risk does not dominate the value changes resulting from the economic relationship; and
• the hedge ratio is the same as that resulting from actual amounts of hedged items and hedging instruments for risk management.
A cash flow hedge is a hedge of the exposure to variability in cash flows attributable to a particular risk associated with an asset, liability or highly
probable forecast transaction that could affect profit or loss.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in equity in
the cash flow hedge reserve. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss within finance income
or expense.
Amounts in the cash flow hedge reserve are recognised in profit or loss in the periods when the hedged item is recognised in profit or loss.
Hedge accounting is discontinued when the hedging instrument matures or is sold, terminated or exercised, no longer qualifies for hedge
accounting, or when Stockland revokes designation. Any cumulative gain or loss recognised in equity at that time remains in equity and is
recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur,
the cumulative gain or loss that was recognised in equity is recognised immediately in profit or loss.
Additionally, there are a number of derivatives that are not designated as fair value and/or cash flow hedges. These are used to hedge economic
exposures and the gains or losses on re-measurement to fair value of these instruments are recognised immediately in profit or loss.
144
145
Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 Borrowings
Derivatives
Stockland and Trust
Carrying Amount
Market to market
$M
US Dollar
2019
2,500
2018
2,184
Effective
2,249
1,943
Ineffective
Euro
HK Dollar
251
965
325
241
926
284
Move-
ments
(Repaid)
Drawn
316
306
10
39
41
82
82
–
–
–
Gain or
loss
on FV
of Debt
(234)
(224)
(10)
(39)
(41)
AUD Bank Debt
AUD MTNs
AUD IRS
175
760
–
–
560
–
175
200
–
175
200
–
–
–
–
Borrowings
costs
(21)
(16)
(5)
Termi-
nated
Paid
Move-
ments
Cash flow
hedge
reserve
impact
Gain or
Loss on
FV of
derivatives
2019
2018
337
286
51
92
44
113
76
37
39
15
224
210
14
53
29
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(10)
(10)
–
15
(10)
234
220
14
38
39
(5)
311
–
–
–
–
–
Net gain
or loss
recognised
in profit
or loss
–
(4)
4
(1)
(2)
(3)
–
–
(177)
(87)
(90)
(47)
(137)
(137)
Foreign
exposure
3,790
3,394
396
82
(314)
473
167
306
Total
4,704
3,938
766
457
(314)
296
80
216
(47)
(5)
174
(140)
17. FAIR VALUE HIERARCHY
KEEPING IT SIMPLE
The financial instruments included on the balance sheet are measured at either fair value or amortised cost. The measurement of fair value
may in some cases be subjective and may depend on the inputs used in the calculations. The Group generally uses external valuations
based on market inputs or market values (e.g. external share prices). The different valuation methods are called hierarchies and are
described below:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices)
or indirectly (i.e. derived from prices); and
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
DETERMINATION OF FAIR VALUE
The fair value of derivative financial instruments, including domestic and offshore medium term notes, interest rate derivatives and CCIRS, is
determined in accordance with generally accepted pricing models by discounting the expected future cash flows using assumptions supported
by observable market rates. Whilst certain derivatives are not quoted in an active market, Stockland has determined the fair value of these
derivatives using quoted market inputs (e.g. interest rates, volatility, and exchange rates) adjusted for specific features of the instruments and
debit or credit value adjustments based on the current credit worthiness of Stockland or the derivative counterparty.
The fair value of forward exchange contracts is the quoted market price of the derivative at balance date, being the present value of the quoted
forward price.
The table below sets out the financial instruments included on the balance sheet at fair value.
Quantitative sensitivities required under AASB 13 Fair Value Measurement in relation to the Retirement Living resident obligations have been
disclosed in note 8.
146
As at 30 June
$M
Derivative assets
Securities in unlisted entities
Other investments
Financial assets carried at fair value
Derivative liabilities
Retirement Living resident obligations
Financial liabilities carried at fair value
Stockland
2019
2018
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
–
–
10
10
–
–
–
516
–
–
516
(220)
–
8
–
8
–
516
8
10
534
(220)
–
(2,597)
(2,597)
(220)
(2,597)
(2,817)
–
–
10
10
–
–
–
10
276
–
–
276
(196)
–
8
–
8
–
276
8
10
294
(196)
–
(2,741)
(2,741)
(196)
(2,741)
(2,937)
80
(2,733)
(2,643)
Net position
10
296
(2,589)
(2,283)
As at 30 June
$M
Derivative assets
Securities in unlisted entities
Financial assets carried at fair value
Derivative liabilities
Financial liabilities carried at fair value
Net position
Trust
2019
2018
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
–
–
–
–
–
–
516
–
516
(220)
(220)
296
–
8
8
–
–
8
516
8
524
(220)
(220)
304
–
–
–
–
–
–
276
–
276
(196)
(196)
80
–
8
8
–
–
8
276
8
284
(196)
(196)
88
Derivative financial assets and liabilities are not offset in the balance sheet as under agreements held with derivative counterparties, the Group
does not have a legally enforceable right to set off the position payable/receivable to a single counterparty.
The following table shows a reconciliation from the opening balances to the closing balances for fair value measurements in Level 3 of the fair
value hierarchy. There were no transfers between levels during the year.
Stockland
2019
2018
$M
entities Derivatives
Securities
in unlisted
Retirement
Living resident
obligations
Securities
in unlisted
Total
entities Derivatives
Balance at 1 July
Gain/losses recognised in
• Profit or loss1
• Other comprehensive income
Cash receipts from incoming
residents on turnover
Cash payments to outgoing
residents on turnover, net of
DMF
Return of capital
Balance at 30 June
8
–
–
–
–
–
8
–
–
–
–
–
–
–
(2,741)
(2,733)
267
–
267
–
(295)
(295)
172
172
32
(1)
2
–
–
–
–
(2,597)
(2,589)
(25)
8
–
–
–
–
–
–
–
Retirement
Living resident
obligations
Total
(2,629)
(2,597)
10
–
9
2
(272)
(272)
150
150
–
(25)
(2,741)
(2,733)
1
Include impact of derecognition of obligations related to village disposals of $187m (FY18 $21m).
Trust
2019
2018
$M
Balance at 1 July
Loss recognised in Profit or loss
Balance at 30 June
Securities
in unlisted
entities Derivatives
Retirement
Living resident
obligations
Securities
in unlisted
Total
entities Derivatives
Retirement
Living resident
obligations
8
–
8
–
–
–
–
–
–
8
–
8
9
(1)
8
–
–
–
–
–
–
Total
9
(1)
8
147
Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 18. FINANCIAL RISK FACTORS
KEEPING IT SIMPLE
The Group’s activities expose it to a variety of financial risks: market risks (including currency risk, interest rate risk and price risk), credit
risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to
minimise potential adverse effects on financial performance.
The Group uses derivatives within its policies described below as hedges to manage certain risk exposures.
Financial risk and capital management is carried out by a central treasury department. The Board reviews and approves written principles
of overall risk management, as well as written policies covering specific areas such as managing capital, mitigating interest rates, liquidity,
foreign exchange and credit risks, use of derivative and investing excess liquidity. The Audit Committee assists the Board in monitoring the
implementation of these treasury policies.
The sensitivity analysis included in this note shows the impact that a shift in the financial risks would have on the financial statements at
year-end, but is not a forecast or prediction. In addition, it does not include any management action that might take place to mitigate these
risks, were they to occur.
A. Market risk
Market risk is the risk that changes in market prices, such as exchange rates, interest rates and equity prices will affect Stockland’s financial
performance or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk
exposures within acceptable parameters, while optimising returns.
CURRENCY RISK
Currency risk arises when anticipated transactions or recognised assets and liabilities are denominated in a currency that is not Stockland’s functional
currency, being Australian dollars (AUD). Stockland has currency exposures to the Euro (EUR), Hong Kong dollar (HKD) and US dollar (USD).
The Group manages its currency risk by using CCIRS and forward exchange contracts.
The Group’s offshore medium term notes create both an interest rate and a currency exchange risk exposure. The Group’s policy is to minimise
its exposure to both interest rate and exchange rate movements. Accordingly, the Group has entered into a series of CCIRS which cover 100% of
the US, European and Asian private placement principals outstanding and are timed to expire when each note matures. These CCIRS also swap
the obligation to pay fixed interest to floating interest. When these swaps held are no longer effective in hedging the interest rate and currency
risk exposure, management will reassess the value in continuing to hold the swap.
These CCIRS have been designated as fair value and cash flow hedges and are accounted for in line with the accounting principles highlighted
in note 16.
The following table provides a summary of the face values of the Group’s currency risk exposures together with the derivatives which have been
entered into to manage these exposures.
As at 30 June
Currency $M
Borrowings
CCIRS
Exposure
1 All amounts are denominated in their natural currency.
Stockland and Trust
2019
EUR1
HKD1
USD1
(600)
(1,710)
(1,468)
600
–
1,710
1,468
–
–
EUR1
(600)
600
–
2018
HKD1
(1,710)
1,710
–
USD1
(1,394)
1,394
–
SENSITIVITY ANALYSIS – CURRENCY RISK
The following sensitivity analysis shows the impact on the profit or loss and equity if there was an increase/decrease in AUD exchange rates of
10% at balance date with all other variables held constant.
Stockland and Trust
2019
2018
As at 30 June
Profit or loss
Equity
Profit or loss
Equity
$M
EUR
HKD
USD
Impact
Increase
Decrease
Increase
Decrease
Increase
Decrease
Increase
Decrease
–
–
(1)
(1)
–
–
2
2
(55)
(11)
(24)
(90)
55
14
30
99
–
–
(1)
(1)
–
–
2
2
(54)
(9)
(23)
(86)
54
11
28
93
B. Interest rate risk
Interest rate risk is the risk that the fair value or cash flows of financial instruments will fluctuate due to changes in interest rates.
The Trust’s interest rate risk arises from borrowings. Borrowings issued at variable rates expose the Trust to cash flow interest rate risk.
Borrowings issued at fixed rates expose the Trust to fair value interest rate risk. The Group’s treasury policy allows it to enter into a variety of
approved derivative instruments to manage the risk profile of the total debt portfolio to achieve an appropriate mix of fixed and floating interest
rate exposures. The Group manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. Such interest rate swaps have
the economic effect of converting borrowings from floating rates to fixed rates. The Trust manages its fair value interest rate risk through CCIRS
and fixed-to-floating interest rate swaps.
These derivatives have been recorded on the balance sheet at their fair value in accordance with AASB 9. These derivatives have not been
designated as hedges for accounting purposes, nevertheless management believe the hedges are effective economically. As a result movements
in the fair value of these instruments are recognised in profit or loss.
The table below provides a summary of the Group’s interest rate risk exposure on interest-bearing loans and borrowings after the effect of the
interest rate derivatives.
$M
Fixed rate interest-bearing loans and borrowings1
Floating rate interest-bearing loans and borrowings1
Interest-bearing loans and borrowings
1 Notional principal amounts.
SENSITIVITY ANALYSIS – INTEREST RATE RISK
Stockland and Trust
Net exposure (after the effect of derivatives)
2019
3,837
453
4,290
2018
3,655
177
3,832
The following sensitivity analysis shows the impact on profit or loss and equity if market interest rates at balance date had been 100 basis points
higher/lower (2018: 100 basis points) with all other variables held constant.
Stockland
Trust
2019
2018
2019
2018
$M
Increase Decrease
Increase Decrease
Increase Decrease
Increase Decrease
Impact on interest income/(expense)
Impact on net gain/(loss) on derivatives –
through profit or loss
1
107
(1)
(113)
3
102
(3)
(106)
36
107
(36)
(113)
Impact on profit or loss
108
(114)
105
(109)
143
(149)
35
102
137
(35)
(106)
(141)
Impact on equity
15
(16)
30
(31)
15
(16)
30
(31)
148
149
Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 C. Equity price risk
E. Liquidity risk
Equity price risk is the risk that the fair value of investments in listed/unlisted entities fluctuate due to changes in the underlying security price.
The Group’s equity price risk arises from investments in listed securities and units in unlisted funds. These investments are classified as financial
assets carried at fair value, with any resultant gain or loss recognised in profit or loss or other comprehensive income.
Material investments within the portfolio are managed on an individual basis and all buy and sell decisions are approved by the Board.
SENSITIVITY ANALYSIS – EQUITY PRICE RISK
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. Due to the dynamic nature of the
underlying businesses, the Group aims to maintain flexibility in liquidity and funding sources by keeping sufficient cash and cash equivalents
and/or undrawn committed credit lines available whilst maintaining a low cost of holding these facilities. Management prepares and monitors
rolling forecasts of liquidity requirements on the basis of expected cash flow.
The Group manages liquidity risk through monitoring the maturity profile of its debt portfolio. The current weighted average debt maturity
is 5.8 years (2018: 6.2 years).
The following sensitivity analysis shows the impact on profit or loss and equity if the market price of the underlying equity securities/units at
balance date had been 10% higher/lower with all other variables held constant.
KEEPING IT SIMPLE
Stockland
Trust
As at 30 June
2019
2018
2019
2018
$M
Increase
Decrease
Increase
Decrease
Increase
Decrease
Increase
Decrease
Impact on profit or loss
Impact on equity
2
–
(2)
–
2
–
(2)
–
–
–
–
–
–
–
–
–
D. Credit risk
Credit risk is the risk that a customer or counterparty to a financial instrument fails to meet its contractual obligations resulting in a financial loss
to the Group.
The Group has no significant concentrations of credit risk to any single counterparty and has policies to review the aggregate exposure of
tenancies across its portfolio. The Group also has policies to ensure that sales of properties with deferred payment terms and development
services are made to customers with an appropriate credit history.
Derivative counterparties and cash deposits are currently limited to financial institutions approved by the Audit Committee. There are also
policies that limit the amount of credit risk exposure to any one of the approved financial institutions based on their credit rating and country
of origin.
The maximum exposure to credit risk at the end of the reporting period is the gross carrying amount of each class of financial assets mentioned
in this Report.
As at 30 June 2019, these financial institutions had an Investment Grade rating (greater than BBB-) provided by S&P.
Bank guarantees and mortgages over land are held as security over certain receivables balances.
As at 30 June 2019 and 30 June 2018, there were no significant financial assets that were past due. Financial assets are subject to the expected
credit loss model as per AASB 9.
The table below analyses the Group’s financial liabilities including derivatives into relevant maturity groupings based on the period
remaining until the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows (including
interest), and therefore may not reconcile with the amounts disclosed on the balance sheet.
As derivative assets have been excluded from these tables, refer to note 17 for the fair value of the derivative assets to provide a meaningful
analysis of Stockland and Trust total derivatives.
$M
2019
Non-derivative
Payables (excl. GST)
Dividends and distributions payable
Borrowings
Retirement Living resident obligations
Derivative
Interest rate derivatives
CCIRS
• Inflows
• Outflows
Stockland
Carrying
amount
Contractual
cash flows
1 year
or less
1 – 2
years
2 – 5
years
Over
5 years
(497)
(336)
(4,704)
(2,597)
(205)
(15)
(522)
(336)
(5,711)
(2,597)
(199)
389
(396)
(350)
(336)
(514)
(34)
–
(53)
–
(85)
–
(409)
(1,763)
(3,025)
(2,496)
–
(1)
(100)
(41)
10
(14)
(46)
(86)
(26)
10
(13)
30
(41)
339
(328)
Financial liabilities
(8,354)
(9,372)
(3,741)
(492)
(1,914)
(3,225)
$M
2018
Non-derivative
Payables (excl. GST)
Dividends and distributions payable
Borrowings
Retirement Living resident obligations
Derivative
Interest rate derivatives
CCIRS
• Inflows
• Outflows
Stockland
Carrying
amount
Contractual
cash flows
1 year
or less
1 – 2
years
2 – 5
years
Over
5 years
(603)
(329)
(3,938)
(2,741)
(104)
(92)
(647)
(329)
(5,020)
(2,742)
(435)
(329)
(396)
(2,577)
(50)
–
(366)
(4)
(110)
–
(1,703)
(1)
(52)
–
(2,555)
(160)
(116)
(40)
(30)
(34)
(12)
1,815
(2,011)
279
(322)
34
(50)
(466)
103
(159)
(1,904)
1,399
(1,480)
(2,860)
Financial liabilities
(7,807)
(9,050)
(3,820)
150
151
Retirement Living resident obligations are classified as current under Accounting Standards, however, it is not expected to result in actual net
cash outflows within the next 12 months. In the vast majority of cases, settlement of Retirement Living resident obligations are able to be repaid
from receipts from incoming residents. As at 30 June 2019, $2,585 million (2018: $2,724 million) existing resident obligations do not represent an
anticipated net cash outflow as they are expected to be covered by receipts from incoming residents.
Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 Financial liabilities
(5,380)
$M
2019
Non-derivative
Payables (excl. GST)
Dividends and distributions payable
Borrowings
Derivative
Interest rate derivatives
CCIRS
• Inflows
• Outflows
$M
2018
Non-derivative
Payables (excl. GST)
Dividends and distributions payable
Borrowings
Derivative
Interest rate derivatives
CCIRS
Inflows
Outflows
Financial liabilities
(4,597)
Carrying
amount
Contractual
cash flows
1 year
or less
1 – 2
years
2 – 5
years
Over
5 years
Trust
19. ISSUED CAPITAL
KEEPING IT SIMPLE
(120)
(336)
(4,704)
(205)
(15)
(120)
(336)
(5,711)
(199)
–
389
(396)
(6,373)
(120)
(336)
(514)
(41)
10
(14)
–
–
–
–
–
–
(409)
(1,763)
(3,025)
(46)
(86)
(26)
10
(13)
30
(41)
339
(328)
(1,015)
(458)
(1,860)
(3,040)
This note explains material movements recorded in issued capital that are not explained elsewhere in the financial statements.
The movements in equity of the Group and the balances are presented in the consolidated statement of changes in equity.
Issued capital represents the amount of consideration received for securities issued by the Group. Transaction costs of an equity
transaction are accounted for as a deduction from equity, net of any related income tax benefit.
For so long as Stockland remains jointly quoted, the number of shares in Stockland Corporation Limited and the number of units in the
Stockland Trust shall be equal and the securityholders and unitholders shall be identical. Unitholders of Stockland Trust are only entitled
to distributions and voting rights upon stapling.
Holders of stapled securities are entitled to receive dividends and distributions as declared from time to time and are entitled to one vote per
stapled security at securityholder meetings. The liability of a member is limited to the amount, if any, remaining unpaid in relation to a member’s
subscription for securities. A member is entitled to receive a distribution following termination of the stapling arrangement (for whatever
reason). The net proceeds of realisation must be distributed to members, after making an allowance for payment of all liabilities (actual and
anticipated) and meeting any actual or anticipated expenses of termination.
Trust
The following table provides details of securities issued by the Group:
Carrying
amount
Contractual
cash flows
1 year
or less
1 – 2
years
2 – 5
years
Over
5 years
(134)
(329)
(134)
(329)
(3,938)
(5,020)
(134)
(329)
(396)
–
–
–
–
–
–
(366)
(1,703)
(2,555)
(104)
(92)
(116)
(40)
(30)
(34)
(12)
Stockland and Trust
Number of securities
Stockland
$M
Trust
$M
As at 30 June
2019
2018
2019
2018
2019
2018
Ordinary securities on issue
Issued and fully paid
2,384,351,503
2,434,469,276
8,692
8,884
7,393
7,571
Other equity securities
Treasury securities
Issued Capital
(6,691,865)
(7,786,666)
2,377,659,638
2,426,682,610
(35)
8,657
(34)
8,850
(34)
7,359
(33)
7,538
1,815
(2,011)
(5,795)
279
(322)
(942)
34
(50)
(412)
103
(159)
(1,793)
1,399
(1,480)
(2,648)
A. Ordinary securities
The following table provides details of movements in securities issued:
As at 30 June
Opening balance
Stockland and Trust
Number of securities
2019
2018
2,434,469,276
2,418,400,142
Securities buy back
(50,117,773)
–
Securities issued under the DRP
–
16,069,134
Issued Capital
2,384,351,503
2,434,469,276
Stockland
$M
2019
8,884
(192)
–
8,692
2018
8,817
–
67
8,884
Trust
$M
2019
7,571
(178)
–
7,393
2018
7,507
–
64
7,571
SECURITIES BUY-BACK
On 6 September 2018, Stockland announced the intention to initiate an on-market buy-back for up to $350 million of Stockland securities on
issue as part of its active approach to capital management, over up to 24 months. A total of 50,117,773 stapled securities have been bought back
on market and cancelled since the commencement of the buy-back on 24 September 2018.
152
153
Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 B. Other equity securities
TREASURY SECURITIES
Treasury securities are securities in Stockland that are held by the Stockland Employee Securities Plan Trust. Securities are held until the end of
the vesting period affixed to the securities. As the securities are held on behalf of eligible employees, the employees are entitled to the dividends
and distributions.
MOVEMENT OF OTHER EQUITY SECURITIES
Stockland and Trust
Stockland
Number of securities
$M
Opening balance
Securities acquired1
2019
2018
7,786,666
6,002,501
3,605,889
4,674,128
Securities transferred to employees on vesting
(4,700,690)
(2,889,963)
Issued Capital
6,691,865
7,786,666
2019
(34)
(15)
14
(35)
2018
(27)
(20)
13
(34)
Trust
$M
2019
(33)
(15)
14
(34)
2018
(27)
(19)
13
(33)
1 Average price: $4.20 per security (2018: $4.37).
C. Security based payments
KEEPING IT SIMPLE
Stockland operates three Security Plans at its discretion for eligible employees which are described below:
Long term incentives (LTI)
Under the LTI, employees have the right to acquire Stockland securities at nil consideration when certain performance conditions are met.
Each grant will comprise two equal tranches, each of which vest based on separate performance hurdles (being underlying EPS growth
and/or relative TSR) and has a three year vesting period. Eligibility is by invitation of the Board and is reviewed annually.
Deferred short term incentives (DSTI)
For Executives and Senior Management there is a compulsory deferral of at least one third of STI incentives into Stockland securities to
further align remuneration outcomes with securityholders. Half of the awarded DSTI securities will vest 12 months after award with the
remaining half vesting 24 months after award, provided employment continues to the applicable vesting date.
$1,000 Plan
Under this plan, eligible employees receive up to $1,000 worth of Stockland securities.
The security options granted under the three Security Plans are held at fair value. The valuation of security options is a key area of
accounting estimation and judgement for the Group.
LTI
The fair value of LTI rights is measured at grant date using the Black-Scholes and Monte Carlo Simulation option pricing models taking into
account the terms and conditions upon which the rights were granted. The fair value is expensed on a straight-line basis over the vesting period,
the period over which the rights are subject to performance and service conditions, with a corresponding increase in reserves.
Where the individual forfeits the rights due to failure to meet a service or performance condition, the cumulative expense is reversed through
profit or loss in the current year. The cumulative expenditure for rights forfeited due to market conditions are not reversed.
Where amendments are made to the terms and conditions subsequent to the grant, the value of the grant immediately prior to and following
the modification is determined. This occurs upon resignation or termination where the amendment relates to rights becoming vested in terms of
beneficial ownership, which would otherwise have been forfeited due to the failure to meet future service conditions. In this situation, the value
that would have been recognised in future periods in respect of the rights not forfeited is recognised in the period that the rights vest.
The number of rights granted to employees under the plan for the year ended 30 June 2019 was 3,564,400 (2018: 3,916,652). The number of
LTI rights awarded is based on the Volume Weighted Average Price of Stockland securities for the ten working days post 30 June (face value
methodology), this is consistent with the approach for determining number of Deferred STI awards.
Assumptions made in determining the fair value of rights granted under the security plans are:
Details
Grant date
Fair value of rights granted under plan
Securities spot price at grant date
Exercise price
Distribution yield
Risk-free rate at grant date
Expected remaining life at grant date
Volatility of Stockland
Volatility of Index price
2019
2018
1 October 2018
27 September 2017
$2.48
$4.11
–
6.34%
2.05%
2.8 years
17%
14%
$2.55
$4.27
–
6.0%
2.0%
2.8 years
19.0%
17.0%
The LTI rights of 7,073,951 (2018: 7,865,999) are outstanding as at 30 June 2019, which have a fair value ranging from $1.50 to $2.07 (2018: $1.50
to $2.04) per right and a weighted average restricted period remaining of 1.5 years (2018: 1.5 years).
During the year, 1,627,781 rights (2018: 1,997,042) vested and will convert to securities with a weighted average fair value of $2.82 (2018: $2.52).
DSTI
The fair value of securities granted under the DSTI has been calculated based on the 10 day volume weighted average price post 30 June 2019
of $4.44 (2018: $4.05).
The DSTI outstanding as at 30 June 2019, included in the table above, are 2,121,166 (2018: 3,156,676). The DSTI outstanding have fair value ranging
from $4.05 to $4.33 (2018: $4.00 to $4.84) per security.
The number and weighted average fair value of LTI rights and DSTI securities under the Security Plans are as follows:
$1,000 PLAN
Details
Opening balance
Granted during the year
Forfeited and lapsed during the year
Rights converted to vested Stockland stapled securities
Outstanding at the end of the year
Weighted average price
per right/security
Number of
rights/securities
2019
$2.97
$2.93
$2.72
$3.56
$2.79
2018
$3.04
$2.93
$2.30
2019
2018
11,022,675
11,551,943
4,923,260
5,951,652
(3,218,341)
(2,524,555)
$3.51
(3,532,477)
(3,956,365)
$2.97
9,195,117
11,022,675
Stockland securities issued to eligible employees under the Tax Exempt Employee Security Plan ($1,000 Plan) are recognised as an expense with
a corresponding increase in issued capital. The value recognised is the market price of the securities granted at grant date.
154
155
Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 Taxation
IN THIS SECTION
This section sets out Stockland’s tax accounting policies and provides an analysis of the income tax expense/benefit and deferred tax
balances, including a reconciliation of tax expense to accounting profit. Accounting income is not always the same as taxable income,
creating temporary differences. These differences usually reverse over time. Until they reverse a deferred asset or liability must be recognised
on the balance sheet, to the extent that it is probable that a reversal will take place. This is known as the balance sheet liability method.
20. INCOME TAX
A. Income tax recognised in profit or loss
Year ended 30 June
$M
Current tax
Adjustments for prior years
Current tax
Tax losses recognised during the year1
Tax losses utilised during the year2
Capital losses utilised during the year2
Origination and reversal of temporary differences
Deferred tax
Income tax in profit or loss
Stockland
2019
2018
–
–
–
–
(19)
(4)
(24)
(47)
(47)
–
–
–
139
(14)
(11)
(55)
59
59
1 Tax losses and capital losses are fully recoverable based on the profitability of Stockland Corporation Group during the year and the latest available profit forecasts.
2 There is no current tax expense because tax and capital losses totalling $23 million (2018: $25 million) have been utilised to offset the Stockland Corporation Group's taxable income.
B. Reconciliation of profit before tax to income tax recognised in profit or loss
Year ended 30 June
$M
Profit before tax
Less: Trust profit before tax
Adjust for: Intergroup eliminations
Profit before tax of Stockland Corporation Group
Prima facie income tax calculated at 30%
Impact on income tax recognised in profit or loss due to:
Non-deductible expenses for the year
Other deductible expense for the current period
Tax losses recognised during the year
Underprovided in prior years
Income tax in profit or loss
Effective tax rate (benefit)/expense
Effective tax rate (excluding tax losses recognised)
Tax benefit relating to items of other comprehensive income
Year ended 30 June
$M
Fair value reserve
Tax benefit relating to items of other comprehensive income
Stockland
2019
358
(242)
13
129
(39)
(12)
4
–
–
(47)
36%
36%
2018
966
(712)
9
263
(79)
–
–
139
(1)
59
(22%)
30%
Stockland
2019
2018
–
–
7
7
STOCKLAND
Income tax expense is recognised in profit or loss except to the extent that it relates to items recognised in other comprehensive income (OCI)
or directly in equity. Income tax expense is calculated at the applicable corporate tax rate of 30%, and is comprised of current and deferred
tax expense.
Current tax expense represents the expense relating to the expected taxable income at the applicable tax rate for the financial year. Deferred tax
expense represents the tax expense in respect of the future tax consequences of recovering or settling the carrying amount of an asset or liability.
Tax consolidation
Stockland Corporation Limited is head of the tax consolidated group which includes its wholly-owned Australian resident subsidiaries. As a
consequence, all members of the tax consolidated group are taxed as a single entity.
Members of the tax consolidated group have entered into a tax sharing agreement and a tax funding arrangement. The arrangement requires
that Stockland Corporation Limited assumes the current tax liabilities and deferred tax assets arising from unused tax losses, with payments to
or from subsidiaries settled via intergroup loan. Any subsequent period adjustments are recognised by Stockland Corporation Limited only and
do not result in further amounts being payable or receivable under the tax funding arrangement. The tax liabilities of the entities included in the
tax consolidated group will be governed by the tax sharing agreement should Stockland Corporation Limited default on its tax obligations.
TRUST
Under current Australian income tax legislation, Stockland Trust and its sub-trusts are not liable for income tax on their taxable income
(including any assessable component of capital gains) provided that the unitholders are attributed the taxable income of the Trust.
Securityholders are liable to pay tax at their effective tax rate on the amounts attributed.
21. DEFERRED TAX
As at 30 June
$M
Inventories
Investment properties
Property, plant and equipment
Payables
Retirement Living resident obligations
Provisions
Reserves
Tax losses carried forward
Tax assets/(liabilities)
Movement in temporary differences
Assets
2019
2018
52
7
3
13
14
7
7
521
624
65
11
4
13
19
5
9
544
670
Stockland
Liabilities
2019
(151)
(433)
2018
(144)
(438)
–
–
–
–
–
–
–
–
–
–
–
–
(584)
(582)
Net
2019
(99)
(426)
3
13
14
7
7
521
40
Recognised in
Recognised in
$M
Inventories
Investment properties
Property, plant and equipment
Other financial assets
Payables
Retirement Living resident obligations
Provisions
Reserves
Tax losses carried forward
Tax assets/(liabilities)
2017
(84)
(372)
(7)
6
13
22
5
9
430
22
Profit or
loss
OCI
5
(55)
–
(2)
–
(3)
–
–
114
59
–
–
7
–
–
–
–
–
–
7
Retained
earnings1
Profit or
loss
–
–
–
–
(1)
–
–
–
–
(1)
(20)
1
–
(1)
1
(5)
2
(2)
(23)
(47)
2018
(79)
(427)
–
4
13
19
5
9
544
88
1
Impact of adoption of new accounting standards recorded in retained earning on 1 July 2018. Refer to note 35 for further details.
2018
(79)
(427)
4
13
19
5
9
544
88
2019
(99)
(426)
–
3
13
14
7
7
521
40
156
157
Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 STOCKLAND
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary
differences can be utilised. Deferred tax assets are reviewed for recoverability at each balance date and the recognised amount is adjusted as
required. This is a key area of accounting estimation and judgement for the Group.
Deferred tax is based upon the expected manner of realisation or settlement of the carrying amount of assets and liabilities using the applicable
tax rates.
Deferred tax arises due to temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the
amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences:
• initial recognition of goodwill;
• the initial recognition of assets or liabilities that affect neither accounting nor taxable profit (for example acquisition of customer lists); and
• differences relating to investments in subsidiaries to the extent that they are unlikely to reverse in the foreseeable future.
RECOVERABILITY OF DEFERRED TAX ASSETS
An assessment of the recoverability of the net deferred tax asset has been made to determine if the carrying value should be reduced with
reference to the latest available profit forecasts, to determine the availability of suitable taxable profits or taxable temporary differences.
The assessment for the current year determined that there is convincing evidence, based upon the profitability of Stockland Corporation Group
during the year and latest available profit forecasts, that all income tax losses of the tax consolidated group have been recognised as deferred
tax assets. This is consistent with the prior year.
At each reporting period end, the net deferred tax asset will be assessed for recoverability.
TRUST
There are no deferred tax assets or liabilities in the Trust. As the Trust limits its activities to deriving income from renting commercial property,
and attributes all of its taxable income each year to its investors, the Trust is not subject to tax. However, all of the annual taxable income is
subject to tax in the hands of Stockland’s investors. The Trustee of Stockland Trust should be liable to pay tax to the extent that Stockland
Trust does not distribute all of its ‘net income’, as determined under Stockland Trust’s trust deed. It is not anticipated that Stockland Trust will
distribute less than its net income for the current year.
Group structure
IN THIS SECTION
This section provides information which will help users understand how the Group structure affects the financial position and performance
of the Group as a whole. The Group includes entities that are classified as joint ventures, joint operations, associates and structured entities.
Joint ventures and associates are accounted for using the equity method, while joint operations are proportionately consolidated and
structured entities are recorded as investments at cost.
In this section of the notes there is information about:
(1) Interests in joint operations;
(2) Transactions with non-controlling interests; and
(3) Changes to the structure that occurred during the year as a result of business combinations or the disposal of a discontinued operation.
22. EQUITY-ACCOUNTED INVESTMENTS
Stockland and the Trust have interests in a number of individually immaterial joint ventures that are accounted for using the equity method.
The Group did not have investments in associates at 30 June 2019 or 30 June 2018.
A joint arrangement is either a venture or operation over whose activities the Group has joint control, established by contractual agreement.
Investments in joint ventures are accounted for on an equity-accounted basis. Investments in joint ventures are assessed for impairment when
indicators of impairment are present and if required, written down to the recoverable amount. Joint operations are discussed in note 23.
The Group’s share of the joint venture’s profit or loss and other comprehensive income is from the date joint control commences until the date
joint control ceases.
If the Group’s share of losses exceeds its interest in a joint venture, the carrying amount is reduced to nil and recognition of further losses is
discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the joint venture.
Transactions with the joint venture are eliminated to the extent of the Group’s interest in the joint venture until such time as they are realised by
the joint venture on consumption or sale.
The following table analyses, in aggregate, the carrying amount and share of profit or loss and other comprehensive income of these
joint ventures.
$M
Aggregate carrying amount of individually immaterial joint ventures
Aggregate share of:
• profit from continuing operations
• other comprehensive income
Total comprehensive income
The ownership interest in each of these immaterial entities is:
%
Brisbane Casino Towers
Compam Property Management Pty Limited1
Eagle Street Pier Pty Limited
Macquarie Park Trust
Riverton Forum Pty Limited
The King Trust2
Willeri Drive Trust3
1 Manager for The King Trust.
2 Owns 50% of the 135 King Street, Sydney NSW.
3 Owns 50% of the Stockland Riverton, Riverton WA.
CHANGES TO JOINT VENTURES
Stockland
Trust
2019
612
2018
613
2019
620
2018
595
75
–
75
69
–
69
56
–
56
69
–
69
Stockland
Trust
2019
2018
2019
2018
50
50
50
51
50
50
50
50
50
50
51
50
50
50
–
50
–
51
50
50
50
–
50
–
51
50
50
50
There have been no changes to the above listed investments in joint ventures during the financial year.
23. OTHER ARRANGEMENTS
A. Investments in unconsolidated structured entities
A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls
the entity. The Group considers all Retail Funds in which it currently holds an investment, and from which it currently earns fee income, to be
structured entities.
The Group holds an interest in a closed-end, unlisted property fund that invests in real estate assets in Australia for the purpose of generating
investment income and for capital appreciation. The fund finances its operations through unitholder contributions and also through external
banking facilities. The fund has been determined to meet the definition of a structured entity.
SDRT No.1
As at 30 June 2019, Stockland held a 19.9% interest in SDRT No.1 (2018: 19.9%), valued at $8 million (2018: $8 million). The Group’s interest in this
fund is included in the ‘Other Financial Assets’ line item on the balance sheet.
The maximum exposure to risk for SDRT No.1 is the carrying value of its investment in the Fund. Note that at a Unitholder meeting in March 2019,
the unitholders passed a resolution to wind-up the SDRT No 1 Trust and sell all of the properties.
B. Joint operations
Interests in unincorporated joint operations are consolidated by recognising the Group’s proportionate share of the joint operations’ assets,
liabilities, revenues and expenses and the joint operation’s revenue from the sale of their share of goods or services on a line-by-line basis, from
the date joint control commences to the date joint control ceases and are not included in the above table.
158
159
Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 24. CONTROLLED ENTITIES
The following entities were 100% controlled during the current and prior years:
CONTROLLED ENTITIES OF STOCKLAND CORPORATION LIMITED
Albert & Co Pty Ltd1
ARC Joint Ventures Pty. Ltd.1
Bayview Road Property Trust
Bellevue Gardens Trust
Endeavour (No. 2) Unit Trust
Stockland Greenleaves Management Services Pty Limited
Stockland Greenleaves Village Pty Limited
Stockland Hibernian Investment Company Pty Limited1
Stockland Highett Pty Limited2
Stockland Highlands Pty Limited1
Stockland Aevum Limited1
Stockland Retail Services Pty Limited1
Stockland Aevum SPV Finance No. 1 Pty Limited
Stockland Retirement Pty Limited1
Stockland Affinity Retirement Village Pty Limited
Stockland Richmond Retirement Village Pty Limited
Stockland Bellevue Gardens Pty Limited
Stockland Ridgecrest Village Management Services Pty Limited
Stockland Bells Creek Pty Limited1
Stockland Ridgecrest Village Pty Limited
Stockland Birtinya Retirement Village Pty Limited1
Stockland RRV Pty Limited1
Stockland Buddina Pty Limited1
Stockland RVG (Queensland) Pty Limited
Stockland Caboolture Waters Pty Limited1
Stockland Salford Living Pty Limited1
Stockland Caloundra Downs Pty Limited1
Stockland Scrip Holdings Pty Limited
IOR Friendly Society Pty Limited1
Stockland Highlands Retirement Village Pty Limited
Stockland Capital Partners Limited
Stockland Selandra Rise Retirement Village Pty Limited
Jimboomba Trust
JT Bid Co No. 1 Pty Limited
JT Bid Co No. 2 Pty Limited
Knowles Property Management Unit Trust
Knox Unit Trust
Mayflower Investments Pty Ltd
Merrylands Court Pty Limited
Northpoint No. 1 Trust
Northpoint No. 2 Trust
Northpoint No. 3 Trust
Northpoint No. 4 Trust
Northpoint No. 5 Trust
Northpoint No. 6 Trust
Nowra Property Unit Trust
Patterson Lakes Unit Trust
Retirement Living Acquisition Trust
Retirement Living Holding Trust No. 1
Retirement Living Holding Trust No. 2
Retirement Living Holding Trust No. 3
Retirement Living Holding Trust No. 4
Retirement Living Holding Trust No. 5
Retirement Living Holding Trust No. 6
Retirement Living Unit Trust No. 1
Retirement Living Unit Trust No. 2
Stockland Holding Trust No. 3
Stockland Holding Trust No. 4
Stockland Holding Trust No. 5
Stockland Holding Trust No. 6
Stockland IOR Group Pty Limited1
Stockland Kawana Waters Pty Limited1
Stockland Knox Village Pty Limited1
Stockland Lake Doonella Pty Limited1
Stockland Lensworth Glenmore Park Limited1
Stockland Lincoln Gardens Pty Limited
Stockland Long Island Village Pty Limited1
Stockland Management Limited
Stockland Maybrook Manor Pty Limited
Stockland Care Foundation Pty Limited
Stockland Care Foundation Trust
Stockland Castlehaven Pty Limited
Stockland Castleridge Pty Limited
Stockland Catering Pty Limited
Stockland Services Pty Limited1
Stockland Singapore Pte Ltd
Stockland South Beach Pty Limited1
Stockland Syndicate No. 1 Trust
Stockland Templestowe Retirement Village Pty Limited1
Stockland Development (Holdings) Pty Limited1
Stockland The Grove Retirement Village Pty Limited4
Stockland Development (NAPA NSW) Pty Limited1
Stockland The Hastings Valley Parklands Village Pty Limited
Stockland Development (NAPA QLD) Pty Limited1
Stockland The Pines Retirement Village Pty Limited1
Stockland Development (NAPA VIC) Pty Limited1
Stockland Trust Management Limited
Stockland Development (PHH) Pty Limited1
Stockland Vermont Retirement Village Pty Limited1
Stockland Development (PR1) Pty Limited
Stockland WA (Estates) Pty Limited1
Stockland Development (PR2) Pty Limited
Stockland WA Development (Realty) Pty Limited1
Stockland Development (PR3) Pty Limited
Stockland WA Development (Vertu Sub 1) Pty Limited
Stockland Mernda Retirement Village Pty Limited
Stockland Development (PR4) Pty Limited
Stockland WA Development Pty Limited1
Stockland Miami (Fund) Unit Trust
Stockland Miami (Non-Fund) Unit Trust
Stockland Miami (QLD) Pty Limited1
Stockland Development (Sub3) Pty Limited
Stockland Wallarah Peninsula Management Pty Limited1
Stockland Development (Sub4) Pty Limited
Stockland Wallarah Peninsula Pty Limited1
Stockland Development (Sub5) Pty Limited
Stockland Wantirna Village Pty Limited1
Stockland Midlands Terrace Adult Community Pty Limited1
Stockland Development (Sub7) Pty Limited1
Stockland Willowdale Retirement Village Pty Limited
Stockland Newport Retirement Village Pty Limited2
Stockland North Lakes Development Pty Limited1
Stockland North Lakes Pty Limited1
Stockland Oak Grange Pty Limited1
Stockland Ormeau Trust
Stockland Patterson Village Pty Limited1
Stockland Development Pty Limited1
Stockland Direct Retail Trust No. 2
Stockland Willows Retirement Village Services Pty Limited
Templestowe Unit Trust
Stockland Epping Retirement Village Pty Limited
The Mount Gravatt Retirement Village Unit Trust
Stockland Eurofinance Pty Limited1
The Pine Lake Management Services Unit Trust
Stockland Farrington Grove Retirement Village Pty Limited
Toowong Place Pty Limited
Stockland Financial Services Pty Limited1
Vermont Unit Trust
Rogan’s Hill Retirement Village Trust
Stockland Pine Lake Management Services Pty Limited
Stockland Golden Ponds Forster Pty Limited
SDRT 2 Property 1 Trust
SDRT 2 Property 2 Trust
SDRT 2 Property 3 Trust
SDRT 2 Property 4 Trust
Stockland (Boardwalk Sub 2) Pty Limited
Stockland (Queensland) Pty. Limited1
Stockland (Russell Street) Pty Limited1
Stockland Pine Lake Village Pty Limited
Stockland PR1 Trust
Stockland PR2 Trust
Stockland PR3 Trust
Stockland PR4 Trust
Stockland Property Management Pty Ltd1
Stockland Property Services Pty Limited1
Stockland A.C.N 116 788 713 Pty Limited1
Stockland Queenslake Village Pty Limited
1 These entities are parties to the Deed of Cross Guarantee and members of the Closed Group as at 30 June 2019.
2 These entities were incorporated in the current financial year.
3 These entities were sold or liquidated in the current financial year.
4 This entity changed its name during the financial year from Stockland Newport Retirement Village Pty Limited. The change was effective from 12 July 2018.
160
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Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 CONTROLLED ENTITIES OF STOCKLAND TRUST
9 Castlereagh Street Unit Trust
Stockland Harrisdale Trust
ADP Trust
Advance Property Fund
Capricornia Property Trust
Endeavour (No. 1) Unit Trust
Flinders Industrial Property Trust
Stockland Industrial No. 1 Property 1 Trust
Stockland Industrial No. 1 Property 4 Trust
Stockland Industrial No. 1 Property 5 Trust
Stockland Industrial No. 1 Property 6 Trust
Stockland Industrial No. 1 Property 7 Trust
Flinders Industrial Property Subtrust (No. 1)
Stockland Industrial No. 1 Property 8 Trust
Hervey Bay Holding Trust
Hervey Bay Sub Trust
Industrial Property Trust
Stockland Industrial No. 1 Property 9 Trust
Stockland Industrial No. 1 Property 11 Trust
Stockland Marrickville Unit Trust
Jimboomba Village Shopping Centre and Tavern Trust
Stockland Mornington Unit Trust
SDOT 4 Property # 1 Trust
SDOT 4 Property # 2 Trust
SDOT 4 Property # 3 Trust
SDRT 1 Property # 3 Trust
SDRT 3 Property # 1 Trust
SDRT 3 Property # 2 Trust
SDRT 3 Property # 3 Trust
Shellharbour Property Trust
Stockland Mulgrave Unit Trust
Stockland North Ryde Unit Trust
Stockland Padstow Unit Trust
Stockland Parkinson Unit Trust
Stockland Quarry Road Trust
Stockland Retail Holding Sub-Trust No. 1
Stockland Retail Holding Trust No. 1
Sugarland Shopping Centre Trust
Stockland Baringa Shopping Centre Trust
Stockland Wholesale Office Trust No. 1
Stockland Bayswater Unit Trust
Stockland Wholesale Office Trust No. 2
Stockland Birtinya Shopping Centre Trust
Stockland Bundaberg Trust
Stockland Brooklyn Industrial Trust
Stockland Castlereagh Street Trust
Stockland Direct Diversified Fund
Stockland Direct Office Trust No. 4
Stockland Direct Retail Trust No. 3
Stockland Eastern Creek Trust
Stockland Finance Holdings Pty Limited1
Stockland Richlands Unit Trust
Stockland St Marys Unit Trust
Stockland Tingalpa Unit Trust
Stockland Truganina Industrial Trust
Stockland Willawong Industrial Trust
Stockland Wonderland Drive Property Trust
SWOT2 Sub Trust No. 1
SWOT2 Sub Trust No. 2
SWOT2 Sub Trust No. 3
Stockland Finance Pty Limited1
Stockland Kemps Creek Industrial Trust2
1 These entities are parties to the Deed of Cross Guarantee (Finance) as at 30 June 2019.
2 These entities were formed/incorporated or acquired in the current financial year.
All Stockland entities were formed/incorporated in Australia with the exception of Stockland Singapore Pte. Ltd. which is incorporated in
Singapore.
Stockland owns all the issued shares/units of the respective controlled entities (unless otherwise stated) and such shares/units carry the voting,
dividend/distribution and equitable rights.
25. DEED OF CROSS GUARANTEE
Stockland Corporation Limited and certain wholly-owned companies (the Closed Group) are parties to a Deed of Cross Guarantee (the Deed).
The effect of the Deed is that the members of the Closed Group guarantee to each creditor, payment in full of any debt, in the event of winding up
of any of the members under certain provisions of the Corporations Act 2001.
ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 provides relief to parties to the Deed from the Corporations Act 2001
requirements for preparation, audit and lodgement of Financial Reports and Directors’ reports, subject to certain conditions as set out therein.
Pursuant to the requirements of this instrument, a summarised consolidated statement of comprehensive income for the year ended 30
June 2019 and consolidated balance sheet as at 30 June 2019, comprising the members of the Closed Group after eliminating all transactions
between members, are set out on the following pages.
Consolidated balance sheet
$M
Cash and cash equivalents
Receivables
Inventories
Other assets
Non-current assets held for sale
Current assets
Receivables
Inventories
Investment properties
Equity-accounted investments
Other financial assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Other assets
Non-current assets
Assets
Payables
Retirement Living resident obligations
Provisions
Other liabilities
Current liabilities
Payables
Borrowings
Retirement Living resident obligations
Provisions
Non-current liabilities
Liabilities
Net assets
Issued capital
Reserves
Accumulated losses
Securityholders’ equity
Closed Group
2019
2018
50
101
1,007
15
1,173
–
1,173
16
2,500
2,349
–
38
31
156
40
3
5,133
6,306
571
1,322
357
20
2,270
147
2,972
38
396
3,553
5,823
483
1,298
2
(817)
483
90
58
707
22
877
43
920
15
2,749
2,234
25
38
27
119
88
–
5,295
6,215
638
1,207
575
33
2,453
173
2,770
38
383
3,364
5,817
398
1,313
2
(917)
398
162
163
Refer to the basis of preparation for comments on the net current asset deficiency position of the group.
Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 Summarised consolidated statement of comprehensive income
$M
Profit before tax
Income tax
Profit after tax
Other comprehensive income
Total comprehensive income
Closed Group
2019
2018
129
(29)
100
–
100
157
59
216
(1)
215
Summarised movement in consolidated accumulated losses
Closed Group
$M
Accumulated losses at 1 July
Adjustment for entities added/removed
Profit after tax
Accumulated losses at 30 June
26. PARENT ENTITY DISCLOSURES
$M
Results for the year ended 30 June
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Financial position as at 30 June
Current assets
Assets1
Current liabilities
Liabilities
Net assets
Issued capital
Reserves
(Accumulated losses)/retained earnings
Equity
1 There were no intangible assets as at 30 June 2019 (2018: $nil).
PARENT ENTITY CONTINGENCIES
2019
(917)
–
100
(817)
2018
(1,133)
–
216
(917)
Stockland
Corporation Limited
Stockland
Trust
2019
2018
2019
2018
85
–
85
4,555
4,688
–
3,831
857
1,299
2
(444)
857
310
(1)
309
4,436
4,617
–
3,831
786
1,313
2
(529)
786
242
(6)
236
686
22
708
466
549
22,678
21,684
9,597
13,739
8,939
7,358
86
1,495
8,939
8,762
12,130
9,554
7,538
96
1,920
9,554
There are no contingencies within either parent entity as at 30 June 2019 (2018: $nil).
PARENT ENTITY CAPITAL COMMITMENTS
Neither parent entity has entered into any capital commitments as at 30 June 2019 (2018: $nil).
ASIC DEED OF CROSS GUARANTEE
Stockland Corporation Limited has entered into a Deed of Cross Guarantee with the effect that it has guaranteed debts in respect of its
subsidiaries. Further details of the Deed of Cross Guarantee and the subsidiaries subject to the deed are disclosed in note 25.
Other items
In this section
This section includes information about the financial performance and position of the Group that must be disclosed to comply with the
Accounting Standards, the Corporations Act 2001 or the Corporations Regulations 2001.
27. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOW
A. Reconciliation of profit after tax to net cash flows from operating activities
$M
Profit after tax
Adjustments for:
Net impact on fair value hedges
Net impact on derivatives
Interest capitalised to investment properties
Net impact on sale of non-current assets
Net impact on other financial assets
DMF base fee earned, unrealised
Net write-back of inventories impairment provision
Depreciation
Straight-line rent adjustments
Impairment of Retirement Living goodwill
Net unrealised change in fair value of investment properties
(including equity-accounted investments)
Share of profits of equity-accounted investments, net of distributions received
Equity-settled security based payments
Other items
Adjustments for movements:
• Receivables
• Other assets
• Inventories
• Deferred tax assets
• Payables and other liabilities
• Resident obligations (net of impact of village disposals)
• Other provisions
Net cash flows from operating activities
Stockland
Trust
2019
311
2018
1,025
2019
242
2018
712
–
12
(5)
(17)
(16)
(26)
(31)
–
16
(6)
–
7
133
(9)
21
–
(26)
1
16
(3)
38
297
(180)
–
12
(3)
(69)
(4)
(40)
48
(169)
43
(210)
394
1
15
(9)
18
14
(974)
(61)
337
112
503
728
6
134
(3)
21
–
–
–
–
(3)
–
210
–
–
7
(11)
(10)
–
–
(1)
–
–
12
(5)
(10)
–
(16)
–
–
–
(6)
–
(109)
1
–
1
(5)
10
–
–
14
–
–
592
599
164
165
Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 B. Reconciliation of movement in financial liabilities arising from financing activities
30. RELATED PARTY DISCLOSURES
Stockland and Trust
Non cash movements
Opening
balance
Net cash
flow
Foreign exchange
movements
Fair value
changes
Closing
balance
3,381
557
–
3,938
2,842
557
130
3,529
82
200
175
457
504
–
(130)
374
10
–
–
10
40
–
–
40
299
–
–
299
(5)
–
–
(5)
3,772
757
175
4,704
3,381
557
–
3,938
$M
Offshore medium term notes
Domestic medium term notes
Bank facilities and commercial paper
2019
Offshore medium term notes
Domestic medium term notes
Bank facilities and commercial paper
2018
28. CONTINGENT LIABILITIES
KEEPING IT SIMPLE
A contingent liability is a liability that is not sufficiently certain to qualify for recognition as a provision where uncertainty may exist
regarding the outcome of future events.
Contingent liabilities at 30 June 2019 comprise bank guarantees, letters of credit and insurance bonds.
$M
Bank guarantees, letters of credit and insurance bonds issued to semi and local government and
other authorities against performance contracts, maximum facility $750 million (2018: $610 million)
Stockland and Trust
2019
443
2018
421
29. COMMITMENTS
A. Capital expenditure commitments
Commitments for acquisition of land and future development costs not recognised in the financial statements at balance date are as follows:
$M
Inventory
Investment property
Capital expenditure commitments
B. Operating lease commitments
$M
Within one year
Later than one year but not later than five years
Later than five years
Operating lease commitments
Stockland
Trust
2019
395
106
501
2018
363
218
581
2019
2018
–
30
30
–
36
36
Stockland
Trust
2019
2018
2019
2018
8
29
2
39
9
31
8
48
–
–
–
–
–
–
–
–
During the current financial year, $9 million was recognised as an expense in Stockland’s profit or loss in respect of operating leases
(2018: $9 million). No operating lease expense was recognised in the Trust’s profit or loss.
Year ended 30 June
$’000s
Responsible Entity fees
Management and service fee
Property management, tenancy design and leasing fees
Rental income
Finance income
Revenue from related parties
Responsible Entity fees
Property management, tenancy design and leasing fees
Recoupment of expenses
Development management fee capitalised to investment property
Expenses to related parties
RESPONSIBLE ENTITY AND OTHER MANAGEMENT FEES
Stockland
Trust
2019
2018
2019
564
77
2,423
–
–
2018
576
77
2,098
–
–
–
–
–
4,774
282,166
3,064
2,751
286,940
–
–
–
–
–
–
–
–
–
–
37,700
28,304
63,156
6,183
135,343
–
–
–
5,125
266,448
271,573
37,583
28,567
66,382
23,657
156,189
Stockland received Responsible Entity and other Management Fees from the unlisted property funds managed by Stockland during the
financial year.
The Trust pays Responsible Entity fees to Stockland Trust Management Limited, calculated at 0.3% to 0.35% of gross assets of the Trust less
intergroup loans (2018: 0.3 – 0.35%).
Property management expenses and tenancy design fees were paid by the Trust to Stockland Trust Management Limited (the Responsible
Entity) or its related parties provided in the normal course of business and on normal terms and conditions.
RENTAL INCOME
Rent was paid by Stockland Corporation Limited, a related party of the Responsible Entity to Stockland Trust in the normal course of business
and on normal terms and conditions.
FINANCE INCOME
The Trust has an unsecured loan to Stockland Corporation Limited of $3,533,931 thousand (2018: $3,303,404 thousand) repayable in 2023.
Interest on the loan is payable monthly in arrears at interest rates within the range of 7.5% to 8.2% during the year ended 30 June 2019 (2018:
7.7% to 8.1%).
Interest was paid by Stockland Corporation Limited to Stockland Trust, a related party of the Responsible Entity provided in the normal course of
business and on normal terms and conditions.
DEVELOPMENT MANAGEMENT FEE
A development management deed was executed between Stockland Trust and Stockland Development Pty Limited (a controlled entity of the
Stockland Corporation Limited) effective 1 July 2012 in relation to a management fee in respect of Retail developments. The fee represents
remuneration for the Corporation’s property development expertise and for developments which commenced after 1 July 2016 is calculated
based on a fixed 4.0% of total development costs in line with recent changes to benchmark methodologies (for developments which
commenced prior to 1 July 2016, the fee is calculated as 50.0% of the total valuation gain or loss on the completion of a development). Fees are
paid by Stockland Trust to Stockland Development Pty Limited.
Stockland has trade receivables of $381 thousand (2018: $379 thousand) due from the unlisted property funds.
As at 30 June 2019, the carrying amount of Stockland’s investment in the unlisted property funds was $8,323 thousand (2018: $8,203 thousand).
166
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Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 31. PERSONNEL EXPENSES
Year ended 30 June
$M
Wages and salaries (including on-costs)
Equity-settled security based payment transactions
Contributions to defined contribution plans
Increase in annual and long service leave provisions
Redundancy provision
Personnel expenses
PERSONNEL EXPENSES
Stockland
Trust
2019
210
12
14
3
6
245
2018
214
15
12
5
6
252
2019
2018
–
–
–
–
–
–
–
–
–
–
–
–
The total personnel expenses for the year was $245 million (2018: $252 million), which includes $12,407 thousand of equity-settled security based
payment transactions (2018: $15,472 thousand).
ANNUAL LEAVE
Accrued annual leave of $13 million (2018: $12 million) is presented in current liabilities, since Stockland does not have an unconditional right
to defer settlement for any of these obligations. Based on past experience, Stockland expects all employees to take the full amount of accrued
leave within the next 12 months.
LONG SERVICE LEAVE
The current portion of long service leave includes all unconditional entitlements where employees have completed the required period of
service and also those where employees are entitled to pro-rata payments in certain circumstances.
The liability for long service leave expected to be settled more than 12 months from the balance date is recognised in the provision for employee
benefits and measured as the present value of expected payments to be made in respect of services provided by employees up to the
balance date.
Consideration is given to expected future wage and salary levels, past experience of employee departures and periods of service. Expected
future payments are discounted using market yields at the balance date on corporate bonds with terms to maturity that match, as closely as
possible, the estimated future cash outflows.
BONUS ENTITLEMENTS
A liability is recognised in current trade and other payables for employee benefits in the form of employee bonus entitlements where there is a
contractual obligation or where there is a past practice that has created a constructive obligation. Liabilities for employee bonus entitlements
are expected to be settled within 12 months and are measured at the amounts expected to be paid when they are settled.
SUPERANNUATION PLAN
Stockland contributes to several defined contribution superannuation plans. Contributions are recognised as a personnel expense as they are
incurred. The annual expense was $14,268 thousand (2018: $12,403 thousand).
32. KEY MANAGEMENT PERSONNEL DISCLOSURES
Year ended 30 June
$000’s
Short term employee benefits
Post-employment benefits
Other long term benefits
Termination benefits
Security based payments
Key management personnel compensation
Stockland
Trust
2019
8,631
255
68
817
2,872
12,643
2018
13,205
309
172
1,050
7,631
22,367
2019
2018
–
–
–
–
–
–
–
–
–
–
–
–
Information regarding individual Directors’ and Executives’ remuneration is provided in the Remuneration Report on pages 86 to 103 of the
Directors’ Report.
OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
There are transactions between the Group and entities with which key management personnel have an association. These transactions do
not meet the definition of related parties since the key management personnel as individuals are not considered to have control or significant
influence over the financial or operating activities of the respective non-Stockland entities. Furthermore, the terms and conditions of those
transactions were no more favourable than those available, or might reasonably be available, on similar transactions to non-key management
personnel related entities on an arm’s length basis.
From time to time key management personnel acquire Residential land lots from the Group. These purchases are at market rates and on an
arm’s length basis. For FY19 this amounted to $518 thousand (2018: $nil) net of deposits received in FY18 of $58 thousand (2019: $nil).
33. AUDITOR’S REMUNERATION
Year ended 30 June
$000’s
PricewaterhouseCoopers Australia
Audit and review of Financial Report
Audit of Unlisted Property Fund Financial Reports
Regulatory audit and assurance services
Other audit and assurance services
Remuneration for audit services
Other non-audit services
Remuneration for non-audit services
Auditor remuneration
Stockland
Trust
2019
2018
2019
2018
1,942
1,669
112
647
–
2,701
199
199
2,900
108
847
–
2,624
98
98
2,722
561
–
393
–
954
–
–
954
565
–
587
–
1,152
–
–
1,152
Auditor’s fees are paid by Stockland Development Pty Limited on behalf of the Group.
34. ACCOUNTING POLICIES
KEEPING IT SIMPLE
Accounting policies that apply to a specific category in the profit or loss or balance sheet have been included within the relevant notes.
The accounting policies listed below are those that apply across a number of the Group’s profit or loss and balance sheet categories and
are not specific to a single category.
A. Principles of consolidation
CONTROLLED ENTITIES
The consolidated financial statements of the Group incorporate the assets, liabilities and results of all controlled entities.
Controlled entities are all entities over which the parent entities Stockland or the Trust is exposed to, or has right to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power to direct the relevant activities of the entity.
Intergroup transactions, balances and unrealised gains on transactions between controlled entities are eliminated. Unrealised losses are also
eliminated unless the transaction provides evidence of the impairment of the asset transferred.
FOREIGN CURRENCY
Transactions
Foreign currency transactions are translated into the entity’s functional currency at the exchange rate on the transaction date.
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Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 Assets and liabilities denominated in foreign currencies are translated to Australian dollars at balance date using the following applicable
exchange rates:
C. New and amended Accounting Standards
MANDATORY IN FUTURE YEARS
Foreign currency amount
Monetary assets and liabilities
Non-monetary assets and liabilities measured at historical cost
Applicable exchange rate
Balance date
Date of transaction
Non-monetary assets and liabilities measured at fair value
Date fair value is determined
Foreign exchange differences arising on translation are recognised in the profit or loss.
Translation of financial reports of foreign operations
Financial reports of foreign operations are translated to Australian dollars using the following applicable exchange rates:
Foreign currency amount
Revenues and expenses of foreign operations
Assets and liabilities of foreign operations, including goodwill
and fair value adjustments arising on consolidation
Applicable exchange rate
Date of transaction
Balance date
Equity items
Historical rates
The following foreign exchange differences are recognised directly in the foreign currency translation reserve, a separate component of equity:
• foreign currency differences arising on translation of foreign operations;
• exchange differences arising from the translation of the net investment in foreign entities and of related hedges (which are recycled into profit
or loss upon disposal); and
• foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which
is neither planned nor likely in the foreseeable future (which are monetary items considered to form part of the net investment in a foreign
operation).
B. Reserves
EXECUTIVE REMUNERATION RESERVE
The executive remuneration reserve arises due to the rights and deferred securities awarded under the LTI and DSTI being accounted for as
security based payments. The fair value of the rights and deferred securities is recognised as an employee expense in profit or loss with a
corresponding increase in the reserve over the vesting period. On vesting, the LTI and DSTI awards are settled by allocating treasury securities
to the rights holder, the cost to acquire the treasury securities is recognised in the executive remuneration reserve by a transfer from treasury
securities. Where rights are forfeited due to failure to satisfy a service or performance condition, the cumulative expense is reversed through
profit or loss in the current year. The cumulative expenditure for rights which lapse due to failure to satisfy a market condition are transferred to
retained earnings on expiry.
Certain new accounting standards and interpretations have been published that are not mandatory for the year ended 30 June 2019. Stockland’s
assessment of the impact of these new standards and interpretations is set out below.
AASB 16 Leases (effective for annual reporting periods beginning on or after 1 January 2019)
AASB 16 Leases replaces existing guidance, including AASB 117 Leases and IFRIC 4 Determining whether an Arrangement contains a Lease. AASB
16 is effective for annual reporting periods beginning on or after 1 January 2019.
The revised lease standard sets out a comprehensive model for identifying lease arrangements and subsequent measurement. Under the new
standard, the lessee is required to recognise all right-of-use assets and corresponding lease liabilities on the balance sheet, with the exception
of short term and low value leases. The right-of-use asset reflects the lease liability, direct costs and any adjustments for lease incentives or
restoration.
The lease liability is the net present value of future lease payments for the lease term, which incorporates any options reasonably expected
to be exercised. The contracted cash flows are separated into principal repayments and interest components, using the effective interest
rate method. Depreciation expense on the right-of-use asset and interest expense on the lease liability will now be recognised instead of a
rental expense.
An assessment has been performed based on each operating lease arrangement that exists in the current reporting period. The assessment
confirmed that the new standard will not have a material impact on Stockland or the Trust. Based on the assessment performed, if AASB 16 had
been adopted for the year ended 30 June 2019, a right-of-use asset and a lease liability would have been recognised on the balance sheet, while
straight line rent liabilities would have been derecognised. Total assets and total liabilities would have increased by less than 1%, Net Assets
would decrease by less than 1%. Statutory profit would decrease by less than 1%. The operating lease commitments would also have been
adjusted accordingly.
Lessor accounting remains largely unchanged, and hence there is no material impact on accounting for income from Stockland’s Retirement
Living and Commercial Property businesses.
35. CHANGES IN ACCOUNTING POLICIES
A. AASB 9 Financial Instruments
The Group has adopted AASB 9 as issued in December 2014. The accounting policies were updated to comply with AASB 9. AASB 9 replaces
the provisions of AASB 139 Financial Instruments: Recognition and Measurement that relate to the recognition, classification and measurement
of financial assets and financial liabilities; derecognition of financial instruments; impairment of financial assets and hedge accounting. AASB
7 Financial Instruments: Disclosures was also amended to incorporate more extensive qualitative and quantitative disclosure requirement
relating to AASB 9.
Adoption of AASB 9 has resulted in a change in accounting policies and adjustments to certain amounts recognised in the financial statements.
The new accounting policies apply to the period commenced 1 July 2018 and the policies in the 30 June 2018 annual financial statements apply
to the comparative periods.
CASH FLOW HEDGE RESERVE
IMPACT OF FIRST TIME ADOPTION OF AASB 9
The cash flow hedge reserve is used to record the effective portion of changes in the fair value of derivatives that are designated and qualify as
cash flow hedges, refer to note 16.
FAIR VALUE RESERVE
The fair value reserve comprises the cumulative net change in the fair value of available for sale financial assets until the assets are derecognised
or impaired.
FOREIGN CURRENCY TRANSLATION RESERVE
The foreign currency translation reserve comprises all foreign currency differences arising from the translation of the financial statements of
foreign operations and from derivatives used to hedge operations/funding.
The Group has fully adopted AASB 9 using the modified retrospective approach, with the effect of initially applying the standard recognised as
a transition adjustment to the opening balance sheet and retained earnings at the date of initial application of 1 July 2018. Comparatives for the
2018 financial year have therefore not been restated.
The adoption of AASB 9 resulted in the following classification changes on initial application at 1 July 2018:
Financial assets
Trade receivables
Other receivables
Other assets
Former classification
under AASB 139
New classification under AASB 9
Loans and receivables
Financial assets subsequently measured at amortised costs
Loans and receivables
Financial assets subsequently measured at amortised costs
Loans and receivables
Financial assets subsequently measured at amortised costs
Available for sale financial assets
Available for sale financial assets
Financial assets subsequently measured at fair value through
profit or loss or other comprehensive income
Financial assets are classified based on the business model within which the asset is held and on the basis of the financial asset's contractual
cash flow characteristics.
The above changes in classification has not had any impact on measurement except as explained below.
AASB 9 also introduces an expected credit loss (ECL) impairment model which differs significantly from the incurred loss approach under AASB
139. The ECL model is forward looking and does not require evidence of an actual loss event for an impairment provision to be recognised.
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Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 Directors’ declaration
(1) In the opinion of the Directors of Stockland Corporation Limited, and the Directors of the Responsible Entity of Stockland Trust, Stockland
Trust Management Limited (collectively referred to as the Directors):
(a) the financial statements and notes of Stockland Corporation Limited and its controlled entities, including Stockland Trust and its
controlled entities (Stockland) and Stockland Trust and its controlled entities (Trust), set out on pages 108 to 172, are in accordance with
the Corporations Act 2001, including:
(i) giving a true and fair view of Stockland’s and the Trust’s financial position as at 30 June 2019 and of their performance, for the financial
year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) there are reasonable grounds to believe that both Stockland and the Trust will be able to pay their debts as and when they become
due and payable.
(2) There are reasonable grounds to believe that Stockland Corporation Limited and the Stockland entities identified in note 24 will be able to
meet any obligations or liabilities to which they are or may become subject to by virtue of the Deed of Cross Guarantee between those Group
entities pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785.
(3) Stockland Trust has operated during the year ended 30 June 2019 in accordance with the provisions of the Trust Constitution of 24 October
2006, as amended.
(4) The Register of Unitholders has, during the year ended 30 June 2019, been properly drawn up and maintained so as to give a true account
of the unitholders of the Stockland Trust.
(5) The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Managing Director and Chief
Financial Officer for the year ended 30 June 2019.
(6) The Directors draw attention to the basis of preparation section to the financial statements, which includes a Statement of Compliance with
International Financial Reporting Standards.
Signed in accordance with a resolution of the Directors:
Tom Pockett
Chairman
Dated at Sydney, 21 August 2019
Mark Steinert
Managing Director
For trade receivables, Stockland and the Trust apply the simplified approach to measuring expected credit losses as prescribed by AASB 9,
which provides for the use of the lifetime expected loss provision for all trade receivables. There was an immaterial impact to Stockland’s
financial asset provisions on adoption of AASB 9.
The Trust has applied the new expected credit losses impairment model to the $3,288 million unsecured intergroup loan receivable from
Stockland Corporation Limited which is repayable in 2023. While there has been no history of defaults, and the loan is considered to be low
credit risk, an impairment provision determined as twelve months expected credit losses of $8 million has been recorded in retained earnings on
adoption as follows. This loan eliminates on consolidation so there is no impact on Stockland.
Consolidated balance sheet
Trust
$M
Amount under AASB 139
30 June 2018
Amount under AASB 9
1 July 2018
Non-current receivables due from related companies
Retained earnings
3,288
2,000
3,280
1,992
Decrease
(8)
(8)
B. AASB 15 Revenue from Contracts with Customers
AASB 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing
revenue recognition guidance, including AASB 118 Revenue, AASB 111 Construction Contracts and IFRIC 13 Customer Loyalty Programmes.
The core principle of AASB 15 is that an entity recognises revenue related to the transfer of promised goods or services when control of the
goods or service passes to the customer. It requires the identification of discrete performance obligations within a transaction and allocating
an associated transaction price to these obligations. The Group adopted AASB 15 with effect from 1 July 2018.
Adoption of AASB 15 has resulted in a change in accounting policies and adjustments to certain amounts recognised in the financial statements
as noted below. The new accounting policies apply to the period commenced 1 July 2018 and the policies in the 30 June 2018 annual financial
statements apply to the comparative periods.
IMPACT OF FIRST TIME ADOPTION OF AASB 15
The Group has adopted AASB 15 using the modified retrospective approach, with the effect of initially applying the standard recognised as a
transition adjustment to the opening balance sheet and retained earnings at the date of initial application of 1 July 2018. Comparatives for the
2018 financial year have therefore not been restated.
There has been no change in the timing of recognition of revenue on adoption of this standard for property development sales and outgoings
recoveries. Commercial Property rental income and Retirement Living DMF revenue continue to meet the definition of a lease arrangement and
fall outside of the scope of AASB 15.
AASB 15 requires incremental costs which are directly attributable to obtaining a contract (e.g. a sales commission) to be deferred and
recognised as a capitalised cost to acquire a contract on balance sheet. This treatment is optional under AASB 15 where the related benefit
(revenue) is expected to flow within one year or less of incurring the commission cost, which is the case for the majority of Residential land and
Retirement Living sales.
On adoption of AASB 15, a $4 million asset relating to capitalised cost to acquire a contract has been recorded at 1 July 2018, with a
corresponding increase in retained earnings, in relation to Medium Density sales commissions incurred where settlements are not forecast
to occur within one year. There will be an immaterial impact on the timing of the recognition of the commission expense in future periods.
$M
Consolidated statement of comprehensive income
Management, administration, marketing and selling expenses:
• residential sales commissions
• amortisation expense (contract asset)
Expense
Consolidated balance sheet
Non-current capitalised cost to acquire a contract
Non-current deferred tax liabilities
Retained earnings
Stockland
Amount under AASB 118
30 June 2018
Amount under AASB 15
1 July 2018
Increase/
(decrease)
5
–
5
–
–
–
–
6
6
4
1
3
(5)
6
1
4
1
3
In addition to revenue generated directly from leases, which are accounted for in accordance with AASB 117, rent from investment properties
includes non-lease revenue earned from tenants, predominantly in relation to recovery of asset operating costs (known as ‘outgoings’). This
outgoings revenue is within the scope of AASB 15 and therefore recognised and measured under that standard. The outgoings recoveries
element of external segment revenue is disclosed in note 1.
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Stockland Annual Report 2019IntroductionStrategy andperformanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportSecurityholder information and key datesGlossaryYear ended 30 June 2019 Independent
auditor’s report
Independent auditor’s report
To the stapled securityholders of Stockland and the unitholders of Stockland Trust Group
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial reports of Stockland, being the consolidated stapled entity, which
comprises Stockland Corporation Limited and its controlled entities, and Stockland Trust and its
controlled entities (together the “Stockland Trust Group” or the “Trust”) are in accordance with the
Corporations Act 2001, including:
(a) giving a true and fair view of the financial positions of Stockland and the Stockland Trust
Group as at 30 June 2019 and of their financial performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The financial reports of Stockland and the Stockland Trust Group (the financial report) comprise:
•
•
•
•
•
•
the consolidated balance sheet as at 30 June 2019
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flow for the year then ended
the notes to the financial statements, which include a summary of significant accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of Stockland and the Stockland Trust Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
174
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Our audit approach
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
opinion on the financial report as a whole, taking into account the geographic and management
structure of Stockland and the Stockland Trust Group, their accounting processes and controls and the
structure of Stockland and the Stockland Trust Group, their accounting processes and controls and the
industry in which they operate.
industry in which they operate.
Materiality
Materiality
Audit scope
Audit scope
Key audit matters
Key audit matters
• Our audit focused on where
• Our audit focused on where
Stockland and the Stockland
Stockland and the Stockland
Trust Group made subjective
Trust Group made subjective
judgements; for example,
judgements; for example,
significant accounting
significant accounting
estimates involving
estimates involving
assumptions and inherently
assumptions and inherently
uncertain future events.
uncertain future events.
• The audit of Stockland and
• The audit of Stockland and
the Stockland Trust Group
the Stockland Trust Group
was performed by a team
was performed by a team
primarily based in Sydney.
primarily based in Sydney.
We ensured that the audit
We ensured that the audit
team possessed the
team possessed the
appropriate skills and
appropriate skills and
competencies needed for the
competencies needed for the
audits, and this included
audits, and this included
industry expertise in real
industry expertise in real
estate, as well as IT
estate, as well as IT
specialists, valuation, tax and
specialists, valuation, tax and
treasury professionals.
treasury professionals.
• Amongst other relevant topics,
• Amongst other relevant topics,
we communicated the
we communicated the
following key audit matters to
following key audit matters to
the Audit Committee:
the Audit Committee:
- Valuation of Investment
- Valuation of Investment
properties – Commercial
properties – Commercial
Property
Property
- Valuation of Investment
- Valuation of Investment
properties - Retirement
properties - Retirement
Living
Living
- Carrying value of inventory
- Carrying value of inventory
and cost of property
and cost of property
developments sold
developments sold
tax assets
tax assets
- Recoverability of deferred
- Recoverability of deferred
• These are further described in
• These are further described in
the Key audit matters section
the Key audit matters section
of our report.
of our report.
•
•
For the purpose of our audit
For the purpose of our audit
of Stockland and the
of Stockland and the
Stockland Trust Group, we
Stockland Trust Group, we
used overall materiality of
used overall materiality of
$44.8 million and $34.9
$44.8 million and $34.9
million, respectively, which
million, respectively, which
represents approximately 5%
represents approximately 5%
of Funds from Operations.
of Funds from Operations.
The metric is defined in note 2
The metric is defined in note 2
of the financial report.
of the financial report.
• We applied this threshold,
• We applied this threshold,
together with qualitative
together with qualitative
considerations, to determine
considerations, to determine
the scope of our audit and the
the scope of our audit and the
nature, timing and extent of
nature, timing and extent of
our audit procedures and to
our audit procedures and to
evaluate the effect of
evaluate the effect of
misstatements on the
misstatements on the
financial report as a whole.
financial report as a whole.
• We chose Funds from
• We chose Funds from
Operations because, in our
Operations because, in our
view, it is the primary metric
view, it is the primary metric
against which the
against which the
performance of Stockland is
performance of Stockland is
most commonly measured in
most commonly measured in
the industry.
the industry.
• We chose 5% based on our
• We chose 5% based on our
professional judgement,
professional judgement,
noting that it is within the
common range relative to
profit-based benchmarks.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period and were determined separately for Stockland
and the Stockland Trust Group. Relevant amounts listed for each part of the stapled group represent
balances as they were presented in the financial report and should not be aggregated. The key audit
matters were addressed in the context of our audit of the financial report as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters. Further, any
commentary on the outcomes of a particular audit procedure is made in that context.
175
Key audit matter
How our audit addressed the key audit
matter
Valuation of Investment properties – Commercial Property
(Refer to note 7)
Stockland - $9,145 million
Stockland Trust Group - $9,133 million
portfolio (“Commercial Property”) is primarily
comprised of retail town centres, logistics, and
workplace investment properties, as well as
properties under development.
Stockland and the Trust’s Commercial Property
We obtained a sample of publicly available
property market reports to obtain an
understanding of the prevailing conditions and
trends in the markets in which Stockland and the
Trust invest, and we compared these factors
against the current year valuations.
Commercial Properties are valued at fair value as at
reporting date using a combination of the income
We met with management and discussed the
capitalisation method and the discounted cash flow
specifics of selected individual properties
method. The value of Commercial Properties is
including, amongst other things, any significant
dependent on the valuation methodology adopted
new leases entered into during the year, lease
and the inputs into the valuation model. Factors
expiries, expectations for future leases, capital
such as prevailing market conditions, the
individual nature, condition and location of each
expenditure and vacancy rates.
property and the expected future income for each
For a sample of leases we agreed the underlying
property, directly impact fair values. Amongst
following assumptions are key in establishing fair
income used in the valuation and internal tolerance
others, the
value:
average market rental growth
• net market rent
•
•
•
capitalisation rate
• discount rate
terminal yield.
At the end of each reporting period the directors
determine the fair value of the Commercial
Properties in accordance with their valuation policy
as described in note 7.
This was a key audit matter because of the:
lease terms to the tenancy schedule and, for a
sample of properties, we compared the rental
check models to the tenancy schedule. We found
that the data used in the samples tested was
consistent with tenant leases.
We discussed with management the rationale
supporting the key assumptions adopted in the
valuations, and compared them to comparable
market data for reasonableness.
For investment properties that were externally
valued, we compared the valuations to the fair
value listed in the accounting records of Stockland
and the Trust, and assessed the reasonableness of
the valuation methodology and the assumptions
Stockland Annual Report 2019Year ended 30 June 2019
noting that it is within the
noting that it is within the
common range relative to
common range relative to
profit-based benchmarks.
profit-based benchmarks.
noting that it is within the
common range relative to
profit-based benchmarks.
Key audit matters
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period and were determined separately for Stockland
Key audit matters
our audit of the financial report for the current period and were determined separately for Stockland
and the Stockland Trust Group. Relevant amounts listed for each part of the stapled group represent
Key audit matters are those matters that, in our professional judgement, were of most significance in
and the Stockland Trust Group. Relevant amounts listed for each part of the stapled group represent
balances as they were presented in the financial report and should not be aggregated. The key audit
our audit of the financial report for the current period and were determined separately for Stockland
balances as they were presented in the financial report and should not be aggregated. The key audit
matters were addressed in the context of our audit of the financial report as a whole, and in forming
and the Stockland Trust Group. Relevant amounts listed for each part of the stapled group represent
matters were addressed in the context of our audit of the financial report as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters. Further, any
balances as they were presented in the financial report and should not be aggregated. The key audit
our opinion thereon, and we do not provide a separate opinion on these matters. Further, any
commentary on the outcomes of a particular audit procedure is made in that context.
matters were addressed in the context of our audit of the financial report as a whole, and in forming
commentary on the outcomes of a particular audit procedure is made in that context.
our opinion thereon, and we do not provide a separate opinion on these matters. Further, any
How our audit addressed the key audit
commentary on the outcomes of a particular audit procedure is made in that context.
How our audit addressed the key audit
matter
matter
How our audit addressed the key audit
matter
Key audit matter
Key audit matter
Key audit matter
Valuation of Investment properties – Commercial Property
Valuation of Investment properties – Commercial Property
(Refer to note 7)
(Refer to note 7)
Stockland - $9,145 million
Valuation of Investment properties – Commercial Property
Stockland - $9,145 million
Stockland Trust Group - $9,133 million
(Refer to note 7)
Stockland Trust Group - $9,133 million
Stockland and the Trust’s Commercial Property
Stockland - $9,145 million
Stockland and the Trust’s Commercial Property
portfolio (“Commercial Property”) is primarily
portfolio (“Commercial Property”) is primarily
Stockland Trust Group - $9,133 million
comprised of retail town centres, logistics, and
comprised of retail town centres, logistics, and
Stockland and the Trust’s Commercial Property
workplace investment properties, as well as
workplace investment properties, as well as
portfolio (“Commercial Property”) is primarily
properties under development.
properties under development.
comprised of retail town centres, logistics, and
workplace investment properties, as well as
Commercial Properties are valued at fair value as at
Commercial Properties are valued at fair value as at
properties under development.
reporting date using a combination of the income
reporting date using a combination of the income
capitalisation method and the discounted cash flow
capitalisation method and the discounted cash flow
Commercial Properties are valued at fair value as at
method. The value of Commercial Properties is
method. The value of Commercial Properties is
reporting date using a combination of the income
dependent on the valuation methodology adopted
dependent on the valuation methodology adopted
capitalisation method and the discounted cash flow
and the inputs into the valuation model. Factors
and the inputs into the valuation model. Factors
method. The value of Commercial Properties is
such as prevailing market conditions, the
such as prevailing market conditions, the
dependent on the valuation methodology adopted
individual nature, condition and location of each
individual nature, condition and location of each
and the inputs into the valuation model. Factors
property and the expected future income for each
property and the expected future income for each
such as prevailing market conditions, the
property, directly impact fair values. Amongst
property, directly impact fair values. Amongst
individual nature, condition and location of each
others, the
others, the
property and the expected future income for each
following assumptions are key in establishing fair
following assumptions are key in establishing fair
property, directly impact fair values. Amongst
value:
value:
others, the
• net market rent
• net market rent
following assumptions are key in establishing fair
•
value:
•
•
• net market rent
•
• discount rate
•
• discount rate
•
•
•
• discount rate
•
average market rental growth
average market rental growth
capitalisation rate
capitalisation rate
average market rental growth
terminal yield.
capitalisation rate
terminal yield.
At the end of each reporting period the directors
At the end of each reporting period the directors
determine the fair value of the Commercial
determine the fair value of the Commercial
Properties in accordance with their valuation policy
Properties in accordance with their valuation policy
At the end of each reporting period the directors
as described in note 7.
as described in note 7.
determine the fair value of the Commercial
Properties in accordance with their valuation policy
This was a key audit matter because of the:
This was a key audit matter because of the:
as described in note 7.
We obtained a sample of publicly available
We obtained a sample of publicly available
property market reports to obtain an
property market reports to obtain an
understanding of the prevailing conditions and
understanding of the prevailing conditions and
We obtained a sample of publicly available
trends in the markets in which Stockland and the
trends in the markets in which Stockland and the
property market reports to obtain an
Trust invest, and we compared these factors
Trust invest, and we compared these factors
understanding of the prevailing conditions and
against the current year valuations.
against the current year valuations.
trends in the markets in which Stockland and the
Trust invest, and we compared these factors
We met with management and discussed the
We met with management and discussed the
against the current year valuations.
specifics of selected individual properties
specifics of selected individual properties
including, amongst other things, any significant
including, amongst other things, any significant
We met with management and discussed the
new leases entered into during the year, lease
new leases entered into during the year, lease
specifics of selected individual properties
expiries, expectations for future leases, capital
expiries, expectations for future leases, capital
including, amongst other things, any significant
expenditure and vacancy rates.
expenditure and vacancy rates.
new leases entered into during the year, lease
expiries, expectations for future leases, capital
For a sample of leases we agreed the underlying
For a sample of leases we agreed the underlying
expenditure and vacancy rates.
lease terms to the tenancy schedule and, for a
lease terms to the tenancy schedule and, for a
sample of properties, we compared the rental
sample of properties, we compared the rental
For a sample of leases we agreed the underlying
income used in the valuation and internal tolerance
income used in the valuation and internal tolerance
lease terms to the tenancy schedule and, for a
check models to the tenancy schedule. We found
check models to the tenancy schedule. We found
sample of properties, we compared the rental
that the data used in the samples tested was
that the data used in the samples tested was
income used in the valuation and internal tolerance
consistent with tenant leases.
consistent with tenant leases.
check models to the tenancy schedule. We found
that the data used in the samples tested was
We discussed with management the rationale
We discussed with management the rationale
consistent with tenant leases.
supporting the key assumptions adopted in the
supporting the key assumptions adopted in the
valuations, and compared them to comparable
valuations, and compared them to comparable
We discussed with management the rationale
market data for reasonableness.
market data for reasonableness.
supporting the key assumptions adopted in the
valuations, and compared them to comparable
For investment properties that were externally
For investment properties that were externally
market data for reasonableness.
valued, we compared the valuations to the fair
valued, we compared the valuations to the fair
value listed in the accounting records of Stockland
value listed in the accounting records of Stockland
For investment properties that were externally
and the Trust, and assessed the reasonableness of
and the Trust, and assessed the reasonableness of
valued, we compared the valuations to the fair
the valuation methodology and the assumptions
the valuation methodology and the assumptions
value listed in the accounting records of Stockland
and the Trust, and assessed the reasonableness of
the valuation methodology and the assumptions
This was a key audit matter because of the:
terminal yield.
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Key audit matter
Key audit matter
Key audit matter
Key audit matter
•
•
•
•
•
•
•
•
relative size of the Commercial Property
relative size of the Commercial Property
portfolio to net assets and related
relative size of the Commercial Property
portfolio to net assets and related
valuation movements and
portfolio to net assets and related
valuation movements and
inherent subjectivity of the key
relative size of the Commercial Property
valuation movements and
inherent subjectivity of the key
assumptions that underpin the valuations.
portfolio to net assets and related
inherent subjectivity of the key
assumptions that underpin the valuations.
valuation movements and
assumptions that underpin the valuations.
inherent subjectivity of the key
assumptions that underpin the valuations.
•
•
•
•
•
•
•
•
How our audit addressed the key audit
How our audit addressed the key audit
matter
How our audit addressed the key audit
matter
matter
adopted for capitalisation and discount rates
How our audit addressed the key audit
adopted for capitalisation and discount rates
relative to comparable market data. In addition,
matter
adopted for capitalisation and discount rates
relative to comparable market data. In addition,
for a sample of investment properties that were
relative to comparable market data. In addition,
for a sample of investment properties that were
externally valued, we:
adopted for capitalisation and discount rates
for a sample of investment properties that were
externally valued, we:
relative to comparable market data. In addition,
externally valued, we:
for a sample of investment properties that were
externally valued, we:
evaluated the competence and capabilities
evaluated the competence and capabilities
of the relevant valuer,
evaluated the competence and capabilities
of the relevant valuer,
read the valuers’ terms of engagement - we
of the relevant valuer,
read the valuers’ terms of engagement - we
did not identify any terms that might have
evaluated the competence and capabilities
read the valuers’ terms of engagement - we
did not identify any terms that might have
affected their objectivity or imposed
of the relevant valuer,
did not identify any terms that might have
affected their objectivity or imposed
limitations on their work relevant to their
read the valuers’ terms of engagement - we
affected their objectivity or imposed
limitations on their work relevant to their
valuation,
did not identify any terms that might have
limitations on their work relevant to their
valuation,
• made inquiries of a sample of the external
affected their objectivity or imposed
valuation,
• made inquiries of a sample of the external
valuers as to their key considerations in
limitations on their work relevant to their
• made inquiries of a sample of the external
valuers as to their key considerations in
assessing fair value, and
valuation,
valuers as to their key considerations in
assessing fair value, and
•
inspected the final valuation reports.
• made inquiries of a sample of the external
assessing fair value, and
•
inspected the final valuation reports.
valuers as to their key considerations in
•
inspected the final valuation reports.
assessing fair value, and
inspected the final valuation reports.
We also used quantitative and qualitative measures
We also used quantitative and qualitative measures
to determine those properties at greater risk of
We also used quantitative and qualitative measures
to determine those properties at greater risk of
being carried at an amount above fair value and
to determine those properties at greater risk of
being carried at an amount above fair value and
varied the nature and extent of audit testing to
We also used quantitative and qualitative measures
being carried at an amount above fair value and
varied the nature and extent of audit testing to
respond to the risk criteria identified. The
to determine those properties at greater risk of
varied the nature and extent of audit testing to
respond to the risk criteria identified. The
procedures conducted, amongst others, included:
being carried at an amount above fair value and
respond to the risk criteria identified. The
procedures conducted, amongst others, included:
varied the nature and extent of audit testing to
procedures conducted, amongst others, included:
compared the valuations to the fair value
respond to the risk criteria identified. The
compared the valuations to the fair value
listed in the accounting records,
procedures conducted, amongst others, included:
compared the valuations to the fair value
listed in the accounting records,
assessed the reasonableness of the
listed in the accounting records,
assessed the reasonableness of the
valuation methodology,
compared the valuations to the fair value
assessed the reasonableness of the
valuation methodology,
assessed the key assumptions adopted
listed in the accounting records,
valuation methodology,
assessed the key assumptions adopted
relative to industry benchmarks and
assessed the reasonableness of the
assessed the key assumptions adopted
relative to industry benchmarks and
market data, including comparable
valuation methodology,
relative to industry benchmarks and
market data, including comparable
transactions where possible, and
assessed the key assumptions adopted
market data, including comparable
transactions where possible, and
tested the mathematical accuracy of a
relative to industry benchmarks and
transactions where possible, and
tested the mathematical accuracy of a
sample of the valuation calculations.
market data, including comparable
tested the mathematical accuracy of a
sample of the valuation calculations.
transactions where possible, and
sample of the valuation calculations.
tested the mathematical accuracy of a
sample of the valuation calculations.
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Valuation of Investment properties - Retirement Living
Valuation of Investment properties - Retirement Living
(Refer to note 8)
Valuation of Investment properties - Retirement Living
(Refer to note 8)
Stockland - $3,990 million
(Refer to note 8)
Stockland - $3,990 million
Stockland Trust Group – this KAM is not applicable as the Trust does not invest in Retirement Living assets.
Valuation of Investment properties - Retirement Living
Stockland - $3,990 million
Stockland Trust Group – this KAM is not applicable as the Trust does not invest in Retirement Living assets.
Stockland’s Retirement Living portfolio
(Refer to note 8)
Stockland Trust Group – this KAM is not applicable as the Trust does not invest in Retirement Living assets.
Stockland’s Retirement Living portfolio
(“Retirement Living”) comprises retirement village
Stockland - $3,990 million
Stockland’s Retirement Living portfolio
(“Retirement Living”) comprises retirement village
investment properties, as well as properties under
Stockland Trust Group – this KAM is not applicable as the Trust does not invest in Retirement Living assets.
(“Retirement Living”) comprises retirement village
investment properties, as well as properties under
development.
Stockland’s Retirement Living portfolio
investment properties, as well as properties under
development.
(“Retirement Living”) comprises retirement village
development.
Retirement Living investment properties are
investment properties, as well as properties under
Retirement Living investment properties are
valued at fair value at the reporting date using a
development.
Retirement Living investment properties are
valued at fair value at the reporting date using a
discounted cash flow analysis. The value of
valued at fair value at the reporting date using a
discounted cash flow analysis. The value of
investment properties in this segment is dependent
Retirement Living investment properties are
discounted cash flow analysis. The value of
investment properties in this segment is dependent
on the terms of the residents’ contracts and the
valued at fair value at the reporting date using a
investment properties in this segment is dependent
on the terms of the residents’ contracts and the
inputs to the valuation model. Factors such as
discounted cash flow analysis. The value of
on the terms of the residents’ contracts and the
inputs to the valuation model. Factors such as
prevailing market conditions, the individual
investment properties in this segment is dependent
inputs to the valuation model. Factors such as
prevailing market conditions, the individual
on the terms of the residents’ contracts and the
prevailing market conditions, the individual
inputs to the valuation model. Factors such as
prevailing market conditions, the individual
Together with the PwC valuation expert, we had
Together with the PwC valuation expert, we had
discussions with management, and read market
Together with the PwC valuation expert, we had
discussions with management, and read market
research and reports to obtain an understanding of
discussions with management, and read market
research and reports to obtain an understanding of
the prevailing conditions and trends in the markets
Together with the PwC valuation expert, we had
research and reports to obtain an understanding of
the prevailing conditions and trends in the markets
in which Stockland invests, and we compared those
discussions with management, and read market
the prevailing conditions and trends in the markets
in which Stockland invests, and we compared those
factors against the current year valuations.
research and reports to obtain an understanding of
in which Stockland invests, and we compared those
factors against the current year valuations.
the prevailing conditions and trends in the markets
factors against the current year valuations.
We met with management and discussed the
in which Stockland invests, and we compared those
We met with management and discussed the
specifics of selected individual properties
factors against the current year valuations.
We met with management and discussed the
specifics of selected individual properties
including, amongst other things, vacancy rates,
specifics of selected individual properties
including, amongst other things, vacancy rates,
growth rates, discount rates, unit values, and
We met with management and discussed the
including, amongst other things, vacancy rates,
growth rates, discount rates, unit values, and
capital expenditure.
specifics of selected individual properties
growth rates, discount rates, unit values, and
capital expenditure.
including, amongst other things, vacancy rates,
capital expenditure.
growth rates, discount rates, unit values, and
capital expenditure.
176
177
Stockland Annual Report 2019Year ended 30 June 2019
Key audit matter
How our audit addressed the key audit
matter
nature, condition and location of each property and
For a sample of resident contracts across the
the expected future income for each property
portfolio, we compared the terms used in the
directly impact fair values. Amongst others, the
valuations to underlying contracts. We found that
•
•
•
•
•
an
following assumptions are
key in establishing fair value:
• discount rates
growth rates
average length of stay of existing and
future residents
current market value of units
renovation / reinstatement costs
renovation recoupment.
The Stockland valuation policy requires that all key
valuation assumptions be externally appraised by
external valuation expert each reporting period. In
addition, at each reporting period a selection of
properties are individually valued by an external
valuation expert.
This was a key audit matter because of the:
•
•
relative size of the Retirement Living
portfolio to net assets and related
valuation movements, and
inherent subjectivity of the key
assumptions that underpin the valuations.
the data used in the samples tested was materially
consistent with the sampled resident contracts.
We discussed with management the rationale
supporting the key assumptions adopted in the
valuations, and compared them to the valuation
expert’s report and market data.
For the external review of key valuation
assumptions obtained by management, we also:
•
•
•
•
assessed the competency and capabilities
of the relevant external expert,
read the expert’s terms of engagement - we
did not identify any terms that might
affect their objectivity or impose
limitations on their work relevant to their
valuation assessment,
assessed the reasonableness of the
assumptions adopted relative to
comparable market data, and
inspected the final valuation assessment
and compared the assumptions to those
used in Stockland’s valuation model.
For a sample of Retirement Living property
valuations, we:
•
•
•
•
compared the resident information used in
the valuation model to a sample of
resident contracts,
assessed the design and operating
effectiveness of the relevant key controls
over the valuation model and the
associated key assumptions used by
Stockland to satisfy ourselves that the
model was operating as designed,
tested the mathematical accuracy of a
sample of the valuation calculations, and
examined the property valuations
undertaken by management’s expert and
compared them with the outputs from the
valuation model.
Carrying value of inventory and cost of property developments sold
(Refer to note 6)
Stockland - $3,505 million
Stockland Trust Group – this KAM is not applicable as the Trust does not hold inventory assets.
Key audit matter
Key audit matter
How our audit addressed the key audit
How our audit addressed the key audit
matter
matter
Carrying value of inventory
Carrying value of inventory
Stockland has a portfolio of residential
Stockland has a portfolio of residential
development projects that it develops for future
development projects that it develops for future
sale, which are classified as inventory. Stockland’s
sale, which are classified as inventory. Stockland’s
inventory is accounted for at the lower of the cost
inventory is accounted for at the lower of the cost
and net realisable value for each inventory project,
and net realisable value for each inventory project,
as assessed at each reporting date.
as assessed at each reporting date.
The cost of the inventory is calculated using actual
The cost of the inventory is calculated using actual
land acquisition costs, construction costs,
land acquisition costs, construction costs,
development related costs and interest capitalised
development related costs and interest capitalised
for eligible projects.
for eligible projects.
Net realisable value is calculated based on the
Net realisable value is calculated based on the
estimated selling price of the inventory, less the
estimated selling price of the inventory, less the
estimated costs of completion, including forecast
estimated costs of completion, including forecast
capitalised interest, and associated selling costs.
capitalised interest, and associated selling costs.
Each of these factors is impacted by expected
Each of these factors is impacted by expected
future market and economic conditions which
future market and economic conditions which
include sales prices, sales rates and development
include sales prices, sales rates and development
costs.
costs.
Where an inventory project’s net realisable value is
Where an inventory project’s net realisable value is
lower than its cost, the inventory project is written
lower than its cost, the inventory project is written
down to its net realisable value under Australian
down to its net realisable value under Australian
Accounting Standards.
Accounting Standards.
Cost of property developments sold
Cost of property developments sold
When inventory is sold by Stockland the carrying
When inventory is sold by Stockland the carrying
amount of the relevant inventory is recognised as
amount of the relevant inventory is recognised as
an expense in the same period that the sale is
an expense in the same period that the sale is
recognised. The expense recognised is based
recognised. The expense recognised is based
directly upon the forecast profit margin for the
directly upon the forecast profit margin for the
relevant project as a whole, and results in the
relevant project as a whole, and results in the
recognition of a profit margin in the period the
recognition of a profit margin in the period the
inventory is sold. To the extent that expected future
inventory is sold. To the extent that expected future
costs exceed expected future revenues the
costs exceed expected future revenues the
inventory is written down to its net realisable
inventory is written down to its net realisable
value.
value.
These were key audit matters because of the:
These were key audit matters because of the:
•
•
•
•
relative size of the inventory balance to net
relative size of the inventory balance to net
assets, and
assets, and
inherent subjectivity of the key
inherent subjectivity of the key
assumptions that underpin net realisable
assumptions that underpin net realisable
value, and the profit margin recognised.
value, and the profit margin recognised.
We obtained a sample of the publicly available
We obtained a sample of the publicly available
property market reports to obtain an
property market reports to obtain an
understanding of the prevailing conditions and
understanding of the prevailing conditions and
trends in the markets in which Stockland invests,
trends in the markets in which Stockland invests,
and we compared those factors against the
and we compared those factors against the
assumptions adopted in the current year’s
assumptions adopted in the current year’s
assessment of net realisable value of inventory.
assessment of net realisable value of inventory.
For each project we discussed with management
For each project we discussed with management
matters such as the overall project strategy and
matters such as the overall project strategy and
forecast profitability.
forecast profitability.
Using the information gained from these
Using the information gained from these
discussions and our existing knowledge of the
discussions and our existing knowledge of the
business, we used a risk based approach to select a
business, we used a risk based approach to select a
sample of projects on which to perform further
sample of projects on which to perform further
procedures over the net realisable value and
procedures over the net realisable value and
margin recognition.
margin recognition.
For the sample of projects selected we:
For the sample of projects selected we:
• Further discussed with management the
• Further discussed with management the
life cycle of the project, key project risks,
life cycle of the project, key project risks,
changes to project strategy, current and
changes to project strategy, current and
future estimated sales prices, development
future estimated sales prices, development
progress and costs and any new and
progress and costs and any new and
previous write downs.
previous write downs.
• Obtained Stockland’s model of the
• Obtained Stockland’s model of the
project’s forecast future returns, known as
project’s forecast future returns, known as
feasibility models, and tested the
feasibility models, and tested the
mathematical accuracy of the model to
mathematical accuracy of the model to
satisfy ourselves that it was operating
satisfy ourselves that it was operating
effectively.
effectively.
• Compared the estimated selling prices to
• Compared the estimated selling prices to
market sales data in similar locations or,
market sales data in similar locations or,
where available, to recent sales in the
where available, to recent sales in the
project.
project.
• Compared the forecast costs to complete
• Compared the forecast costs to complete
the project to the relevant construction
the project to the relevant construction
contracts (if applicable) or the
contracts (if applicable) or the
construction contract proposals.
construction contract proposals.
• Tested the mathematical accuracy of a
• Tested the mathematical accuracy of a
sample of the feasibility models.
sample of the feasibility models.
• Compared the carrying value to the
• Compared the carrying value to the
project’s net realisable value (NRV).
project’s net realisable value (NRV).
In addition we:
In addition we:
• Traced a sample of additions to the cost of
• Traced a sample of additions to the cost of
the project (e.g. development costs) to
the project (e.g. development costs) to
invoices and verified that they were valid
invoices and verified that they were valid
costs that could be capitalised.
costs that could be capitalised.
179
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Key audit matter
Key audit matter
nature, condition and location of each property and
nature, condition and location of each property and
the expected future income for each property
the expected future income for each property
directly impact fair values. Amongst others, the
directly impact fair values. Amongst others, the
following assumptions are
following assumptions are
key in establishing fair value:
key in establishing fair value:
• discount rates
• discount rates
•
growth rates
•
growth rates
•
average length of stay of existing and
•
average length of stay of existing and
future residents
future residents
•
current market value of units
•
current market value of units
•
renovation / reinstatement costs
•
renovation / reinstatement costs
•
renovation recoupment.
•
renovation recoupment.
The Stockland valuation policy requires that all key
The Stockland valuation policy requires that all key
valuation assumptions be externally appraised by
valuation assumptions be externally appraised by
an
an
external valuation expert each reporting period. In
external valuation expert each reporting period. In
addition, at each reporting period a selection of
addition, at each reporting period a selection of
properties are individually valued by an external
properties are individually valued by an external
valuation expert.
valuation expert.
This was a key audit matter because of the:
This was a key audit matter because of the:
relative size of the Retirement Living
relative size of the Retirement Living
portfolio to net assets and related
portfolio to net assets and related
valuation movements, and
valuation movements, and
inherent subjectivity of the key
inherent subjectivity of the key
assumptions that underpin the valuations.
assumptions that underpin the valuations.
•
•
•
•
How our audit addressed the key audit
How our audit addressed the key audit
matter
matter
For a sample of resident contracts across the
For a sample of resident contracts across the
portfolio, we compared the terms used in the
portfolio, we compared the terms used in the
valuations to underlying contracts. We found that
valuations to underlying contracts. We found that
the data used in the samples tested was materially
the data used in the samples tested was materially
consistent with the sampled resident contracts.
consistent with the sampled resident contracts.
We discussed with management the rationale
We discussed with management the rationale
supporting the key assumptions adopted in the
supporting the key assumptions adopted in the
valuations, and compared them to the valuation
valuations, and compared them to the valuation
expert’s report and market data.
expert’s report and market data.
For the external review of key valuation
For the external review of key valuation
assumptions obtained by management, we also:
assumptions obtained by management, we also:
assessed the competency and capabilities
assessed the competency and capabilities
of the relevant external expert,
of the relevant external expert,
read the expert’s terms of engagement - we
read the expert’s terms of engagement - we
did not identify any terms that might
did not identify any terms that might
affect their objectivity or impose
affect their objectivity or impose
limitations on their work relevant to their
limitations on their work relevant to their
valuation assessment,
valuation assessment,
assessed the reasonableness of the
assessed the reasonableness of the
assumptions adopted relative to
assumptions adopted relative to
comparable market data, and
comparable market data, and
inspected the final valuation assessment
inspected the final valuation assessment
and compared the assumptions to those
and compared the assumptions to those
used in Stockland’s valuation model.
used in Stockland’s valuation model.
•
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For a sample of Retirement Living property
For a sample of Retirement Living property
valuations, we:
valuations, we:
•
•
•
•
•
•
•
•
compared the resident information used in
compared the resident information used in
the valuation model to a sample of
the valuation model to a sample of
resident contracts,
resident contracts,
assessed the design and operating
assessed the design and operating
effectiveness of the relevant key controls
effectiveness of the relevant key controls
over the valuation model and the
over the valuation model and the
associated key assumptions used by
associated key assumptions used by
Stockland to satisfy ourselves that the
Stockland to satisfy ourselves that the
model was operating as designed,
model was operating as designed,
tested the mathematical accuracy of a
tested the mathematical accuracy of a
sample of the valuation calculations, and
sample of the valuation calculations, and
examined the property valuations
examined the property valuations
undertaken by management’s expert and
undertaken by management’s expert and
compared them with the outputs from the
compared them with the outputs from the
valuation model.
valuation model.
Carrying value of inventory and cost of property developments sold
Carrying value of inventory and cost of property developments sold
(Refer to note 6)
(Refer to note 6)
Stockland - $3,505 million
Stockland - $3,505 million
Stockland Trust Group – this KAM is not applicable as the Trust does not hold inventory assets.
Stockland Trust Group – this KAM is not applicable as the Trust does not hold inventory assets.
178
Stockland Annual Report 2019Year ended 30 June 2019
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responsible for the other information. The other information comprises the information included in
responsible for the other information. The other information comprises the information included in
the Annual Report for the year ended 30 June 2019, but does not include the financial report and our
responsible for the other information. The other information comprises the information included in
the Annual Report for the year ended 30 June 2019, but does not include the financial report and our
auditor’s report thereon.
the Annual Report for the year ended 30 June 2019, but does not include the financial report and our
auditor’s report thereon.
auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
express any form of assurance conclusion thereon.
In connection with our audit of the financial report , our responsibility is to read the other information
In connection with our audit of the financial report , our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
In connection with our audit of the financial report , our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
Responsibilities of the directors for the financial report
Responsibilities of the directors for the financial report
The directors are responsible for the preparation of the financial report that gives a true and fair view
The directors are responsible for the preparation of the financial report that gives a true and fair view
in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
The directors are responsible for the preparation of the financial report that gives a true and fair view
in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal control as the directors determine is necessary to enable the preparation of the financial
in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
error.
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
error.
error.
In preparing the financial report, the directors are responsible for assessing the ability of Stockland
In preparing the financial report, the directors are responsible for assessing the ability of Stockland
and the Stockland Trust Group to continue as a going concern, disclosing, as applicable, matters
In preparing the financial report, the directors are responsible for assessing the ability of Stockland
and the Stockland Trust Group to continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting unless the directors either
and the Stockland Trust Group to continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting unless the directors either
intend to liquidate Stockland and the Stockland Trust Group or to cease operations, or have no
related to going concern and using the going concern basis of accounting unless the directors either
intend to liquidate Stockland and the Stockland Trust Group or to cease operations, or have no
realistic alternative but to do so.
intend to liquidate Stockland and the Stockland Trust Group or to cease operations, or have no
realistic alternative but to do so.
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Auditor’s responsibilities for the audit of the financial report
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor's report.
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor's report.
auditor's report.
Report on the remuneration report
Report on the remuneration report
Report on the remuneration report
Our opinion on the remuneration report
Our opinion on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 90 to 107 of the directors’ report for the
We have audited the remuneration report included in pages 90 to 107 of the directors’ report for the
year ended 30 June 2019.
We have audited the remuneration report included in pages 90 to 107 of the directors’ report for the
year ended 30 June 2019.
year ended 30 June 2019.
Key audit matter
Key audit matter
How our audit addressed the key audit
matter
How our audit addressed the key audit
matter
How our audit addressed the key audit
How our audit addressed the key audit
matter
matter
Key audit matter
Key audit matter
• Recalculated the cost of property
• Recalculated the cost of property
• Checked that interest was capitalised for
qualifying assets and recalculated the
• Checked that interest was capitalised for
interest capitalised during the period.
qualifying assets and recalculated the
• Traced a sample of sales recorded to the
• Checked that interest was capitalised for
interest capitalised during the period.
underlying sale documents and the receipt
• Checked that interest was capitalised for
qualifying assets and recalculated the
• Traced a sample of sales recorded to the
of cash.
qualifying assets and recalculated the
interest capitalised during the period.
underlying sale documents and the receipt
• Recalculated the cost of property
interest capitalised during the period.
• Traced a sample of sales recorded to the
of cash.
developments sold recognised for the
• Traced a sample of sales recorded to the
underlying sale documents and the receipt
• Recalculated the cost of property
sample of sales recorded based on the
underlying sale documents and the receipt
of cash.
developments sold recognised for the
relevant project’s forecast profit margin.
of cash.
sample of sales recorded based on the
Recoverability of deferred tax assets
developments sold recognised for the
relevant project’s forecast profit margin.
(Refer to note 21)
developments sold recognised for the
sample of sales recorded based on the
Recoverability of deferred tax assets
sample of sales recorded based on the
Stockland - $40 million
relevant project’s forecast profit margin.
(Refer to note 21)
relevant project’s forecast profit margin.
Stockland Trust Group – this KAM is not applicable as while the Trust generates taxable profits each year,
Recoverability of deferred tax assets
Stockland - $40 million
Recoverability of deferred tax assets
this Trust income is distributable each year in full and is taxed in the hands of the unitholders as a Trust
(Refer to note 21)
Stockland Trust Group – this KAM is not applicable as while the Trust generates taxable profits each year,
(Refer to note 21)
Distribution.
Stockland - $40 million
this Trust income is distributable each year in full and is taxed in the hands of the unitholders as a Trust
Stockland - $40 million
Stockland Trust Group – this KAM is not applicable as while the Trust generates taxable profits each year,
Distribution.
Stockland recognised a net deferred tax asset
The recoverability of the DTA and carried forward
Stockland Trust Group – this KAM is not applicable as while the Trust generates taxable profits each year,
this Trust income is distributable each year in full and is taxed in the hands of the unitholders as a Trust
(“DTA”) of $40 million at 30 June 2019,
tax losses, and the period over which they will be
this Trust income is distributable each year in full and is taxed in the hands of the unitholders as a Trust
Distribution.
The recoverability of the DTA and carried forward
Stockland recognised a net deferred tax asset
comprising a deferred tax asset of $624 million and
used, depends upon the forecast profitability of the
Distribution.
tax losses, and the period over which they will be
(“DTA”) of $40 million at 30 June 2019,
Stockland Corporation Limited tax consolidated
a deferred tax liability of $584 million.
The recoverability of the DTA and carried forward
Stockland recognised a net deferred tax asset
used, depends upon the forecast profitability of the
comprising a deferred tax asset of $624 million and
group (“SCL”).
The recoverability of the DTA and carried forward
Stockland recognised a net deferred tax asset
tax losses, and the period over which they will be
(“DTA”) of $40 million at 30 June 2019,
Stockland Corporation Limited tax consolidated
a deferred tax liability of $584 million.
The availability of tax losses is dependent on the
tax losses, and the period over which they will be
(“DTA”) of $40 million at 30 June 2019,
used, depends upon the forecast profitability of the
comprising a deferred tax asset of $624 million and
group (“SCL”).
satisfaction of either the continuity of ownership
Our audit work focussed on the review of the Board
used, depends upon the forecast profitability of the
comprising a deferred tax asset of $624 million and
Stockland Corporation Limited tax consolidated
a deferred tax liability of $584 million.
The availability of tax losses is dependent on the
test
approved forecast which supports the strategic and
Stockland Corporation Limited tax consolidated
a deferred tax liability of $584 million.
group (“SCL”).
satisfaction of either the continuity of ownership
(“COT”) or, where this fails, the same business test
Our audit work focussed on the review of the Board
operational plans of Stockland, including SCL. We
group (“SCL”).
The availability of tax losses is dependent on the
test
(“SBT”) under the Income Tax Assessment Act
approved forecast which supports the strategic and
The availability of tax losses is dependent on the
then examined SCL’s taxable profit forecasts to
satisfaction of either the continuity of ownership
Our audit work focussed on the review of the Board
(“COT”) or, where this fails, the same business test
1997. Where either of these tests is satisfied, a DTA
operational plans of Stockland, including SCL. We
satisfaction of either the continuity of ownership
Our audit work focussed on the review of the Board
assess whether key assumptions were consistent
test
approved forecast which supports the strategic and
(“SBT”) under the Income Tax Assessment Act
is recognised to the extent there is an offsetting
test
then examined SCL’s taxable profit forecasts to
approved forecast which supports the strategic and
(“COT”) or, where this fails, the same business test
with Stockland’s board approved forecast. In
operational plans of Stockland, including SCL. We
1997. Where either of these tests is satisfied, a DTA
deferred tax liability (“DTL”), and tax losses in
(“COT”) or, where this fails, the same business test
assess whether key assumptions were consistent
(“SBT”) under the Income Tax Assessment Act
operational plans of Stockland, including SCL. We
addition, we used PwC tax experts to assist in our
is recognised to the extent there is an offsetting
addition to the offsetting DTL are recognised to the
then examined SCL’s taxable profit forecasts to
(“SBT”) under the Income Tax Assessment Act
1997. Where either of these tests is satisfied, a DTA
with Stockland’s board approved forecast. In
then examined SCL’s taxable profit forecasts to
consideration of Stockland’s assessment that tax
deferred tax liability (“DTL”), and tax losses in
extent that there is evidence that the generation of
assess whether key assumptions were consistent
1997. Where either of these tests is satisfied, a DTA
is recognised to the extent there is an offsetting
addition, we used PwC tax experts to assist in our
assess whether key assumptions were consistent
addition to the offsetting DTL are recognised to the
losses would be available for the relevant periods.
future taxable profit against which the unused tax
with Stockland’s board approved forecast. In
is recognised to the extent there is an offsetting
deferred tax liability (“DTL”), and tax losses in
consideration of Stockland’s assessment that tax
extent that there is evidence that the generation of
losses can be utilised is considered probable.
with Stockland’s board approved forecast. In
deferred tax liability (“DTL”), and tax losses in
addition, we used PwC tax experts to assist in our
addition to the offsetting DTL are recognised to the
losses would be available for the relevant periods.
future taxable profit against which the unused tax
addition, we used PwC tax experts to assist in our
addition to the offsetting DTL are recognised to the
consideration of Stockland’s assessment that tax
extent that there is evidence that the generation of
losses can be utilised is considered probable.
Stockland estimates the likely forecast taxable
consideration of Stockland’s assessment that tax
extent that there is evidence that the generation of
losses would be available for the relevant periods.
future taxable profit against which the unused tax
profits each year based on current and approved
losses would be available for the relevant periods.
future taxable profit against which the unused tax
losses can be utilised is considered probable.
Stockland estimates the likely forecast taxable
Board strategies to assess the utilisation period of
losses can be utilised is considered probable.
profits each year based on current and approved
recognised tax losses.
Stockland estimates the likely forecast taxable
Board strategies to assess the utilisation period of
Stockland estimates the likely forecast taxable
profits each year based on current and approved
recognised tax losses.
This was a key audit matter because of the size of
profits each year based on current and approved
Board strategies to assess the utilisation period of
the gross DTA and DTL.
Board strategies to assess the utilisation period of
recognised tax losses.
This was a key audit matter because of the size of
recognised tax losses.
the gross DTA and DTL.
This was a key audit matter because of the size of
This was a key audit matter because of the size of
the gross DTA and DTL.
the gross DTA and DTL.
Other information
The directors of Stockland Corporation Limited and the directors of Stockland Trust Management
Other information
Limited, the Responsible Entity for Stockland Trust, (collectively referred to as “the directors”) are
Other information
The directors of Stockland Corporation Limited and the directors of Stockland Trust Management
Other information
Limited, the Responsible Entity for Stockland Trust, (collectively referred to as “the directors”) are
The directors of Stockland Corporation Limited and the directors of Stockland Trust Management
The directors of Stockland Corporation Limited and the directors of Stockland Trust Management
Limited, the Responsible Entity for Stockland Trust, (collectively referred to as “the directors”) are
Limited, the Responsible Entity for Stockland Trust, (collectively referred to as “the directors”) are
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Stockland Annual Report 2019Year ended 30 June 2019
responsible for the other information. The other information comprises the information included in
responsible for the other information. The other information comprises the information included in
the Annual Report for the year ended 30 June 2019, but does not include the financial report and our
the Annual Report for the year ended 30 June 2019, but does not include the financial report and our
auditor’s report thereon.
auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
express any form of assurance conclusion thereon.
In connection with our audit of the financial report , our responsibility is to read the other information
In connection with our audit of the financial report , our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
Responsibilities of the directors for the financial report
The directors are responsible for the preparation of the financial report that gives a true and fair view
The directors are responsible for the preparation of the financial report that gives a true and fair view
in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal control as the directors determine is necessary to enable the preparation of the financial
internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
error.
error.
In preparing the financial report, the directors are responsible for assessing the ability of Stockland
In preparing the financial report, the directors are responsible for assessing the ability of Stockland
and the Stockland Trust Group to continue as a going concern, disclosing, as applicable, matters
and the Stockland Trust Group to continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting unless the directors either
related to going concern and using the going concern basis of accounting unless the directors either
intend to liquidate Stockland and the Stockland Trust Group or to cease operations, or have no
intend to liquidate Stockland and the Stockland Trust Group or to cease operations, or have no
realistic alternative but to do so.
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor's report.
auditor's report.
Report on the remuneration report
Report on the remuneration report
Our opinion on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 90 to 107 of the directors’ report for the
We have audited the remuneration report included in pages 86 to 103 of the directors’ report for the
year ended 30 June 2019.
year ended 30 June 2019.
In our opinion, the remuneration report of Stockland and the Stockland Trust Group for the year
In our opinion, the remuneration report of Stockland and the Stockland Trust Group for the year
ended 30 June 2019 complies with section 300A of the Corporations Act 2001.
ended 30 June 2019 complies with section 300A of the Corporations Act 2001.
Responsibilities
Responsibilities
The directors are responsible for the preparation and presentation of the remuneration report in
The directors are responsible for the preparation and presentation of the remuneration report in
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the remuneration report, based on our audit conducted in accordance with Australian
In our opinion, the remuneration report of Stockland and the Stockland Trust Group for the year
opinion on the remuneration report, based on our audit conducted in accordance with Australian
Auditing Standards.
ended 30 June 2019 complies with section 300A of the Corporations Act 2001.
Auditing Standards.
Responsibilities
In our opinion, the remuneration report of Stockland and the Stockland Trust Group for the year
The directors are responsible for the preparation and presentation of the remuneration report in
ended 30 June 2019 complies with section 300A of the Corporations Act 2001.
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
PricewaterhouseCoopers
PricewaterhouseCoopers
opinion on the remuneration report, based on our audit conducted in accordance with Australian
Auditing Standards.
Responsibilities
Securityholder
information and
key dates
The directors are responsible for the preparation and presentation of the remuneration report in
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the remuneration report, based on our audit conducted in accordance with Australian
Auditing Standards.
PricewaterhouseCoopers
NR McConnell
NR McConnell
Partner
Partner
SJ Hadfield
SJ Hadfield
Partner
Partner
Sydney
Sydney
21 August 2019
21 August 2019
PricewaterhouseCoopers
SJ Hadfield
Partner
SJ Hadfield
Partner
NR McConnell
Partner
NR McConnell
Partner
Sydney
21 August 2019
Sydney
21 August 2019
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Year ended 30 June 2019Stockland Annual Report 2019IntroductionStrategy and performanceBusiness risks and materialityClimate-related risksA better way to deliver shared valueGovernance and remunerationFinancial reportIndependent auditor’s reportGlossary
Securityholder
information and
key dates
Securityholders
As at 31 July 2019, there were 2,384,351,503 Securities on issue and the top 20 securityholders as at 31 July 2019 is as set out in the table below.
In September 2018, Stockland announced an intention to buy-back up to $350 million of Securities over 24 months. As at 31 July 2019, a total
of 50,117,773 Securities have been bought-back on-market and cancelled since the commencement of the on-market buy-back programme
Securityholders
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Nominees Pty Ltd
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