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Highcroft Investments Plcstockland.com.au30 June 2020AnnualReportStockland30 June 2020Property Portfolio We believe there is a better way to liveWelcome to Stockland’s Annual Report (Report).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, present and emerging, and acknowledge the ongoing connection that Aboriginal and Torres Strait Islander peoples have with Australia’s land and waters. Stockland’s Report is an opportunity for us to demonstrate how we create value for all our stakeholders. It illustrates how we achieve our purpose, ‘we believe there is a better way to live’, as we help shape communities across Australia.The Report is a consolidated summary of Stockland Corporation Limited and its controlled entities, including Stockland Trust and its controlled entities (Stockland or Group) for the year ended 30 June 2020 (FY20). The Report adopts the principles of the International Integrated Reporting Council (IIRC) Integrated Reporting (IR) Framework to communicate how our strategy, operational and financial performance, and approach to environmental, social, and governance matters creates value for stakeholders over the short, medium and long term.In addition to complying with our statutory reporting requirements, the Report includes our response to the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).Annual Report: this report features information about Stockland, our strategy, our integrated financial and non-financial performance, risk management, corporate governance, remuneration and our financial statements Results Presentations: Stockland’s strategy, financial results, operational performance for the period, including business unit operational performance, portfolio and development pipeline prepared on a six-monthly basis together with quarterly operational updatesProperty Portfolio: details on the assets within the Stockland portfolioSustainability Reporting Suite: includes comprehensive Management Approaches, Deep Dives containing our annual performance reports and case studies, and people, environment and community Data Packs across our enduring sustainability themes and material mattersCorporate Governance Statement: features Stockland’s application of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (4th Edition) andModern Slavery Statement: Stockland’s inaugural statement on our actions to assess and address modern slavery risks in our supply chain.Throughout the Report are information boxes (see example below) to indicate where more detailed information on specific items can be found.Our corporate reporting suite documents are available for download on the Stockland Investor Centre www.stockland.com.au/investor-centreCorporate reporting suiteThe Report is part of our broader corporate reporting suite, including: Stockland Annual Report
Our business
2020 performance
Our COVID-19 response
Chairman and CEO Letters
Strategy and performance
Our strategy
Grow our asset returns
Capital management
Operational excellence
Delivering shared value
Risk management
Governance
Remuneration report
Financial report for the year ended 30 June 2020
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the financial report
Directors’ declaration
Independent auditor’s report
Securityholder information and key dates
Glossary
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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
Independent Auditor’s Report thereon. The Directors’ Report for FY20 has
been prepared in accordance with the requirements of the Corporations Act
2001 (Cth) including the following information:
• Operating and Financial Review on page 15
• Information on Directors and the Company Secretary on page 52
• Board and Committee meetings and attendance on page 60
• General information required under the Corporations Act on page 65
• Lead Auditor Independence Declaration on page 68
• Remuneration Report on page 69
Our business
A leading creator of residential and retirement
communities, retail town centres and workplace and
logistics assets valued at $15.0 billion.
Our strategy
Our vision, purpose and values
Our strategy is to maximise returns by developing
sustainable communities, owning and managing leading
retail town centres and growing our workplace and
logistics portfolio.
Our structure
Stockland is a listed company on the Australian Securities
Exchange (ASX). To optimise value to our securityholders
we are structured as a stapled security. A Stockland
stapled security (ASX:SGP) represents one ordinary share
in Stockland Corporation Limited and one ordinary unit
in Stockland Trust. This allows us to efficiently undertake
property investment, property management and property
development activities.
Our vision is to be a great Australian real estate company
that makes a valuable contribution to our communities and
our country.
This approach is underpinned by our purpose – "we
believe there is a better way to live" – and is brought
to life by over 1,600 employees who are guided by
Stockland's values of Community, Accountability, Respect
and Excellence (CARE).
Our diverse portfolio
We are one of the largest diversified real estate
groups in Australia, creating communities covering whole
of life housing solutions across our residential and
retirement living communities. We also own, manage
and develop leading retail town centres, workplaces and
logistics centres.
4
Stockland Annual Report 2020
1341111481118141145812092211PROPERTIES 51RESIDENTIAL COMMUNITIESPROPERTIES 30RETAIL1PROPERTIES 63RETIREMENT LIVING COMMUNITIESPROPERTIES 28PROPERTIES 4LOGISTICSWORKPLACE1 Excludes WIP and sundry properties
For over 65 years,
Stockland has been
building communities
across Australia.
Today we are a leading
creator of sustainable
communities and
workplaces that enable
a better way to live.
City of Colour - Aura, Queensland
Our Aura masterplanned community
on Queensland's Sunshine Coast is an
exemplar of our community creation
capabilities - designed for every facet
of life.
We have drawn inspiration from some of
the world’s most liveable cities to enhance
the unique lifestyle that the Sunshine
Coast offers; to create a city that is truly
world class.
In partnership with Capital Property Group,
we will shape a community that will
eventually occupy 24 square kilometres
and become home to approximately
50,000 people over the next 30 years.
The project includes a city centre
for employment, shopping, business,
education, recreation and entertainment.
This includes two business parks and
up to 20 proposed education and
learning facilities.
Aura was recently recertified by the Green
Building Council of Australia and received a
record high masterplan community rating.
WORLD LEADERSHIP
6 star
Green Star Community
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Year ended 30 June 2020
5
2020
performance
Funds from operations (FFO)
$825m
Down 8.0% on FY19
Distribution per security (DPS)
24.1c
70% distribution payout ratio
Gearing
25.4%
Improved from 26.7% in FY19
FFO per security
34.7c
Down 7.2% on FY19
Statutory loss
$(14)m
Return on equity (ROE)
11.5%
Down 40 bps
Net tangible assets (NTA) per security
$3.77
Down from $4.04 at 30 June 2019
Total real estate assets
$15.0bn
Employee engagement
82%
Commercial Property emissions intensity
20%
4 points above Australian National Norm
Reduction on FY19
Customer satisfaction
>80%
Residential liveability score
74%
Across Retail Town Centres and Communities
Marginally below 75% target
6
Stockland Annual Report 2020
Good progress on strategy
Contracted to acquire over $1 billion of
Workplace and Logistics sites
Entered into agreements to acquire the Johnson &
Johnson site with potential $1.5 billion consolidated
development opportunity with M_Park (NSW). Acquired
over $450 million of Sydney office assets and two Brisbane
logistics developments.
Read more on page 18
$535 million in strategic restocking and record
townhome settlements
Acquired Community projects The Gables (NSW) and
Katalia (Vic) and Brunswick (Vic) all on capital efficient
terms. Delivered over 600 townhome settlements
representing 11 per cent of total residential settlements.
Read more on page 26
$1.2 billion in joint ventures and $3.0 billion in
capital partnerships
Established two logistics joint ventures with Fife Group at
Kemps Creek (NSW) and Willawong (Qld) and residential
capital partnerships with Capital Property at Aura (Qld) and
Supalai Group at Katalia1 (Vic).
$5.5 billion Workplace and Logistics
development pipeline
More than doubled development pipeline since 30 June
2019. Heads of Agreement executed with large
multinational tenant over whole building at M_Park (NSW)
and planning a new headquarters for Johnson & Johnson.
Read more on page 26
Read more on page 18
Leading portfolio of Green Star rated
communities and assets
Recorded the most Green Star rated retail town centres and
retirement living developments in Australia and achieved
a record high 'World Leadership' rating for our Aura
masterplan community (Qld). Delivered the first retirement
living projects in Australia to be certified using the Green
Star Design & As Built rating tool.
2% of FFO from innovation projects
Lab-52 supporting new growth initiatives contributing
approximately 2 per cent of FFO. Accelerated innovation
across the business leveraging technology and our digital
and data capabilities including implementation of CORE
our end to end enterprise platform, residential product
digitisation and retail omni-channel capabilities.
Read more on page 33
Read more on page 40
Success with non-core retail divestments
Settled $220 million of non-core divestments contracted
to sell in FY19 and executed contracts for $418 million
post balance date in line with 30 June 2020 independent
valuations. The success of our remixing strategy
was reflected in sales performance prior to the
COVID-19 pandemic.
Read more on page 24
1
Subject to FIRB approval
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Year ended 30 June 2020
7
Our COVID-19 response
Since early March 2020 the COVID-19 pandemic has
presented challenges across our business.
During this challenging time, our purpose of ‘we believe
there is a better way to live’ is more important than
ever. Since the COVID-19 pandemic began to unfold in
Australia in March 2020 we’ve continued to monitor the
impact across all aspects of our business.
Our response
Our response has been guided by advice from the
Australian Federal and State governments and the World
Health Organisation.
• increasing our liquidity and implementing initiatives
focused on the preservation of cash.
We continue to manage our COVID-19 response in Victoria
and across hotspots in other states.
As some government-imposed restrictions have begun
to progressively ease since June 2020, we continue to
monitor changes and work with our respective businesses
and key stakeholders to ensure adequate safety controls
are in place and ongoing communication is provided to
accommodate these changes.
The key guiding principles of our response are based on
assessing and managing:
• the wellbeing and safety of our employees
• the impact of the pandemic on our operations across our
assets, projects, customers, residents, community and
supply chain
and stakeholders
• the financial impacts relating to the pandemic.
Our response to date has included:
• establishing governance protocols including a
pandemic working group and activating our Crisis
Management team to support and guide our operational
and strategic response
• reviewing business continuity plans to address
implications associated with COVID-19
• proactively working with industry bodies and
government to enact effective containment strategies
and the implementation of the Federal Government's
Commercial Code of Conduct (Commercial Code
of Conduct) as implemented under state
government legislations
our front-line teams and offices
• issuing hygiene kits comprising adequate equipment to
• recommending where possible, that our people work
• distributing specific and ongoing communications to
from home across our State head offices
office-based staff
our tenants, contractors, suppliers and residents across
multiple platforms detailing our response to COVID-19
• delivering bespoke COVID-19 safety training to all head
• implementing customer safety initiatives and adopting
business unit specific controls across our retirement
villages (e.g. closure of communal facilities such as
swimming pools, community centres), retail town
centres, sales offices, workplace and logistics assets
Our financial position
On 23 March 2020, we withdrew our funds from operations
and distribution guidance for the 12 months to 30 June
2020 following heightened uncertainty surrounding the
COVID-19 pandemic. All other forward-looking statements
made by Stockland were also withdrawn.
We have focused on providing certainty of funding
to continue delivering operational activities and Group
priorities, and balance sheet capacity to leverage
opportunities arising during this period.
Liquidity - we boosted the available liquidity of the
Group using short term and long term debt issuances
and together with strong second half cashflows improved
liquidity from $850 million in February 2020 to $2.0 billion
at 30 June 2020.
Operational costs - we have actively reduced or deferred
variable and non-critical expenses which is helping to cover
COVID-19 specific costs like additional hygiene measures.
This includes placing a freeze on remuneration, training
and recruitment and other cost saving measures. Our
Board and executive team took a 20 per cent voluntary
reduction in directors fees and fixed salaries, respectively,
for a two month period commencing in May 2020. We
also implemented an accelerated leave program for
all employees.
We reduced the second half distribution against our
original guidance reflecting the impact of COVID-19 on
our business during the last quarter of the financial year.
The Group has not applied for or received funds from the
Federal Government under its JobKeeper scheme.
8
Stockland Annual Report 2020
Our people
We are determined to help our employees stay well and
productive during this very difficult time as well as maintain
our strong organisational culture. To support them, we
have focused on:
Enabling technology – we fast tracked the implementation
of Microsoft Teams collaboration technology, rolling it out
to all employees in 14 days.
Communication – from March 2020 to the end of
June 2020, regular employee virtual live events were
held with our Executive Committee providing updates
on the current situation and spending time answering
employee questions.
Safety and wellbeing – we launched 30 Days of Wellbeing
in April 2020 to help support the physical and mental
health of our people which included virtual seminars and
providing educational resources.
Leadership – we developed a program called Leading
the Recovery, including tools, resources and learning
experiences for managers, leaders and employees.
Our customers
Keeping our customers safe and supporting the resilience
of our tenants are critical to our success. With the onset of
the pandemic we have focused on the following:
Leading practice safety management - We have
implemented leading practice safety management and
hygiene standards across the business. We have made a
range of process changes across our assets to deliver this
outcome including the implementation of social distancing
protocols, appointment-only visits to residential sales
centres where appropriate, comprehensive safety and
visitor protocols for our retirement living communities and
expanded cleaning programs for our Retail Town Centres.
Tenant support - We have increased communication with
our tenants to successfully navigate this crisis. This has
included detailed discussions with Commercial Property
tenants affected by the COVID-19 pandemic following the
principles set out in the Commercial Code of Conduct which
was issued in April 2020 and progressively implemented
through state legislation.
The Commercial Code of Conduct defines qualifying tenants
who are eligible for rent relief as small to medium-sized
enterprises (SME), with an annual turnover of up to
$50 million, suffering financial stress or hardship as a
result of the COVID-19 pandemic and eligible for the
Commonwealth Government’s JobKeeper program as a
result of estimating that their turnover has, or is likely to,
fall by 30 per cent or more.
We are working within the Commercial Code of Conduct on
a case by case basis and discussing assistance packages
necessary to protect our valuable business relationships
into the future.
Customer experience - Our Retail Town Centres remained
open during government restrictions, demonstrating our
commitment to the safe provision of essential goods and
services to Australian communities.
To help ease the impact of restrictions and provide a safe
buying experience we expanded our existing digital sales
capabilities and omni-channel retail shopping experiences
to our customers.
Our communities
We are providing support wherever we can to maintain
the benefits of community connection, along with staying
safe including providing free space for temporary COVID-19
testing centres in several of our Retail Town Centres.
Our Stockland CARE Foundation and national community
partners have helped to deliver community support
through mental and physical health and wellbeing
programs across Australia.
• Jamie's Ministry of Food has provided online cooking
• Live Life Get Active has provided access to online fitness
training, and virtual coaching, helping our residents stay
as healthy as possible
classes to our retirement village residents
• R U OK? sent over 9,000 connection postcards
to our retirement living residents and included
tips for wellbeing and reducing loneliness in our
national newsletters
• Eat Up distributed 10,000 co-funded emergency
foodboxes to disadvantaged families.
Our supply chain
We increased communication with our suppliers
continually assessing supply chains for potential
disruption. We have also assessed where the pandemic
could increase the vulnerability of supply chain workers
providing services under difficult working conditions. We
continue to reinforce our requirement to comply with
Stockland's subcontracting standards and Supplier Code of
Conduct throughout the pandemic.
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Year ended 30 June 2020
9
Letter from
the Chairman
Dear Securityholders,
These are truly challenging times. In Australia, we have
faced the devastating impact of the 2019/2020 bushfires
and are currently facing a global pandemic which will have
profound long term consequences.
I am particularly proud of our people who continue to
demonstrate their remarkable commitment to protecting
the wellbeing of our residents, customers and communities
in the face of such adversity.
Notwithstanding the challenges brought by these crises,
we made good progress on executing our strategy.
Our FY20 result saw funds from operations per security
down 7.2 per cent over the year to 34.7 cents. Our statutory
loss of $14 million was largely due to net devaluations of
$464 million1 in Commercial Property and a reduction in
income reflecting current market conditions impacted by
the COVID-19 pandemic as well as net fair value declines of
$116 million in Retirement Living.
We are mindful of the importance of distributions to many
of our securityholders and have balanced this with our
future capital needs to ensure our balance sheet is well
positioned for the future recovery phase.
Our full year distribution was 24.1 cents per security,
with a distribution payout ratio of 70 per cent which
was slightly below our target range but reflective of the
impact of COVID-19 on our business and fully covered by
operating cashflow.
Our rapid response
In this period of extreme uncertainty, we remained
agile in order to respond proactively as the pandemic
rapidly evolved.
Very early in the crisis we took decisive action to minimise
the impact to our business and our people. Our immediate
priority was, and continues to be, the health and safety of
our employees, customers, tenants and contractors.
As government restrictions first came into place in March
2020, it was critical for us to support the viability of
our tenants and suppliers. We were proactive in our
engagement with government and industry regarding the
implementation of an approach to support the SME tenants
across our Commercial Property portfolio, whom were
negatively impacted by COVID-19.
We implemented an employee accelerated leave program
and our Board and executive team took a 20 per cent
voluntary reduction in directors' fees and fixed salaries
respectively, for a two-month period. This reduced or
deferred costs in a sustainable way that minimised the
impact on jobs while retaining focus on delivering all
operational activities and Group priorities.
Our available liquidity has been bolstered to $2 billion to
provide certainty of funding and to ensure balance sheet
capacity to access and leverage opportunities, positioning
us well to navigate the crisis and the recovery phase.
The Board has been proactive in its oversight of the crisis
response and the need to balance this with thinking beyond
the immediate impacts. Numerous meetings were held
between the Board and Executive Committee throughout
the period. We continue to manage our COVID-19 response
in Victoria and across hotspots in other states, providing
the safe delivery of development, services and sales in line
with government restrictions.
New ways of working
The pandemic has changed the way we work; for both
employees in our head offices and those on the ground
at our developments and assets. Stockland has supported
a flexible work environment for many years, however the
pandemic has accelerated this trend. Pleasingly, employee
engagement and wellbeing has remained high and has
been regularly assessed by our ‘pulse’ surveys undertaken
across the country.
We have amplified our focus on employee and community
wellbeing, leveraging our new Stockland CARE Foundation
partners R U OK? and ReachOut, to provide support and
communicate the importance of mental health.
We have continued to focus on customer-centric
innovation and have accelerated our digital transformation
strategy. As the sponsor of the Chairman’s Award for
Innovation, I continue to be impressed by the value that
these initiatives offer Stockland including digital display
villages, electronic contracts and repurposing waste into
high-performing roads.
1
Excludes stapling adjustments for owner-occupied space and includes Stockland's share of revaluation gains relating to property held through joint venture entities.
10
Governance and leadership
In recognition of the importance of the digital and
customer-centric transformation of the business, in
December 2019, we welcomed Kate McKenzie to the
Stockland Board. Kate is a highly respected and
experienced executive, with a strong background in
the telecommunications and government sectors. Most
recently, Kate was the Chief Executive Officer of Chorus,
New Zealand’s largest provider of telecommunications
infrastructure. Prior to this, she held several senior roles at
Telstra, including Chief Operating Officer.
Change also extends to the Group's leadership, with
Managing Director and Chief Executive Officer, Mark
Steinert, recently announcing his decision to retire. The
Board has agreed a flexible transition period with Mark,
and he will continue to lead the organisation while we
undertake a process to identify a successor from a field of
internal and external candidates.
The Board is pleased to be continuing its strong relationship
with Mark during this transition period. Over the past
seven and half years of Mark's tenure, we have made great
progress in reshaping our portfolio and creating a customer
centric business.
In particular, Mark has overseen the development
of Australia’s leading residential business, reshaped
and expanded our Workplace and Logistics portfolio,
repositioned our retail town centre business and reduced
costs. Mark has fostered a strong executive team, advanced
our building innovation and digital capabilities and
solidified Stockland’s position as a diverse employer of
choice and global leader in sustainability.
Tom Pockett, Chairman
Long term value creation
We seek to proactively address the complex and global
nature of sustainability issues and embed our response in
our day-to-day operations across climate change, modern
slavery and cyber security.
We continue to build the climate resilience of our portfolio
and reduce our emissions profile. I'm pleased to report we
have achieved our FY25 emission intensity target five years
ahead of schedule.
We have released our inaugural Modern Slavery Statement
describing our actions to assess and address modern
slavery risks so we play our part in improving human rights.
To this end, we have worked with our supply chain with
a particular focus on those sectors with heightened risk
exposure during the pandemic.
Mark is committed to the continued delivery of our strategic
priorities and our purpose of creating a better way to live
during this transition period.
In recognition of our proactive approach to sustainability
we have retained our leadership rankings on global
sustainability investment indices and benchmarks.
The Board gives careful thought to how our remuneration
framework supports the execution of our business strategy.
During the year we undertook a review in light of our
refreshed strategic priorities, however with the continuing
uncertainty due to COVID-19, we are yet to finalise some
aspects of our remuneration structure for FY21. Further
details of the changes will be disclosed in the FY21
Remuneration Report.
Full year distribution per security
24.1c
70% distribution payout ratio
Conclusion
Whilst it is difficult to predict the outcome of FY21 with
certainty, in the coming months, we are committed to the
continuation of our strategy and positioning the business
for the future. I am confident in the management and
governance structures we have in place to respond to the
current challenges and balance our response with the long
term interests of our securityholders and the community.
Thank you to my Board colleagues and the executive team
for their leadership during these challenging times and
to our people for their commitment to Stockland and our
purpose, 'we believe there is a better way to live'.
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Tom Pockett
Chairman
Year ended 30 June 2020
11
Letter from the
Managing Director
and CEO
Dear Securityholders,
I am pleased to announce our full year result which reflects
the benefit of our diversified portfolio despite the impact of
the COVID-19 pandemic. Overall, our funds from operations
were down 8.0 per cent on FY19, to $825 million, and our
FFO per security was 34.7 cents, representing a decline of
7.2 per cent.
We continued to successfully execute our Group strategy
throughout the year while also focusing on the wellbeing
of our residents, customers and team. We have
remained focused on creating Australia’s most liveable
and sustainable communities, accelerating our Logistics
development pipeline, future proofing our Retail Town
Centres and broadening our capital sources.
Throughout the year, we strategically allocated capital
towards our Workplace and Logistics portfolio and reduced
our exposure to Retail Town Centres as we target a
balanced allocation to Communities, Workplace and
Logistics, and Retail Town Centres.
Our performance demonstrates the benefits resulting
from the execution of these strategic priorities and
the tremendous efforts of our team to ensure the safe
operations of our properties.
Resilience in a
challenging environment
The COVID-19 pandemic affected our financial performance
for the year with the business demonstrating relative
resilience. This was largely due to our focus on affordable
products, low and non-discretionary retail categories and
our geographically diverse exposure.
Our Communities business performed well, with our
Residential portfolio delivering a good profit result of
$372 million, up 2.5 per cent on FY19. We achieved
over 5,300 residential settlements reflecting an increasing
customer preference for masterplanned communities and
demand driven by government stimulus.
The COVID-19 pandemic and the associated restrictions
materially impacted our sales in April 2020 with the
gradual recovery in May 2020 and the market significantly
buoyed by the government stimulus HomeBuilder program
in June 2020.
To help ease the impact of government restrictions we
accelerated the development of our digital platform to
drive enquiries and sales conversion, with a significant
portion of the customer journey now able to be
completed virtually.
We have seen a solid rebound in our sales and enquiries
since June 2020 and with close to 4,300 contracts on
hand at 31 July 2020 we have reasonable visibility of FY21
settlement volume.
Throughout the year we contracted to acquire $535 million
of projects to strategically restock our residential pipeline,
including the purchase of The Gables for $415 million in the
undersupplied north west Sydney market. All acquisitions
were purchased on capital efficient terms and all assets are
well positioned to support our built form strategy.
We have seen a solid rebound in our
sales and enquiries since June 2020 and
with close to 4,300 contracts now on
hand we have reasonable visibility of FY21
settlement volume.
Our strong pipeline of active projects and our reputation as
Australia’s leading community creator means we are well
positioned to meet increasing demand, driven by recent
state and federal government stimulus programs and the
current low interest rate and positive credit environment.
However, residential sales in Melbourne are likely to
come under pressure in the first quarter of FY21 due
to current Victorian government restrictions, albeit our
construction pipeline is still operating within government
defined safety parameters.
At the onset of the COVID-19 pandemic, the safety
and wellbeing of our Retirement Living residents was
paramount and we responded quickly with the early and
ongoing implementation of Emergency Response Plans.
Our Retirement Living teams continue to work tirelessly to
provide safe and connected community living. It is this level
of customer service that has seen us achieve our highest
level of resident 'happiness' in FY20 compared to the last
five years.
The Retirement Living results reflected the increase in
customer preferences for community-based living with FFO
up 4.8 per cent on FY19, to $58 million. We settled 860
12
Stockland Annual Report 2020
units within the year with a 11.3 per cent improvement in
established unit sales.
Looking ahead, we are focused on the disciplined execution
of our Retirement Living priorities as we implement new
initiatives to enhance the customer experience, realign our
development pipeline to our new land lease product and
continue to improve the quality of the portfolio.
Within the space of a few months, the COVID-19 pandemic
has acted as a major disruptor for our Commercial
Property business impacting the performance of the
portfolio. Commercial Property FFO was down 13.8 per
cent to $537 million.
We have collected 70 per cent2 of rental billings for
the fourth quarter of FY20 and recorded a net valuation
decline of $464 million3 reflecting current and anticipated
market conditions.
We are making steady progress on tenant rental
negotiations and have continued to operate within the
Commercial Code of Conduct in our negotiations with
relevant tenants impacted by COVID-19. Positively, over
85 per cent of agreements negotiated with non-SME retail
retailers include lease extensions and/or new store deals.
Our Retail Town Centres, in particular, have been
impacted by the pandemic with comparable FFO down
17.0 per cent. However, the improved trading performance
from late May 2020 reflects our exposure to convenience
based, low discretionary categories in sub-regional and
non-metropolitan retail town centres which have been
relatively less impacted by the pandemic restrictions.
Prior to the onset of the pandemic, our retail remixing
strategy was showing signs of success and this has
positioned us well in the current market with over 70
per cent of retail sales from non-discretionary and low
discretionary categories.
We have experienced faster than expected sales recovery
following the easing of government restrictions with over
94 per cent of stores open and foot traffic 92 per cent of
pre-pandemic levels4.
Workplace and Logistics key operating and financial
metrics demonstrate the strength of this portfolio with
Workplace comparable FFO growth of 1.7 per cent and
Logistics comparable FFO growth also 1.7 per cent.
Occupancy remains high across the portfolio with over
430,000 square metres of new leases executed within the
last 12 months. The portfolio is in a good position with
a small number of deals required under the Commercial
Code of Conduct, low outstanding rent arrears and stable
valuations reflecting the quality of the portfolio as it
continues to grows.
Our Workplace and Logistics development pipeline more
than doubled during the period to $5.5 billion and continues
to progress requiring minimal capital in the near term due
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Mark Steinert, Managing Director and CEO
to early stages of planning for our major projects including
M_Park, Piccadilly and Walker Street in Sydney (NSW). We
will continue to carefully assess market conditions before
commencing new developments.
We have strengthened the capability of the team and are
well positioned to deliver and grow the Workplace and
Logistics portfolio into the future.
Financial management
The Group finished the year on a sound financial footing
benefiting from the work undertaken over several years to
build and maintain the strength of our balance sheet.
Our balance sheet continues to be supported by the
retention of our investment grade credit ratings of A-/A3
with stable outlook from S&P and Moody’s respectively.
We have improved our gearing to 25.4 per cent and are
well within our target range, despite material devaluation
in Commercial Property and Retirement Living assets, but
also driven by strong second half cashflows. Stronger
than expected residential settlements and a deferral
of development expenditure during March 2020 and
April 2020 in response to the COVID-19 pandemic have
contributed to our strong net cashflow. The business has a
demonstrated ability to scale production quickly and has
started to do so already for FY21 settlements.
A combination of a strong liquidity position, our access
to short and long term debt markets and ongoing cash
discipline, positions us well to navigate the current market
disruption and into the future recovery phase. Our capital
and operational strength allows us to scale up rapidly to
meet demand as it recovers.
2
3
4
Before rental abatement and expected credit loss (ECL) provisions are applied.
Excludes stapling adjustments for owner-occupied space and includes Stockland's share of revaluation gains relating to property held through joint venture entities.
As at 17 August 2020
Year ended 30 June 2020
13
Operational excellence
Looking to the future
This is a period of significant and continuing uncertainty,
particularly in light of the government restrictions currently
in place in Victoria. The impact of COVID-19 is extensive and
at this time we are unable to provide funds from operations
and distribution guidance for FY21.
We will continue to monitor the impact of COVID-19 and
its implications for our business, remaining agile in our
execution of strategic priorities. We will provide further
disclosures as and when appropriate.
As Tom mentioned in his letter, in June 2020 I announced
my intention to retire. I want to assure you that my
continuing focus is leading Stockland through the COVID-19
period and ensuring a seamless leadership transition.
Thank you for your ongoing support.
Mark Steinert
Managing Director
and CEO
There is no question that the future will look different
from our recent past, as digital technology transforms
and evolves our everyday lives. In early August 2020,
we launched our end-to-end enterprise CORE technology
platform. Together with digital customer interfaces and
advanced data analytics, CORE will drive greater customer
experience, efficiency, collaboration and insights across
the whole group.
Our digital transformation is unlocking the value of
customer experience by leveraging data-science and
virtual technology to optimise sales processes and tenant
remixing. We are also actively engaging with PropTech
start-ups and have invested in platforms that will support
our strategy execution including Yodel and Bricklet
I am immensely proud of how our people have responded in
prioritising the safety and wellbeing of our customers,
tenants, residents, contractors and importantly, each
other while continuing to drive our business forward. This
is reflected in our high customer satisfaction, employee
engagement scores and importantly in the high quality of
our services and developments.
We continue to develop assets and communities for leading
sustainability and liveability outcomes. Pleasingly we have
developed the most Green Star rated retail town centres
and retirement living communities and achieved a record
high 'World Leadership' rating for our Aura masterplan
community in Queensland.
Artist's impression, Walker Street, North Sydney (NSW)
14
Stockland Annual Report 2020
Strategy and
performance
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15
Minta, Vic
16
Stockland Annual Report 2020
Stockland Wendouree, Vic Our strategy
Maximise returns by developing sustainable
communities and assets
Our strategy is to leverage the benefits of our diversified portfolio and maximise returns by developing sustainable
Communities, owning and managing leading Retail Town Centres, and growing our Workplace and Logistics portfolio. We
achieve this by focusing on our three enduring pillars; grow asset returns, capital management and operational excellence.
OUR PILLARS
Grow asset returns
Grow returns in our core businesses
by creating liveable, affordable
and connected communities, future
proofing our Retail Town Centres and
retirement villages, and up-weighting
our Workplace and Logistics portfolio.
Capital management
Actively manage our balance sheet to
maintain diverse funding sources and
efficient cost of capital.
Operational excellence
Improve the way we operate to drive
efficiencies, compliance, sustainability
and employee engagement.
Our strategic priorities
Our three sustainability focus areas are integrated with our
business strategy to ensure we maintain our competitive
advantage and deliver shared value to all our stakeholders.
Our sustainability progress and priorities are reviewed in
detail in the 'delivering shared value' chapter.
• Improve customer experience, the
quality of our portfolio and digitise
the business
• Increase Workplace and Logistics
weighting and reduce Retail Town
Centres weighting
• Accelerate Communities
growth opportunities
• Broaden sources of capital
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Year ended 30 June 2020
17
Grow our
asset returns
Communities
RESIDENTIAL
Our Residential business delivered a good profit result of
$372 million, up 2.5 per cent on FY19. The result reflects the
strong pre-pandemic market conditions, our high-quality
new community launches and asset sale profits.
Customer preference towards community living, housing
affordability, government stimulus, credit availability and
continuing low interest rates has strengthened demand in
recent months.
Included in the result is the sale of the second tranche of
The Grove (Vic) and the capital partnership of Aura (Qld)
totalling $79 million and Merrylands Court (NSW). We do
not expect further material transactions in FY21 but the
business will benefit from underlying margin growth in New
South Wales and a full year of settlements from new project
releases in Victoria, subject to easing of restrictions.
We achieved over 5,300 residential settlements for
the year reflecting the increasing customer preference
for masterplanned communities and demand driven by
government stimulus. Operating profit margins were stable
at 19.9 per cent supported by the strengthening demand
and asset sales.
The COVID-19 pandemic and the associated government
restrictions materially impacted our sales in April 2020.
There was a gradual recovery in May 2020 and the market
was significantly buoyed by the government stimulus
HomeBuilder program in June 2020. We have seen a solid
rebound in our sales and enquiries since June 2020 and with
close to 4,300 contracts on hand at 31 July 2020 we have
reasonable coverage for FY21 settlement volume.
We continue to be the market leader with a 13 per cent
market share, more than three times the market share of
our nearest competitor. Our share has reduced compared
to last year due to the temporary impact of project roll-
offs in Victoria and Queensland ahead of new product
releases in the first half and a surge in completed inventory
sales following the introduction of government stimulus in
June 2020.
Our leadership reflects the advantages of our activated
land bank, mix of affordable land and built form, access
to finished product and a balance sheet supportive of
opportunistic restocking.
Throughout the year we have contracted to acquire
$535 million of projects to strategically restock our pipeline
with all assets transacted on capital efficient terms. This
included $415 million for The Gables (NSW), $105 million for
Katalia (Vic), of which 50 per cent is now in partnership with
Thai-based Supalai Group1, and $15 million for Brunswick
(Vic). These projects will contribute to the progression
of our built form strategy and provide long-term margins
above our hurdle rates.
We have accelerated the development of our end-to-end
digital platform, including virtual display villages, to drive
enquiries and sales conversion. This is helping ease the
impact of government imposed COVID-19 restrictions
with the entire customer journey now able to be
completed virtually.
We are well positioned to respond to shifting customer
preferences with a demonstrated ability to scale
production quickly and have started to do so for
FY21 settlements. However, due to current Victorian
government restrictions Melbourne sales have reduced,
although our construction is still progressing in Victoria.
sound with an undersupplied position pre-COVID-19
EXPECTED COVID-19 SECTOR IMPACT
• Residential fundamentals expected to remain
• Net overseas migration to moderate the pace of
• Change in customer preferences expected due to
recovery over the medium term
lifestyle changes and affordability focus
1
Subject to FIRB approval.
18
Stockland Annual Report 2020
Our competitive advantage
Market leader
Strong brand built on the quality of our
community creation for over 65 years.
Diverse land bank of over 74,000 lots
with strong embedded margins.
Leading market share of 13 per
cent, more than three times our
nearest competitor.
Customer preferences
COVID-19 has further shifted customer
preferences toward: affordable
product, house and land packages,
lower density living, open spaces, and
increased levels of working from home.
Market drivers
Our affordable, new-build products
are well placed to benefit from
government stimulus.
Key lending drivers of credit
availability and low mortgage rates
remain supportive.
Key project catchments have
lower relative exposure to current
net overseas migration and our
customers typically have above
average employment resilience
based on exposure to COVID-19
resilient sectors.1
Key priorities
• Product affordability and
customer preferences
• Product optionality
• Accelerate digitisation of the
customer journey
1
Based on exposure to COVID-19 resilient sectors such as manufacturing,
construction, wholesale trade, transport, health and public administration.
Residential snapshot
Funds from operations
$372m
Up 2.5% on FY19
Operating profit margin
19.9%
Return on assets
21.1%
Lots settled
5,319
Contracts on hand
~4,300
At 31 July 2020
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Year ended 30 June 2020
19
RETIREMENT LIVING
Increasing customer preferences for the safety and support
of community based living in a village style environment
have driven a strong performance in our Retirement
Living business.
FFO for the year was $58 million, up 4.8 per cent on FY19
and we settled 860 units, up 3.6 per cent over the same
period. Our established sales increased by 11.3 per cent
reflecting our improved service offering and the appeal of
village living.
Our Retirement Living teams continue
to work tirelessly to provide safe and
connected community living. It is this level
of customer service that has seen us achieve
our highest level of resident 'happiness' in
last five years.
We continue to implement initiatives to enhance customer
experience and satisfaction including our 'trial stay' and
'rent to buy' products being scaled across the portfolio.
We are also leveraging our Salesforce and data analytics
capabilities to market and price our units.
Sales are expected to increase over time, supported by
customer preferences and the continued growth in our
target demographic.
EXPECTED COVID-19 SECTOR IMPACT
• Change in customer preferences expected due to
lifestyle changes and affordability focus
• Greater focus on safety and security among
customer demographic
Increasing returns through our development pipeline
remains a key priority. Our development contracts on
hand are lower than FY19 as we phase out of our deferred
management fee projects and realign our pipeline towards
land lease communities.
We have commenced construction of a land lease
community at Aura (Qld) and are planning our Minta (Vic)
development to deliver a total of 420 dwellings.
The disciplined improvement in the quality of our portfolio
is ongoing as we continue to upgrade facilities and reshape
the portfolio through the disposal of non-core villages.
The net fair value of the portfolio reduced by $116 million
driven by reduction in near term growth rates primarily due
to COVID-19, softening of discount rates to reflect the age of
some villages and reduction in the carrying value of vacant
established stock. Residual goodwill was also written off
due to changes in development strategy.
Key priorities
• Enhance customer experience
and satisfaction
• Increase returns through our
land lease development pipeline
and capability
• Improve the quality of our portfolio
20
Stockland Annual Report 2020
Retirement Living snapshot
FFO
$58m
Up 4.8% on FY19
Total lots settled
860
Up 3.6% on FY19
Established sales
11.3%
Increase on FY19
Established contracts on hand
22.0%
Increase on FY19
Return on assets
5.1%
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Commercial Property
The entire Commercial Property portfolio (excluding sundry properties) was independently valued at 30 June 2020 with a
net valuation decline of $464 million1 for FY20 compared to the estimated book value at 30 June 2020. The reductions were
concentrated in Retail Town Centres where the pandemic has had the greatest impact. The difficulty in predicting the future
implications of the COVID-19 pandemic on the Australian real estate sector has resulted in independent valuers adopting
a range of qualifications, including material uncertainty clauses. We will continue to closely monitor market conditions on
asset values, particularly in the context of ongoing restrictions in Victoria and other hotspot locations.
We have continued detailed discussions with our Commercial Property tenants, affected by the COVID-19 pandemic, on
a case by case basis, to provide appropriate levels of support following the announcement of the Federal Government’s
Commercial Code of Conduct. We have finalised approximately 54 per cent of tenant rental negotiations by number of
relevant tenants2, seeking support.
WORKPLACE AND LOGISTICS
Our Workplace and Logistics key operating and financial
metrics demonstrate the strength and quality of the
portfolio. Comparable FFO growth was 1.7 per cent for
Logistics and Workplace each.
We continue to carefully assess market conditions before
commencing new developments with preparatory work
underway for most of our major projects which requires
minimal capital in the near term.
Occupancy is high across the portfolio and leasing demand
remains strong with our Logistics portfolio renewing leases
for over 420,000 square metres within the last 12 months.
The portfolio is in a good position with a small number of
deals required under the Commercial Code of Conduct, low
outstanding rent arrears and stable valuations reflecting
the quality of the portfolio as it continues to grow.
Our capital allocation to the Logistics and Workplace
portfolio continues to increase and we have acquired or
contracted to acquire over $1.0 billion of strategic sites
throughout the year. This includes the residual 50 per cent
acquisition of Piccadilly, Sydney (NSW), 118 and 122 Walker
Street North Sydney (NSW), Carole Park (Qld), Richlands
(Qld), and entered into an agreement to acquire Kemps
Creek (NSW) land and Johnson & Johnson site, Macquarie
Park (NSW).
As a result our development pipeline has more than
doubled since 30 June 2019 to $5.5 billion and our capital
allocation to Workplace and Logisitics increased by six per
cent to 29 per cent3 of portfolio asset value.
EXPECTED COVID-19 SECTOR IMPACT
• Workplace: tenant demand impacted by economic
uncertainty and ways of working in the near term,
and long term impact of flexible working and
space requirements
• Logistics: acceleration of e-commerce supporting
sector tailwinds, and leasing activity and effective
rent growth with minor short term slow down due to
economic uncertainty
During the year we completed approximately 58,000
square metres of new logistics developments, with a
combined value of $88.3 million and a weighted average
lease expiry of 7.8 years
In December 2019 the $123 million M_Park Stage 1
development application at Macquarie Park (NSW) was
approved, comprising a net lettable area of 16,000 square
metres, and construction is expected to commence in the
first half of FY21. Tenant enquiry on the project has been
strong, reflecting the quality of the development and tenant
demand from technology and health sectors.
We are planning a new 10,000 square metre head office
for Johnson & Johnson, and further to this, a Heads of
Agreement has been executed with a large multinational
tenant over another whole building. We lodged a planning
proposal for Piccadilly, Sydney (NSW) Stage 1 in August
2020 and expect to lodge a development application for
Walker St, North Sydney (NSW) at the end of 2020.
Key priorities
• Grow and execute our
development pipeline
• Drive capital partnerships and joint
venture initiatives
1
2
3
Excludes stapling adjustments for owner-occupied space and includes Stockland's share of revaluation gains relating to property held through joint venture entities.
As at 17 August 2020
Reflects portfolio weightings at 30 June 2020 adjusted for post balance date transactions
22
Stockland Annual Report 2020
Workplace and
Logistics snapshot
Logistics FFO
$160m
Comparable growth of 1.7% on FY19
Workplace FFO
$54m
Comparable growth of 1.7% on FY19
Logistics occupancy
96.3%
Workplace occupancy
93.6%
Development pipeline
$5.5bn
at 25 August 2020
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23
Rental support negotiations are ongoing and as at 17 August
2020 we have finalised 52 per cent of negotiations, by
number of relevant tenants, seeking support. We continue
to work closely with our tenants to assess support on a
case by case basis acting within the Commercial Code of
Conduct. As at 31 July 2020, 61 per cent of billings had been
collected for the fourth quarter of FY20 with our metrics
remaining stronger than peers post March 2020.
To further support our retailers and the community we
launched new omni-channel shopping experiences and
continue to draw on our leading edge digital integration
platform and customer insights capabilities to enhance the
customer experience in our centres.
The portfolio's value decreased by $715 million with a
significant portion occurring in the second half reflecting
current market conditions impacted by the COVID-19
pandemic. During FY20 we settled $220 million non-core
retail asset divestments contracted for sale in FY19 and
executed a further $418 million post balance date in line
with 30 June 2020 valuations.
We have now executed $923 million of retail disposals over
the past 24 months in line with our non-core divestment
strategy. Our exposure to retail, on a proforma basis, is now
39 per cent of our total portfolio weighting.
Key priorities
• Rebase and reposition our
centres to ensure a quality and
resilient portfolio
• Divest non-core centres
RETAIL TOWN CENTRES
Our Retail Town Centres have been materially impacted
by the COVID-19 pandemic and associated government
restrictions. Comparable FFO was down 17.0 per cent to
$343 million1. However our relative trading performance
was good reflecting our exposure to convenience based,
low discretionary categories in sub-regional and non-
metropolitan assets.
Prior to the impact of the COVID-19 pandemic on the
portfolio, we had begun to see success from our rebasing
and remixing strategy. Solid retail comparable sales growth
of approximately 3 per cent was achieved for the eight
months to February 2020. Comparable sales performance
was significantly impacted in the fourth quarter of FY20
with a specialty sales decline of 30.1 per cent, offset by
supermarket growth of 8.0 per cent. We saw a faster than
expected rebound in sales through May 2020 and June 2020
following the easing of government restrictions. For July
2020 comparable total sales growth was 2.4 per cent and
comparable specialty sales growth was 1.4 per cent.
During FY20 the portfolio delivered slightly positive MAT
growth, up 0.8 per cent, with the impacts of the pandemic
largely offset by supermarket, mini-majors and discount
department store sales. Total retail turnover across the
portfolio remained flat with the comparable sales rate
slightly negative.
Minimal leasing activity was conducted in the last quarter
of FY20 with approximately 190 tenants on holdover at
30 June 2020 higher than the long-term average reflecting
continued uncertainty around the COVID-19 pandemic.
We have proactively worked with tenants to safely reopen
stores following easing in government restrictions in some
states. Around 94 per cent of stores by rental income
are now trading2 across the portfolio and July 2020 foot
traffic recovered to 92 per cent of pre-COVID levels3. Retail
assets located in Victoria, which are affected by increased
government restrictions implemented in August 2020,
currently have approximately 54 per cent of stores trading2.
EXPECTED COVID-19 SECTOR IMPACT
• Acceleration of e-commerce
• Store consolidation
• Weaker economic outlook in the short to medium
term impacting consumer confidence
1
2
3
Includes $27 million of tenant abatement and $36 million of ECL.
As at 17 August 2020.
Represents comparable portfolio excluding Piccadilly Retail Centre.
24
Stockland Annual Report 2020
Shaping future town centres
Retail town centre snapshot
FFO
$343m
Down 20.5% on FY19
Stores trading
94%
As at 17 August 2020
Comparable specialty sales
(6.7)%
Portfolio total MAT
0.8%
Occupancy
99.01%
Data-led approach
We use data from a range of sources
to achieve a deep understanding
of customer segmentation proving a
competitive advantage for Stockland
and our tenants.
This data, which is managed,
secured and assessed with a
key focus on privacy, includes in-
centre customer spending behaviour,
demographics, digital and social
media consumption and our internal
Salesforce enterprise capabilities.
Cross functional use of insights
Our data-led insights are used to
customise our leasing and marketing to
target customer growth segments and
drive foot traffic.
There is also an opportunity to share
these insights with our retailers to
assist in improving their product
offering and online presence.
Diversifying the
customer experience
We are already leveraging digital
opportunities in our centres. We
were the first Australian property
company to offer Amazon lockers,
and we provide delivery on demand
and click and collect at select
centres, and we are accelerating our
omni-channel capabilities through the
COVID-19 pandemic.
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Occupancy across the stable portfolio based on signed leases and agreements at
30 June 2020, ~94 per cent of stores by rental income are open and trading as at
17 August 2020.
Year ended 30 June 2020
25
Capital
management
S&P credit rating
A-/Stable
Moody’s credit rating
A3/Stable
Gearing
25.4%
Improved from 26.7% in FY19
Weighted average debt maturity
5.7 years
Net tangible assets
As at
Cash and cash equivalents
Real estate assets
• Commercial Property
• Residential
• Retirement Living
• Other assets
Retirement Living gross up
Other financial assets
Other assets
Total tangible assets
Borrowing
Retirement Living resident obligations
Other financial liabilities
Other liabilities
Total liabilities
Net tangible assets
Number of securities on issue
NTA per security
26
Stockland Annual Report 2020
Weighted average cost of debt (WACD)
4.0%
Expected 3.7% WACD in FY21
Distribution payout ratio
70%
30 June 2020
30 June 2019
$M
443
10,140
3,395
1,287
130
2,682
749
235
19,061
5,022
2,695
313
2,051
10,081
8,980
$M
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10,323
3,411
1,452
36
2,585
534
325
18,806
4,704
2,597
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1,650
9,171
9,635
2,384,351,503
2,384,351,503
3.77
4.04
Change
%
216.1%
(1.8%)
(.5%)
(11.3%)
262.5%
3.8%
40.3%
(27.6%)
1.4%
6.8%
3.8%
42.3%
24.2%
9.9%
(6.7%)
(6.7%)
Stockland finished the year on a sound
financial footing benefiting from the work
completed over several years to build and
maintain the strength of our balance sheet.
This was supported by investment grade credit ratings
of A-/A3 with stable outlook from S&P and Moody’s
respectively which have been maintained during the
COVID-19 pandemic.
We continue to actively manage our debt portfolio with a
weighted average cost of debt of 4.0 per cent and weighted
average debt maturity of 5.7 years.
In response to the COVID-19 pandemic we increased the
Group’s available liquidity by $790m, through new long
and short term facilities (liquidity as at 30 June 2020 was
$2.0 billion).
Our gearing has improved to 25.4 per cent and is well
within our target range despite devaluations in Commercial
Property and Retirement Living but driven by strong second
half cashflows.
The combination of our strong liquidity position, access
to short term and long term debt markets and ongoing
discipline around cashflows, positions us well to navigate
the current market disruption and into the recovery phase.
Cash flow management
We ended the year with $1,127 million in net operating
cashflow, exceeding our distribution of $658 million.
This reflects our strong residential settlements and
deferral of development expenditure during March 2020
and April 2020 in response to COVID-19. We also
implemented measures to limit expenditure during the
pandemic resulting in corporate overhead savings and
were able to refocus cash as restrictions eased to increase
business activity.
During the year, 88 per cent of the land payments were
purchased previously on capital efficient terms.
Capital allocation
We closely manage our capital to ensure we have the
optimal allocation across our diversified portfolio. We
continue to actively reweight the portfolio with $418 million
of non-core retail assets contracted for sale and the
increase of our Workplace and Logistics development
pipeline to $5.5 billion, to target a balanced strategic
allocation to Communities, Workplace and Logistics
and Retail Town Centres. Currently, our Retail Town
Centres represent 39 per cent of our total portfolio on
a proforma basis.
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Year ended 30 June 2020
27
We are executing on our strategy to bring in capital
partners to invest alongside us to deliver projects.
Capital partnering
Expected credit loss
To drive growth in our business and deliver on our strategic
priorities, we are actively progressing joint ventures and
capital partnering opportunities across all sectors.
In July 2019, we announced a strategic capital partnership
in our residential portfolio, with Capital Property
Group investing a 50 per cent interest in our largest
masterplanned community, Aura on the Sunshine Coast
at around a 30 per cent premium to book value.
Post period end in July 2020, we announced a new capital
partnership in our residential portfolio with Thailand-based
Supalai Group1 investing $52.5 million for a 50 per cent
interest in our newest masterplanned community, Katalia
on Donnybrook Road in Melbourne’s north.
Distributions
The distribution for the year ended 30 June 2020, is
24.1 cents per security, down 12.7 per cent on FY19. The
distribution payout ratio of 70 per cent is slightly below
our target range but reflective of the impact of COVID-19
on our business during the last quarter of the financial
year and fully covered by operating cashflow. Reducing
the distribution and retaining this capital will help protect
our balance sheet and positions us well to navigate the
recovery phase.
We have been prudent in our consideration of the impact
of the ongoing COVID-19 pandemic and Commercial
Code of Conduct. Our accounting recognition is in line
with the recent Australian Securities and Investments
Commission (ASIC) guidelines and reflects $29 million in
tenant abatements including deals agreed and estimates
for deals yet to be completed at 30 June 2020, and a
$38 million expected credit loss (ECL) provision2 against net
lease receivable of $73 million.
The ECL has been determined utilising a framework to
assess and address credit risk across our Commercial
Property portfolio. The framework evaluates the risk of
default on an individual tenant basis, by considering
various factors such as tenant type and size, occupancy
costs, business vulnerability and historic credit profile.
Key priorities
• Strategic capital partnering
• Maintain high investment grade
credit ratings
• 20 - 30 per cent target
gearing range
1
Subject to FIRB approval
28
Stockland Annual Report 2020
CASE STUDY
TOWARD NET ZERO WITH
$75 million CEFC FUNDING
We have further diversified our funding
as we pursue our 2030 target for net
zero carbon emissions across our Logistics
centres, Retirement Living operations
and corporate head offices, due to a
$75 million senior debt facility from the
Australian Government’s Clean Energy
Finance Corporation (CEFC).
The finance provided by the CEFC will
support a portfolio-wide energy efficiency
renewal program, as well as market-
leading Green Star design and as-built
standards for Retirement Living new-
builds which will target a 35 per cent
reduction in emissions levels, compared
with the requirements of the current
building code. Other initiatives will
see Stockland:
• accelerate the installation of 11MW of
solar across its Logistics business
• develop a market-leading scheme to
trade solar energy among Stockland
assets, so excess energy generated at
its Logistics premises can support other
Stockland Group businesses
• support the adoption of solar
and battery installation in
residential properties
• accelerate renewable energy and
energy efficiency programs within
retirement living centres.
This agreement with the CEFC is a
strong example of how clean energy can
be used across the built environment
to deliver long term economic and
environmental benefits.
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Despite the ECL booked in FY20, Stockland reserves the right to collect rent under its lease agreements.
Year ended 30 June 2020
29
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.
CUSTOMER EXPERIENCE
As a customer-centric organisation, we are focused on
understanding customer needs, behaviours and feedback,
and, in response, we generate innovative ways to optimise
customer experience and satisfaction and maximise
commercial outcomes.
Our drive for innovation has generated
a surge in new ideas. We apply data
science-based methodologies to evaluate
commerciality and unlock the true value of
customer experience.
One of our FY20 initiatives mapped the end-to-end
customer journey overlayed with many years of survey
results and behavioural insights. We used our key
success metric – customer referrals – to determine
the main drivers of an excellent experience; to deliver
to expectations, generate more customer referrals and
increase sales conversion.
By using this methodology we identified the potential
to unlock upwards of $12 million of revenue annually
by making pain points easier, setting and delivering to
expectations (for example, on land registration timelines
and amenity delivery) and eliminating delays.
We are also leveraging our data-science capabilities to
optimise our retail portfolio and the shopper experience.
Throughout the year we rolled out initiatives to support
delivery on demand, click and collect and parcel collection.
We also accelerated our omni-channel capabilities through
the COVID-19 pandemic with over 14 million views on
key campaigns. The data used across these projects
is managed, secured and assessed with a key focus
on privacy.
Customer satisfaction targets
We continue to evolve our proprietary customer research,
satisfaction and liveability surveys and use these tools to
measure and improve our performance to help shape our
communities, town centres and workplaces.
Pleasingly, our FY20 retail tenant satisfaction score has
remained high at 80 per cent, exceeding our 77 per cent
target, and we have maintained our 80 per cent shopper
satisfaction score.
In light of the impact of the COVID-19 pandemic on various
sectors, we deferred the annual Workplace and Logistics
tenant satisfaction survey to FY21.
We maintained high levels of resident satisfaction across
our Communities. In FY20, our Retirement Living resident
'happiness' score was the highest level achieved in
five years.
In our Residential business our resident satisfaction
remains high at 91 per cent and our prospective resident
satisfaction was slightly below our target at 81 per cent
largely due to the volume of leads and challenging
market conditions.
We have made a number of customer-focused
enhancements during FY20, including establishing
national guidelines for setting accurate settlement
timing expectations and increasing the frequency and
personalisation of our customer communications.
Amidst the COVID-19 pandemic and bushfires, when
many traditional customer engagement and qualitative
research practices ceased, our online research community,
Stockland Exchange, allowed the business to continuously
gather insights from our customers in a safe manner via
online forums and virtual discussion panels.
30
Stockland Annual Report 2020
Customer satisfaction
Residential communities
resident satisfaction
91%
Residential prospective
resident satisfaction
81%
Target 85%
Retirement living
resident happiness
8.6/10
Target 8.25/10
Retail tenant satisfaction
80%
Target 77%
Retail shopper satisfaction
80%
Target 80%
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31
CASE STUDY
OUR VIRTUAL CUSTOMER JOURNEY
The value of community living has never been more
apparent. During the COVID-19 pandemic, people have
reclaimed surrounding green space and are seeking more
comfort and versatility at home.
To capture this demand we accelerated our digital
capabilities to deliver safe, efficient and customised
experiences for our customers available anytime.
by providing detailed house and land pricing and builder
availability at the click of a button.
To provide a safe buying experience we offer one-on-one,
private sales experiences. Appointments can be made on
the website, via our social media channels and enquiries
receive quick responses with our LiveChat manned by
sales professionals.
During the year we launched our 360 degree virtual
skytours experience for our top residential projects
providing customers with an interactive view of our
masterplanned communities. Our choose-your-own tours
fly above our communities so customers can discover
parks, schools, shopping and transport and explore the
future plans for the community.
Our end to end virtual sales process also includes
digital contract signing by appointment and the ability
to proceed with a deposit. With a focus on continually
improving our customers' experience contracts have been
simplified, project process tracking improved and we
offer contactless pre-settlement inspections including
personalised lot tours.
Customers can further immerse themselves in the
experience by stepping into virtual display villages and
video walk-throughs. The experience is then enhanced
Explore our Highlands masterplanned community
in Victoria.
32
Stockland Annual Report 2020
INNOVATION, DIGITAL AND DATA
Innovation
Integrated technology backbone
Our internal innovation capability helps select, support
and nurture new initiatives across the business.
These initiatives are deeply rooted in customer
insight, understanding of customer 'jobs to be done'
(understanding the customers’ motivations and the jobs
they want to accomplish) and their known pain points.
By addressing these through innovation initiatives, we are
able to optimise customer experience and generate value
for Stockland.
We have invested in two promising PropTech start-ups:
Yodel, a communication and workplace management
platform, and Bricklet, a platform that makes property
investment more accessible by breaking up a property into
smaller units called ‘bricklets’ which can then be bought
individually by investors.
Some of our key achievements during FY20 include the
Stockland Accelerator, multiple innovation pilots, a record
number of entries in the Chairman’s Award for Innovation
and embedded innovation across our ways of working.
The Stockland Accelerator culminated with an Investor
Showcase in Sydney where 10 start-ups pitched to over
100 potential investors, partners and customers. Three
of the PropTech start-ups built during the Stockland
Accelerator piloted their solutions at our residential and
commercial assets.
Innovation projects generated
~2% FFO
in FY20
One of the focus areas in our digital transformation is the
improvement of our systems and technology to support an
agile, efficient and digital workforce.
In August 2020, post financial period end, we released the
main stage of our end-to-end CORE technology platform
(CORE). CORE provides a Group-wide single source data
source and is a technology backbone focused on customer
centricity, collaboration and policy compliance.
We believe this truly integrated end-to-end digital
transformation system is world leading for real
estate companies.
Some benefits of the integrated end-to-end
processes include:
• single source of truth for customers across Stockland
• integrated customer processes for enhanced
• team collaboration using shared project space for
managing large projects or complex capital works
programs and procurement sourcing where suppliers
can log their own data and
customer experiences
• one finance system, with simpler consolidated
financial reporting.
As a direct result of the COVID-19 pandemic, we incurred a
one-off cost of $18 million due to the delay of CORE go live
from May 2020 to August 2020, which has been expensed
in FY20.
Cyber security
As we continue to digitalise our business and enable digital
services for our customers, protecting our information and
the privacy of our customers is critical. We remain focused
on data safety measures to protect our business and our
people from cyber security related threats.
During FY20, we continued to strengthen our cyber security
and rolled out mandatory training for employees. We
proactively monitor and investigate data breaches that
occur outside our systems, that may have a potential
impact to our business.
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Year ended 30 June 2020
33
PEOPLE AND CULTURE
Employee engagement
Health, wellbeing and safety
The ability to maintain employee engagement and
productivity during these challenging times is critical to our
overall 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 FY20 with a
score of 82 per cent, up from 81 per cent in FY19.
The improvement was driven mostly by an increase in
advocacy (likelihood to recommend Stockland as a good
place to work) and intent to stay (lower likelihood of leaving
Stockland in the near future). We reported improved scores
in our major areas of focus which included leadership,
strategy communication and execution, and removing
obstacles to perform. Our scores across wellbeing,
diversity and inclusion, and health and safety remain very
strong compared to norms.
Strengthening Stockland
We are proud to be a purpose-driven organisation with
a strong culture. It is important we continue to build
on this foundation and further strengthen the Stockland
culture through an integrated program of work across
leadership, structure, capability, processes and systems.
During the year, we launched Leader Zone, an online
learning resource to support employees to enhance their
leadership capability.
Since the onset of the COVID-19 pandemic we have
increased the frequency of our employee communications
and the visibility of our executives and senior leaders. This
is complemented by regular employee 'pulse' surveys so
that we can adapt our response to the changing needs of
our people.
Our priority is the health, safety and wellbeing of
our people. Throughout the year we have responded
with strength to the challenges presented by bushfires
and the COVID-19 pandemic and have continued to
evolve our systems and processes to ensure a safe
working environment.
In FY20 we achieved zero fatality and life changing injuries in
our business, which was consistent with the previous years.
We also maintained a low lost time injury frequency rate
(LTIFR)(3.4 in FY20), a reflection of our continuous focus on
injury prevention in line with our LTIFR improvement plan.
We equipped our employees, at both head office and at
an asset-level, with techniques to address psychosocial
hazards such as dealing with difficult conversations. We
worked with a specialist psychological consultancy to
develop a ‘Dealing with Challenging Interactions' training
program for our customer and public facing roles.
Our flexibility and wellbeing initiatives were accelerated
during the onset of the pandemic. This included fast-
tracking flexible and remote working with Microsoft Teams
collaboration technology rolled out to all employees
and providing support to our people through a multi-
faceted wellbeing program working with our CARE
Foundation partners.
Diversity and inclusion
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 cover Gender
Equity, Flexibility, LGBTI+, and Wellbeing, Accessibility &
Cultural Inclusion.
In acknowledgement of our focus on gender equity,
we have:
• Been recognised by WGEA Employer of Choice for
• Ranked sixth on Equileap’s Global Top 100 gender-equal
• Achieved Bronze Status in the 2020 Australian
Gender Equality for the sixth year in a row
companies and
Workplace Equality Index (AWEI).
During FY20 we launched our updated Domestic and Family
Violence (DFV) Policy. We ran a 16 Days of Activism to end
Gender-Based Violence leadership-led campaign to raise
awareness of DFV and to promote the support we provide
our people and our zero tolerance of perpetrators.
34
Stockland Annual Report 2020
People and culture snapshot
Employee engagement
82%
Target 80%
Women in management
46.7%
Target 45%
Gender pay equity
99%
Target 100%
Equileap's Global Top 100
6th
gender-equal companies
Lost time injury frequency rate
3.4
down from 3.9 in FY19
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35
Delivering
shared value
We have both the opportunity and
responsibility to create the right balance of social,
environmental and economic conditions for our
stakeholders, now and in the future.
We are a committed leader in sustainability and believe
this approach is fundamental to the way we do business.
Our three sustainability focus areas are integrated with our
business strategy to ensure we maintain our competitive
advantage and deliver shared value to all our stakeholders.
• Shape thriving communities - Our focus is on creating
robust communities with strong connections and
opportunities. This supports our growth as a business
by delivering better social, environmental and economic
outcomes for all our stakeholders.
• Optimise and innovate - Innovation is at the core of
everything we do. 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 support our supply
chain, manage risk, and ensure sustainable and
transparent practices.
Due to the impacts associated with the COVID-19
pandemic we have delayed the release of our 2030
Sustainability Strategy. We look forward to sharing this
with securityholders in FY21.
FY20 SUSTAINABILITY LEADERSHIP
GRESB
Global Sector Leader for Listed, Diversified – Office/Retail
CDP
Climate A List for climate disclosure and performance
DJSI
Ranked 2nd on the Dow Jones Sustainability Index, listed in
the top five for 10 consecutive years
MSCI
MSCI AAA ESG rating
36
Stockland Annual Report 2020
Shape thriving communities
In FY20 we received almost 2,000 responses across 18
residential communities that took part in the annual
proprietary Liveability Index survey. We scored 74 per
cent, marginally below the target of 75 per cent. This
result was in part due to the removal of a number of
high-performing and well-established communities and
the inclusion of newly developed communities (eight out of
18 communities in scope are in the early to mid stages of
development). Liveability scores traditionally increase for
more established developments with mature amenity.
Our FY20 liveability research identified ‘access to amenity’
(such as access to retail, recreational or transport services)
and ‘public spaces’ as potential areas for improvement
at a community level. For communities where we are
in the early stages of development, we are looking at
opportunities to provide pop-up amenity and greater
promotion of surrounding and existing amenity to alleviate
resident concerns.
We continue to achieve high wellbeing scores in our
residential and retirement living communities. Our
residential communities achieving a Personal Wellbeing
Index score of 78 per cent and our retirement living
residents achieved a Personal Wellbeing Index score of
83 per cent, both above the national wellbeing average of
74.2–76.7 per cent.
As one of Australia’s largest diversified property groups,
we are well placed to have a positive and lasting impact
on the communities in which we operate. Our research
clearly indicates that for a community to thrive it needs
a focus on health and wellbeing, community connection
and education.
In FY20 we continued to support these fundamental
elements of our sustainability strategy, contributing over
$4.4 million to community development and engagement
across Australia. This includes our $500,000 pledge to
six charitable organisations in response to the devastating
Black Summer Australian bushfires, shared between the
Foundation for Rural and Regional Renewal, Foodbank
Australia, the Foundation for National Parks and Wildlife,
the NSW Farmers Association, the Business Council
of Australia and Good360. Our reported FY20 total
contribution is lower than prior years largely due to a
change in our reporting coverage. This year we have not
collected community development spend data by our
assets and communities, instead, allowing our teams to
focus on supporting customers, residents and tenants
during the COVID-19 pandemic.
Stockland Liveability Index
Our annual Liveability Index Survey measures what matters
to our residents, so we can incorporate what is important
to our customers into our community designs. 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 and responding to
feedback from our residents has helped us shape some of
Australia’s most liveable communities.
FY20 TARGETS AND PROGRESS
FOCUS AREA
TARGET
STATUS
PROGRESS
Health and
wellbeing, community
connection, education
All Stockland Communities (residential and
retirement living) score above the Australian
average national Wellbeing Index.
Achieved
Achieved a retirement living resident Personal
Wellbeing Index score of 83% and 78% for
residential communities, both well above the
Australian national average range of 74.2–76.7
per cent.
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.
In progress
Achieved a 74% Liveability score, marginally below
the target of 75%.
Ongoing
Stockland CARE Foundation launched two new
Foundation partners, ReachOut and R U OK?, joining
our existing partner Redkite.
Invested over $4.4 million through our community
development, community investment programs
and the Stockland CARE Foundation.
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37
Partnering to
strengthen communities
The Stockland CARE Foundation was established to support
charity organisations that can help Stockland deliver on our
aspiration to improve the health, wellbeing and education
of Australian communities.
In October 2019, the Stockland CARE Foundation
established a collaborative partnership between our three
charity partners ReachOut, Redkite and R U OK?. Through
this partnership we will seek to empower our communities
to build the essential skills, resources and networks to
support each other towards a better way to live. This
partnership has seen the four organisations come together
to share resources, tools and challenges and build a culture
of continuous learning and improvement.
The establishment of this new collaborative partnership
has been timely given the outbreak of the COVID-19
pandemic and its impact on wellbeing. Over the next three
years, the CARE Foundation will invest more than $1 million
as well as ongoing non-financial support in our Foundation
partners, to help raise awareness and support for mental
health programs that will assist Australian communities as
they recover and rebuild into the future.
Impact of our community partnerships
Live Life Get Active
Close to 8,000 residents attended free
Stockland community fitness classes
with ~8,000kgs in weight loss
Jamie's Ministry of Food
Over 1,200 participants in healthy
eating and good nutrition classes for
all ages
Australian Business and
Community Network
Close to 350 students from
26 ABCN schools mentored by
Stockland employees
Elara community, NSW
38
Stockland Annual Report 2020
Enrich our value chain
Responsible supply
chain management
We are committed to responsible procurement and
sustainable supply chain management. We recognise that
having a sustainable supply chain is fundamental to having
a sustainable business.
We work closely with our suppliers to develop and
communicate our values and expectations, and in FY20
we released our updated 'What Stockland Expects from
its Suppliers' policy. The policy includes a greater focus
on sustainability, including diversity and inclusion, human
rights and Indigenous procurement and employment. It
sets out key considerations for our development suppliers
such as health and safety, materials and resource use, and
local employment.
With a targeted focus on influencing industry practice
around safety, during the year we hosted our second
annual National Sights on Safety Award. This award
offers our suppliers and contractors the opportunity to
showcase enhancements to their safety performance. The
FY20 awards were well supported by our suppliers and
contractors, with over 40 submissions received.
Providing a consistent, quality product and experience
to our customers is key to our success. In FY20 we
implemented the standardisation of quality inspection
checklists across our medium density project sites. This
was the result of a collaboration with our contractors,
and involved sourcing and sharing best practice to
improve standards across our sites and ultimately across
the industry.
Human rights
Our commitment to both respect and promote human
rights underpins our business activities and stakeholder
relationships, and this is appropriately reflected in
our human rights policies and procedures. We do not
tolerate behaviour that is in breach of the law or our
corporate policies.
In FY20 we expanded our human
rights approach to consider the Modern
Slavery Act and to identify and address
modern slavery within our operations and
supply chains.
Our approach includes a commitment to continuous
improvement as we increase our understanding of modern
slavery risks. To date we have made good progress on
awareness training for employees in supply chain-facing
roles. We have mapped and assessed our supply chain for
modern slavery risk potential and built an understanding
of the activities of our higher-risk, high-spend suppliers
through a modern slavery supplier assessment tool. These
steps will allow us to adapt our approach over time and
build appropriate remediation and remedy mechanisms if
cases of modern slavery are uncovered.
We have continued to conduct specialised due diligence
across our cleaning contractors during the COVID-19
pandemic, and remain vigilant to the heightened risk within
that sector. Investigations into the supply chains of our
development projects have given us insights into potential
modern slavery risks in construction materials and labour,
and helped us to identify areas on which to focus our
engagement going forward.
FY20 TARGETS AND PROGRESS
FOCUS AREA
TARGET
STATUS
PROGRESS
Supply
chain management
Identify and address key environmental, social and
governance risks in our supply chain.
Achieved
Launched our updated ‘What Stockland Expects
from its Suppliers’ policy.
Collaborate with our partners to raise
awareness of sustainability issues and encourage
sustainable procurement.
Achieved
Human rights
Draft and commence implementation of our next
Innovate Reconciliation Action Plan FY20-22.
Achieved
Developed Modern Slavery Statement and engaged
with suppliers to raise awareness of the associated
risks. Sights on Safety supplier safety awards
expanded to include our operational suppliers.
Drafted our second Innovate RAP in partnership with
Reconciliation Australia to be launched in NAIDOC
Week 2020.
Accessibility - Achieve a minimum LHA Silver
standard (design certified) for 20% of our
Townhomes in FY20.
Achieved
Delivered 29% of our Townhomes product to meet
LHA Silver standard.
Employee engagement, diversity and inclusion - read more on in People and culture
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Year ended 30 June 2020
39
Optimise and innovate
We entered the new decade amid Australia’s worst ever
bushfire season and crippling drought; events aggravated
by climate change. We acknowledge that climate change
as well as resource constraints present risks and
opportunities for our business, and we are committed
to identifying, assessing and managing these to support the
resilience of our business, assets, communities, customers
and people.
We respond to these challenges through robust risk
management, smart design, investment in technology, and
operational efficiencies as we make the transition to a
low-carbon future.
Resilient communities and assets
The unprecedented 2019/20 bushfire season had an impact
on several of our assets, triggering our internal crisis
management response. Whilst six retirement villages and
one shopping centre were temporarily evacuated, no
injuries were sustained by Stockland staff or residents and
no property damage was sustained.
Bushfires are an inherent risk to Stockland and the
community, with over 50 properties located in or adjacent
to a bushfire zone. As part of our risk management
strategy, annual Bushfire Preparedness Reviews have been
undertaken since 2017. In the lead up to the 2019/20
bushfire season we completed Bushfire Preparedness
Reviews for all of these assets.
These reviews are done in addition to our Climate Resilience
Assessments. As at 30 June 2020, we have completed
assessments for 45 per cent of our portfolio, with six
assessment undertaken in FY20.
During FY20, we also extended our climate change scenario
analysis to better understand the extent of water scarcity
across Australia and the adaptive capacity of Australian
water utilities, to further develop Stockland’s role in
contributing to water system resilience.
Green buildings and communities
We are committed to incorporating best practice
sustainable design across energy, water and material
selection, as well as creating highly connected and
accessible communities that enhance liveability.
FY20 TARGETS AND PROGRESS
FOCUS AREA
TARGET
Climate
resilience
Improve climate change resilience within our
portfolio undertaking new resilience assessments
as required, including new developments and high-
priority assets as per our national mapping.
Carbon and
energy
60% reduction in carbon emissions by FY25 in
Commercial Property.
Design all new residential and retirement living
communities to exceed minimum energy efficiency
compliance standards by 10%.
STATUS
PROGRESS
Achieved
45% of our portfolio assessed for climate resilience
100% of assets located in/adjacent to bushfire zones
underwent Bushfire Preparedness Reviews
Achieved
Achieved
Achieved a carbon emissions intensity reduction of
65% against the FY06 baseline.
Exceeded energy performance design targets,
achieving a 46% reduction in our residential
communities and a 12% reduction at Newport RL (Qld)
and a 31% reduction at Shine RL (Qld).
Biodiversity
All new eligible masterplanned community
developments to make an aggregated net positive
contribution to biodiversity value in FY20.
Achieved
Achieved a positive Biodiversity Index Score for the two
projects assessed during FY20 - Paradise Waters and
West Dapto 2.
Waste and
materials
Divert 90% of Retail Town Centre development
waste from landfill.
Achieved
90% of waste diverted from landfill from retail
development projects between FY18-FY20.
Divert 60% of Residential development waste
from landfill.
Divert 45% of Commercial Property operations
from landfill
Water
management and
quality
Retail town centres and retirement living villages
to reduce water consumption by 5% and all
new residential communities designed to exceed
minimum water efficiency standards by 5%.
Achieved
98% of civil contractor waste diverted from landfill.
Not
Achieved
Achieved
36% of waste diverted from landfill in our Commercial
Property operations - see waste commentary.
Achieved 11% reduction in water consumption against
the FY17 baseline in our Retail portfolio and 14%
reduction in Workplace and Business Parks.
40
Stockland Annual Report 2020
Our portfolio has the most Green Star rated retail town
centres and retirement living communities and achieved
a record high 'World Leadership' rating for our Aura
masterplan community in Queensland. Our Newport and
Shine Birtinya (Qld) retirement living villages were the first
two retirement living projects in Australia to be certified
using the Green Star Design & As Built rating tool.
Net zero carbon future
We continue to improve the emission intensity of our
Commercial Property portfolio, achieving our FY25 target
five years ahead of target. This is largely due to our
$33 million investment in renewable energy over the last
three years which has driven a 32 per cent reduction in
emissions intensity across Commercial Property since FY17.
In FY20 we partnered with the Clean Energy Finance
Corporation (CEFC) on a $75 million debt facility. This
supports the delivery of our 2030 Net Zero Commitment
for our Retirement Living and Industrial portfolio and
Corporate Head Offices, based on the World Green Building
Council Net Zero Carbon Buildings Commitment.
One of the key deliverables of this agreement is the
installation of additional solar across our Logistics and
Retirement Living assets, with the objective of establishing
an inter-asset energy trading platform.
By the end of FY20 we had completed a further 2.3MW
of solar PV capacity, including our largest logistics
installation of 770kW at Yennora Distribution Centre.
This brings our total solar operational capacity to 18MW,
with the capacity to generate approximately 24GWh in
renewable energy annually.
In addition to our formal net zero commitment, we are
collaborating with our customers and builder partners to
support a low-carbon transition in the residential sector.
In partnership with Sustainability Victoria and Creation
Homes we delivered a certified Zero Net Carbon Home at
our Orion project.
We are also working closely with the Green Building Council
of Australia to help create a market for healthy, resilient
and net zero energy homes through their new standard
‘Green Star for Homes’.
Improving waste management
Our new national waste and recycling contract signed in
FY20 will see greater landfill diversion rates across multiple
waste streams in our Commercial Property operations. For
the three-year period FY18-20 we diverted 90 per cent
of waste from landfill across our four Retail Town Centre
developments at Birtinya (Qld) Baringa (Qld), Wendouree
(Vic) and Green Hills (NSW).
Our net zero carbon progress
Commercial Property - emissions
intensity reduction
65%
FY06 baseline | Target 60% by 2025
Savings from energy
efficiency initiatives
>$123m
since FY06
All new residential communities
46%
reduction in emissions against energy
compliance standards
Renewable energy capacity
18MW
36% of retail energy consumption
Renewable energy
>$33m
Total investment
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Year ended 30 June 2020
41
Risk
management
42
Somerton Distribution Centre, Somerton, Vic Our approach to
risk management
Stockland adopts a rigorous approach to understanding
and proactively managing the material risks and
opportunities we face in our business. 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 all
Stockland’s stakeholders.
Stockland’s risk appetite is the degree to which we are
prepared to accept risk in pursuit of our strategic priorities.
We continuously engage with our stakeholders and use
these views, together with research and evidence, to
maintain a register of the material risks and opportunities
that influence our ability to deliver on our vision and
purpose. The Board has determined that Stockland will
maintain a balanced risk profile so that we remain
a sustainable business and an attractive investment
proposition over the long term.
Three lines of defence
We also recognise 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. We have a Stockland Code of Conduct that
applies to all employees and provides clear guidance on
how we expect our people to accept, engage and respond
to each other and our stakeholders. The performance
scorecard for our employees, including our Managing
Director and CEO and the Executive Committee also
contains key performance indicators linked to effective
risk management.
The Board provides oversight of Stockland’s risk
management which is underpinned by our risk
management framework and Three Lines of Defence
model. Our governance framework is provided on .
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Year ended 30 June 2020
43
Our materiality process
Stockland has adopted the materiality definition
from the International Integrated Reporting
Framework (Integrated Reporting) to disclose
information about matters that may substantively affect
the organisation’s ability to create value over the short,
medium, and long term. Our Executive Committee and
Board regularly review these key risks and disclose them on
a bi-annual basis.
We identify material matters using the following process:
1. Identify
Each year we conduct an operational and strategic
risk assessment and identify draft material matters by
capturing internal and external perspectives in line with the
principles of Integrated Reporting and the Global Reporting
Initiative (GRI) Standards.
Stakeholder perspectives included:
• Investor research and engagement
• Customer feedback and insights
• Employee, executive and Board surveys
• Political and regulatory developments
• Industry engagement and advocacy
• Social and mainstream media.
Risks and opportunities
2. Evaluate and prioritise
Members of our leadership team and senior management
participated in interviews and reviews to evaluate
the material matters, rank them in terms of greatest
significance and prioritise them based on their ability to
affect and impact on value creation over the short, medium
and long term.
3. Review and disclose
The following risks and opportunities are considered
the most relevant current material matters which are
developed and mapped. These have been reviewed and
approved by Stockland’s Executive Committee and Board.
The process and associated disclosures have been assured
by Ernst & Young (EY).
Due to the complex nature of these risks and the impact
of COVID-19 many of the risks and opportunities detailed
below have the potential to impact our business and
stakeholders over the short, medium and long term.
• reducing or deferring variable and non-critical
expenses. This includes placing a freeze on
remuneration, training, and recruitment and the
implementation of other cost saving measures
• implementing a 20 per cent reduction in Directors’ fees
and fixed salaries of the Executive Committee for a
two-month period commencing in May 2020
• accelerating annual leave that resulted in most of
our people taking 10 days of leave between April and
June 2020
• the deferral of non-essential development expenditure
and the reduction of discretionary spend and
• reducing the 2H20 distribution payment by
approximately 25 per cent from our original guidance to
10.6 cents.
Ongoing impact of the COVID-19 pandemic on
our business
The impact of the COVID-19 pandemic on the economy since
early March 2020 has presented challenges across most
areas of our business. We have tackled these COVID-19
challenges proactively and our response to the pandemic
to date has included:
• proactive engagement with industry bodies and
government to implement effective containment
strategies to enable the continued safe operation of
our properties within government guidelines
• a focus on the safety and wellbeing of our
employees, tenants, customers and suppliers through
the implementation of best practice safety management
and hygiene standards
• proactive engagement with SME tenants to provide a
range of supportive measures, acknowledging the new
Commercial Code of Conduct
• enhancing our strong liquidity position and maintaining
investment grade credit ratings using short term and
long term debt issuances of $790 million
44
Stockland Annual Report 2020
Our ability to deliver on strategic priorities in
challenging market conditions
We remain cautious about the shape and speed of the
recovery of the market after the COVID-19 pandemic. We
will continue to monitor the impact on COVID-19 and its
implications for our strategy and business.
whole portfolio
We will continue to carefully assess market conditions in
the delivery of our strategic priorities:
• concentrating our exposure across higher quality assets
• broadening our capital partnering initiatives across the
• increasing our weighting in Workplace and Logistics
• reducing our exposure to Retail Town Centres and
• bringing new business initiatives to scale.
Our ability to provide environments that
support the health, safety, and wellbeing of
our employees, tenants, residents, customers
and suppliers.
The health and wellbeing of our people, suppliers and
customers has always been and continues to be our
priority. Health and safety incidents, including security
threats can have long-term impacts on our stakeholders.
We are committed to delivering communities and assets
where our employees, tenants, residents, customers and
suppliers always feel safe. We will continue to:
• 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
• reinforce safe operations and messages to our
employees, tenants, residents, customers and suppliers
as we continue to focus on suppressing the transmission
of COVID-19
• extend our focus on mental health and wellbeing
including through our CARE Foundation collaborative
partnership with ReachOut and RUOK?
• evolve our ‘Sights on Safety’ contractors, consultants
and supplier engagement which has assisted in reducing
incidents in key focus areas on our projects and
• train our employees and increase their risk awareness
including undertaking regular scenario testing.
Climate change may have adverse effects on
our business
Physical and transitional climate change risks have the
potential to damage our assets, disrupt operations
and impact the health and wellbeing of our customers
and communities.
We are committed to creating climate resilient assets that
operate with minimal disruption in the event of increased
climate events, as well as building strong communities that
are equipped to adapt to long-term climate change risks
and opportunities.
risk assessment
resilience and implement action plans
To do this, we will continue to:
• assess our portfolio for climate and community
• embed climate resilience within our standard asset
• invest in asset upgrades and adapt community designs
• work with our communities to build awareness of
climate risks including cyclone and bushfire risk to
provide safe environments for people in and around
our assets
• assess and implement wholesale energy strategies and
renewable energy installations, to provide alternative
sources of energy to mitigate the risk of price shocks
• actively manage our corporate insurance program to
• continue to incorporate scenario analysis into our
provide adequate protection against insurable risks and
climate risk process to understand how physical and
transition climate-related risks and opportunities may
evolve over time.
Our ability to dispose of non-core assets
We adopt a disciplined approach to the disposal program
for non-core assets. Our Investment Review Group
undertakes detailed due diligence, assesses market
fundamentals and confirms alignment to Group strategy to
ensure disposals are made in the best long-term interests
of our securityholders.
Change within the retail sector impacts
rental growth
The retail landscape has undergone significant structural
change and seen a convergence of technological advances,
e-commerce, and changes in underlying consumer
behaviour. The COVID-19 pandemic has placed significant
pressure on the retail sector with an associated impact on
our rental income.
We have been proactive in our retail strategy and will
continue to:
• rebase rents to sustainable levels
• evolve our pandemic response plans and operations at
our centres to manage and promote social distancing
and good hygiene practices
• remix our tenancies with a focus on experiential retail,
technology, health, services, and food catering
• apply our placemaking strategy across our assets to
create convenient, curated communities that form the
social hub and
• leverage deep customer insights and analytics to inform
our tenant remixing.
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Year ended 30 June 2020
45
Information and technology system continuity
and cyber security breaches impact
our business
Our business leverages IT systems, networks, and data to
operate efficiently. Managing potential IT system failures
and cyber security breaches is a focus area to help us
manage the risk of loss of sensitive information, operational
disruption, reputation damage, and fines and penalties.
As part of our focus on operational efficiency, we continue
to improve our systems and capabilities. We launched our
end-to-end CORE system technology platform in August
2020. Together with our existing Salesforce and SAP
SuccessFactors systems, this new SAP platform provides
a Group-wide single source of truth and is a technology
backbone focused on customer centricity, collaboration
and policy compliance.
Our ability to adapt to new ways of working and
maintain a strong corporate culture
The ability to attract, engage and retain our employees is
critical to our ongoing success. Physical and organisational
boundaries have become increasingly blurred as new
technology enables greater workplace flexibility and new
ways of working. We will leverage our strong culture as we
navigate these new ways of working and become an even
more sustainable business. Our culture will continue to be
a strong mitigant for compliance risk.
We had already provided the majority of our employees
with technology devices and applications that increased
their mobility and flexibility prior to the onset of the
COVID-19 pandemic. This was instrumental in the smooth
transition to remote working and increased employee
engagement during the COVID-19 government restrictions.
working environment
Technology safety is integral to our overall working
environment and there are measures in place in order
to protect our business and employees from cyber security
related threats, including:
• providing employees with a digitally safe
• protecting systems, networks and end-point devices
• putting policies in place on how to safely access and
manage data, for both employees and third parties
• mandatory training for all employees to identify and
• vulnerability testing of key systems and simulated
cyber attacks to identify potential gaps and
improvement areas.
manage potential threats and
Regulatory and policy changes impact our
business and customers
Failure to anticipate and respond to regulatory and policy
change could have an adverse effect on our ability to
conduct business.
We will continue to:
• implement forward-looking practices to remain well
positioned for regulatory change – in FY20 we
have focused on enhancing and updating a number
of key policy and governance matters including
whistleblowing, modern slavery and privacy and data
breach response procedures
• engage with industry and government on policy areas
including taxation and planning reform
• focus our development activity in areas where
• carry out mandatory training for all employees in
relation to the compliance areas and obligations
relevant to our business.
governments support growth and
46
Stockland Annual Report 2020
supported by our collaboration platforms
constructive culture to deliver value to all stakeholders
We continue to focus on how we support employees by:
• maintaining a focus on fostering a strong and
• encouraging ongoing or new flexible work practices
• training our senior leaders to be more agile and resilient
• enhancing our communication approach to our team
• continuing to invest in adopting new ways of working to
drive efficiency and improve our practices to increase
accountability and build on core strengths.
through Stockland leadership programs
members across Stockland and
To support the smooth transition to the new Managing
Director and CEO, we have a strong focus on our
executives and senior leaders providing visible leadership,
collaboration and regular communication as they steer
the business through the COVID-19 recovery period and
execute our strategic priorities.
Our ability to anticipate 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,
• enhance our design excellence, providing greater
functionality and value for money that meet the
demands of Australia’s changing socio-demographics,
including an ageing population and more socially
conscious millennials.
resilient to changes in climate and
Differences between community and customer
expectations or beliefs and our current or
planned actions could harm our reputation
and business.
Standards for interaction with customers and the
community have been under intense scrutiny in Australia
for some time. 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. There
are consequences for poor behaviour that does not reflect
Stockland’s values including potentially remuneration and
employment impacts.
Capital market volatility impacts our ability to
transact and access suitable capital.
A strong balance sheet is important so that we can
drive growth in our business and deliver on our
strategic priorities, and access broad sources of capital.
Acknowledging the impact COVID-19 has had on financial
markets we will continue to:
• allocate capital strategically across our diversified
portfolio in response to changing markets
• progress capital partnering opportunities across
• retain a strong balance sheet at appropriate levels of
gearing within our target range of between 20 per cent
to 30 per cent
all sectors
• access diverse funding sources across global capital
markets on competitive terms and tenors;
• maintain our disciplined and prudent capital
• retain investment grade ratings across multiple credit
agencies to demonstrate our strong credit value
proposition and
management approach
• engage with existing and potential debt and equity
investors to regularly update them about the business.
Housing affordability continues to impact the
dynamics of the Australian housing market
To help address affordability we will continue to:
• partner with government and industry to drive
solutions including innovative construction processes to
lower costs
• Proactively engage with industry bodies and
governments in implementing support measures for
the housing and construction sector including the
HomeBuilder stimulus grant
• provide a broad mix of value for money, quality housing
options including house and land packages, completed
housing, medium density, and apartments and
• balance the demand from owner occupiers and
investors so that our residential communities remain
attractive to future buyers.
Retirement living residents have high
expectations about value and fairness
In the first half of FY20, we signed up to the Retirement
Living Code of Conduct to promote and protect the
interests of current and future residents and to improve
trust and confidence in the Retirement Living sector.
We will continue to:
• have an open and respectful relationship with our
residents, and continue our commitment to being
transparent and up-front about costs associated with
living in our retirement villages
satisfaction levels and standards of care
• proactively engage with residents to maintain high
• focus on health and wellbeing and our approach to care
• demonstrate industry leadership and work with our
• review product and contract choice to meet changing
customer preferences and provide more certainty for
our residents.
peers to improve industry standards and
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Climate-related risks
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 our transition to lower-carbon energy
sources at our assets.
This is Stockland’s third 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).
GOVERNANCE
The Board and Risk 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
material 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’ on .
The 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
STRATEGY
As a global leader in sustainability 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) as part of its public disclosures for nearly
15 years. Our response to these risks and opportunities
has been guided by our Sustainability Strategy, our
detailed Climate Adaptation Strategy, and our business
unit sustainability strategies.
We recognise that climate-related risks will persist
for the foreseeable future and, likely, into the long-
term. 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. The
outcomes of this scenario analysis highlighted specific
48
Stockland Annual Report 2020
is composed of senior management from various
organisational departments including Strategy, Investor
Relations, Stakeholder Relations, Project Management,
People and Culture, Legal, Risk, Operations, Development
and Sustainability. The committee meets at least two times
per year and its key responsibilities include:
• informing our sustainability strategy and supporting the
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.
climate-related issues that could have a material impact on
Stockland, relating to both physical and transition risks.
Physical risks
As a real estate 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
which include:
• Extreme heat – impacting the health and wellbeing of
residents and the community and 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 carparks creating property
damage and business interruptions;
• Sea level rise – an increase in saltwater 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 and
• Bushfires – resulting in issues such as fire
damage to property, disruption to business activities,
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.
In FY20 we extended our scenario analysis to better
understand the extent of water scarcity across Australia
and the adaptive capacity of Australian water utilities,
including the resilience of water supply and water
infrastructure. We will use these insights to further develop
Transition risk
Regarding transition risk, we acknowledge that Australia
has agreed to the objective of limiting global warming to
below two degrees celsius. 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 and how
they may evolve over time, including:
• Policy changes impacting development and building
– including changes in zoning and density requirements,
policies promoting more 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;
Stockland’s role in contributing to water system resilience,
along with providing greater focus on key climate hazards
in the future.
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, exposure to litigation) and increased
revenues from increasing consumer preferences for
climate-resilient products.
• 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 solution and
• Reputation – prioritisation of the transition to a low
carbon economy by early adopters.
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 energy
and emissions intensity reduction targets and strategy
since 2006. Executing this strategy prioritises the delivery
of energy efficiency enhancements and renewable energy
installations across our portfolio. It also involves engaging
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Year ended 30 June 2020
49
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 and
• enhanced brand and reputation by educating
consumers, and the ability to attract capital from
organisations seeking to invest in companies helping
the transition to a low carbon economy.
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 (RCP) 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
RCP2.6 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.
RISK MANAGEMENT
Our risk management approach is detailed on page 43 of
this report. Part of this approach includes leaders from
across the business participating in annual risk workshops
and ongoing risk discussions to assess and consolidate our
views on key and emerging risks, including climate risks.
Business units analyse, evaluate, and consolidate these
risks and findings into a profile for each business unit and
these are then incorporated into our assessment for the
Group. This process is complemented by climate-related
risk and opportunity assessments.
Climate-related risks and opportunities that may impact
assets are prioritised for action based on:
• impact on communities and the environment in which
• overall potential impact on asset performance
• financial impact to the business in managing the risk
the asset is operating
or opportunity.
significant loss
Across our portfolio, climate-related risks and
opportunities are prioritised for action based on:
• geographical areas of highest risk
• lessons learned and perceived likelihood of
• design attributes of the asset which affect
• climate change scenarios
• overall impact on business-wide emissions reductions
• impact on local communities and environment (relative
climate resilience
to where we operate)
• overall risk to value and revenue.
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. 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.
Our focus in FY20 has been to continue the development
of our Group Resilience Assessment Tool through the
integration of our climate resilience assessments with
the Stockland Enterprise Risk Framework to ensure that
climate related risks are assessed and managed as an
integral part of Stockland’s risk assessment process. This
tool currently contains 10 years’ worth of asset level
climate risk assessments (over 62 assets across Australia)
which will be used to better understand the risks and
opportunities associated with climate change.
For assets under development, the management of
climate-related risks and opportunities is integrated into
our project development life cycle, known as D-Life. Each
50
Stockland Annual Report 2020
promoting efficient operation of our assets and increasing
our renewable energy capacity. Progress on our energy
and emissions commitments are detailed on page 40 of
this report.
Managing climate-related transition risks and
opportunities also involves participation in industry-wide
collaborations such as with the Property Council of
Australia and the Green Building Council of Australia, that
focus on how the property industry can lead a transition to
a low carbon economy.
stage of the D-Life process requires the delivery of specific
sustainability objectives, including climate-related risk
assessments at defined approval gates.
Managing our transition risks
and opportunities
Our Government Relations, Investor Relations, Group Risk,
Group 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
METRICS AND TARGETS
Our key climate targets and performance outcomes
are provided on page 40. Our full set of targets and
metrics is provided in our annual sustainability reporting,
available online at stockland.com.au/about-stockland/
sustainability/downloads
Our progress demonstrates our commitment to support
the transition to a low carbon economy and ongoing
assessment of climate risk across our portfolio.
Our targets and metrics are incorporated into annual asset-
level business planning and reporting procedures as well as
key performance indicators which include climate-related
risks and opportunities where relevant. Performance
against these indicators is included in individual employee
remuneration evaluations.
Our full set of targets and metrics is
provided in our annual sustainability reporting,
available online at stockland.com.au/about-stockland/
sustainability/downloads
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51
Governance
52
(From left to right) Kate McKenzie, Barry Neil, Christine O’Reilly, Stephen Newton, Mark Steinert, Tom Pockett, Andrew Stevens, Melinda Conrad Board of 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 Lendlease.
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
People and Culture Committee. Mr Pockett is also Chairman
of the Stockland CARE Foundation Board.
Qualifications and Age
BComm, FCA, 62
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)
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, a $559 billion Global Fund Manager.
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 and former Director of the
Green Building Council of Australia.
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.
Mr Steinert is a key management person for the purposes of
the Remuneration Report.
Qualifications and Age
BAppSc, G Dip App Fin & Inv (Sec Inst), F Fin, AAPI, 53
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
Ampol Limited (formerly 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 AICD Corporate Governance Committee.
Ms Conrad is Chair of the People and Culture Committee
and a member of the Sustainability Committee.
Qualifications and Age
BA, MBA, FAICD, 51
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) Ampol
Limited (formerly Caltex Australia Limited) (1 March 2017
to present)
Kate McKenzie
Non-Executive Director
Kate McKenzie was appointed to the Board on
2 December 2019.
Ms McKenzie’s executive career included over 30 years’
experience in the telecommunication and government
sectors in Australia, New Zealand and Hong Kong. She
was most recently the chief executive officer of Chorus,
New Zealand’s largest provider of telecommunications
infrastructure, a top 50 New Zealand Stock Exchange
listed company.
Prior to this, Ms McKenzie held several senior roles
at Telstra from 2004 – 2016, including Chief Operating
Officer, where she oversaw the group’s extensive property
portfolio, and seven years in senior roles in NSW
Government, including the Department of Commerce
and Department of Industrial Relations. Ms McKenzie is
currently a Director of NBN Co Limited.
Ms McKenzie is a member of the Audit Committee and
Sustainability Committee.
Qualifications and Age
BA, LLB, 59
Directorships of other listed entities in last three years
None
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Year ended 30 June 2020
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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 and Age
BE (Civil), 72
Directorships of other listed entities in last three years
None
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 Lendlease.
Mr Newton is currently a Director of BAI Communications
Group, Waypoint REIT Group (formerly 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 and Age
BA (Ec and Acc), M.Com, MICAA, MAICD, 67
Directorships of other listed entities in last three years
Gateway Lifestyle Group (28 April 2015 to 10 October 2018),
Waypoint REIT Group (formerly 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 and Age
Bbus, 59
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)
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 Western
Sydney Football Club and is a member of the Male
Champions of Change. Mr Stevens is a member of the
Risk Committee, People and Culture Committee and the
Sustainability Committee.
Qualifications and Age
BComm, MComm, FCA, 60
Directorships of other listed entities in last three years
Thorn Group Limited (1 June 2015 to 4 December 2019),
MYOB Group Limited (30 March 2015 to 8 May 2019)
54
Stockland Annual Report 2020
Former Director Carol Schwartz AO
Non-Executive Director
Carol Schwartz was appointed to the Board on 1 July 2010
and retired from the Board on 21 October 2019. 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 was a member of the Risk Committee, People
and Culture Committee and Sustainability Committee.
Qualifications and Age
BA, LLB, MBA, FAICD, 64
Directorships of other listed entities in last three years
Temple and Webster Group (31 July 2015 to 25 October 2016)
Our executive committee
Mark Steinert
Managing Director and Chief Executive Officer
Refer to biography on page 53.
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 20 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.
Ms Grace is a key management person for the purposes of
the Remuneration Report.
Qualifications
BA (Hons), LLB (Hons), MPP, GAICD
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.
Ms Mason is a key management person for the purposes of
the Remuneration Report.
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 America Trust
and Westfield Trust.
Mr O'Rourke is a key management person for the purpose of
the Remuneration Report.
Qualifications
BComm (Hons), MBA, FCA, GAICD
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Year ended 30 June 2020
55
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.
Mr Whitson is a key management person for the purposes
of the Remuneration Report.
Qualifications
BE (Civil)
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, MMgt, GAICD, 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)
Sharmila Tsourdalakis
Chief Innovation, Marketing and
Technology Officer
Sharmila Tsourdalakis was appointed Chief Innovation,
Marketing and Technology Officer on 27 April 2020. Ms
Tsourdalakis leads our Innovation, Marketing, Technology
and Customer teams. She has over 20 years’ experience
working in senior roles in technology, innovation, customer
and digital transformation for ASX-listed companies.
She was previously the Executive General Manager for
Suncorp’s Banking and Wealth Technology responsible
for the strategic direction and operational leadership of
technology. Prior to Suncorp, Ms Tsourdalakis was Chief
Information Officer at The GPT Group.
Qualifications
BComm, LLB, GAICD
Former executive
Robyn Elliott
Chief Innovation, Marketing and
Technology Officer
Robyn Elliott was Stockland's Chief Innovation, Marketing
and Technology Officer from 26 March 2018 to 28 February
2020. Ms Elliott departed Stockland in February 2020.
56
Stockland Annual Report 2020
Our approach to
corporate governance
The Board places a high importance on its corporate governance
responsibilities and in FY20 was in compliance with all of the
recommendations in the ASX Corporate Governance Principles
and Recommendations.
The Board 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.
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.
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Year ended 30 June 2020
57
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
• 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
and management policies with a view to creating sustainable long term value for securityholders
• 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
reporting and major capital expenditure, acquisitions and divestitures
• Approving and monitoring the annual budget, business plans, financial statements, financial policies and financial
• 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.
The Board actively engages with management in overseeing the operations of the Group. In addition to Board and Committee
meetings held across Stockland offices, the Board meets with employees at operational sites and undertakes asset tours
across the portfolio on a regular basis. During COVID-19 a number of asset tours were postponed and will be rescheduled
during FY21.
58
Stockland Annual Report 2020
BOARD COMMITTEES
Four permanent Board Committees covering Audit, Risk, People and Culture 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, People and Culture 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 People and
Culture Committee.
Current members of the Board Committees
Audit Committee
Stephen Newton
Barry Neil
Christine O’Reilly
Kate McKenzie
People & Culture
Committee
Melinda Conrad
Tom Pockett
Andrew Stevens
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 People & Culture Committee incorporates the functions of two board committees recommended by the ASX Corporate
Governance Principles and Recommendations: a Nominations Committee and a Remuneration Committee. The purpose
of the People and Culture Committee is to consider and make recommendations to the Board on:
• The 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
• Stockland’s policies for employment, performance planning and assessment,
within other statutory reports, including financial statements
training and development, promotion and people management.
Risk Committee
Christine O’Reilly
Stephen Newton
Andrew Stevens
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 FY20 the Risk Committee reviewed a number
of risk policies including Stockland’s risk management framework, the fraud, bribery and anti-corruption policy, and
Stockland’s inaugural Modern Slavery Statement. The Group’s whistleblower policy was also reviewed and updated
following consultation with the Audit Committee.
Sustainability
Committee
All Directors
The purpose of the Sustainability Committee is to:
ethical impacts
• Consider the sustainability impacts of Stockland’s business activities including social, environmental and
• 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.
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Year ended 30 June 2020
59
BOARD COMMITTEES 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. In addition to the meetings below,
since the outbreak of the COVID-19 pandemic the Board has participated in over 13 briefings with the Executive Committee
as well as holding several ad hoc Board meetings.
Scheduled
Board
Audit
Committee
People and
Culture1 Committee
Sustainability
Committee
Risk
Committee
Director
Ms M Conrad
Mr B Neil
Ms K McKenzie2
Mr S Newton
Ms C O’Reilly
Mr T Pockett3
Mr M Steinert
Mr A Stevens
Former Director
Ms C Schwartz4
A
15
15
9
15
15
15
15
15
3
B
15
15
9
15
15
15
15
15
4
A
B
A
B
A
B
A
B
–
8
5
8
8
–
–
3
–
–
8
5
8
8
–
–
3
–
5
–
–
–
5
–
2
1
5
–
–
–
5
–
2
3
2
2
2
2
2
2
2
2
–
2
2
2
2
2
2
2
2
–
–
–
5
5
1
–
3
1
–
–
5
5
1
–
3
1
A - Meetings attended / B - Meetings eligible to attend
The People and Culture Committee was formerly known the Human Resources Committee. Date of change 24 August 2020.
Joined the Board on 2 December 2019
1
2
3 Mr Pockett was a member of the Risk Committee after the retirement of Ms Schwartz and before the appointment of Mr Stevens to the Risk Committee.
4 Ms Schwartz retired from the Board at the conclusion of the Annual General Meetings on 21 October 2019.
60
Stockland Annual Report 2020
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 in accordance with the
Board Charter.
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.
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 FY20 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.
Diversity
The Board recognises the benefits of diversity both across
the organisation as well as in relation to Board composition.
Female Non-Executive Directors
43%
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Year ended 30 June 2020
61
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 and digital innovation
• Data analytics and insights
• Industrial supply chain logistics
• Funds management
• Banking and finance
• Government and regulatory relations
• Environmental, social and governance matters
• Strategy development
• Significant senior executive experience.
TENURE
As at 30 June 2020, the tenure profile of the Board is shown
in the below diagram.
Tenure profile
12% 0-1 year = 1 Director
38% 1-4 years = 3 Directors
38% 4-10 years = 3 Directors
12% 10+ = 1 Director
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 FY20 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
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. An external consultant was last engaged
to review of Board performance in late 2019. As part of
this review, each Director and member of the Executive
Committee completed an interview with the external
consultant relating to the Board’s role, composition,
procedures, practices and behaviour. Feedback from the
review was provided to individual Directors, the Board and
Executive Committee, with recommendations to further
enhance the effectiveness of the Board including in relation
to the format and structure of the Board papers.
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 FY20, Ms Carol Schwartz stepped down
from the Board after nine years of service and Ms Kate
McKenzie was appointed to the Board on 2 December 2019.
The Group has an induction program for new Directors
including detailed briefings from management, meetings
with external advisers and asset tours.
The People and Culture 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 People and Culture 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.
62
Stockland Annual Report 2020
DIVERSITY OF BOARD SKILLS AND EXPERIENCE
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63
Our approach to tax
Stockland’s tax strategy is to conduct all its tax affairs in a transparent,
equitable and commercially responsible manner, having regard to
all relevant tax laws, regulations and tax governance processes, to
demonstrate good corporate citizenship.
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 (Income Tax) and 21 (Deferred Tax)
in the Financial Report.
TAX CONTRIBUTION SUMMARY
As one of Australia’s largest diversified property groups,
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 FY20 these taxes totalled more than $211 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 2020 tax year.
Total tax contribution
39% Net GST Paid
31% PAYG Withholding
24% State Taxes (includes Land
Tax and Payroll Taxes)
5.5% Other Duties & Levies
0.5% Fringe Benefit Tax
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
64
Stockland Annual Report 2020
General information
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 (Cth) in respect of Stockland, and
there are no proceedings that a person has brought or
intervened in on behalf of Stockland under that section.
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 (Cth) for the following reasons:
The non-audit services included agreed upon procedures
for tenant claims under the Commercial Code of Conduct,
economic, land and traffic analysis at masterplanned
communities, and an independent review of Stockland's
remuneration process.
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 (Cth).
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 68 and forms part of the Directors’ Report for the
year ended 30 June 2020.
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.
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Year ended 30 June 2020
65
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 2020, 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 (Cth)
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 (Cth) 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 (Cth).
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 2020, 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 2020 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.
To support the Executive Confirmations a robust framework is in place to verify the integrity of the reporting providing
to securityholders. For financial reporting periods this includes a structured series of management questionnaries, sign
offs, direct interviews and engagement with auditors. All information released to the market is reviewed for accuracy,
supported by a vertification and management approval process and approved by the Continuous Disclosure Committee
and, where required, the Board, as set out in the External Communications and Continuous Disclosure Policy avilable on our
website www.stockland.com.au/about-stockland/corporate-goverance. The Board is promptly provided with a copy of
all material market announcements after they have been made.
66
Stockland Annual Report 2020
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 (4th
edition) published by the ASX Corporate Governance Council.
The 2020 corporate governance statement is dated as at 30 June 2020 and reflects the corporate governance practices
in place throughout the 2020 financial year. The 2020 corporate governance statement was approved by the Board
on 25 August 2020. Stockland governance and risk management documentation including key polices, charters, and
Stockland’s Appendix 4G Key to Disclosures under the Corporate Governance Principles and Recommendations for the year
ended 30 June 2020 can be viewed at www.stockland.com.au/about-stockland/corporate-governance.
Signed in accordance with a resolution of the Directors.
Tom Pockett
Chairman
Mark Steinert
Managing Director
Dated at Sydney, 25 August 2020
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Year ended 30 June 2020
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68
Stockland Annual Report 2020
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. Auditor’s Independence Declaration As lead auditor for the audit of Stockland Corporation Limited and Stockland Trust for the year ended 30 June 2020, I declare that to the best of my knowledge and belief, there have been: (a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in 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. N R McConnell Sydney Partner PricewaterhouseCoopers 25 August 2020 Remuneration report
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69
Stockland Elara, NSW
Message from the People &
Culture Committee
On behalf of the Board, I am pleased to present the
Remuneration Report for FY20.
At Stockland, our purpose is that we believe there is
a better way to live. The events of the past 12 months
have provided a real challenge for our people as we
continue to deliver on that purpose. The bushfires during
the Australian summer had a devastating impact on many of
our communities and like most organisations, we have been
affected by the social, health and economic impact of the
COVID-19 pandemic.
The Board is immensely proud of how our people have
responded to these challenges in prioritising the safety
and well-being of our customers, tenants, residents,
contractors and their fellow employees; underpinned by
our Stockland values and commitment to our purpose.
We also recognise that executive remuneration outcomes
need to be sensitive to the experiences and expectations of
our many stakeholders, given the impact of COVID-19 on the
financial returns of our securityholders and the businesses
and lives of many of our customers and communities.
Remuneration outcomes
The Board takes a robust approach to determining
executive remuneration outcomes, using judgement and
oversight to consider a range of quantitative and qualitative
factors. As a first step in determining short-term incentives
(STI), we conducted a bottom-up assessment of the STI
Corporate Scorecard consisting of financial metrics and
measures of financial value-drivers that were set at the
start of FY20 without the context of COVID-19.
As a second step in determining the overall STI pool
and individual STI awards for the Managing Director &
CEO and other members of the Executive Committee,
the Board has taken care to balance the expectations of
our customers, securityholders, employees and the wider
community. In doing so, the Board took into consideration
the following factors:
Financial returns to our securityholders were impacted
by COVID-19:
• despite the headwinds of COVID-19, our key financial
measure of Funds From Operations (FFO) moderately
decreased on FY19 and Return on Equity (ROE) was
within the target range. This was achieved without the
support of JobKeeper
70
Stockland Annual Report 2020
• our total securityholder return (TSR) for the year was
-15.8 per cent compared to the sector index of -21.3
per cent
• we have been prudent in the management of our capital
to protect our balance sheet and position us well to
navigate the ongoing challenges of COVID-19 and set us
up for the future. This was a key consideration in our
decision to reduce the estimated distribution for the six
months to 30 June 2020 by approximately 25 per cent
from our original guidance, driving a full year reduction
in distribution per security of 12.7 per cent.
We have prioritised the safety and long-term well-being
of our tenants, customers, residents and contractors,
working with and following the guidance provided by
Federal and State authorities:
• we have been prudent in our consideration of the impact
of the ongoing COVID-19 pandemic and Commercial
Code of Conduct. We working within the Code and on
a case-by-case basis discussing assistance packages
necessary to protect our valuable business relationships
into the future
• our commitment to the safe provision of essential
services to Australian communities meant our Retail
Town Centres stayed open throughout the pandemic
and we provided space for COVID-19 testing facilities at
certain assets as a community contribution
• we quickly introduced measures to ensure the safety
of the residents and staff in our Retirement Living
communities, including deep cleaning practices and
reduced visitation to mitigate transmission risk as well
as initiatives and activities to look after resident health
and well-being
• we introduced protocols to protect our staff
and customers in sales environments by moving
to appointment-only engagements, implementing
contact tracing practices, and provision of hygiene
supplies including hand sanitiser stations and daily
cleaning regimes.
We reduced our people-related costs in a sustainable
way that minimised impact on jobs and prioritised
the well-being of our people while retaining focus on
delivering all operational activities and Group priorities:
• our people agreed to a program of accelerated leave
which saw the majority take 10 days of annual leave
between April and June 2020
• we introduced a salary freeze across the organisation
with no increases to fixed salaries to apply in FY21 other
than in exceptional circumstances (such as promotion
or material increase in role scope) or to meet industrial
awards. Similarly, there will be no increase to Board fees
for FY21
• the Board and executive team took a voluntary 20
per cent reduction in Board fees and fixed salaries
respectively in May and June 2020
• Long-term incentive (LTI) awards for which performance
hurdles were tested as at 30 June 2020, will not vest
• no employees were stood down or made redundant due
• the strong leadership of the Executive Committee and
our focus on supporting our leaders lead through the
crisis was valued by our people and saw a further
increase in employee engagement.
to COVID-19
After careful consideration of these factors and competing
expectations, the Board determined there would be a
company-wide STI pool of $23.4m for FY20, which is
approximately 18 per cent lower than FY19, recognising
the overall performance of Stockland. Following the
application of downward discretion, the Board approved
an STI award to the Managing Director & CEO equal to 51
per cent of his STI opportunity and awards to the other
Executive Key Management Personnel (KMP) in the range of
53 per cent to 57 per cent. Further details of these awards
are included in section 2.2.
To maintain full alignment of the STI award with
securityholders and the performance of Stockland through
this unprecedented period and to support the retention
of an engaged and focused executive team, the Board
exercised discretion to deliver 100 per cent of the STI award
for the Managing Director & CEO and Executive Committee
members in the form of deferred securities with no cash
component. In addition, for prudent capital management,
deferred securities, other than those made to the Managing
Director & CEO, will be issued by the Group rather than
purchased on-market.
Changes to the executive
remuneration structure for FY21
At last year’s Annual General Meeting we announced our
intention to conduct a review of our executive remuneration
framework to ensure it drives focus on our strategic
priorities. Given our diversified business model, it is also
critical that our remuneration structure appropriately
supports our strategies to attract and retain the best talent
in the market.
In recognising securityholder and community views on
executive remuneration, the People & Culture Committee
followed a process which was thorough and included
consultation with an independent remuneration advisor,
and internal and external stakeholders. Throughout
the year, regular meetings with investors and their
representative bodies provided the opportunity to hear
their perspectives and this feedback has been invaluable in
informing our approach for FY21.
The review found that, on the whole, the existing
remuneration framework continues to serve us well but
there are opportunities for improvement.
We are in a period of significant and continuing uncertainty
due to COVID-19 and setting appropriate long-term
financial targets for LTI purposes is challenging. With this,
and the transition to a new Managing Director & CEO in
FY21, the Board is seeking to align FY21 LTI awards with an
emphasis on execution of strategy in a COVID-19 impacted
environment to drive superior securityholder returns.
Further details of changes to the remuneration structure for
FY21 will be disclosed in the FY21 Remuneration Report.
Pending retirement of the
Managing Director & CEO
On 22 June 2020, Stockland announced the intention of the
Managing Director & CEO, Mark Steinert, to retire following
a flexible transition period during which the Board will
conduct an extensive search to appoint a new Managing
Director & CEO.
On ceasing employment, the Managing Director & CEO
will receive his contractual entitlements and those that
apply in the normal operation of our incentive plans in the
circumstances of retirement. Any such payments will be
subject to all relevant laws including the requirements of
the Corporations Act 2001 (Cth) and, where applicable,
securityholder approval. More details of entitlements to
the Managing Director & CEO on retirement are included in
section 4.6.
A summary of the key employment terms for the new
Managing Director & CEO will be disclosed at the time the
appointment is made.
Thank you for your support.
Melinda Conrad
Chair, People & Culture Committee
This report forms part of the Directors’ Report and has
been audited in accordance with section 308(3C) of the
Corporations Act 2001 (Cth). The Remuneration Report
covers Stockland and the Trust.
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Year ended 30 June 2020
71
Remuneration Report
Contents
1 Remuneration framework at a glance
2 Performance and remuneration outcomes
3 Remuneration governance
4 Executive remuneration in detail
5 Executive KMP remuneration tables
6 Non-Executive Director remuneration
page 73
page 74
page 79
page 81
page 85
page 88
Key Management Personnel
Individuals who were Key Management Personnel (KMP) at any time during the financial year were as follows:
Name
Non-Executive Directors
Mr Tom Pockett
Ms Melinda Conrad
Ms Kate McKenzie
Mr Barry Neil
Mr Stephen Newton
Ms Christine O’Reilly
Ms Carol Schwartz
Mr Andrew Stevens
Executive Director
Mr Mark Steinert
Other Executive KMP
Joined 2 December 2019
Retired 21 October 2019
Managing Director and Chief Executive Officer
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 Communities
72
Stockland Annual Report 2020
1. Remuneration framework at a glance
Our remuneration framework is designed to support Stockland’s strategy to maximise returns by developing sustainable
communities, owning and managing leading retail town centres, and growing our workplace and logistics portfolio.
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73
2. Performance and remuneration outcomes
2.1. STI CORPORATE SCORECARD ASSESSMENT
The STI Pool is determined by the Board’s assessment of performance against the Corporate Scorecard which is shown below
for FY20. The Board then applies discretion to consider other relevant factors on performance not reflected in the scorecard.
Strategic
priority
KPI
BUSINESS AND FINANCIAL PERFORMANCE (60%)
Group and business unit performance
Commentary
Overall rating
Below target
Within target range
Below target range
Upper end of
target range
Lower end of
target range
Within target range
Within target range
Group performance
guidance of 37.4 cps
• Funds from Operations (FFO) per security
• Return on Equity1 (ROE) of 11.3 – 11.8%
Operating business financial performance
• Operating Business financial performance in
line with plan
• FFO per security was 34.7 cps
• ROE1 was 11.5%
Business unit financial performance was mixed:
• Commercial Property FFO of $537 million was
on track to deliver plan as at 31 March 2020
but finished below plan due to COVID-19
impacted operations
on FY19
was up on FY19
• Residential Operating Profit of $372 million
• Retirement Living profit of $58 million was up
• Weighted average debt maturity was 5.7 years
• Credit Rating and liquidity buffer maintained
• Gearing within target range
• Interest cover at 6.1x
strategic priorities with most priorities met
• Good progress against our key business and
• Divestment of Retail and re-weighting into
• Partial progress on growth opportunities
• Established two logistics joint ventures
Workplace & Logistics achieved
valued at $1.2bn and two residential capital
partnerships valued at $3bn
Logistics pipeline to $5.5bn
• More than doubled our Workplace and
• CORE go live was delayed from May 2020 to
August 2020 due to COVID-19
• 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
• Gearing within target range 20 – 30%
• Deliver against key business priorities
undrawn facilities
74
Stockland Annual Report 2020
Strategic
priority
KPI
CUSTOMER AND ORGANISATIONAL PERFORMANCE (40%)
Customer and stakeholder
• Achieve independent customer satisfaction
ratings goals for each business unit
Commentary
Overall rating
Within target range
• In a difficult year for our customers,
satisfaction scores were variable with most
increasing to be at or above target but some
were below target
• Commercial Property (Retail) was above
target however the Workplace & Logistics
surveys were deferred due to COVID-19
• Residential was slightly below target
• Retirement Living was above target
People management
• Achieve employee engagement target – 80% • Employee engagement score increased to 82
per cent, four points above the Australian
High Performing Norm
Above target
• Increase women participation across all levels
of management
• We have maintained gender diversity in senior
roles with 50 per cent of the Executive
Committee comprising of women and 37.5 per
cent of senior leadership teams being women
Within target range
• Progress longer term diversity and
inclusiveness objectives
Choice for Gender Equality
• Received citation as a WGEA Employer of
• 80 per cent of employees had a flexible
work arrangement in place prior to the
COVID-19 pandemic
Within target range
• Good progress on our Reconciliation Action
Plan to create a future that values, respects
and celebrates Australia’s First Peoples and
contributes to meaningful reconciliation
Operational excellence, sustainability & risk management
• Continued Process Improvement and
enhanced innovation
• Approximately 2% of FFO due to
new innovation
Above target range
• Embed sustainable business practices and
make good progress against environment
improvement goals
• Ensure strong risk compliance and safety
management practices
1
Excluding Residential workout projects. ROE was 11.2% including these projects.
• Recognised for global sustainability
leadership, ranked 2nd in real estate on
the Dow Jones Sustainability Index (DJSI) as
assessed by Sustainable Asset Management
(SAM - S&P Global)
• Continued strong progress across our
Greenhouse gas targets (exceeding our
carbon intensity reduction target of 60% for
2025 against the FY06 baseline achieving 64.6
per cent for Commercial Property)
• Strong safety record with reduced
Lost Time Injuries and continued
improvement in embedding the risk and
compliance framework
Above target range
Within target
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2.2. EXECUTIVE KMP STI OUTCOMES
The table below sets out the STI awards for FY20. To maintain full alignment of the STI award with securityholders and
the performance of Stockland through this unprecedented period and to support the retention of an engaged and focused
executive team, the Board has exercised discretion to make 100% of the FY20 STI award for the Managing Director & CEO
and Executive Committee members in the form of deferred securities with no cash component. Half of the deferred STI
securities vest 12 months after award with the remaining half vesting 24 months after award, subject to service conditions
and clawback provisions.
In determining individual STI awards, the Board took into account the overall performance of the Group as well as
performance of the individual in meeting business unit/ functional and personal objectives.
Target
STI
(as % of
Fixed Pay)
Maximum
STI
(as % of
Fixed Pay)
STI
awarded
(as % of
Target)
STI
awarded
(as % of
Maximum
STI)
STI
awarded
for FY20
STI paid in cash1
STI deferred into
equity2
DSTI
securities
to be
granted3
%
%
%
%
$
$
%
$
%
Executive Director
Mark Steinert
100
Other Executive KMP
Katherine Grace
Louise Mason
Tiernan O'Rourke4
Andrew Whitson
80
90
90
90
150
120
135
135
135
77
83
80
81
86
51
1,149,000
55
53
54
57
398,400
540,000
637,875
580,500
-
-
-
-
-
-
-
-
-
-
1,149,000
100
340,274
398,400
540,000
637,875
580,500
100
100
100
100
117,986
159,920
188,905
171,914
The portion of STI awarded for the FY20 performance year which is paid as cash.
The portion of STI awarded for FY20 performance that is deferred into Stockland securities which will vest over the next two years.
The number of securities granted for deferred STI is based on the Volume Weighted Average Price for the ten business days after 30 June 2020. This price was $3.3767.
1
2
3
4 Following a market benchmarking exercise, the target STI opportunity for Tiernan O’Rourke was increased from 80% to 90% for FY20.
2.3. PERFORMANCE AGAINST LTI MEASURES
The table below shows Stockland’s performance against the respective FFO and TSR performance hurdles for the three years
to 30 June 2020. As a result of this performance, no LTI awards from FY18 will vest and will therefore lapse.
Hurdle
FFO per security for FY18 – FY20
Target/
benchmark
performance
Actual
performance
Out/(Under)
performance
% vesting
Weight
Vesting
outcome
Compound Average Growth Rate1
4.5%
1.3%
(3.2%)
TSR for FY18 – FY20
Relative TSR FY18 – FY202
11.3%
(6.3%)
(17.6%)
Vesting
0%
0%
50%
50%
0%
0%
0%
For LTI awards made in FY18 and future years, the performance benchmark is growth in FFO per security.
1
2 Benchmark based on ASX AREIT 200 Index excluding Stockland. For LTI awards made in FY18 and future years, the TSR performance benchmark is a tailored AREIT 200 index
comprising six large companies forming 80% and a number of smaller companies forming 20%.
76
Stockland Annual Report 2020
2.4. REALISED REMUNERATION TABLE
Executives received a mix of remuneration during FY20 including Fixed Pay, deferred STI securities and LTI awarded as
performance rights.
The table below outlines the cash remuneration that was received in relation to FY20 which includes Fixed Pay and the
non-deferred portion of any FY20 STI. The table also includes the value of deferred STI awards from FY18 and FY19 which
vested during FY20 and LTI awards from FY17 which vested during FY20.
This information differs from that provided in the remuneration for executives set out in section 5.1 which was calculated in
accordance with statutory rules and applicable Accounting Standards.
$
Executive Director
Mark Steinert
Other Executive KMP
Katherine Grace
Louise Mason
Tiernan O’Rourke
Andrew Whitson
STI awarded
and received
as cash2
Fixed Pay1
1,459,016
–
1,500,000
600,000
583,607
600,000
729,508
750,000
851,093
875,000
729,508
750,000
–
301,333
–
392,000
–
403,333
–
408,667
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Previous
years’ DSTI
which were
realised3
Previous
years’ LTI
which were
realised3
Total
Remuneration
(received
and/or
realised)
Awards which
lapsed or were
forfeited4
508,873
961,640
123,175
208,246
195,115
154,444
160,432
293,714
226,801
428,622
482,969
2,450,858
2,324,169
1,156,550
4,218,190
1,600,521
106,254
243,482
–
–
813,036
1,353,061
924,623
1,296,444
169,038
1,180,563
399,315
144,892
346,965
1,971,362
1,101,201
1,934,254
557,801
347,436
–
–
813,459
557,846
697,252
480,163
1
2
Fixed Pay includes cash salary, superannuation and packaged benefits (and associated taxes). The executive team took a 20% voluntary reduction in fixed salaries in May and
June 2020.
FY20 STI awards are shown in section 2.2. For FY20, STI awards will be made fully in equity with no cash component. For 2019, the cash / equity split for the Managing Director was
50% / 50% while for Other Executive KMP, the cash / equity splt was two-thirds / one-third.
This represents the value of all prior years’ deferred STI and LTI which vested during FY20 using the 30 June 2020 closing security price of $3.31.
3
4 The value shown represents the value of any previous years’ equity awards which lapsed or were forfeited during the financial year. The FY20 values are based on the closing 30 June
2020 security price of $3.31 (FY19: $4.17).
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2.5. FINANCIAL PERFORMANCE OVER THE PAST FIVE YEARS
The remuneration outcomes for our executives vary with short-term and long-term performance outcomes. The table below
summarises Stockland's performance for the past five years and shows the link to incentive outcomes. As can be seen below,
incentive outcomes for FY20 are the lowest they have been for the past five years, recognising the overall performance of
the company in FY20.
FY16
FY17
FY18
FY19
FY20
Financial performance
FFO ($m)1
Statutory profit ($m)
FFO per security (cents)
Statutory EPS (cents)
Returns to securityholders
Security price as at 30 June ($)
Distribution per security (cents)
Stockland TSR – 1 year (%)
Tailored index TSR2
Incentive outcomes
Cash STI ($m)3
DSTI ($m)
Company-wide STI pool ($m)4
Managing Director & CEO STI (% of target)
LTI vested (% of grant)5
Managing Director & CEO total incentive outcome
(% of opportunity)
740
889
31.1
37.4
4.71
24.5
16.4
–
28.1
8.9
37.0
802
1,195
33.4
49.8
4.38
25.5
7.1
–
28.4
9.5
37.9
122.0%
50.0%
67.4%
132.0%
50.0%
65.7%
863
1,025
35.6
42.3
3.97
26.5
(7.0)
7.2
26.6
6.6
33.2
94.0%
35.1%
46.6%
897
311
37.4
13.0
4.17
27.6
13.9
27.0
22.1
6.6
28.7
80.0%
47.1%
49.8%
825
(14)
34.7
(0.6)
3.31
24.1
(15.8)
(21.3)
16.0
7.4
23.4
76.6%
0.0%
21.9%
1
FFO is a non-IFRS measure which 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 after tax is presented
in note 2B of the Financial Report. Performance against this benchmark is set out in Section 2.1.
Tailored AREIT 200 index comprised six large companies forming 80% and a number of smaller companies forming 20% as detailed in Section 4.5. Measured from FY17 as a LTI hurdle.
Includes applicable superannuation.
2
3
4 In addition, $1.3m has been set aside to fund a $1,000 award of Stockland securities to employees at Manager level and below to recognise their contribution in supporting our
customers, tenants, residents and communities during this difficult time.
5 Represents the achievement of performance hurdles tested during the year.
78
Stockland Annual Report 2020
3. Remuneration governance
3.1. GOVERNANCE FRAMEWORK
Stockland has a robust remuneration governance framework overseen by the Board. This ensures that remuneration
arrangements are appropriately managed and that the agreed frameworks and policies are applied across Stockland.
3.2. THE ROLE OF THE PEOPLE & CULTURE COMMITTEE
The People & Culture Committee is responsible for reviewing, monitoring and making recommendations in relation to the
appointment, performance and remuneration of the Managing Director & CEO and senior executives. Where decisions
are being made on the variable remuneration outcomes of executives, the executives being discussed are not present at
the meeting.
The Committee also oversees all employment and remuneration policies to ensure that, at all levels in the organisation,
fairness and balance is maintained between reward, cost and value to Stockland, whilst also reflecting risk and compliance
performance using input from the Audit Committee and Risk Committee.
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.
From August 2020, the Committee changed its title from the Human Resources Committee to the People &
Culture Committee.
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79
3.3. THE USE OF EXTERNAL ADVISORS
Remuneration consultants are engaged from time to time to provide independent information and guidance on remuneration
for executives, facilitate discussion, conduct benchmarking and provide commentary on a number of remuneration issues.
Any advice provided by external advisors is used as a guide and is not a substitute for the considerations and procedures of
the Board and People & Culture Committee.
During the year, the People & Culture Committee appointed KPMG 3dc to act as its remuneration advisor on the executive
reward framework review. KPMG 3dc provided market practice, remuneration data, trends and assistance with stakeholder
engagement matters. 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 FY20, no recommendations in relation to the remuneration of KMP were provided as part of these engagements.
3.4. OTHER GOVERNANCE PRACTICES
Managing risk
Stockland’s remuneration structure is underpinned by our CARE values and prudent risk management. The way executives
manage risk and conduct themselves are key considerations of the Board in determining incentive outcomes. Specific
practices include:
• A joint meeting of the People & Culture Committee and Risk Committee is held to discuss input from the Group Risk
Officer on material risk issues, behaviours and / or compliance breaches which are considered when determining
remuneration outcomes
• Incentive plans that balance both short and long-term performance against a range of financial metrics aligned to
• The deferral of a significant portion of the STI award in Stockland securities which vests over an extended time frame
• Plan rules which provide the Board with discretion to take other factors not included in the balanced scorecard into
• The use of a clawback (malus) provision.
account when determining incentive outcomes
Stockland’s long-term strategic priorities
Use of discretion
The Board retains the right to apply discretion over remuneration decisions to ensure outcomes for executives appropriately
reflect the performance of the individuals and Stockland, and reflect the expectations and experience of stakeholders. In
this regard, Stockland has established an indicative framework for applying discretion to adjust remuneration outcomes
upwards or downwards including to zero where appropriate.
Change in control A change in control is defined in the plan rules governing Stockland’s incentive plans as a circumstance where any person
together with their associates acquire Stockland securities which when aggregated with securities already held by that
person and their associates, comprises more than 50% of the issued securities of Stockland. The Board will not accelerate
the vesting of unvested incentives in the event of a change in control, except to the extent that applicable performance
conditions (determined as at the date of the change of control) have been satisfied.
Minimum
securityholding
The Managing Director & 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 Executive KMP) for any securities granted after 1 July 2010. This aligns the
interests of executives to those of securityholders and encourages a mindset of business ownership.
Securities Trading
Policy
The Stockland Securities Trading Policy prohibits employees from dealing in Stockland securities while in possession of
price-sensitive information that is not generally available to the public.
Clawback
The Managing Director & CEO and senior executives may otherwise only deal in Stockland securities during permitted trading
windows after first obtaining consent of the Chairman of the Board.
The policy also prohibits entering into any derivative or margin lending arrangements over Stockland securities at any time.
The Board may in its absolute discretion determine that some or all of an employee’s unvested STI and/or LTI awards
be forfeited if, in the Board’s reasonable opinion, adverse circumstances affecting the performance or reputation of the
company have come to the Board’s attention which had they known at the time when the incentive award was being made,
would have caused the Board to make a different decision. Clawback may apply both while the employee is employed or
after termination of employment.
80
Stockland Annual Report 2020
4. Executive remuneration in detail
4.1. REMUNERATION DELIVERY
To deliver our strategy, we must ensure our executive remuneration framework reflects Stockland’s desire to attract
and retain the best people. Stockland’s executive remuneration framework is structured so that a substantial portion of
remuneration is delivered as Stockland securities through STI and LTI. This section sets out our approach in FY20.
4.2. REMUNERATION MIX
Generally, Stockland’s executives have a greater proportion of remuneration at risk than their counterparts in comparable
companies. We believe this provides strong alignment between executive outcomes and performance.
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Year ended 30 June 2020
81
4.3. FIXED PAY
Fixed Pay comprises cash salary, superannuation contributions and packaged benefits (including associated taxes).
Packaged benefits may include novated leases on vehicles and parking. Fixed Pay is delivered in accordance with terms and
conditions of employment.
We review Fixed Pay for the Managing Director & CEO and Executive Committee members each year against independently
provided external data sources and market benchmarks from a group of ASX100 companies and larger property firms,
ensuring that our Fixed Pay remains competitive with companies of comparable size and complexity in our industry. There
were no Fixed Pay increases to the Managing Director & CEO or any members of the Executive Committee in FY20.
4.4. SHORT-TERM INCENTIVES
Feature
Description
Purpose
To reward the achievement of annual targets aligned to the delivery of sustainable stakeholder outcomes
Value
% of Fixed Pay
Managing Director and CEO
Target
100%
Other Executive KMP
80% - 90%
Maximum
150%
120% - 135%
Individual STI awards are dependent on Group, business unit and individual performance measures based on the STI Corporate
Scorecard approach which the Board uses to set Key Performance Indicators (KPIs) that are aligned to overall business strategy
and key priorities. The performance measures in the STI Corporate Scorecard in FY20 are shown below:
Performance measure
Business and financial outcome
(60%)
Customer and
organisational performance
(40%)
financial performance
• Funds From Operations per security
• Operating business
• Return on Equity
• Capital management and key
• Customer and Stakeholder
business priorities
• People and Leadership
• Operational excellence, sustainability
and risk management
Reason for choosing this measure
• Key measures of progress against our
strategy to grow asset returns
• Reflects how well Stockland is using
capital to generate earnings
• A measure of how well we are meeting
the expectations of our customers and
external stakeholders
• Recognises that organisations with a
diverse, inclusive and engaged workforce
deliver superior returns
• Drives focus on the delivery of
important initiatives relating to
Stockland’s operational, risk and
sustainability objectives
Performance
assessment
The Board takes a robust approach to determining executive remuneration outcomes, using judgement and oversight to consider
a range of quantitative and qualitative factors
As a first step, a bottom-up assessment of the Corporate Scorecard is conducted to provide an initial view of the potential pool.
A discretionary overlay is then applied to allow for other factors affecting performance that were not reflected in the scorecard.
Individual awards are proposed by the Managing Director & CEO, endorsed by the People & Culture Committe and approved by
the Board. For the Managing Director & CEO, the People & Culture Committee proposes the STI award for Board approval.
Delivery of
awards
To maintain full alignment of the STI award with securityholders and the performance of Stockland through COVID-19 and to
support the retention of an engaged and focused executive team, 100% of the FY20 STI award for the Managing Director & CEO
and Executive Committee members will be made in the form of deferred securities with no cash component.
In previous years, the normal practice has been to deliver awards as follows:
• 50% awarded as cash for performance up to target for Managing Director & CEO (two-thirds as cash for Other KMP Executives)
• 50% awarded in deferred securities for performance up to target for Managing Director & CEO (one-third for other KMP
• 100% awarded as deferred securities for any performance above target
• Any deferred securities vest equally subject to continued service after one and two years
Executives) and
Leaver
provisions
On voluntary termination or termination for cause or due to poor performance, all awards are forfeited. In the circumstances
of death, disability, retirement, redundancy or mutually agreed separation, the Board has discretion to retain deferred awards
subject to the original vesting conditions.
82
Stockland Annual Report 2020
4.5. LONG-TERM INCENTIVES
Feature
Purpose
Instrument
Description
To align executive outcomes with long-term securityholder returns to build business accountability and ownership.
LTI awards are made in the form of performance rights to Stockland securities granted under the Stockland Performance
Rights Plan. A performance right is a right to acquire, at no cost to the executive, one fully-paid Stockland security subject
to certain performance and service conditions.
No distributions are paid on performance rights.
Value
The maximum LTI opportunity for awards made in FY20 were:
• 200% of Fixed Pay for the Managing Director & CEO
• 120% of Fixed Pay for Other Executive KMP
Performance
period
Performance
conditions
Stockland uses a ‘face-value’ methodology for allocating performance rights, being the Volume Weighted Average Price of
Stockland securities for the 10 trading days post 30 June.
The performance period for FY20 awards is 1 July 2019 to 30 June 2022.
Vesting is subject to two equally weighted performance conditions measured over the performance period.
Performance
measure
Description
Reason for choosing this measure
Earnings Per
Security Growth
(EPS Growth)
The measure used for determining earnings is
FFO, with EPS Growth measured as the compound
average growth rate (“CAGR”) for EPS.
Aligns to our strategy in that it underpins value
accretion in the asset base over the long-term and is
key to managing liquidity and credit objectives.
Total
Securityholder
Return (TSR)
TSR measures the growth in the price of securities
plus cash distributions notionally reinvested
in securities.
Aligns to our to strategic objective to deliver
sustainable earnings growth and securityholder
returns above the AREIT 200 Index.
In order for the TSR grant to vest, Stockland’s
TSR must be greater than the growth in the
applicable TSR hurdle. The TSR hurdle is a
weighted, composite TSR benchmark for a peer
group comprising the 14 companies in the AREIT
200 Index other than Westfield, Iron Mountain
and Stockland (“Peer Benchmark”).
Each of the six largest capitalised companies from
the Peer Benchmark has been allocated a 13.3%
weighting, while each of the other eight smaller
capitalised companies has been allocated a
2.5% weighting.
Vesting
conditions
The vesting schedule for FY20 awards is as follows:
TSR
EPS Growth
TSR of Stockland compared to
Index growth
Proportion of TSR
grant vesting
≤ TSR Index
> TSR Index
0%
>50%
CAGR in EPS
based on FFO
≤ 2.0% CAGR
> 2.0% CAGR
Proportion of EPS
Growth grant vesting
0%
50%
Up to 10% greater than TSR Index
Pro-rata 50% - 100%
Up to 3.7% CAGR
Pro-rata 50% - 100%
10% or more greater than TSR Index 100%
≥ 3.7% CAGR
100%
Performance rights that meet the performance conditions at the end of the performance period are converted to Stockland
securities and vest in two tranches, subject to service conditions and clawback provisions.
Tranche
Vesting date
Proportion of eligible performance rights to vest
1
2
30 June 2022
30 June 2023
50%
50%
Leaver
provisions
Reason for termination
Treatment of unvested performance rights
In the circumstances of death,
disability, retirement, redundancy
or mutually agreed separation.
At the discretion of the Board, a pro-rata number of performance rights may be
retained with vesting determined in accordance with the original performance
conditions and clawback provisions.
All other circumstances
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Year ended 30 June 2020
83
4.6. EMPLOYMENT TERMS
The Managing Director & CEO and Other Executive KMP are on rolling contracts until notice of termination is given by either
Stockland or the senior executive. The notice period for the Managing Director & CEO and Other Executive KMP 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 executive would receive a termination payment of up to twelve
months’ Fixed Pay (including applicable notice) and be considered for a cash pro-rata payment in respect of STI in the year
of termination, subject to the Board’s assessment of performance against KPIs.
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 prorated based on service to the date of termination. Any applicable
prorated 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.
Entitlements to the Managing Director & CEO on retirement
will commence on the appointment of the new Managing Director & CEO
On 22 June 2020, Stockland announced the intention of the Managing Director & CEO to retire following a flexible transition
period. On retirement, Mr Steinert will receive his contractual entitlements and those that apply in the usual operation of
our incentive plans in the circumstances of retirement. These include:
• A cash payment of 12 months’ Fixed Pay (inclusive of his notice period served). It is expected that notice for Mr Steinert
• A cash pro-rata STI payment for the portion of the year of retirement that was worked, subject to performance against KPIs
• Unvested deferred STI securities held at the time of retirement shall be retained and vest (or not vest) in accordance with
• A pro-rata number of unvested LTI performance rights from awards made in 2018 and 2019 shall be retained with vesting
• No LTI award will be made to Mr Steinert for FY21.
Any payments will be subject to all relevant laws including the requirements of the Corporations Act 2001 (Cth) and, where
applicable, securityholder approval.
subject to the original performance and vesting conditions in accordance with the terms of the LTI plan
the terms of the STI plan and the original vesting schedule
84
Stockland Annual Report 2020
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85
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5.2. PERFORMANCE RIGHTS MOVEMENTS
LTI awards are made in the form of performance rights which are subject to performance conditions as detailed in section
4.5. The number of performance rights held during the year are set out below.
Granted during year
Vested and exercised
Balance at
1 July 2019
Number
Value
$1
Number
Value
$1
Exercised into
Securities &
Remain
Unvested2
Forfeited /
Lapsed
Balance at
30 June
2020
Executive Director
Mark Steinert
2,062,468
670,721
2,270,391
(145,912)
545,711
(145,912)
(327,755)
2,113,610
Other Executive KMP
Katherine Grace
482,602
160,973
419,336
(32,101)
129,688
(32,101)
(72,106)
507,267
Louise Mason
Tiernan O'Rourke
Andrew Whitson
222,217
721,864
618,741
201,217
234,753
201,217
524,171
611,532
524,171
-
-
-
-
423,434
(51,070)
206,323
(51,069)
(114,714)
739,764
(43,774)
176,847
(43,774)
(98,326)
634,084
1
2
The value as at the grant date calculated in accordance with AASB 2 Share-based Payment.
Performance rights exercised into Stockland securites on meeting performance hurdles with vesting subject to further service conditions.
5.3. EXECUTIVE SECURITYHOLDINGS
The table below details movements during the year in the number of Stockland securities held by executives, including their
personally related parties.
Executive Director
Mark Steinert
Other Executive KMP
Katherine Grace
Louise Mason
Tiernan O'Rourke
Andrew Whitson
Balance at
1 July 2019
DSTI Granted1
LTI
Performance
Rights
Exercised2
Purchased /
(Sold)
Balance at
30 June 2020
3,253,568
134,145
291,824
-
3,679,537
249,815
74,073
436,056
393,329
33,686
43,821
45,088
45,684
64,202
(37,000)
-
102,139
87,548
-
-
(185,992)
310,703
117,894
583,283
340,569
1 Deferred STI securities granted in respect of FY19 STI awards.
2
Includes securities settled from the exercise of performance rights after meeting performance hurdles. The vesting of some securities is subject to further service conditions and
clawback provisions.
86
Stockland Annual Report 2020
5.4. UNVESTED EQUITY HOLDINGS
The table below details Stockland securities and performance rights granted to executives as part of their remuneration in
the previous, current or future reporting periods.
Grant
Instrument
Executive Director
Performance
Period
Start Date
Grant
Date
Vesting
Date1
Unvested
Equity at
30 June
2020
Maximum
Value of
Award to
Vest $
Fair Value per
Instrument2
FFO
TSR DSTI
Mark Steinert
FY19 LTI Tranche 1
Rights
27-Oct-18
1-Jul-18
30-Jun-21
370,362
766,649
3.03
FY19 LTI Tranche 2
Rights
27-Oct-18
1-Jul-18
30-Jun-22
370,361
766,647
3.03
1.11
1.11
FY20 LTI Tranche 1
Rights
29-Oct-19
1-Jul-19
30-Jun-22
335,361
1,135,197
4.15
2.62
FY20 LTI Tranche 2
Rights
29-Oct-19
1-Jul-19
30-Jun-23
335,360
1,135,194
4.15
2.62
DSTI FY19 Tranche 2 Securities
15-Oct-19
1-Jul-18
30-Jun-21
67,072
300,000
4.47
Other Executive KMP
Katherine Grace
FY19 LTI Tranche 1
Rights
27-Sep-18
1-Jul-18
30-Jun-21
88,887
219,995
3.47
1.48
FY19 LTI Tranche 2
Rights
27-Sep-18
1-Jul-18
30-Jun-22
88,887
219,995
3.47
1.48
FY20 LTI Tranche 1
Rights
21-Oct-19
1-Jul-19
30-Jun-22
80,487
209,669
3.50
FY20 LTI Tranche 2
Rights
21-Oct-19
1-Jul-19
30-Jun-23
80,486
209,666
3.50
1.71
1.71
DSTI FY19 Tranche 2 Securities
15-Oct-19
1-Jul-18
30-Jun-21
16,843
75,335
4.47
Louise Mason
FY19 LTI Tranche 1
Rights
27-Sep-18
1-Jul-18
30-Jun-21
111,109
274,995
3.47
1.48
FY19 LTI Tranche 2
Rights
27-Sep-18
1-Jul-18
30-Jun-22
111,108
274,992
3.47
1.48
FY20 LTI Tranche 1
Rights
21-Oct-19
1-Jul-19
30-Jun-22
100,609
262,086
3.50
FY20 LTI Tranche 2
Rights
21-Oct-19
1-Jul-19
30-Jun-23
100,608
262,084
3.50
1.71
1.71
DSTI FY19 Tranche 2 Securities
15-Oct-19
1-Jul-18
30-Jun-21
21,910
97,999
4.47
Tiernan O'Rourke
FY19 LTI Tranche 1
Rights
27-Sep-18
1-Jul-18
30-Jun-21
129,627
320,827
3.47
1.48
FY19 LTI Tranche 2
Rights
27-Sep-18
1-Jul-18
30-Jun-22
129,626
320,824
3.47
1.48
FY20 LTI Tranche 1
Rights
21-Oct-19
1-Jul-19
30-Jun-22
117,377
305,767
3.50
FY20 LTI Tranche 2
Rights
21-Oct-19
1-Jul-19
30-Jun-23
117,376
305,764
3.50
1.71
1.71
DSTI FY19 Tranche 2 Securities
15-Oct-19
1-Jul-18
30-Jun-21
22,544
100,835
4.47
Andrew Whitson
FY19 LTI Tranche 1
Rights
27-Sep-18
1-Jul-18
30-Jun-21
111,109
274,995
3.47
1.48
FY19 LTI Tranche 2
Rights
27-Sep-18
1-Jul-18
30-Jun-22
111,108
274,992
3.47
1.48
FY20 LTI Tranche 1
Rights
21-Oct-19
1-Jul-19
30-Jun-22
100,609
262,086
3.50
FY20 LTI Tranche 2
Rights
21-Oct-19
1-Jul-19
30-Jun-23
100,608
262,084
3.50
1.71
1.71
DSTI FY19 Tranche 2 Securities
15-Oct-19
1-Jul-18
30-Jun-21
22,842
102,168
4.47
1
2
For LTI grants, 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.
Any rights that convert to securities then vest at the dates shown. The securities remain under a 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 full-year results following the end of the performance period or 31 August of that year.
The fair value of performance rights at the grant date is determined using appropriate models including Monte Carlo simulations, depending on the vesting conditions. The value
of each performance right is recognised evenly over the service period ending at the vesting date. The fair value of DSTI securities is determined as the Volume Weighted Average
Price of Stockland securities over the 10 trading days after 30 June in the year of the award.
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Year ended 30 June 2020
87
6. Non-Executive Director remuneration
6.1. POLICY AND APPROACH
Stockland’s remuneration policy for Non-Executive Directors aims to ensure the Group 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 People & Culture 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 People & Culture 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 a special purpose Board committee is established by the Board, 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 FY20, there were no changes in the base fees for the Chairman, Non-Executive Directors or any of the Board committees,
other than a 20% voluntary reduction in Board fees for May and June 2020 in response to the COVID-19 pandemic.
In FY21, 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
People & Culture
SCPL Board
Chairman
Non-Executive Director
Independent Non-Executive Director1
SCPL Board Committees
Audit and Risk
FY21
FY20
$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 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 FY21.
Total fees of $1,767,712 (70.7% of the approved limit) were paid to Non-Executive Directors in FY20. This amount was 7% lower
than the total fees paid in FY19 primarily due to the voluntary two month 20% reduction applied to fees in response to the
COVID-19 pandemic.
88
Stockland Annual Report 2020
6.2. REMUNERATION DETAILS FOR NON-EXECUTIVE DIRECTORS
The nature and amount of each element of remuneration for each Non-Executive Director is detailed below.
Year
Board and Committee Fees1 Non-monetary benefits
Superannuation contributions
Total2
Short-term
Post-employment
Non-Executive Directors
Tom Pockett
Melinda Conrad
Kate McKenzie3
Barry Neil
Stephen Newton
Christine O'Reilly
Andrew Stevens
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Former Non-Executive Directors
Carol Schwartz4
Consolidated
remuneration
2020
2019
2020
20195
462,239
479,469
185,353
202,725
105,482
–
200,976
207,945
250,116
260,718
203,006
170,110
179,620
178,082
58,889
205,699
1,645,681
1,704,748
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
21,003
20,531
17,609
19,259
1,379
–
19,093
19,755
21,003
20,531
19,286
16,160
17,064
16,918
5,594
19,379
483,242
500,000
202,962
221,984
106,861
–
220,069
227,700
271,119
281,249
222,292
186,270
196,684
195,000
64,483
225,078
122,031
1,767,712
132,533
1,837,281
1
2
The Board took a 20% voluntary reduction in directors fees in May and June 2020.
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).
3 Kate McKenzie was appointed on 2 December 2019.
4 Carol Schwartz retired 21 October 2019.
5
The 2019 totals above are not the same as those disclosed in the 2019 Remuneration Report because of changes in Directors.
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Year ended 30 June 2020
89
6.3 NON-EXECUTIVE DIRECTOR SECURITYHOLDINGS
To align the personal financial interests of our Non-Executive Directors with securityholder interests, the Board believes that
Non-Executive 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. The relevant interest of each
Non-Executive Director in Stockland securities, at the date of this Report are as follows:
Balance at 1 July 2019
Purchased / (Sold)
Balance at 30 June 2020
Non-Executive Directors
Tom Pockett
Melinda Conrad
Kate McKenzie
Barry Neil
Stephen Newton
Christine O'Reilly
Andrew Stevens
40,000
60,000
-
76,718
40,000
50,000
20,000
10,000
-
20,000
-
-
-
20,000
50,000
60,000
20,000
76,718
40,000
50,000
40,000
90
Stockland Annual Report 2020
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Year ended 30 June 2020
91
Cloverton, VicFinancial report for the year ended 30 June 2020
Consolidated statement of comprehensive income
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
Impairment loss on trade and other receivables
Net change in fair value of investment properties:
• Commercial Property
• Retirement Living
Net change in fair value of Retirement Living resident obligations
Impairment of Retirement Living goodwill
Net reversal of impairment of inventories
Net loss on other financial assets
Net gain/(loss) on sale of other non–current assets
Finance income
Finance expense
Net loss on financial instruments
Profit/(loss) before tax
Income tax expense
Profit/(loss) after tax
Items that are or may be reclassified to profit or loss, net of tax
Cash flow hedges – net change in fair value of effective portion
Cash flow hedges – reclassified to profit or loss
Other comprehensive income/(loss)
Total comprehensive income/(loss)
Basic earnings/(losses) per security (cents)
Diluted earnings/(losses) per security (cents)
Stockland
Trust
Note
1
2020
2,812
2019
2,768
(1,254)
(1,252)
2020
766
–
–
–
(253)
71
(40)
(66)
2019
790
–
–
–
(259)
56
(41)
(2)
(93)
24
(269)
75
(332)
(1)
(228)
(509)
(236)
(72)
19
(38)
1
–
(21)
4
(87)
(140)
358
(47)
311
(5)
(1)
(6)
305
13.0
13.0
–
–
–
–
(4)
21
230
(169)
(109)
(62)
–
(62)
(75)
(6)
(81)
(143)
(2.6)
(2.6)
–
–
–
–
–
(21)
284
(189)
(140)
242
–
242
(5)
(1)
(6)
236
10.1
10.1
5
22
8
6
7
7
11
5
13
13
13
20
3
3
(129)
22
(259)
72
(333)
(69)
(496)
(138)
22
(38)
–
(4)
20
2
(88)
(109)
33
(47)
(14)
(75)
(6)
(81)
(95)
(0.6)
(0.6)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
92
Stockland Annual Report 2020
Stockland
Trust
Note
2020
Consolidated balance sheet
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
Deferred tax liabilities
Other liabilities
Non–current liabilities
Liabilities
Net assets
Issued capital
Reserves
14
8
5
16
12
8
5
6
7
22
16
11
21
9
15
7
5
16
9
15
7
5
16
21
19
Retained earnings/undistributed income
Securityholders’ equity
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
O
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a
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a
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d
G
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s
s
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y
443
117
690
15
101
1,366
469
1,835
117
2,840
8,890
3,936
354
734
153
170
–
202
17,396
19,231
593
272
2,594
290
–
97
3,846
508
4,750
101
501
313
7
55
6,235
10,081
9,150
8,656
8
486
9,150
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
2,496
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
2020
359
30
–
15
92
496
469
965
3,027
–
8,978
–
361
724
–
–
–
186
13,276
14,241
378
272
–
–
–
54
704
–
2019
63
41
–
9
81
194
171
365
3,580
–
9,133
–
620
515
–
–
–
217
14,065
14,430
455
343
–
–
2
29
829
–
4,750
4,361
–
148
313
–
28
5,239
5,943
8,298
7,358
6
934
8,298
–
–
218
–
–
4,579
5,408
9,022
7,359
88
1,575
9,022
Year ended 30 June 2020
93
Consolidated statement of changes in equity
Attributable to securityholders of Stockland
Note
Issued
capital
Security based
payments
Hedging
Retained
earnings
Reserves
$M
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
Security based payment expense
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
Adoption of new accounting standards
36
Balance at 1 July 2019
Loss for the year
Other comprehensive income, net of tax
Total comprehensive income
Dividends and distributions
Security based payment expense
Acquisition of treasury securities
Securities vested under Security Plans
Securities lapsed under Security Plans
Securities buy–back
Other movements
4
31
19
19
19
8,850
–
8,850
–
–
–
–
–
(15)
14
–
(192)
(193)
8,657
–
8,657
–
–
–
–
–
(13)
12
–
–
(1)
41
–
41
–
–
–
–
12
–
(14)
(2)
–
(4)
37
–
37
–
–
–
–
11
–
(12)
(1)
–
(2)
35
60
–
60
–
(6)
(6)
–
–
–
–
–
–
–
54
–
54
–
(81)
(81)
–
–
–
–
–
–
–
(27)
1,425
3
1,428
311
–
311
(661)
–
–
–
2
–
(659)
1,080
(7)
1,073
(14)
–
(14)
(574)
–
–
–
1
–
(573)
486
Equity
10,376
3
10,379
311
(6)
305
(661)
12
(15)
–
–
(192)
(856)
9,828
(7)
9,821
(14)
(81)
(95)
(574)
11
(13)
–
–
–
(576)
9,150
Balance at 30 June 2020
8,656
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
94
Stockland Annual Report 2020
Consolidated statement of changes in equity
Attributable to securityholders of Trust
Note
Issued
capital
Security based
payments
Hedging
Undistributed
income
Reserves
$M
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
Security based payment expense
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
19
19
19
Adoption of new accounting standards
36
Balance at 1 July 2019
Loss for the year
Other comprehensive income, net of tax
Total comprehensive loss
Dividends and distributions
Security based payment expense
Acquisition of treasury securities
Securities vested under Security Plans
Securities lapsed under Security Plans
Securities buy–back
Other movements
4
19
19
19
7,538
–
7,538
–
–
–
–
–
(15)
14
–
(178)
(179)
7,359
–
7,359
–
–
–
–
–
(12)
11
–
–
(1)
38
–
38
–
–
–
–
12
–
(14)
(2)
–
(4)
34
–
34
–
–
–
–
11
–
(11)
(1)
–
(1)
33
60
–
60
–
(6)
(6)
–
–
–
–
–
–
–
54
–
54
–
(81)
(81)
–
–
–
–
–
–
–
(27)
2,000
(8)
1,992
242
–
242
(661)
–
–
–
2
–
(659)
1,575
(6)
1,569
(62)
–
(62)
(574)
–
–
–
1
–
Equity
9,636
(8)
9,628
242
(6)
236
(661)
12
(15)
–
–
(178)
(842)
9,022
(6)
9,016
(62)
(81)
(143)
(574)
11
(12)
–
–
–
Balance at 30 June 2020
7,358
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
(573)
934
(575)
8,298
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Year ended 30 June 2020
95
Consolidated statement of cash flows
Stockland
Trust
Note
2020
2,880
2019
2,797
(1,462)
(1,805)
2020
795
(389)
–
24
–
–
230
(180)
480
342
2019
906
(430)
–
32
–
–
284
(200)
592
260
(664)
(338)
–
–
336
(12)
4
485
491
–
(12)
1,430
(1,412)
(23)
(658)
(675)
296
63
359
–
–
–
(2)
1
(229)
(308)
(178)
(15)
2,426
(1,969)
(47)
(653)
(436)
(152)
215
63
(324)
25
332
(145)
2
(181)
1,127
369
(664)
(47)
(134)
336
(12)
4
–
(148)
–
(13)
1,430
(1,412)
(23)
(658)
(676)
303
140
443
(576)
51
295
(172)
4
(200)
394
329
(290)
(149)
(51)
25
(2)
1
–
(137)
(192)
(15)
2,426
(1,969)
(47)
(653)
(450)
(193)
333
140
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 from/(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 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
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
96
Stockland Annual Report 2020
Notes to the financial report
Basis of preparation
98
Taxation
20. Income tax
21. Deferred tax
Group structure
22. Equity–accounted investments
23. Other arrangements
24. Controlled entities
25. Deed of cross guarantee
26. Parent entity disclosures
Other items
27. Notes to the consolidated statement of cash flows
28. Commitments
29. Contingent liabilities
30. Related party disclosures
31. Personnel expenses
32. Key management personnel disclosures
33. Auditor's remuneration
34. Events subsequent to the end of the year
35. Accounting policies
36. Adoption of new accounting standards
Results for the year
1. Revenue
2. Operating segments
3. EPS
4. Dividends and distributions
Operating assets and liabilities
5. Inventories
6. Commercial Property
7. Retirement Living
8. Receivables
9. Payables
10. Leases
11. Intangible assets
12. Non–current assets held for sale
Capital structure and financing costs
13. Net financing costs
14. Cash and cash equivalents
15. Borrowings
16. Other financial assets and liabilities
17. Fair value measurement of financial instruments
18. Financial risk factors
19. Issued capital
100
100
102
106
107
108
108
112
120
124
126
127
130
131
132
132
134
134
137
139
141
146
150
150
151
153
153
154
154
157
159
160
160
161
161
162
163
163
164
164
165
166
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Year ended 30 June 2020
97
Basis of preparation
IN THIS SECTION
This section sets out the basis upon which Stockland’s financial report is 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.
STAPLING ARRANGEMENT
Stockland represents the consolidation of Stockland Corporation Limited (the Corporation) and Stockland Trust (the Trust) and
their respective 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. Both
Stockland Corporation Limited and the Responsible Entity of Stockland Trust must at all times act in the best interest of Stockland.
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.
As permitted by Class Order 13/1050, issued by ASIC, this financial report is a combined financial report that presents the financial
statements and accompanying notes of both Stockland and the Trust as at and for the year ended 30 June 2020.
STATEMENT OF COMPLIANCE
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.
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 Stockland and Stockland 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 and certain financial assets and liabilities which are stated
at fair value.
COMPLIANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS
The financial statements of both Stockland and the Trust also comply with International Financial Reporting Standards (IFRS) as issued
by the International Accounting Standards Board.
Comparative figures have been restated where appropriate to ensure consistency of presentation throughout the financial report.
NEW AND AMENDED ACCOUNTING STANDARDS
Stockland adopted AASB 16 Leases on 1 July 2019. AASB 16 aligns the treatment of finance and operating leases such that all leases are
recognised on the balance sheet. There have been no significant changes to Stockland’s financial performance and position as a result of
the adoption of the new and amended accounting standard and interpretation.
The impact of the adoption of this standard is disclosed in note 36A.
NET CURRENT ASSET DEFICIENCY POSITION
Stockland and the Trust generated positive cash flows from operations of $1,127 million and $480 million respectively during the year.
Undrawn bank facilities of $1,575 million (refer to note 15) are also available should they need to be drawn. In addition, Stockland and the
Trust have successfully refinanced external borrowings and raised new external debt when required. Based on the cash flow forecast for
the next 12 months and a detailed assessment of the current economic and operating environment, Stockland and the Trust will be able
to pay their debts as and when they become due and payable. Stockland also has a robust capital management framework and ample
capital headroom, allowing flexibility in foreseeable business environments.
98
Stockland Annual Report 2020
COVID-19 has presented challenges to Stockland's business. Stockland has managed these proactively and taken measures to protect its
capital position. Importantly, Stockland has been able to increase its available liquidity through additional unsecured bank debt facilities
and the issuance of both short-term and long-term debt since February 2020 totalling $790 million. This has strengthened the liquidity
position and will allow the business to continue the acquisition of new opportunities and the delivery of its development pipeline, further
demonstrating the strength and discipline of Stockland's capital management strategy. Management has considered several different
outcomes using scenario analysis including different speeds of recovery from the COVID-19 crisis and, after applying a range of challenging
assumptions, the integrity of Stockland's solvency remains intact under all tested scenarios. Furthermore, Stockland has met all terms
of its debt covenants during the year and is expected to maintain sufficient headroom under all of the scenarios tested. Accordingly, the
financial statements have been prepared on a going concern basis.
Stockland has a prima facie net current asset deficiency of $2,011 million at 30 June 2020 (2019: $2,320 million). The Trust has a prima
facie net current asset surplus of $261 million (2019: $464 million deficit). This prima facie position occurs each year and is unrelated to
COVID-19. A detailed explanation is set out below.
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 12 months (in particular Retirement Living resident obligations). Similarly, some assets held
as non-current will generate cash income in the next 12 months (including Retirement Living DMF included within Retirement Living
investment properties, residential development work in progress and Retirement Living 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 (2020: $2,587 million; 2019: $2,490 million),
approximately 8% (2019: 8%) 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 Stockland does not hold an unconditional contractual right to defer settlement for at least 12
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 12 months.
Trust
The net current asset deficiency in the Trust in the prior year primarily arose due to the intergroup loan receivable which is classified as
a non-current asset.
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.
SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS
Stockland 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, profit margin recognition and Whole of Life (WOL) accounting – Note 5
• Commercial Property – assumptions underlying fair value – Note 6
• Retirement Living – assumptions underlying fair value – Note 7
• Receivables1 – assumptions underlying expected credit loss – Note 8
• 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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1
The expected credit loss calculation is considered a significant accounting estimate for the first time in the current year due to the impact of COVID-19 and the resulting increase
in lease receivables from tenants at 30 June 2020.
Year ended 30 June 2020
99
Results for the year
IN THIS SECTION
This section explains the results and performance of Stockland.
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 Stockland, including:
• accounting policies that are relevant for understanding the items recognised in the financial report; and
• analysis of the results for the period by reference to key areas, including revenue, results by operating segment and taxation.
1. REVENUE
Year ended
$M
30 June 2020
Rental income1
Outgoings recoveries2
Rent from investment properties
Property development sales3,4
DMF revenue1
Other revenue
Statutory revenue
Amortisation of lease incentives
Straight–line rent
Unrealised DMF revenue1
Segment revenue
30 June 2019
Rental income1
Outgoings recoveries2
Rent from investment properties
Property development sales3
DMF revenue1
Other revenue
Statutory revenue
Amortisation of lease incentives
Straight–line rent
Unrealised DMF revenue1
Segment revenue
Residential
Retirement
Living
Communities
sub–total
Commercial
Property
Other
Stockland
Trust
–
–
–
1,871
–
16
1,887
–
–
–
1,887
–
–
–
1,819
–
10
1,829
–
–
–
1,829
2
–
2
46
109
2
159
–
–
(29)
130
1
–
1
45
99
–
145
–
–
(26)
119
2
–
2
1,917
109
18
2,046
–
–
(29)
2,017
1
–
1
1,864
99
10
1,974
–
–
(26)
1,948
685
74
759
–
–
4
763
75
(3)
–
835
703
80
783
–
–
10
793
71
(3)
–
861
–
–
–
–
–
3
3
–
–
–
3
–
–
–
–
–
1
1
–
–
–
1
687
74
761
1,917
109
25
2,812
75
(3)
(29)
690
74
764
–
–
2
766
75
(3)
–
2,855
838
704
80
784
1,864
99
21
704
80
784
–
–
6
2,768
790
71
(3)
(26)
71
(3)
–
2,810
858
1
Commercial Property rental income and Retirement Living DMF revenue continue to meet the definition of a lease arrangement. Therefore they fall outside the scope of AASB 15
Revenue from Contracts with Customers and are accounted for in accordance with AASB 16 Leases.
2 Revenue related to outgoings recoveries is recognised under AASB 15 over time in the accounting period in which the performance obligations are met.
3
4 Property development sales includes the revenue recognised from the disposal of 50% of Aura, Qld.
Property development sales revenue is recognised under AASB 15 at a point in time when control of the asset passes to the customer.
100
Stockland Annual Report 2020
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 in accordance with AASB 16 Leases on a straight-line basis over the lease term, net of any incentives. See
note 10 for the treatment of rent concessions granted in response to COVID-19 and note 8 for the treatment of expected credit losses on
lease receivables.
Outgoings recoveries are recognised in accordance with AASB 15 Revenue from contracts with customers and 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.
Rent from investment properties includes $3 million (2019: $4 million) contingent rents billed to tenants. Contingent rents are derived from
the tenants’ revenues and represent 0.4% (2019: 0.5%) of gross lease income.
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 upon receipt of the
next incoming resident's loan.
The DMF calculated on the exit price of the unit is recognised and realised in cash upon receipt of the next incoming resident's loan.
DIVIDENDS AND DISTRIBUTIONS
Revenue from dividends and distributions are recognised in Other Revenue on the date they are declared by the relevant entity but are
only recognised in the statement of cash flows upon receipt.
1A. Breakdown of revenue from property development sales
Residential revenue from property development by major product and geographical area is disaggregated as follows:
Year ended
$M
30 June 2020
Residential communities
Townhomes
Apartments
Property development sales
30 June 2019
Residential communities
Townhomes
Apartments
Property development sales
NSW
QLD
VIC
WA
Residential
328
40
41
409
476
159
–
635
510
66
–
576
468
30
40
538
563
179
–
742
468
24
–
492
135
9
–
144
147
7
–
154
1,536
294
41
1,871
1,559
220
40
1,819
PROPERTY DEVELOPMENT SALES
Revenue from land and property sales is recognised when control over the property has been transferred to the customer. The properties
generally have no alternative use for Stockland 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.
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Year ended 30 June 2020
101
2. OPERATING SEGMENTS
STOCKLAND
Stockland has four reportable segments, as listed below:
• Commercial Property – invests in, develops and manages Retail town centres, Workplace and Logistics properties;
• Residential – delivers a range of masterplanned and mixed use residential communities in growth areas, and townhomes and
• 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
apartments in general metropolitan areas;
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 Stockland'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 Stockland. 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 result in a cash flow.
A reconciliation from FFO to profit after tax is presented in note 2B.
AFFO is an alternative, secondary, non-IFRS measure used by the CODM to assist in the assessment of the underlying performance of
Stockland. AFFO is calculated by deducting maintenance capital expenditure and incentives and leasing costs from FFO.
There is no customer who accounts for more than 10% of the gross revenue 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 report. Refer to the
consolidated statement of comprehensive income for the segment financial performance and the consolidated balance sheet for the
assets and liabilities.
There is no customer who accounts for more than 10% of the gross revenue of the Trust.
102
Stockland Annual Report 2020
2A. FFO and AFFO
The contribution of each reportable segment to FFO and AFFO is summarised as follows:
Year ended
$M
30 June 2020
Segment revenue1,2
Segment EBIT1,2
Amortisation of lease fees
Interest expense in cost of sales
Segment FFO4
Finance income
Finance expense
Unallocated corporate and other expenses
FFO
Maintenance capital expenditure5
Incentives and leasing costs6
AFFO
30 June 2019
Segment revenue1,2
Segment EBIT1,2
Amortisation of lease fees
Interest expense in cost of sales
Segment FFO4
Finance income
Finance expense
Unallocated corporate and other expenses
FFO
Maintenance capital expenditure5
Incentives and leasing costs6
AFFO
Residential
Retirement
Living
Communities
sub–total
Commercial
Property
Other
Stockland
1,887
500
–
(128)
372
1,829
455
–
(93)
362
130
65
–
(7)3
58
119
62
–
(6)3
56
2,017
565
–
(135)
430
1,948
517
–
(99)
418
835
523
14
–
537
861
607
16
–
623
3
–
–
–
–
1
–
–
–
–
2,855
1,088
14
(135)
967
2
(88)
(56)
825
(32)
(57)
736
2,810
1,124
16
(99)
1,041
4
(87)
(61)
897
(47)
(70)
780
1
Commercial Property segment revenue and EBIT adds back $75 million (2019: $71 million) of amortisation of lease incentives and excludes $3 million (2019: $3 million) of straight–line
rent adjustments.
$6 million (2019: $6 million) interest expense in Retirement Living is contained in the fair value adjustment of investment properties.
2 Retirement Living segment revenue and EBIT exclude $29 million (2019: $26 million) of unrealised DMF revenue.
3
4 Commercial Property segment FFO includes share of profits from equity–accounted investments of $22 million (2019: $30 million).
5 Maintenance capital expenditure includes $6 million (2019: $9 million) of Retirement Living maintenance capital expenditure.
6 Expenditure incurred on incentives and leasing costs during the year excluding centres under construction.
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Year ended 30 June 2020
103
2B. Reconciliation of FFO to profit after tax
FFO excludes adjustments such as unrealised fair value gains/losses, realised transactions occurring infrequently and those that are
outside the course of Stockland's core ongoing business activities.
Year ended 30 June ($M)
FFO
Adjust for:
Amortisation of lease incentives
Amortisation of lease fees
Straight–line rent
Net unrealised change in fair value of Commercial Property investment properties1
Net unrealised change in fair value of Retirement Living investment properties
Net unrealised change in fair value of Retirement Living obligations
Unrealised DMF revenue
Net gain/(loss) on financial instruments
Net gain/(loss) on other financial assets
Net gain/(loss) on sale of other non-current assets
Net (Impairment)/Reversal of Impairment of Inventories
Impairment of Retirement Living goodwill2
Restructuring cost3
Income tax non–cash
Other one-off costs4
Profit/(loss) after tax
2020
825
(75)
(14)
3
(452)
(152)
22
29
(109)
(4)
20
–
(38)
(4)
(47)
(18)
(14)
2019
897
(71)
(16)
3
(202)
(95)
19
26
(140)
–
(21)
1
(38)
(5)
(47)
–
311
1
Includes Stockland’s share of revaluation relating to properties held through joint ventures (2020: $44 million gain; 2019: $24 million gain) and fair value unwinding of ground leases
recognised under AASB 16 (2020: $1 million; 2019: $nil).
2 Write–down of goodwill associated with historic Retirement Living acquisitions.
3 Restructuring cost associated with reorganisation during the period to improve operational efficiencies and position the business for sustainable growth in the future.
4 One-off costs incurred due to the delay of CORE Systems go-live, primarily impacted by COVID-19. To be classified as a one-off, these costs were assessed to have no enduring
benefit to Stockland and be highly unlikely to reoccur in future years.
104
Stockland Annual Report 2020
2C. Balance sheet by operating segment
As at
$M
30 June 2020
Real estate related assets1,2
Other assets
Assets
Retirement Living resident obligations
Borrowings
Other liabilities
Liabilities
Net assets/(liabilities)
30 June 2019
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
3,395
114
3,509
–
–
1,292
1,292
2,217
3,411
164
3,575
–
–
951
951
2,624
3,969
11
3,980
2,695
–
10
2,705
1,275
4,037
85
4,122
2,597
–
20
2,617
1,505
7,364
125
7,489
2,695
–
1,302
3,997
3,492
7,448
249
7,697
2,597
–
971
3,568
4,129
10,140
51
10,191
–
–
333
333
130
1,421
1,551
–
5,022
729
5,751
9,858
(4,200)
10,323
57
10,380
–
–
157
157
36
886
922
–
4,704
742
5,446
10,223
(4,524)
17,634
1,597
19,231
2,695
5,022
2,364
10,081
9,150
17,807
1,192
18,999
2,597
4,704
1,870
9,171
9,828
1
2
Includes non–current assets held for sale, inventories, investment properties, equity–accounted investments and certain other assets.
Includes equity–accounted investments of $354 million (2019: $612 million) in Commercial Property.
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Year ended 30 June 2020
105
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 period 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 the Directors’ report and more directly reflects underlying income performance of the portfolio.
3A. Basic and diluted EPS
Year ended 30 June
cents
Basic EPS
Diluted EPS
3B. Earnings used in calculating EPS
Year ended 30 June
$M
Profit/(loss) after tax attributable to securityholders
Stockland
2020
(0.6)
(0.6)
Stockland
2020
(14)
2019
13.0
13.0
2019
311
Trust
2020
(2.6)
(2.6)
Trust
2020
(62)
2019
10.1
10.1
2019
242
3C. Weighted average number of securities used as the denominator
As at 30 June
Weighted average number of securities used in calculating basic EPS
Effect of rights and securities granted under Security Plans
Weighted average number of securities in calculating diluted EPS
Stockland and Trust
2020
2019
2,378,133,131
2,400,974,898
1,945,535
3,154,024
2,380,078,666
2,404,128,922
Rights and securities granted under Security Plans are only included in diluted EPS where Stockland is meeting performance hurdles for
contingently issuable security based payment rights.
106
Stockland Annual Report 2020
4. DIVIDENDS AND DISTRIBUTIONS
STOCKLAND CORPORATION LIMITED
There were no dividends from Stockland Corporation Limited during the current or previous financial years. The dividend franking account
balance as at 30 June 2020 is $14 million based on a 30% tax rate (2019: $14 million).
STOCKLAND TRUST
For the current year, the interim and final distributions are paid solely out of the Trust and therefore the franking percentage is not relevant.
Date of payment
Cents per security
Total amount ($M)
Non attributable (%)
2020
2019
Interim distribution
28 February 28 February
Final distribution
31 August
30 August
Total distribution
2020
13.5
10.6
24.1
2019
13.5
14.1
27.6
2020
2019
2020
321
253
574
325
336
661
31.6
–
0.8
2019
33.7
23.2
28.4
The non-attributable component represents the amount distributed in excess of 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% of Trust taxable income or 75% to 85% of FFO over time. The payout ratio for
the current and comparative periods is 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
2020
825
2019
897
2,378,133,131
2,400,974,898
34.7
24.1
70%
37.4
27.6
74%
1
FFO is a non–IFRS measure. A reconciliation from FFO to statutory profit after tax is presented in note 2B.
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Year ended 30 June 2020
107
Operating assets and liabilities
IN THIS SECTION
This section shows the real estate and other operating assets used to generate Stockland’s trading performance and the liabilities
incurred as a result.
5. INVENTORIES
KEEPING IT SIMPLE
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 cost forecasts
are updated.
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 project forecasts across the reporting period to ensure these estimates
reflect market conditions through the cycle.
108
Stockland Annual Report 2020
As at 30 June
$M
Completed inventory
Cost of acquisition
Development and other costs
Interest capitalised
Impairment provision
Completed inventory1
Development work in progress
Cost of acquisition
Development and other costs
Interest capitalised
Impairment provision
Residential communities
Cost of acquisition
Development and other costs
Interest capitalised
Apartments
Cost of acquisition
Development and other costs
Interest capitalised
Impairment provision
Logistics
Cost of acquisition
Development and other costs
Interest capitalised
Aspire villages
Stockland
2020
2019
Current Non–current
Total
Current Non–current
Total
85
224
23
(5)
327
212
81
30
(8)
315
–
–
–
–
24
3
3
–
30
3
14
1
18
–
–
–
–
–
1,988
444
302
(105)
2,629
127
9
3
139
71
–
–
(9)
62
2
8
–
10
85
224
23
(5)
327
2,200
525
332
(113)
2,944
127
9
3
139
95
3
3
(9)
92
5
22
1
28
95
291
37
(12)
411
354
137
93
(21)
563
10
6
1
17
5
1
1
–
7
2
5
–
7
–
–
–
–
–
1,665
486
290
(107)
2,334
101
4
1
106
54
6
1
(9)
52
3
5
–
8
95
291
37
(12)
411
2,019
623
383
(128)
2,897
111
10
2
123
59
7
2
(9)
59
5
10
–
15
Development work in progress
363
2,840
3,203
594
2,500
3,094
Inventories
690
2,840
3,530
1,005
2,500
3,505
1 Mainly comprises residential communities. Includes Logistics projects of $nil million (2019: $3 million) and Aspire villages of $6 million (2019: $30 million). No apartments are included
in completed inventory in the current or prior year.
The following impairment provisions are included in the inventory balance with movements for the period recognised in profit or loss:
$M
Balance at 1 July 2019
Amounts utilised
Reversal of provisions previously recorded
Additional provisions created
Balance at 30 June 2020
Residential
communities
140
(22)
(14)
14
118
Apartments
Logistics
Aspire villages
Total
–
–
–
–
–
9
–
–
–
9
–
–
–
–
–
149
(22)
(14)
14
127
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 completed or work in progress expected to be settled within 12 months,
otherwise it is classified as non-current.
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Year ended 30 June 2020
109
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 $324 million (2019: $576 million) reported in the statement of cash flows are in respect of land that will be
developed in the short-term as well as long-term.
LAND UNDER OPTION
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
Costs include 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 3.5 to 4.6% during the financial year (2019: 4.0 to 5.0%).
ALLOCATION OF INVENTORIES TO COST OF SALES
A Whole of Life (WOL) methodology is applied to calculate the margin percentage for each project. On settlement, all costs, including
those spent to date and those forecast in the future, are proportionally allocated to each lot in line with net revenue and released from
inventories to cost of sales. The allocation of costs can change throughout the life of the project, as revenue and cost forecasts are updated
to reflect market conditions not previously forecast.
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 30 June 2020 of the amount the inventories are
expected to be realised at (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 Stockland.
Each reporting period, key estimates are reviewed including the costs of completion, sales rates and revenue escalations to determine
whether an impairment provision is required where cost (including costs to complete) exceeds net realisable value. For the year ended
30 June 2020, there was no net impairment charge as a result of this review. In 2019 there was a net $1 million reversal.
COVID-19 has created uncertainty in residential property markets as at 30 June 2020. Management undertook an extensive impairment
review of all development projects. Based on information available at 30 June 2020 and the information arising since that date about
conditions at that date, the Directors have determined that the inventory balances reported are held at the lower of cost or net realisable
value. To address the uncertainty in net realisable value in the current environment between the date of the impairment assessments and
signing of this report, the Directors reviewed market dynamics and project performance on an ongoing basis to ensure that the inventory
balance remains recoverable through sale. However, new information regarding the impact of the COVID-19 pandemic and the pace of
economic recovery may still come to light after the date of signing of this report.
110
Stockland Annual Report 2020
To illustrate the exposure of inventory to impairment as a result of changes in the economic environment, a sensitivity analysis over the key
drivers of recoverability most affected by the current uncertainty has been prepared across all inventory projects. An extended economic
slowdown may lower demand for purchases in the near-term, leading to slower sales rates and reduced pricing. However, government
stimulus such as the Federal Government's HomeBuilder grant program, has buoyed demand for Stockland's products in most markets in
the last quarter of FY20 and the first quarter of FY21. At this stage, the eligibility period for this grant expires in December 2020. Further,
Stockland has a range of options available such as altering the product mix, the timing of production and the release of lots for sale, which
it can use to preserve margins and mitigate the risk of future impairments. While it is unlikely that these drivers would move in isolation,
these sensitivities have been performed independently to illustrate the impact each individual driver has on the reported net realisable
value of inventory and they do not represent management's estimate at 30 June 2020.
Stockland
$M
Additional impairment charge on inventories
Sales price
5% Decrease
(46)
Average 3 year
price growth1
0%
(85)
1-year sales rate
25% reduction
–
1
The average 3 year price growth underpinning the 30 June 2020 impairment assessment is 2.9%.
Key inputs used to assess impairment of inventories are:
Item
Sales rates
Current sales price
Description
Assumptions on the number of lot sales expected to be achieved each month.
Sales prices are generally reviewed semi-annually by the sales and development teams in light of internal
benchmarking and market performance and are approved by the General Manager Communities Sales and
CEO Communities.
Revenue escalation rates
The annual growth rate a lot is expected to increase in value by until point of sale.
Costs to complete
The cost expected to be incurred to bring remaining lots to practical completion and any rectification
provisions specifically chargeable under contracts.
Cost escalation rates
The annual increase in base costs applied up to the period in which the costs are incurred.
Financing costs
Assumptions on the annual interest rates underpinning future finance costs capitalised to the cost
of inventories.
Selling costs
The costs expected to be incurred to complete sale of inventories.
DEVELOPMENT COST PROVISIONS
As at 30 June
$M
2020
Current
Non–current
Development cost provisions
290
501
2019
Total
791
Current
Non–current
343
370
Balance at 1 July 2019
Additional provisions
Amounts utilised
Balance at 30 June 2020
Total
713
$M
713
417
(339)
791
The development cost provisions reflect obligations as at 30 June 2020 that arose as a result of past events. This balance includes deferred
land options, and cost to complete provisions for both active and traded out projects. They are determined by discounting the expected
future cash outflows 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.
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Year ended 30 June 2020
111
6. COMMERCIAL PROPERTY
As at 30 June
$M
Retail Town Centres
Logistics
Workplace
Retirement Living1
Capital works in progress and sundry properties
Book value of commercial property
Less amounts classified as:
• cost to complete provision
• property, plant and equipment
• non–current assets held for sale
• other assets (including lease incentives and fees)
• other assets (including lease incentives and fees) attributable to equity–
• other receivables (straight–lining of rental income)
• other receivables (straight–lining of rental income) attributable to equity–
accounted investments
accounted investments
Stockland
Trust
2020
5,910
2,859
1,084
33
307
2019
6,726
2,537
891
20
190
2020
5,910
2,859
1,130
–
252
2019
6,724
2,537
925
–
133
10,193
10,364
10,151
10,319
(19)
(130)2
(469)
(256)
(1)
(69)
(7)
(42)
(43)
(171)
(273)
(5)
(74)
(10)
(19)
–
(469)
(255)
(1)
(70)
(7)
(42)
–
(171)
(280)
(5)
(77)
(10)
Investment properties (including Stockland’s share of investment properties held
by equity–accounted investments)
9,242
9,746
9,330
9,734
Less: Stockland’s share of investment properties held by equity–
accounted investments
Investment properties
Net carrying value movements
Balance at 1 July
Acquisitions
Expenditure capitalised
Transfers to non–current assets held for sale
Movement in ground leases of investment properties
Transfers to inventories
Disposals
Net change in fair value
Balance at 30 June
(352)
(601)
(352)
(601)
8,890
9,145
8,978
9,133
9,145
9,563
9,133
9,487
613
246
(469)
273
–
(176)
(496)
8,890
17
260
(171)
–
(29)
(267)
(228)
9,145
613
359
(469)
273
–
(176)
(509)
8,978
10
309
(171)
–
–
(266)
(236)
9,133
1
2
3
The investment property balance at 30 June 2020 includes $33 million of healthcare and childcare centre Commercial Property held by the Retirement Living business (2019:
$20 million) to be leased to tenants under commercial leases.
Increase in property, plant and equipment is driven by the acquisition of Stockland Piccadilly.
$27 million is driven by adoption of AASB 16 Leases.
112
Stockland Annual Report 2020
RETAIL TOWN CENTRES
Stockland
$M
Directly owned
Stockland Green Hills, East Maitland NSW
Stockland Wetherill Park, Western Sydney NSW
Stockland Shellharbour, Shellharbour NSW1
Stockland Merrylands, Merrylands NSW
Stockland Rockhampton, Rockhampton QLD
Stockland Glendale, Newcastle NSW
Stockland Point Cook, Point Cook VIC
Stockland Baldivis, Baldivis WA
Stockland Burleigh Heads, Burleigh Heads QLD2
Stockland Forster, Forster NSW
Stockland Townsville, Townsville QLD (50%)2,3
Stockland Hervey Bay, Hervey Bay QLD
Stockland Cairns, Cairns QLD
Stockland Wendouree, Wendouree VIC
Stockland The Pines, Doncaster East VIC4
Stockland Balgowlah, Balgowlah NSW
Stockland Baulkham Hills, Baulkham Hills NSW4
Stockland Bundaberg, Bundaberg QLD
Stockland Gladstone, Gladstone QLD2,1
Stockland Nowra, Nowra NSW
Stockland Caloundra, Caloundra QLD4
Stockland Traralgon, Traralgon VIC
Stockland Birtinya, Birtinya QLD2
Shellharbour Retail Park, Shellharbour NSW
Stockland Bull Creek, Bull Creek WA
Stockland Harrisdale Complex, Harrisdale WA
Stockland Baringa, Baringa QLD5
North Shore Townsville, Townsville QLD4
Stockland Townsville Kingsvale Sunvale, Aitkenvale
QLD (50%)3,6
Stockland Jesmond, Newcastle NSW7
Stockland Tooronga, Tooronga VIC7
Stockland Cammeray, Cammeray NSW7
Owned through equity–accounted investments
Independent valuation
Independent valuers’
capitalisation rate %
Book value
Date
$M
2020
2019
2020
2019
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
n/a
Jun-20
n/a
Jun-20
Jun-20
Jun-20
n/a
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
n/a
Dec-18
n/a
n/a
n/a
754
648
620
513
351
290
210
182
179
178
165
165
162
158
n/a
145
n/a
137
127
107
n/a
83
71
68
67
57
22
n/a
5
n/a
n/a
n/a
5.75
5.50
5.75
5.75
6.00
6.25
6.75
6.50
5.50
5.25
5.50
5.50
6.00
6.00
6.50
6.25
6.75
6.50 – 7.00
6.50
6.25
6.00 – 6.75
5.75 – 6.50
7.00
6.75
6.75
n/a
6.00
n/a
6.75
6.75 – 7.00
6.75
n/a
7.5
6.50
6.50
6.50
6.25
6.00
6.50
6.50
6.75
6.50
6.25
7.00
5.75 – 6.25
6.00 – 6.25
7.00
6.75
6.50
6.00
n/a
n/a
n/a
n/a
n/a
7.00
6.75
6.50
n/a
7.00
n/a
7.50
6.00
6.75
754
648
620
513
351
290
210
182
179
178
165
165
162
158
147
145
140
137
127
107
93
83
71
68
67
57
22
15
2
–
–
–
821
722
727
573
359
330
238
190
191
177
183
185
183
181
185
154
151
146
130
121
110
96
67
65
88
57
–
17
2
118
62
38
Stockland Riverton, Riverton WA (50%)
Jun-20
54
6.75
6.50
Retail Town Centres8
54
5,910
62
6,726
Independent valuation excludes the adjacent property owned by Stockland.
Stockland's share of this property is held through a direct interest in the asset.
1
2 A range of capitalisation rates are disclosed for a complex comprising of a number of properties.
3
4 Asset held for sale at year end.
5
6 Independent valuation based on 100% ownership.
7
Property was sold during the year.
8 Totals may not add due to rounding.
Property was acquired during the year.
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Year ended 30 June 2020
113
LOGISTICS
Stockland
$M
Directly owned
Yennora Distribution Centre, Yennora NSW
Triniti Business Park, North Ryde NSW
Ingleburn Logistics Park, Ingleburn NSW
Brooklyn Distribution Centre, Brooklyn VIC
60–66 Waterloo Road, Macquarie Park NSW1
Hendra Distribution Centre, Brisbane QLD
Coopers Paddock, Warwick Farm NSW
Mulgrave Corporate Park, Mulgrave VIC
Granville Industrial Estate, Granville NSW1
Forrester Distribution Centre, St Marys NSW
Carole Park, Carole Park QLD2
Oakleigh Industrial Estate, Oakleigh South VIC
16 Giffnock Avenue, Macquarie Park NSW
Willawong Industrial Estate, QLD
Somerton Distribution Centre, Somerton VIC1
Balcatta Distribution Centre, Balcatta WA3
Macquarie Technology Business Park, Macquarie
Park NSW1
23 Wonderland Drive, Eastern Creek NSW
Altona Industrial Estate, Altona VIC
M1 Yatala Enterprise Park, Yatala QLD
KeyWest Distribution Centre, Truganina VIC2
Altona Distribution Centre, Altona VIC1,4
Wetherill Park Distribution Centre, Wetherill Park NSW
Smeg Distribution Centre, Botany NSW
72–76 Cherry Lane, Laverton North VIC
Erskine Park, Erskine Park NSW
Richlands, Richlands QLD2
Port Adelaide Distribution Centre, Port Adelaide SA5
40 Scanlon Drive, Epping VIC5
Export Distribution Centre, Brisbane Airport QLD6
Owned through equity–accounted investments
Independent valuation
Independent valuers’
capitalisation rate %
Book value
Date
$M
2020
2019
2020
2019
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
n/a
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
n/a
n/a
n/a
524
233
201
135
130
114
113
98
81
78
75
70
69
65
64
5.50
5.75
5.25
5.75
6.00
6.00
6.00
6.00
5.88 – 6.00
6.00 – 6.37
6.75
5.00
6.75
7.00
6.00
7.00
5.75 – 6.00
6.25 – 6.75
6.25
5.25 – 6.00
5.75
6.00
6.00
6.25 – 6.50
7.00
n/a
6.00
7.00
7.00
7.00
7.00
n/a
n/a
61
55
51
48
46
43
37
36
34
30
14
n/a
n/a
n/a
n/a
6.63 – 7.50
5.00
6.00
6.25
5.13
5.75 – 6.00
5.75
4.75
6.25
4.75
6.50
n/a
n/a
n/a
6.00
6.00
n/a
n/a
6.00
6.00
5.00
6.00
5.00
n/a
10.00
6.00
11.00
524
233
201
135
130
114
113
98
81
78
75
70
69
65
65
64
61
55
51
48
46
43
37
36
34
30
14
–
–
–
475
212
184
122
116
114
99
95
74
76
–
67
64
38
63
56
59
47
50
6
–
59
33
32
33
28
–
78
13
7
Optus Centre, Macquarie Park NSW (51%)7
Mar-20
292
5.00
6.00
Logistics8
292
2,859
240
2,537
A range of capitalisation rates are disclosed for a complex comprising of a number of properties.
Property was acquired during the year.
1
2
3 Asset held for sale at year end.
4 11-25 Toll Drive was sold during the year.
5
Property was sold during the year.
6 Property was a leasehold property that was sold during the year.
7
8 Totals may not add due to rounding.
The valuation received in March 2020 was reassessed in June 2020 by the same valuer. It was determined that no adjustment to the valuation originally provided was required.
114
Stockland Annual Report 2020
WORKPLACE
Stockland
$M
Directly owned
Independent valuation
Independent valuers’
capitalisation rate %
Book value
Date
$M
2020
2019
2020
2019
Stockland Piccadilly, 133–145 Castlereagh Street,
Sydney NSW1,2,3,4,5
601 Pacific Highway, St Leonards NSW
Durack Centre, 263 Adelaide Terrace, Perth WA1,2
118 Walker Street, North Sydney NSW6
110 Walker Street, North Sydney NSW
122 Walker Street, North Sydney NSW6
Owned through equity–accounted investments
135 King Street, Sydney NSW (50%)1,7
Workplace8
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
Jun-20
–
697
5.25 – 5.75
5.25 – 6.00
125
91
91
62
37
–
6.00
6.00
8.75 – 9.00
7.75 – 8.25
n/a
n/a
n/a
n/a
5.75
n/a
n/a
4.00 – 5.00
651
125
118
91
62
37
–
1,084
309
117
108
–
45
–
313
891
A range of capitalisation rates are disclosed for a complex comprising of a number of properties.
Property is a leasehold property.
1
2
3 During the year Stockland acquired the remaining 50% of the property. Stockland now owns 100% of Stockland Piccadilly.
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 acquired during the year.
7
8 Totals may not add due to rounding.
Stockland disposed of its investment in The King Trust during the year.
INVESTMENT PROPERTIES
Commercial Property comprises investment interests in land and buildings including integral plant and equipment held for the purpose
of producing rental income, capital appreciation or both.
Commercial Property is 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 profit
or loss in the period. The valuation of Commercial Property is a key area of accounting estimation and judgement for Stockland.
Commercial Property under development is classified as investment property 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.
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 profit or loss as an expense as incurred.
LEASE INCENTIVES
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 profit or loss in the year of disposal.
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Year ended 30 June 2020
115
6A. 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, the income capitalisation
method and the direct comparison method.
In ordinary years, 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.
COVID-19 has created a level of uncertainty in investment property markets as at 30 June 2020. As a result, the Directors engaged
external valuation experts to value 100% of Stockland's Commercial Property assets (excluding sundry properties) at that date, in addition
to the usual internal and external processes undertaken to ensure that assets are carried at fair value. Across the portfolio, valuers
adopted a range of adjustments to reflect the short-term impact of the current situation. These adjustments, which were made based on
property-specific factors and considered each property's tenancy mix, included increases in vacancy periods, increases in operating costs
for common area cleaning, reductions in revenues for lease abatements, reductions in renewal assumptions on expiry, and reductions in
rental growth rates. Generally, the external experts applied these adjustments over a forward-looking period of six months to two years,
with an assumed return to long-term averages after that point. The greatest negative valuation impact at 30 June 2020 is seen in Retail,
with Workplace and Logistics less impacted.
Whilst the above short-term impacts have been factored into valuations, the external valuers have indicated that their valuations are
subject to material uncertainty on a forward-looking basis. They have certified that their valuations were appropriate on the valuation
date of 30 June 2020, but do state that due to the current market uncertainty the valuations may change materially after that date as new
information comes to light.
Based on available information at 30 June 2020 and information arising since that date about conditions at that date, the Directors have
determined that all relevant information has been incorporated into the reported valuations. To address the material uncertainty raised
by the external valuation experts between the date of valuation and the date of authorisation of this report, the Directors have reviewed
relevant market information on an ongoing basis, ensuring that the Commercial Property balances reported represent the fair value of the
properties at 30 June 2020.
To illustrate the exposure of the carrying value of Commercial Property at 30 June 2020 to further fair value movements as a result of
changes in the economic environment, a sensitivity analysis of fair value has been prepared over the key drivers most affected by the
current uncertainty. Commercial Property valuations remain subject to market-based assumptions on discount rates and capitalisation
rates. Given the reduced volume of transactions during COVID-19, the volatility in markets and the lack of certainty around economic
recovery, it is possible that there will be movements in these key inputs after 30 June 2020. Further, the future operating income of each
asset will be affected by the speed of economic recovery and changes in how businesses and individuals interact with our Commercial
Property assets. While it is unlikely that these reported drivers would move in isolation, these sensitivities have been performed
independently to illustrate the impact each individual driver has on the reported fair value and they do not represent management's
estimate at 30 June 2020.
Stockland
$M
Fair value gain/(loss) on
• Retail Town Centres
• Logistics
• Workplace
Commercial Property
Capitalisation rate
Discount rate
Net operating income
0.25%
Decrease
0.25%
Increase
0.25%
Decrease
0.25%
Increase
5%
Decrease
5%
Increase
255
137
39
431
(235)
(124)
(37)
(396)
104
53
17
174
(105)
(52)
(17)
(174)
(303)
(147)
(47)
(497)
303
147
47
497
The following table shows the valuation techniques used in measuring the fair value of Commercial Property excluding assets held for sale,
as well as significant unobservable inputs used.
116
Stockland Annual Report 2020
Class of
property
Fair value
hierarchy
Valuation technique
Inputs used to measure
Net market rent (per sqm p.a.)
2020
$185 – 714
10 year average specialty market rental growth
2.17 – 2.85%
Retail Town
Centres
Level 3
DCF and income
capitalisation method
Workplace
Level 3
DCF and income
capitalisation method
Adopted capitalisation rate
Adopted terminal yield
Adopted discount rate
Net market rent (per sqm p.a.)
10 year average market rental growth
Adopted capitalisation rate
Adopted terminal yield
Adopted discount rate
Net market rent (per sqm p.a.)
10 year average market rental growth
5.5 – 7.5%
5.75 – 7.75%
6.5 – 8.0%
$399 – 922
2.78 – 3.82%
5.25 – 8.91%
5.63 – 10.16%
6.25 – 7.41%
$69 – 484
1.77 – 3.71%
2019
$193 – 736
2.3 – 3.8%
4.0 – 7.5%
4.3 – 7.8%
6.3 – 8.0%
$389 – 947
3.0 – 3.9%
5.0 – 8.1%
5.4 – 8.3%
6.6 – 8.4%
$54 – 465
2.4 – 4.0%
Logistics
Level 3
DCF and income
capitalisation method
Properties
under
development
Level 3
Income
capitalisation method
Adopted capitalisation rate
4.75 – 6.75%
5.0 – 10.3%
Adopted terminal yield
Adopted discount rate
5.0 – 7.25%
5.25 – 13.1%
6.75 – 7.75%
6.75 – 9.5%
Net market rent (per sqm p.a.)
$105 – 280
$78 – 429
Adopted capitalisation rate
5.25 – 6.0%
6.25 – 6.5%
Key inputs used to measure fair value for Commercial Property are:
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
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).
10 year average market
rental growth
The expected annual rate of change in market rent over a 10 year forecast period in alignment with expected
market movements.
10 year average specialty market
rental growth
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).
Adopted capitalisation rate
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.
Adopted terminal yield
Adopted discount rate
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.
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Year ended 30 June 2020
117
VALUATION PROCESS
The Commercial Property valuation team is responsible for managing the valuation process across Stockland’s Commercial Property
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 an income capitalisation and DCF valuation. The internal tolerance check gives consideration to both the
income capitalisation and DCF valuations.
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% of the current book value (higher or lower), then the current book value is retained, and
• If the internal tolerance check varies by more than 5% to the current book value (higher or lower), then an external independent
judgement is taken that this remains the fair value of the property.
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.
A development feasibility is prepared for each Commercial Property under development. The feasibility includes an estimated valuation
upon 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. In ordinary years:
• If the internal tolerance check is within 5% of the current book value (higher or lower), then the current book value is retained, and
• If the internal tolerance check varies by more than 5% to the current book value (higher or lower), then an internal valuation will be
judgement is taken that this remains the fair value of the property under development
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 above.
• The asset undergoing major development or significant capital expenditure.
• 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.
In the current year, all properties were valued externally.
118
Stockland Annual Report 2020
SENSITIVITY INFORMATION
Significant input
Net market rent
10 year average market rental growth
10 year specialty 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 at 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.
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Year ended 30 June 2020
119
7. RETIREMENT LIVING
KEEPING IT SIMPLE
Stockland offers a range of independent living retirement products to meet the needs of its 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.
DEFERRED MANAGEMENT FEE (DMF) CONTRACTS
The DMF model contracts allow 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.
DMF contracts are generally affordable as they sell at a lower price than the non–retirement freehold properties in the area.
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 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 accrued portion of DMF forms part of statutory
profit only.
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 to 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 under DMF
Stockland continues to improve its customer offerings with Benefits Plus home care partnerships and up–front contract choices,
‘Capital Share’ and ‘Peace of Mind’.
The Capital Share contract offers the resident the opportunity to offset DMF by receiving 50% of any capital gain earned after
deducting 50% of any capital expenditures, when the home is resold or after a maximum of 18 months from when the resident leaves
the village. In the event of a capital loss, the resident pays 50% of the loss arising to Stockland through a reduction in the exit
repayment. DMF is calculated at 5% per annum, capped at 35%.
The Peace of Mind contract offers certainty by ensuring the residents know what the 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 has not yet been sold.
DMF is calculated at 5% per annum, capped at 25%, and there is no capital expenditure obligation or share in capital gains or losses.
ASPIRE VILLAGES
Aspire villages grant freehold title. Under the 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. Common areas and facilities are owned under
a community title managed by a body corporate which is funded by resident contributions. Stockland recognises profit based on
property development sales revenue net of associated cost of property developments sold.
LAND LEASE COMMUNITIES (LLC)
Stockland is developing a pipeline of LLC to further broaden its product offering. LLC, commonly referred to as manufactured, mobile
or relocatable homes, are typically built on site and are engineered to be relocated. Residents pay an initial purchase price for the
home and also ongoing site rental costs (without departure costs), and are entitled to the total capital gain or loss upon sale of the
relocatable home. Stockland will operate and retain ownership of the land and common amenity at each community. LLC broadens
the customer reach of Stockland’s existing communities offering an affordable product to a growing demographic. It provides a
potential for improved sales revenue and attractive rental yield while maintaining ownership of the underlying land.
120
Stockland Annual Report 2020
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 movements
Unrealised investment properties fair value movements1
Unrealised Retirement Living Resident Obligations fair value movements
Other movements
Balance at 30 June
Stockland
2020
3,717
219
3,936
(2,682)
1,254
1,405
58
(131)
14
(152)
22
38
1,254
2019
3,623
367
3,990
(2,585)
1,405
1,396
143
(114)
23
(95)
19
33
1,405
1
Includes a $24m fair value loss due to discounting of vacant stock not expected to settle within the next 12 months (2019: $nil)
7A. Investment properties
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 ILUs, SAs, community facilities and integral plant
and equipment.
DISPOSALS
No villages were disposed of during the current year. During the prior year, Stockland disposed of three villages in Victoria for $59 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 Stockland.
Both the investment properties and resident obligations are considered to be level 3 in the fair value hierarchy.
COVID-19 has created a level of uncertainty in relation to the inputs underpinning the Retirement Living investment property valuation.
For the year ended 30 June 2020, there was a reduction in the near term growth rates primarily due to COVID-19 and the weighted average
discount rate adopted across the Retirement Living properties increased by 0.2% to reflect the ageing of some villages. Demand for
the Retirement Living offering may fluctuate in the short-term depending on the wider macroeconomic environment, however Stockland
expects demand to be strong in the long-term given the growth in Australia's aged population.
The Directors have determined, based on the available information at 30 June 2020 and the information arising since that date about
conditions at that date, that all relevant information has been incorporated into the reported valuations.
Retirement Living valuations are subject to key market-based assumptions including discount rates, the market value of residential units
and the growth in those values over time. Given the volatility in markets and the lack of certainty around economic recovery, it is possible
there will be movements in these key inputs after 30 June 2020. A protracted economic recovery may result in a slowdown in the wider
housing market. As a large proportion of incoming residents must sell their existing homes to fund entry to a village, this may result in
a reduction in current market values. Demand may also be positively or negatively impacted by potential residents' perceptions of the
advantages and disadvantages of living in a retirement community at this time.
To illustrate the exposure of the carrying value of Retirement Living investment properties at 30 June 2020 to further fair value movements
as a result of changes in the economic environment, a sensitivity analysis of fair value has been prepared across all Retirement Living
assets over the key drivers most affected by the current uncertainty. While it is unlikely that these drivers would move in isolation, these
sensitivities have been performed independently to illustrate the impact each individual driver has on the fair value and they do not
represent management's estimate at 30 June 2020.
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Year ended 30 June 2020
121
Stockland
$M
Fair value gain/(loss) on Retirement Living
investment property
Current market value
Discount rate
5%
Decrease
5%
Increase
0.25%
Decrease
0.25%
Increase
(57)
57
25
(24)
Average 3 year
price growth1
0%
(76)
1
The average 3 year price growth rate underpinning the 30 June 2020 valuation is 2.5%.
The following significant unobservable inputs are used to measure the fair value of the investment properties:
Inputs used to measure fair value
Discount rate1
Average 20 year growth rate2
Average length of stay of existing and future residents
Current market value of unit
Renovation/reinstatement cost
Renovation recoupment
2020
2019
12.5 – 15.75% (average: 13.2%)
12.5 – 14.75% (average: 13.0%)
3.20%
11 years
$0.1 – 2.2 million
$4 – 88 thousand
0 – 100%
3.30%
11 years
$0.1 – 2.2 million
$3 – 75 thousand
0 – 100%
1 Discount rate includes a premium to allow for future village–wide capital expenditure.
2
This is the average of the 20 year growth rates adopted across the portfolio. The maximum growth rate adopted is capped at 4%.
The DCF methodology uses unobservable inputs and these are further explained below:
Item
DCF method
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.
Discount rate
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.
20 year growth rate
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 valuations
performed and the market, and are approved by the General Manager Communities Sales and CEO Communities.
Renovation/
Reinstatement cost
Renovation
recoupment
The cost that is required to maintain the independent living units and serviced apartments to the appropriate condition.
The percentage of renovation costs that will be recouped from the residents based on contractual terms.
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, which was obtained
at 31 March 2020, incorporated COVID-19 considerations. Further, through ongoing conversations from April to August 2020 with the
independent valuer, which considered actual performance and transactions at a unit level, it was determined that no changes to
the assessment were required. 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 in their estimate of fair value at
reporting date.
122
Stockland Annual Report 2020
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 also 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
The impact of this is dependent on the length of stay as the majority of contracts have maximum DMF periods.
7B. Resident obligations
Resident obligations represent the net amount owed by Stockland to existing and former residents. Resident obligations are non-interest
bearing and net 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 8% (2019: 8%) 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.
However, resident obligations are classified as current under the Accounting Standards as Stockland does not hold an unconditional
contractual right to defer settlement for at least 12 months (residents may give notice of their intention to vacate their unit with
immediate effect).
NON-CURRENT RESIDENT OBLIGATIONS
The non-current obligations relate to certain legacy contracts that give Stockland a right to defer settlement of the obligation for up to
eight years.
As at 30 June
$M
Existing resident obligations
Former resident obligations
Resident obligations
2020
Current
Non–current
2,587
7
2,594
95
6
101
Stockland
Total
2,682
13
2,695
2019
Current
Non–current
2,490
6
2,496
95
6
101
Total
2,585
12
2,597
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. Both the investment properties and resident obligations inputs are considered to be Level 3 in the fair
value hierarchy.
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Year ended 30 June 2020
123
The following table shows a reconciliation from the opening to the closing Retirement Living resident obligation balances:
$M
Opening balance
Realised movement recognised in profit or loss
Unrealised movement recognised in profit or loss
Cash receipts from incoming residents on turnover
Cash payments to outgoing residents on turnover, net of DMF
Closing balance
VALUATION PROCESS
Stockland
2020
2019
(2,597)
(2,741)
67
22
(332)
145
248
19
(295)
172
(2,695)
(2,597)
It is impractical to have the resident obligations valued externally, therefore these are valued every six months by the Directors as
described above. 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. The market values are externally
reviewed and assessed for reasonableness each reporting period as part of the Retirement Living investment property valuations.
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:
As at 30 June
Significant input
Current market value
8. RECEIVABLES
As at 30 June
$M
Trade receivables1
Allowance for expected credit loss
Net current trade receivables
Straight–lining of rental income
Other receivables
Current receivables
Trade receivables1
Allowance for expected credit loss
Net non–current trade receivables
Straight–lining of rental income
Other receivables
Receivables due from related companies
Allowance for expected credit loss
Non–current receivables
Increase/(decrease) in resident obligations ($M)
Increase in input
Decrease in input
Change in
assumption
10%
2020
170
2019
163
2020
(170)
2019
(163)
Stockland
2020
125
(27)
98
8
11
117
27
(13)
14
61
42
–
–
117
2019
1572
(2)
155
7
462
208
–
–
–
67
27
–
–
94
Trust
2020
32
(25)
7
9
14
30
27
(13)
14
61
11
2,948
(7)
3,027
2019
9
(2)
7
7
27
41
–
–
–
70
–
3,518
(8)
3,580
1
2
Lease receivables from tenants total $73 million, of which $27 million is classified as non-current.
$53 million which was classified in other receivables in 2019 has been reclassified to trade receivables to align with current year classification.
124
Stockland Annual Report 2020
The loss allowances for trade receivables, tenant receivables, contract assets and the intergroup loan as at 30 June 2020 reconcile to the
opening loss allowances as follows:
$M
Opening ECL balance
Adoption of AASB 9 Financial Instruments
Provision raised during the year relating to
• rent abatements
• credit risk
Provision release during the year
Bad debts written off in the year
Closing ECL balance
Stockland
Trust
2020
2019
2
–
29
40
–
(31)
40
1
–
–
1
–
–
2
2020
10
–
29
38
(1)
(31)
45
2019
1
81
–
2
–
(1)
10
1 On adoption of AASB 9 Financial Instruments, the Trust was required to recognised an ECL on the cross-stapled loan.
Expected Credit Losses
Receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less any
allowance under the Expected Credit Loss (ECL) model. Stockland applies the simplified approach to the ECL calculation used for trade
receivables, lease receivables and contract assets, and measures the ECL allowance at an amount equal to lifetime ECL. The lifetime ECL
calculation is based on an unbiased and probability-weighted amount determined by evaluating a range of possible outcomes, the time
value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions
and forecasts of future economic conditions.
Given the possible extended timeframe over which receivables will be collected, the receivables balance has been split between current
and non-current based on the expected timing of cash receipts, with cash receipts expected beyond 12 months booked as non-current.
This will ensure adequate emphasis is placed on the risk of default as the debt ages and the time value of money.
TRADE RECEIVABLES FROM TENANTS
Prior to the outbreak of COVID-19, Stockland did not have a material tenant receivable balance as most tenants paid rent monthly in
advance within a short timeframe from billing date. In response to the operational and liquidity pressures faced by tenants as a result of
COVID-19, the Federal Government’s Commercial Code of Conduct2 as implemented under State legislation (the Code) was introduced in
April 2020 and requires, among other things, that businesses share the economic impacts arising from COVID-19. As a result, Stockland has
deferred rent payments from some tenants for a period of up to two years. Terms are negotiated on a lease-by-lease basis for tenants that
come under the Code. In addition, Stockland has entered negotiations with tenants who are not covered by the Code but are experiencing
significant financial hardship.
In assessing credit risk, management has applied a matrix approach to categorise tenants as high, medium and low risk of default. In
arriving at these categorisations, consideration has been given to a range of risk factors, including:
• whether the tenant's payments were up-to-date leading into COVID-19;
• tenant type and size;
• a qualitative assessment of the tenant's circumstances as part of the negotiation process;
• performance of the tenant's business before and during COVID-19;
• management's forward-looking tenant risk assessment; and
• whether the tenant's occupancy cost ratio is in line with the industry sustainable ratio.
Using all these relevant inputs, an ECL percentage has been booked against each risk category, reflecting management's best estimate of
expected losses on balances owed at 30 June 2020 based on the historical, current and future-looking information available at that date.
Depending on the speed of economic recovery and the business performance of affected tenants after 30 June 2020, the actual losses may
be higher or lower and will be assessed on an ongoing basis. Further, for individual tenants identified as likely to default on their debts,
the full value of their debts have been provided for. Despite the ECL booked in 2020, Stockland intends to collect as much of the closing
receivables balance as reasonably possible.
For abatements expected to be granted in the future over lease receivables under negotiation at 30 June 2020, a separate ECL provision
was both raised and written off during the year. These negotiations are expected to be finalised within a number of months. Rent
abatements relating to future periods that change the scope of a lease are accounted for in accordance with the disclosure in Note 10.
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2 National Cabinet Mandatory Code of Conduct - SME Commercial Leasing Principles During COVID-19
Year ended 30 June 2020
125
The loss allowance as at 30 June 2020 is as follows for lease receivables:
$M
Lease receivables at 30 June 2020
ECL provision on lease receivables
Lease receivables net of provisions
Stockland and Trust
Low
21
Medium
24
High
25
Specific
3
Total
73
(38)
35
RECEIVABLES DUE FROM RELATED COMPANIES
The Trust has applied the ECL model under AASB 9 to its unsecured intergroup loan receivable from Stockland, 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 the 12
month ECL has been recorded at balance date. Despite the current economic environment, management has determined that there has
not been a significant increase in credit risk on the intercompany loan since its inception as the Corporation maintains a strong capital
position and forecasts sufficient cash flows to repay the loan to the Trust on expiry. There is no impact on Stockland as this loan eliminates
on consolidation.
9. PAYABLES
As at 30 June
$M
Trade payables and accruals
Land purchases
Distributions payable
GST payable/(receivable)
Current payables
Other payables
Land purchases
Non–current payables
Stockland
Trust
Note
2020
2019
2020
2019
4
262
70
253
8
593
1
507
508
281
69
336
10
696
–
147
147
91
35
253
(1)
378
–
–
–
120
–
336
(1)
455
–
–
–
Trade and other payables are initially recognised at fair value less transaction costs and subsequently carried at amortised cost.
The carrying values of payables at balance date represent a reasonable approximation of their fair value.
126
Stockland Annual Report 2020
10. LEASES
This note provides information about Stockland's accounting for leases. Stockland adopted AASB 16 Leases on 1 July 2019 – see note 36A
for the impact on adoption.
Stockland as a lessee
AMOUNTS RECOGNISED IN THE CONSOLIDATED BALANCE SHEET
The consolidated balance sheet contains the following amounts relating to leases:
As at 30 June
$M
Right–of–use assets
Investment properties (non–current)4
Other assets (non–current)5
Total right–of–use assets
Lease liabilities
Other liabilities (current)
Other liabilities (non-current)
Total lease liabilities
Stockland
Trust
2020
20191,2
2020
20191,3
27
14
41
2
41
43
36
5
41
1
47
48
27
–
27
–
28
28
36
–
36
–
42
42
1 On adoption of AASB 16 Leases as at 1 July 2019.
2
In the previous year, Stockland only recognised lease assets and lease liabilities relating to leases that were classified as finance leases under AASB 117 Leases . Refer to note 36A
for adjustments recognised on adoption of AASB 16.
In the previous year, the Trust only recognised lease assets and lease liabilities relating to leases that were classified as finance leases under AASB 117 Leases . Refer to note 36A for
adjustments recognised on adoption of AASB 16.
3
4 Right–of–use assets capitalised to investment properties include ground leases for Durack Centre, WA.
5 Right–of–use assets capitalised to other assets includes the lease for Stockland's Brisbane office, Stockland's Melbourne office and a number of other individually immaterial
operating leases.
Additions to the right-of-use assets during the year were $10 million.
AMOUNTS RECOGNISED IN THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
The consolidated statement of comprehensive income contains the following amounts relating to leases:
Year ended 30 June
$M
Depreciation charge of right–of–use assets
Investment properties
Other assets
Total depreciation charge of right–of–use assets
Other expenses relating to leases
Interest expense (included in finance expense)
Expense relating to short–term leases (included in management,
administration, marketing and selling expenses)
Total other expenses relating to leases
The total cash outflow for leases in the year was $7 million.
Stockland
Trust
2020
2019
2020
2019
1
1
2
2
2
4
–
–
–
–
–
–
1
–
1
2
–
2
–
–
–
–
–
–
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as
to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
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Year ended 30 June 2020
127
RIGHT-OF-USE ASSETS
Right–of–use assets are measured at cost less depreciation and impairment and adjusted for any remeasurement of the lease liability.
The cost of the asset includes the amount of the initial measurement of lease liability and any lease payments made at or before the
commencement date, less any lease incentives received, any initial direct costs, and restoration cost.
Right–of–use assets are depreciated on a straight–line basis from the commencement date of the lease to the earlier of the end of the
useful life of the right–of–use asset or the end of the lease term, unless they meet the definition of an investment property. Right–of–use
assets which meet the definition of an investment property form part of the investment property balance and are measured at fair value
in accordance with AASB 140 Investment Property (refer to note 6 and below section on ground leases).
The lease term is the non–cancellable period of a lease together with the lease period under reasonably certain extension options and
periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option.
Management considers all the facts and circumstances that create an economic incentive to exercise an extension option or not exercise
a termination option. This assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this
assessment and that is within the control of the lessee. No lease terms were revised during the period.
Stockland tests right–of–use assets for impairment where there is an indicator that the asset may be impaired. An asset’s carrying amount
is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
Stockland’s right–of–use assets are all property leases.
Payments associated with lease terms of 12 months or less and leases of low value assets are recognised in profit or loss.
LEASE LIABILITIES
Lease liabilities are initially measured at the present value of the lease payments discounted using the interest rate implicit in the
lease. If that rate cannot be determined, Stockland’s incremental borrowing rate is used. Lease payments used in calculating the lease
liability include:
• fixed payments less incentives receivable;
• variable lease payments that are based on an index or a rate, initially measured using the index or rate at commencement date;
• payments of penalties for terminating the lease if the lease term reflects Stockland exercising that option; and
• lease payments to be made under options for extension which are reasonably certain to be exercised.
Lease liabilities are subsequently measured by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying
amount to reflect the lease payments made, and remeasuring the carrying amount to reflect any reassessment or lease modifications.
Interest on the lease liability and any variable lease payments not included in the measurement of the lease liability are recognised in profit
or loss in the period in which they relate.
Stockland is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease
liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed
and adjusted against the right-of-use asset.
INCREMENTAL BORROWING RATE
financing was received;
The incremental borrowing rate is the rate of interest that a lessee would have to pay to borrow over a similar term, and with a similar
security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. To determine
the incremental borrowing rate, Stockland:
• where possible, uses recent third-party financing as a starting point, adjusted to reflect changes in financing conditions since the
• uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by Stockland, which does not
• makes adjustments specific to the lease, e.g. term, country, currency and security.
INVESTMENT PROPERTIES WITH GROUND LEASES
have recent third party financing; and
A lease liability reflecting the leasehold arrangements of investment properties is disclosed in other liabilities in the balance sheet and
the carrying value of the investment properties are adjusted (i.e. grossed up) so that the net of these two amounts equals the fair value
of the investment properties. The lease liabilities are calculated as the net present value of the future lease payments discounted at the
incremental borrowing rate.
128
Stockland Annual Report 2020
Stockland as a lessor
Information relating to Stockland's accounting for revenue from operating leases is contained in note 1. Information relating to Stockland's
accounting for lease incentives is contained in note 6.
MATURITY ANALYSIS OF FUTURE LEASE RECEIPTS
The following table shows a maturity analysis of undiscounted, contracted lease payments to be received under operating leases:
$M
Undiscounted lease payments due to Stockland or the Trust in the years ending 30 June:
2020
2021
2022
2023
2024
2025
Beyond 2025 (2019: Beyond 2024)
Total undiscounted lease payments due:
LEASE MODIFICATIONS
Stockland
Trust
2020
2019
2020
2019
n/a
650
n/a
638
552
440
337
232
808
562
471
365
267
n/a
912
646
562
450
341
232
806
652
565
475
370
267
n/a
912
3,007
3,227
3,037
3,241
Lease modifications arise when there is a change in the scope of a lease or a change in the consideration for a lease that was not part of its
original terms and conditions. Stockland accounts for lease modifications from the effective date of the modification. Existing unamortised
lease incentives capitalised to investment property will continue to be amortised over the remaining lease term. Any amounts prepaid or
owing relating to the original lease are treated as payments for the new lease.
During the year, Stockland granted a combination of rent abatements and deferrals to tenants, under the Code and in line with the
Australian Government's request for businesses to work together to protect the economy.
Rent deferrals
Rent deferrals alone do not constitute a lease modification as they do not change the scope of a lease. During the year, Stockland granted
rent deferrals to be repaid in instalments over a period of up to two years starting from the date of the agreement. This amount is recorded
as revenue and in trade receivables as at 30 June 2020. Refer to note 8 for details on the receivable and the associated expected credit loss.
Rent abatements
Where an abatement is granted retrospectively on uncollected past due rent, the abatement is expensed as an impairment of trade
receivables. Where an agreement on past due receivables has not been reached by 30 June 2020, an estimate of the expected abatement
on the outstanding balance is made and incorporated into the expected credit loss calculation - see note 8.
Where an abatement has been agreed between Stockland and the tenant and is considered under the lease agreement, there is no lease
modification. Instead, the abatement is treated as a variable lease payment whereby Stockland recognises a reduction in rental revenue
in the current year.
For abatements or other lease modifications accompanied by extensions of lease terms or other changes in lease scope, Stockland has
accounted for these as a lease modification. The abated portion will be capitalised as a lease incentive and amortised on a straight-line
basis over the remaining life of the lease.
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Year ended 30 June 2020
129
11. INTANGIBLE ASSETS
As at 30 June
2020
2019
Stockland
$M
Cost
Opening balance
Additions
Retirements/disposals1
Transfer
Closing balance
Accumulated amortisation
and impairment
Opening balance
Retirements/disposals1
Amortisation
Impairment
Closing balance
Intangible assets
Goodwill
Software
Under
development
Total
Goodwill
Software
Under
development
Total
117
–
–
–
117
(79)
–
–
(38)
(117)
–
53
–
–
7
60
(19)
–
(9)
–
(28)
32
121
25
–
(8)
138
–
–
–
–
–
138
291
25
–
(1)
315
(98)
–
(9)
(38)
(145)
170
117
–
–
–
117
(41)
–
–
(38)
(79)
38
113
–
(79)
19
53
(85)
79
(13)
–
(19)
34
90
54
–
(23)
121
–
–
–
–
–
121
320
54
(79)
(4)
291
(126)
79
(13)
(38)
(98)
193
1
The net impact of these retirements and disposals on the intangible assets carrying value is $nil in the current and prior year 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 Stockland.
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 (2019: $38 million), reducing the goodwill balance to zero. This
was primarily driven by a reduction in the future development pipeline and projects under construction as Stockland shifts its strategic
focus towards Land Lease Communities and Aspire projects.
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 Stockland.
Costs associated with maintaining software are recognised as an expense as incurred.
All software is amortised using the straight-line method at rates between 10 to 100% (2019: 10 to 100%) from the point at which the asset
is ready for use. Amortisation is recognised in profit or loss.
The residual value, the useful life and the amortisation method applied to an asset are reviewed at least annually.
130
Stockland Annual Report 2020
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
2020
469
469
2019
171
171
2020
469
469
2019
171
171
The following investment properties were held for sale at 30 June 2020:
• Stockland Baulkham Hills, Baulkham Hills NSW
• North Shore Townsville, Townsville QLD
• Stockland Caloundra, Caloundra QLD and associated sundry properties
• Stockland The Pines, Doncaster East VIC
• Balcatta Distribution Centre, Balcatta WA
Contracts for the sale of the properties have been exchanged after reporting date.
During the current year, Stockland completed the sale of the following properties which were classified as non-current assets held for sale
at 30 June 2019:
• Stockland Tooronga, Tooronga Vic
• 40 Scanlon Drive, Epping Vic
• 11-25 Toll Drive, Altona Vic
• Port Adelaide Distribution Centre, Port Adelaide SA
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 6.
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Year ended 30 June 2020
131
Capital structure and financing costs
IN THIS SECTION
This section outlines how Stockland manages its capital structure and related financing costs, including its liquidity and access to
capital markets.
The Board determines the appropriate capital structure of Stockland, specifically, how much is raised from securityholders (equity)
and how much is borrowed from financial institutions and capital markets (debt), in order to finance Stockland’s activities both now
and in the future.
The Board considers Stockland’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. The Board
continues to monitor Stockland’s capital structure through its gearing ratio and maintains a capital structure to minimise the cost of
capital. Stockland has a stated target gearing ratio range of 20% to 30% and credit ratings of A-/stable and A3/stable from S&P and
Moody's respectively.
In addition, Stockland is exposed to changes in interest rates on its net borrowings and to changes in foreign exchange rates on its
transactions, assets and liabilities denominated in foreign currencies. In accordance with risk management policies, Stockland uses
derivatives to appropriately hedge these underlying exposures.
In respect of COVID-19, we have assessed the potential impact of the pandemic on our financing agreements and we continue to
meet both the general and financial undertakings required under the documentation. We do not foresee that any COVID-19 related
amendments will be required to our financing documentation. Furthermore, there has been no change in the Group's hedging policy
as a result of COVID-19, with the resulting derivative portfolios operating as expected and in line with market movements.
13. NET FINANCING COSTS
KEEPING IT SIMPLE
This note details the interest income generated on Stockland’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 Stockland’s derivative instruments between the later of inception or 1 July
2019 and 30 June 2020. The fair value at year end is not necessarily the same as the settlement value at maturity.
Net financing costs can be analysed as follows:
132
Stockland Annual Report 2020
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
Finance expense on lease liabilities
Less: interest capitalised to inventories
Less: interest capitalised to investment properties
Finance expense
Designated hedge accounting relationships
Fair value hedges – gain on change in fair value of derivatives
Fair value hedges – loss on change in fair value of borrowings
Net gain/(loss) on designated hedge accounting relationships
Non-designated hedge accounting relationships
Loss on foreign exchange movements
Loss on fair value movements
Net gain/(loss) on non–designated hedge
accounting relationships
Net gain/(loss) on financial instruments
Stockland
Trust
2020
2019
–
2
2
(174)
(33)
(2)
114
7
(88)
177
(200)
(23)
(3)
(83)
(86)
(109)
–
4
4
(192)
(40)
–
136
9
(87)
233
(240)
(7)
(12)
(121)
(133)
(140)
2020
229
1
230
(173)
–
(2)
–
6
2019
282
2
284
(192)
–
–
–
3
(169)
(189)
177
(200)
(23)
(3)
(83)
(86)
(109)
233
(240)
(7)
(12)
(121)
(133)
(140)
Interest income is recognised in profit or loss as it accrues using the effective interest method.
The interest expense relating to borrowings includes $47 million (2019: $62 million) relating to interest on financial liabilities carried at
amortised cost, and not designated in a fair value hedge relationship.
Finance expense includes interest payable on short-term and long-term borrowings calculated using the effective interest method and
payments of interest 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 while in active development until the assets are ready
for their intended use or sale. Total interest capitalised does not exceed the net interest expense in any period. Project carrying values,
including all capitalised interest attributable to projects, 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 5.
Where funds are borrowed by the Group as a whole, 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.
RECONCILIATION OF HEDGE RESERVE
Year ended 30 June
$M
Opening hedge reserve
Net change in fair value of cash flow hedges
Reclassified to profit or loss
Closing hedge reserve
Stockland
Trust
2020
2019
2020
2019
54
(75)
(6)
(27)
60
(5)
(1)
54
54
(75)
(6)
(27)
60
(5)
(1)
54
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Year ended 30 June 2020
133
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 flows. As at 30 June 2020, Stockland does not have any bank overdrafts.
Included in the cash and cash equivalents balance of $443 million is $59 million (2019: $55 million) in cash that is relating to joint operations
and/or held to satisfy real estate and financial services licensing requirements, and is not immediately available for use by Stockland.
15. BORROWINGS
KEEPING IT SIMPLE
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 typically have fixed interest rates and are for a fixed term.
The interest expense on these instruments is shown in note 13.
Interest-bearing loans and borrowings are recognised initially at fair value less attributable transaction costs and are subsequently 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 a qualifying fair value hedge is in place, borrowings are stated at the
carrying amount adjusted for changes in fair value of the hedged risk. The changes are recognised in profit or loss.
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. Stockland
has complied with all covenants throughout the year ended 30 June 2020 and up to the date of authorisation of these accounts.
The weighted average cost of debt for the year was 4.0% (2019: 4.4%).
As at 30 June
$M
Offshore medium term notes
Domestic medium term notes and
commercial paper
Bank facilities
Borrowings
Stockland and Trust
2020
2019
Note
Current
Non–
current
Carrying
value Fair value Current
15A
15B
15C
102
170
–
272
4,227
4,329
4,715
448
75
618
75
641
75
4,750
5,022
5,431
78
150
115
343
Non–
current
Carrying
value Fair value
3,694
3,772
4,215
607
60
757
175
801
175
4,361
4,704
5,191
The difference of $409 million (2019: $487 million) between the carrying amount and fair value of the offshore medium term notes,
commercial paper and domestic medium term notes is due to notes being carried at amortised cost under AASB 9.
15A. Offshore medium term notes
US PRIVATE PLACEMENTS
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.
The Trust repaid USD 55 million ($71 million) of notes in July 2019.
The fair value of the US private placements as at 30 June 2020 is $2,953 million (2019: $2,816 million). Details of the offshore medium term
notes on issue in the US private placement market are set out below:
134
Stockland Annual Report 2020
As at 30 June ($M)
Face value1
Carrying amount
Maturing in the financial year ending 30 June
2020
2019
2020
2019
Stockland and Trust
2020
2021
2022
2023
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
Total
Less: attributable transaction costs
US private placement
–
90
204
105
50
257
220
178
442
106
234
59
133
28
71
90
204
105
50
257
220
178
442
106
234
59
133
28
–
102
316
117
77
297
252
231
577
127
297
72
146
36
78
100
308
101
50
281
249
209
517
117
259
61
139
31
2,106
2,177
2,647
(10)
2,637
2,500
(11)
2,489
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.
EUROPEAN MEDIUM TERM NOTES
The Trust has issued medium term notes in the Asian and European capital markets. During the year, the Trust issued HKD 800 million
($150 million) in February 2020 and HKD 805 million ($180 million) of notes in March 2020.
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 the European medium term notes on issue as at 30 June 2020 is $1,762 million (2019: $1,399 million). Details of the offshore
medium term notes on issue in the Asian and European capital markets are set out below:
As at 30 June ($M)
Face value1
Carrying amount
Maturing in the financial year ending 30 June
2020
2019
2020
Stockland and Trust
2022
2025
2026
2028
2030
Total
Less: attributable transaction costs
European medium term notes
433
62
633
51
330
1,509
433
62
633
51
0
1,179
501
92
713
65
325
1,696
(4)
1,692
1
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.
2019
446
86
698
60
0
1,290
(7)
1,283
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2
0
2
0
f
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h
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y
e
a
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e
n
d
e
d
3
0
J
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e
F
i
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a
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c
i
a
l
r
e
p
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t
k
e
y
d
a
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e
s
S
e
c
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y
h
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f
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m
a
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i
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a
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d
G
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y
Year ended 30 June 2020
135
15B. Commercial Paper and Domestic medium term notes
Commercial paper (CP) and 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 or premium 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 year, the Trust repaid medium term notes with a face value of $150 million. The fair value of all CP and domestic medium term
notes on issue as at 30 June 2020 is $641 million (2019: $801 million). Details of the CP and domestic medium term notes on issue are set
out below:
As at 30 June ($M)
Maturing in the financial year ending 30 June
2020
2021
2023
2024
Total
Less: attributable transaction costs
Domestic medium term notes and commercial paper
1
Carrying amount excluding transaction costs is equal to Face Value.
Stockland and Trust
Carrying amount1
2020
2019
–
170
250
200
620
(2)
618
150
160
250
200
760
(3)
757
15C. Bank facilities
The bank facilities are multi–use facilities which may be used partially for bank guarantees. Bank facilities are unsecured and held at
amortised cost. Details of maturity dates are set out below:
As at 30 June ($M)
Stockland and Trust
2020
2019
Maturing in the financial year ending 30 June
Utilised
Facility Limit
Utilised
Facility Limit
2020
2021
2022
2023
2024
2027
Bank facilities
–
–
–
–
–
75
75
–
525
650
300
100
75
1,650
115
–
60
–
–
–
175
320
250
350
–
–
–
920
136
Stockland Annual Report 2020
16. OTHER FINANCIAL ASSETS AND LIABILITIES
KEEPING IT SIMPLE
Investments in other financial assets are managed in accordance with Stockland’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.
As at 30 June
Other financial assets
Other financial liabilities
Other financial assets
Other financial liabilities
$M
2020
2019
2020
2019
2020
2019
2020
2019
Stockland
Trust
Instruments held at fair value through profit or loss
CCIRS
IRS
Current
11
4
15
Instruments in a designated fair value hedge
CCIRS
IRS
551
5
Instruments in a designated cash flow hedge
CCIRS
IRS
105
–
Instruments held at fair value through profit or loss
CCIRS
IRS
Other
Non–current
34
29
10
734
8
1
9
350
5
81
–
43
28
18
525
DERIVATIVE FINANCIAL INSTRUMENTS
KEEPING IT SIMPLE
–
–
–
(23)
–
–
(2)
(2)
–
–
(16)
(14)
–
–
(274)
–
(313)
–
–
(204)
–
(218)
11
4
15
551
5
105
–
34
29
–
724
8
1
9
350
5
81
–
43
28
8
515
–
–
–
(23)
–
–
(2)
(2)
–
–
(16)
(14)
–
–
(274)
–
(313)
–
–
(204)
–
(218)
A derivative is a type of financial instrument typically used to manage an 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 underlying exposures. Stockland uses derivatives to manage exposure to foreign exchange and interest
rate risk.
Stockland manages its exposure to financial market risks as part of its operations through the use of derivatives.
Stockland’s treasury policy requires:
• all contractual or committed foreign exchange payments or receipts to be fully hedged back to the Australian dollar unless the exposure
• interest rate risk exposures to be within a fixed hedge ratio of:
is immaterial; and
• 45 to 55% on debt maturing within five 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
• changes in interest rates will impact the fair value of the Australian dollar margin and implied foreign currency margin respectively.
the hedged item; and
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s
s
2
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2
0
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9
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p
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a
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2
0
2
0
f
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y
e
a
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d
3
0
J
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F
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c
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l
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p
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d
a
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s
S
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c
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G
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y
Year ended 30 June 2020
137
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.
Stockland holds a number of derivative instruments including interest rate swaps, forward 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 Stockland.
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 counterparty.
The fair value of forward 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. If a credit event had 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 $258 million (2019: $195 million).
DERIVATIVES THAT QUALIFY FOR HEDGE ACCOUNTING
Stockland uses derivatives 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 effective in offsetting changes in fair value or cash flows of hedged items.
FAIR VALUE HEDGE
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 method. Amortisation begins when the hedged item ceases
to be adjusted for changes in its fair value attributable to the risk being hedged.
CASH FLOW HEDGE
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.
138
Stockland Annual Report 2020
Borrowings
Derivatives
Stockland and Trust
Carrying amount
Mark to market
2020
2019
2,647
2,500
2,176
1,953
471
1,028
547
965
325
4,344
3,790
Move–
ments
(Repaid)
Drawn
147
223
(76)
63
344
554
(71)
–
(71)
–
330
259
Gain/ (loss)
on FV of
debt 2020
2019
(218)
(223)
5
(63)
(14)
529
483
46
95
42
337
286
51
92
44
Move–
ments
192
197
(5)
3
(2)
(295)
666
473
193
75
175
(100)
(100)
620
760
(140)
(140)
AUD IRS
–
–
Borrowing
costs
(16)
(21)
–
5
–
–
–
–
–
–
–
–
–
–
(241)
(177)
(64)
(23)
As at
30 June
$M
US Dollar
• Effective
• Other1
Euro2
Foreign
exposure
AUD Bank
Debt
AUD MTNs
and
Commercial
paper
HK Dollar2
669
Termi-
nated
Paid
Cash flow
hedge
reserve
impact
Gain/ (loss)
on FV of
derivatives
Net gain/
(loss)
recognised
in profit or
loss
–
–
–
–
–
–
–
–
(19)
(19)
–
(54)
(7)
(80)
–
–
–
211
216
(5)
57
5
273
–
–
(7)
(7)
–
(6)
(9)
(22)
–
–
(87)
(87)
Total3
5,022
4,704
318
19
(295)
426
296
129
(23)
(81)
186
(109)
1
2
3
Relates to instruments which are in economic hedge relationships but do not qualify for hedge accounting or have not been designated in hedge accounting relationships.
These hedge relationships were deemed effective accounting hedges in the current and prior years.
Totals may not add due to rounding.
17. FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS
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. Stockland 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.
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
There were no transfers between levels during the year.
as prices) or indirectly (i.e. derived from prices); and
DETERMINATION OF FAIR VALUE
The fair value of financial instruments, including 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. While 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 creditworthiness of Stockland or the derivative counterparty.
The fair value of foreign exchange contracts is the quoted market price of the derivative at balance date, being the present value of the
quoted forward price. The following table sets out the financial instruments included on the balance sheet at fair value:
O
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s
s
2
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2
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0
2
0
f
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3
0
J
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F
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a
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c
i
a
l
r
e
p
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d
a
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e
s
S
e
c
u
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i
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y
h
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d
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i
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n
a
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d
G
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y
Year ended 30 June 2020
139
As at 30 June
$M
Derivative assets
Securities in
unlisted entities
Other investments
Financial assets carried at
fair value
Offshore MTNs1
Derivative liabilities
Retirement Living
resident obligations
Financial liabilities
carried at fair value
–
–
10
10
–
–
–
–
Stockland
2020
2019
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
739
–
–
739
(3,873)
(313)
–
–
–
–
–
–
Total
739
–
10
749
(3,873)
(313)
516
–
–
516
(3,243)
(220)
–
8
–
8
–
–
Total
516
8
10
534
(3,243)
(220)
–
(2,695)
(2,695)
(4,186)
(2,695)
(6,881)
–
(2,597)
(2,597)
(3,463)
(2,597)
(6,060)
–
–
10
10
–
–
–
–
Net position
10
(3,447)
(2,695)
(6,132)
10
(2,947)
(2,589)
(5,526)
1 Offshore MTNs not in an accounting hedge relationship are carried at amortised cost. This table only reflects offshore MTNs carried at fair value according to its hedge designation.
As at 30 June
$M
Derivative assets
Securities in
unlisted entities
Financial assets carried at
fair value
Offshore MTNs1
Derivative liabilities
Financial liabilities
carried at fair value
Net position
2020
2019
Trust
Level 1
Level 2
Level 3
–
–
–
–
–
–
–
739
–
739
(3,873)
(313)
(4,186)
(3,447)
–
–
–
–
–
–
–
Total
739
–
739
(3,873)
(313)
(4,186)
(3,447)
Level 1
Level 2
Level 3
–
–
–
–
–
–
–
516
–
516
(3,243)
(220)
(3,463)
(2,947)
–
8
8
–
–
–
8
Total
516
8
524
(3,243)
(220)
(3,463)
(2,939)
1 Offshore MTNs not in an accounting hedge relationship are carried at amortised cost. This table only reflects offshore MTNs carried at fair value according to its hedge designation.
Derivative financial assets and liabilities are not offset in the balance sheet as under agreements held with derivative counterparties,
Stockland 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.
140
Stockland Annual Report 2020
Stockland
2020
2019
$M
Balance at 1 July
Gains/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
Capital distribution
Balance at 30 June
Securities
in unlisted
entities Derivatives
Retirement
Living
resident
obligations
Securities
in unlisted
Total
entities Derivatives
8
–
–
–
–
(8)
–
–
–
–
–
–
–
–
(2,597)
(2,589)
89
–
89
–
(332)
(332)
145
–
145
(8)
(2,695)
(2,695)
8
–
–
–
–
–
8
–
–
–
–
–
–
–
Retirement
Living
resident
obligations
(2,741)
267
–
Total
(2,733)
267
–
(295)
(295)
172
–
172
–
(2,597)
(2,589)
1
In 2019 this includes impact of derecognition of obligations related to village disposals of $187 million.
2020
2019
Trust
$M
entities Derivatives
Securities
in unlisted
Retirement
Living
resident
obligations
Securities
in unlisted
Total
entities Derivatives
Retirement
Living
resident
obligations
Balance at 1 July
Loss recognised in profit
or loss
Capital distribution
Balance at 30 June
8
–
(8)
–
–
–
–
–
–
–
–
–
8
–
(8)
–
8
–
–
8
–
–
–
–
–
–
–
–
Total
8
–
–
8
18. FINANCIAL RISK FACTORS
KEEPING IT SIMPLE
Stockland’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. Stockland’s overall risk
management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on
financial performance.
Stockland 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 derivatives 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.
18A. Market risk
Market risk is the risk that changes in market prices, such as foreign 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.
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Year ended 30 June 2020
141
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).
Stockland manages its currency risk by using CCIRS and forward exchange contracts.
Stockland’s offshore medium term notes create both an interest rate and a currency risk exposure. Stockland’s policy is to minimise its
exposure to both interest rate and exchange rate movements. Accordingly, Stockland has entered into a series of CCIRS which cover 100%
of the 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 hedge ratio for CCIRS is 1:1 (2019: 1:1).
The following table provides a summary of the face values of Stockland’s currency risk exposures together with the derivatives which have
been entered into to manage these exposures:
As at 30 June
$M
Offshore MTNs
CCIRS
Exposure
Weighted average hedge rate
Stockland and Trust
2020
2019
EUR1
(600)
600
–
1:0.66
HKD1
(3,315)
3,315
–
1:5.54
USD1
(1,413)
1,413
–
1:0.81
EUR1
(600)
600
–
1:0.66
HKD1
(1,710)
1,710
–
1:6.38
USD1
(1,468)
1,468
–
1:0.81
1
All amounts are denominated in their natural currency.
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, being the movement Stockland determines is reasonably possible
(2019: 10%). In determining what constitutes a reasonably possible movement, management gives consideration to their best estimate
at balance date of the range of possible future exchange rate movements.
As at 30 June
Profit or loss
Equity
Profit or loss
Equity
Stockland and Trust
2020
2019
$M
EUR
HKD
USD
Impact
Interest rate risk
Increase
Decrease
Increase
Decrease
Increase
Decrease
Increase
Decrease
–
–
(1)
(1)
–
–
2
2
(4)
(6)
(11)
(21)
4
7
14
25
–
–
(1)
(1)
–
–
2
2
(55)
(11)
(24)
(90)
55
14
30
99
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. Stockland’s treasury policy allows it to enter into 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. Stockland 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 interest rate risk through CCIRS
and fixed-to-floating interest rate swaps. The hedge ratio for interest rate swaps at 30 June 2020 is 62% (2019: 89%), and the weighted
average hedged rate is 3.2% (2019: 3.5%).
The table below provides a summary of Stockland’s interest rate risk exposure on interest-bearing loans and borrowings after the effect
of the interest rate derivatives.
142
Stockland Annual Report 2020
As at 30 June
$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
2020
2,656
1,653
4,309
2019
3,837
453
4,290
The following sensitivity analysis shows the impact on profit or loss and equity if there was an increase/decrease in market interest rates
of 100 basis points (bps) at balance date with all other variables held constant, being the movement Stockland determines is reasonably
possible (2019: 100bps). In determining what constitutes a reasonably possible movement, management gives consideration to their best
estimate at balance date of the range of possible future interest rate movements.
Stockland
Trust
2020
2019
2020
2019
Increase
Decrease
Increase
Decrease
Increase
Decrease
Increase
Decrease
5
133
138
11
(5)
(143)
(148)
(11)
1
107
108
15
(1)
(113)
(114)
(16)
33
133
166
11
(33)
(143)
(176)
(11)
36
107
143
15
(36)
(113)
(149)
(16)
As at 30 June
$M
Impact on interest
income/(expense)
Impact on net gain/(loss)
on derivatives – through
profit or loss
Impact on profit or loss
Impact on equity
Equity price risk
Equity price risk is the risk that the fair value of investments in listed/unlisted entities fluctuates due to changes in the underlying security
price. Stockland’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.
Decisions required for the purchase or divestment of material equity investments are made by the Board.
SENSITIVITY ANALYSIS – EQUITY PRICE RISK
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.
As at 30 June
$M
Stockland
Trust
2020
2019
2020
2019
Increase
Decrease
Increase
Decrease
Increase
Decrease
Increase
Decrease
Impact on profit or loss
Impact on equity
1
–
(1)
–
2
–
(2)
–
1
–
(1)
–
–
–
–
–
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Year ended 30 June 2020
143
18B. 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 Stockland.
RISK MANAGEMENT
Stockland has no significant concentrations of credit risk to any single counterparty and has policies to review the aggregate exposure of
tenancies across its portfolio. Stockland 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 2020, 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.
IMPAIRMENT OF FINANCIAL ASSETS
As at 30 June 2020 and 30 June 2019, there were no significant financial assets that were past due. Financial assets are subject to the
expected credit loss model as per AASB 9. Refer to note 8 for details of the loss allowances recognised on trade receivables and the
intercompany loan.
18C. Liquidity risk
Liquidity risk is the risk that Stockland will not be able to meet its financial obligations as they fall due. Due to the dynamic nature of
the underlying businesses, Stockland aims to maintain flexibility in liquidity and funding sources by keeping sufficient cash and cash
equivalents and/or undrawn committed credit lines available while maintaining a low cost of holding these facilities. Management
prepares and monitors rolling forecasts of liquidity requirements on the basis of expected cash flow.
Stockland manages liquidity risk through monitoring the maturity profile of its debt portfolio. The current weighted average debt maturity
is 5.7 years (2019: 5.8 years).
KEEPING IT SIMPLE
The following table analyses Stockland’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.
144
Stockland Annual Report 2020
As at 30 June 2020
$M
As at 30 June 2020
Non–derivative
Payables (excl. GST)
Lease liabilities
Dividends and distributions payable
Borrowings
Retirement Living
resident obligations1
Derivative
Interest rate derivatives
CCIRS
• Inflows
• Outflows
Financial liabilities
As at 30 June 2019
Non–derivative
Payables (excl. GST)
Dividends and distributions payable
Borrowings
Retirement Living
resident obligations1
Derivative
Interest rate derivatives
CCIRS
• Inflows
• Outflows
Carrying
amount
Contractual
cash flows
1 year or less
1 – 2 years
2 – 5 years
Over 5 years
Stockland
(839)
(43)
(253)
(839)
(43)
(253)
(5,022)
(5,684)
(332)
(2)
(253)
(440)
(94)
(2)
–
(177)
(6)
–
(236)
(33)
–
(944)
(1,066)
(3,234)
(2,695)
(2,695)
(2,599)
(1)
(4)
(273)
(40)
(287)
(40)
577
(626)
14
(16)
(37)
14
(16)
(129)
43
(50)
(9,165)
(9,850)
(3,668)
(1,080)
(1,389)
(91)
(81)
506
(544)
(3,713)
(497)
(336)
(4,704)
(2,597)
(205)
(15)
(522)
(336)
(5,711)
(350)
(336)
(514)
(2,597)
(2,496)
(199)
389
(396)
(9,372)
(41)
10
(14)
(3,741)
(34)
–
(409)
–
(46)
10
(13)
(492)
(53)
–
(85)
–
(1,763)
(3,025)
(1)
(100)
(86)
30
(41)
(1,914)
(26)
339
(328)
(3,225)
Financial liabilities
(8,354)
1
Refer to the net current asset deficiency position section under the Basis of preparation note for further explanation of the impact of Retirement Living resident obligations on
liquidity risk.
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2
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3
0
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Year ended 30 June 2020
145
As at 30 June 2020
$M
As at 30 June 2020
Non–derivative
Payables (excl. GST)
Lease liabilities
Dividends and distributions payable
Borrowings
Derivative
Interest rate derivatives
CCIRS
• Inflows
• Outflows
Financial liabilities
As at 30 June 2019
Non–derivative
Payables (excl. GST)
Dividends and distributions payable
Borrowings
Derivative
Interest rate derivatives
CCIRS
• Inflows
• Outflows
Carrying
amount
Contractual
cash flows
1 year or less
1 – 2 years
2 – 5 years
Over 5 years
Trust
(126)
(28)
(253)
(126)
(28)
(253)
(5,022)
(5,684)
(126)
–
(253)
(440)
–
(1)
–
–
(1)
–
–
(26)
–
(944)
(1,066)
(3,234)
(273)
(40)
(5,742)
(120)
(336)
(4,704)
(205)
(15)
–
(287)
–
577
(626)
(6,427)
(120)
(336)
(5,711)
(199)
–
389
(396)
(6,373)
(40)
(37)
(129)
(81)
14
(16)
(861)
(120)
(336)
(514)
(41)
10
(14)
(1,015)
14
(16)
(984)
–
–
43
(50)
506
(544)
(1,203)
(3,379)
–
–
–
–
(409)
(1,763)
(3,025)
(46)
10
(13)
(458)
(86)
30
(41)
(26)
339
(328)
(1,860)
(3,040)
Financial liabilities
(5,380)
19. ISSUED CAPITAL
KEEPING IT SIMPLE
This note explains material movements recorded in issued capital that are not explained elsewhere in the financial statements. The
movements in equity of Stockland 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 Stockland. 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
Stockland Trust shall be equal and the securityholders and unitholders shall be identical.
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.
The following table provides details of securities issued by Stockland:
146
Stockland Annual Report 2020
Stockland and Trust
Number of securities
Stockland
$M
Trust
$M
As at 30 June
2020
2019
2020
2019
2020
2019
Ordinary securities on issue
Issued and fully paid
2,384,351,503
2,384,351,503
8,692
8,692
7,393
7,393
Other equity securities
Treasury securities
(5,147,539)
(6,691,865)
Issued capital
2,379,203,964
2,377,659,638
(36)
8,656
(35)
8,657
(35)
7,358
(34)
7,359
19A. Movements in ordinary securities
Stockland and Trust
Number of securities
Stockland
$M
As at 30 June
Opening balance
Securities buy–back
2020
2019
2,384,351,503
2,434,469,276
–
(50,117,773)
Issued capital
2,384,351,503
2,384,351,503
2020
8,692
–
8,692
2019
8,884
(192)
8,692
Trust
$M
2020
7,393
–
7,393
2019
7,571
(178)
7,393
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 a period of up to 24 months. A total of 50,117,773 stapled securities
were bought back on market and cancelled following the commencement of the buy-back on 24 September 2018.
On 14 November 2019, Stockland announced the termination of the on–market buy–back programme due to the prevailing price of
Stockland securities and the related inactivity in the buy–back of securities since May 2019.
19B. 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
Number of securities
2020
6,691,865
2,910,142
2019
7,786,666
3,605,889
(4,454,468)
(4,700,690)
Opening balance
Securities acquired1
Securities transferred to
employees on vesting
Treasury securities
5,147,539
6,691,865
1
Average price:$4.37 per security (2019: $4.20).
Stockland
$M
Trust
$M
2020
2019
2020
2019
(35)
(13)
12
(36)
(34)
(15)
14
(35)
(34)
(12)
11
(35)
(33)
(15)
14
(34)
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Year ended 30 June 2020
147
19C. 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 Stockland.
The number and weighted average fair value of LTI rights and DSTI securities under the Security Plans are as follows:
Details
Opening balance
Adjustment to prior year1
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
2020
$2.79
–
$3.65
$3.31
$4.18
$3.33
2019
$2.97
–
$2.93
$2.72
$3.56
$2.79
2020
2019
9,195,117
11,022,675
(393,593)
–
4,816,864
4,923,260
(685,391)
(3,218,341)
(1,871,549)
(3,532,477)
11,061,448
9,195,117
1
Presentation in the current year is in line with the number of LTI rights and DSTI securities formally granted and vested under the offer terms. Comparatives figures were presented
in line with the expense accrual.
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 2020 was 3,490,356 (2019: 3,564,400). 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 the number of DSTI awards.
Assumptions made in determining the fair value of rights granted under the security plans are:
148
Stockland Annual Report 2020
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
2020
2019
1 July 2019
1 October 2018
$2.61
$4.21
–
6.38%
0.98%
3 years
17%
14%
$2.48
$4.11
–
6.34%
2.05%
2.8 years
17%
14%
The LTI rights outstanding as at 30 June 2020 of 9,115,913 (2019: 7,073,951), have a fair value ranging from $1.11 to $4.47 (2019:$1.11 to $4.80)
per right and a weighted average restricted period remaining of 1.5 years (2019: 1.5 years).
During the year, 129,560 rights (2019: 1,627,781) vested and will convert to securities with a weighted average fair value of $4.13 per security
(2019: $2.82).
DSTI
The fair value of securities granted under the DSTI plan has been calculated based on the 10 day Volume Weighted Average Price post
30 June 2019 of $4.47 (2019: $4.44).
The DSTI outstanding as at 30 June 2020, included in the table above, are 1,945,535 (2019: 2,121,166). The DSTI outstanding have a fair value
ranging from $4.05 to $4.47 (2019: $4.05 to $4.33) per security.
EMPLOYEE SECURITY PLAN
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.
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Year ended 30 June 2020
149
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
20A. 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 year
Origination and reversal of temporary differences
Deferred tax
Income tax in profit or loss
Stockland
2020
2019
–
(4)
(4)
–
(22)
–
(21)
(43)
(47)
–
–
–
–
(19)
(4)
(24)
(47)
(47)
1
2
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.
There is no current tax expense because tax and capital losses totalling $77.8 million (2019: $23 million) have been utilised to offset the Stockland Corporation Group's taxable income.
20B. Reconciliation of profit before tax to income tax recognised in profit or loss
Year ended 30 June
$M
Profit before tax
Less: Trust loss/(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
Other assessable income for the year
Under–provided in prior years
Income tax in profit or loss
Effective tax rate
Effective tax rate (excluding tax losses recognised)
150
Stockland Annual Report 2020
Stockland
2020
33
62
8
103
(31)
(11)
–
(1)
(4)
(47)
46%
46%
2019
358
(242)
13
129
(39)
(12)
4
–
–
(47)
36%
36%
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 loans. 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
Leases
Reserves
Tax losses carried forward
Tax assets/(liabilities)
Assets
Liabilities
2020
46
6
3
6
92
23
4
7
494
681
2019
52
7
3
13
14
7
–
7
521
624
2020
(163)
(440)
–
–
(81)
–
(4)
–
–
2019
(151)
(433)
–
–
–
–
–
–
–
(688)
(584)
Net
2020
(117)
(434)
3
6
11
23
–
7
494
(7)
2019
(99)
(426)
3
13
14
7
–
7
521
40
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Year ended 30 June 2020
151
MOVEMENT IN TEMPORARY DIFFERENCES
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)
Recognised in
Recognised in
2018
(79)
(427)
4
13
19
5
9
544
88
Retained
earnings1
–
–
–
(1)
–
–
–
–
(1)
Profit or
loss
(20)
1
(1)
1
(5)
2
(2)
(23)
(47)
2019
(99)
(426)
3
13
14
7
7
521
40
Retained
earnings2
Profit or
loss
–
(1)
(1)
(1)
–
–
–
(1)
(4)
(18)
(7)
1
(6)
(3)
16
–
(26)
(43)
2020
(117)
(434)
3
6
11
23
7
494
(7)
1
2
Impact of adoption of new accounting standards recorded in retained earning on 1 July 2018.
Impact of adoption of new accounting standards recorded in retained earning on 1 July 2019. Refer to note 36 for further details.
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 Stockland.
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
• differences relating to investments in subsidiaries to the extent that they are unlikely to reverse in the foreseeable future.
TRUST
lists); and
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 interest on the cross stapled loan with Stockland, all of the Trust's taxable income each year is attributed to its investors
and the Trust is not subject to tax. 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.
152
Stockland Annual Report 2020
Group structure
IN THIS SECTION
This section provides information which will help users understand how Stockland's structure affects the financial position and
performance of Stockland as a whole. Stockland 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:
Interests in joint arrangements;
1.
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 has interests in a number of individually immaterial joint ventures that are accounted for using the equity method. Stockland
did not have investments in associates at 30 June 2020 or 30 June 2019.
A joint arrangement is either a venture or operation over whose activities Stockland 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.
Stockland’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 Stockland’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 Stockland 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 Stockland’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.
As at 30 June
$M
Aggregate carrying amount of individually immaterial
joint ventures1
Aggregate share of:
• profit from continuing operations
• other comprehensive income
Total comprehensive income
Stockland
2020
354
72
–
72
2019
612
75
–
75
Trust
2020
361
71
–
71
2019
620
56
–
56
1
The decrease in carrying amount is due to the disposal of The King Trust.
The ownership interest in each of these immaterial entities is presented below:
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Year ended 30 June 2020
153
As at 30 June
%
Brisbane Casino Towers1
Compam Property Management Pty Limited2
Eagle Street Pier Pty Limited3
Fife Kemps Creek Trust
Stockland Fife Willawong Trust
Macquarie Park Trust
Riverton Forum Pty Limited
The King Trust4
Willeri Drive Trust5
Stockland
Trust
2020
50
100
50
50
50
51
50
–
50
2019
50
50
50
–
–
51
50
50
50
2020
–
100
–
50
50
51
50
–
50
2019
–
50
–
–
–
51
50
50
50
The remaining units in the Brisbane Casino Towers development were settled during the period.
1
2 Compam Property Management Pty Limited was the manager for The King Trust. Under the contract of sale for The King Trust, Stockland took full ownership of this entity. The entity
is now dormant and in the process of being wound up.
This entity is in the process of being wound up. An application to deregister this entity was lodged with ASIC in June 2020.
3
4 Owner of 135 King Street, Sydney NSW. Stockland disposed of the investment in The King Trust during the year.
5 Owner of Stockland Riverton, Riverton WA.
CHANGES TO JOINT VENTURES
During the year:
• Stockland entered into a Joint Venture with the Fife Group to develop Workplace and Logistics properties at Kemps Creek, NSW;
• Stockland entered into a Joint Venture with the Fife Group to develop Workplace and Logistics properties Willawong, QLD; and
• Stockland sold its interest in The King Trust, which held 135 King Street, Sydney NSW. As part of this arrangement Stockland took full
ownership of Compam Property Management Pty Limited, the previous managing entity of the King Trust.
There were no other changes to the above listed investments in joint ventures during the year.
23. OTHER ARRANGEMENTS
23A. 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.
Stockland 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 2020, Stockland held a 19.9% interest (2019: 19.9%) in SDRT No. 1 (the Fund), valued at $0.4 million (2019: $8 million).
Stockland’s interest in this fund is included in the ‘Other Financial Assets’ line item on the balance sheet.
The maximum exposure to risk is the carrying value of Stockland's investment in the Fund. At a unitholder meeting in March 2019, the
unitholders passed a resolution to wind-up the Fund and sell all of the properties. All properties in the Fund were sold during the year and
it is now in the process of being wound up.
23B. Joint operations
Interests in unincorporated joint operations are consolidated by recognising Stockland’s proportionate share of the joint operations’
assets, liabilities, revenues and expenses 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.
24. CONTROLLED ENTITIES
The following entities were 100% controlled during the current and prior years:
154
Stockland Annual Report 2020
CONTROLLED ENTITIES OF STOCKLAND CORPORATION LIMITED
Albert & Co Pty Ltd1
ARC Joint Ventures Pty. Ltd.1
AW Bidco 1 Pty Limited2
AW Bidco 2 Pty Limited2
AW Bidco 4 Pty Limited2
AW Bidco 5 Pty Limited2
AW Bidco 6 Pty Limited2
Bayview Road Property Trust
Bellevue Gardens Trust
Eisha Pty Ltd2
Enaard Pty Ltd2
Endeavour (No. 2) Unit Trust
IOR Friendly Society Pty Limited1
Jimboomba Trust
JT Bid Co No. 1 Pty Limited
JT Bid Co No. 2 Pty Limited
Knowles Property Management Unit Trust
Knox Unit Trust
LAB-52 Bricklet Pty Limited2
LAB-52 Holdings Pty Limited2
LAB-52 Yodel Pty Limited2
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
Rogan’s Hill Retirement Village Trust
SDRT 2 Property 1 Trust
SDRT 2 Property 2 Trust
SDRT 2 Property 3 Trust
Stockland Eurofinance Pty Limited1
Stockland Farrington Grove Retirement Village Pty Limited
Stockland Financial Services Pty Limited1
Stockland Golden Ponds Forster Pty Limited
Stockland Greenleaves Management Services Pty Limited
Stockland Greenleaves Village Pty Limited
Stockland Hibernian Investment Company Pty Limited1
Stockland Highett Pty Limited
Stockland Highlands Pty Limited1
Stockland Highlands Retirement Village Pty Limited
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 Land Lease Communities Holdings Pty Limited2
Stockland Land Lease Landlord Pty Limited2
Stockland Land Lease Management Pty Limited2
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 Mernda Retirement Village Pty Limited
Stockland Miami (Fund) Unit Trust
Stockland Miami (Non–Fund) Unit Trust
Stockland Miami (QLD) Pty Limited1
Stockland Midlands Terrace Adult Community Pty Limited1
Stockland Newport Retirement Village Pty Limited
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 Pine Lake Management Services Pty Limited
Stockland Pine Lake Village Pty Limited
Stockland PR1 Trust
Stockland PR2 Trust
Stockland PR3 Trust
Stockland PR4 Trust
Stockland Property Management Pty Ltd1
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Year ended 30 June 2020
155
SDRT 2 Property 4 Trust
Stockland Property Services Pty Limited1
Stockland (Boardwalk Sub 2) Pty Limited
Stockland Queenslake Village Pty Limited
Stockland (Queensland) Pty. Limited1
Stockland (Russell Street) Pty Limited1
Stockland Retail Services Pty Limited1
Stockland Retirement Pty Limited1
Stockland A.C.N 116 788 713 Pty Limited1
Stockland Richmond Retirement Village Pty Limited
Stockland Aevum Limited1
Stockland Ridgecrest Village Management Services Pty Limited
Stockland Aevum SPV Finance No. 1 Pty Limited
Stockland Ridgecrest Village Pty Limited
Stockland Affinity Retirement Village Pty Limited
Stockland RRV Pty Limited1
Stockland Bellevue Gardens Pty Limited
Stockland RVG (Queensland) Pty Limited
Stockland Bells Creek Pty Limited1
Stockland Salford Living Pty Limited1
Stockland Birtinya Retirement Village Pty Limited1
Stockland Scrip Holdings Pty Limited
Stockland Buddina Pty Limited1
Stockland Selandra Rise Retirement Village Pty Limited
Stockland Caboolture Waters Pty Limited1
Stockland Caloundra Downs Pty Limited1
Stockland Capital Partners Limited
Stockland Care Foundation Pty Limited
Stockland Care Foundation Trust
Stockland Castlehaven Pty Limited
Stockland Castleridge Pty Limited
Stockland Catering Pty Limited
Stockland CH Finance Pty Limited2
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 The Grove Retirement Village Pty Limited
Stockland The Hastings Valley Parklands Village Pty Limited
Stockland The Pines Retirement Village Pty Limited1
Stockland Trust Management Limited
Stockland Development (Holdings) Pty Limited1
Stockland Vermont Retirement Village Pty Limited1
Stockland Development (NAPA NSW) Pty Limited1
Stockland WA (Estates) Pty Limited1
Stockland Development (NAPA QLD) Pty Limited1
Stockland WA Development (Realty) Pty Limited1
Stockland Development (NAPA VIC) Pty Limited1
Stockland WA Development (Vertu Sub 1) Pty Limited
Stockland Development (PHH) Pty Limited1
Stockland WA Development Pty Limited1
Stockland Development (PR1) Pty Limited
Stockland Wallarah Peninsula Management Pty Limited1
Stockland Development (PR2) Pty Limited
Stockland Wallarah Peninsula Pty Limited1
Stockland Development (PR3) Pty Limited
Stockland Wantirna Village Pty Limited1
Stockland Development (PR4) Pty Limited
Stockland Willowdale Retirement Village Pty Limited
Stockland Development (Sub3) Pty Limited
Stockland Willows Retirement Village Services Pty Limited
Stockland Development (Sub4) Pty Limited
Templestowe Unit Trust
Stockland Development (Sub5) Pty Limited
The Mount Gravatt Retirement Village Unit Trust
Stockland Development (Sub7) Pty Limited1
The Pine Lake Management Services Unit Trust
Stockland Development Pty Limited1
Stockland Direct Retail Trust No. 2
Stockland Epping Retirement Village Pty Limited
Toowong Place Pty Limited
Vermont Unit Trust
1
2
These entities are parties to the Deed of Cross Guarantee and members of the Closed Group as at 30 June 2020.
These entities were formed/incorporated or acquired in the current financial year.
156
Stockland Annual Report 2020
CONTROLLED ENTITIES OF STOCKLAND TRUST
9 Castlereagh Street Unit Trust
Stockland Harrisdale Trust
ADP Trust
Advance Property Fund
Advance Property Fund No. 21
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
Stockland Industrial No. 1 Property 8 Trust
Flinders Industrial Property Subtrust (No. 1)
Stockland Industrial No. 1 Property 9 Trust
Hervey Bay Holding Trust
Hervey Bay Sub Trust
Industrial Property Trust
Stockland Industrial No. 1 Property 11 Trust
Stockland Kemps Creek Industrial 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
SDRT1 Property # 3 Trust
SDRT3 Property # 1 Trust
SDRT3 Property # 2 Trust
SDRT3 Property # 3 Trust
Shellharbour Property Trust
Stockland Baringa Shopping Centre Trust
Stockland Bayswater Unit Trust
Stockland Birtinya Shopping Centre Trust
Stockland Bundaberg Trust
Stockland Brooklyn Industrial Trust
Stockland Castlereagh Street Trust
Stockland CP Acquisition Trust1
Stockland CPR Industrial Trust1
Stockland Direct Diversified Fund
Stockland Direct Office Trust No. 4
Stockland Direct Retail Trust No. 3
Stockland Eastern Creek Trust
Stockland Finance Holdings Pty Limited2
Stockland Finance Pty Limited2
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 Wholesale Office Trust No. 1
Stockland Wholesale Office Trust No. 2
Stockland Richlands Unit Trust
Stockland St Marys Unit Trust
Stockland Tingalpa Unit Trust
Stockland Truganina Industrial Trust
Stockland Willawong Industrial Trust
Stockland Willawong Industrial Trust No. 21
Stockland Wonderland Drive Property Trust
SWOT2 Sub Trust No. 1
SWOT2 Sub Trust No. 2
SWOT2 Sub Trust No. 3
The M_Park Trust1
1
2
These entities were formed/incorporated or acquired in the current financial year.
These entities are parties to the Deed of Cross Guarantee (Finance) as at 30 June 2020.
25. DEED OF CROSS GUARANTEE
Stockland Corporation Limited and certain wholly-owned companies (the Closed Group, also the Extended 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.
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Year ended 30 June 2020
157
Pursuant to the requirements of this instrument, a summarised consolidated balance sheet as at 30 June 2020 and consolidated statement
of comprehensive income for the year ended 30 June 2020, comprising the members of the Closed Group after eliminating all transactions
between members, are set out on the following pages.
Summarised consolidated balance sheet
As at 30 June
$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
Deferred tax liabilities
Other liabilities
Non–current liabilities
Liabilities
Net assets
Issued capital
Reserves
Accumulated losses
Securityholders’ equity
158
Stockland Annual Report 2020
Closed Group
2020
31
63
364
9
467
–
467
19
2,840
2,329
–
39
32
170
–
16
5,445
5,912
546
1,462
311
12
2,331
204
2,394
38
367
7
14
3,024
5,355
557
1,298
2
(743)
557
2019
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
Summarised consolidated statement of comprehensive income
Year ended 30 June
$M
Profit before tax
Income tax
Profit after tax
Other comprehensive income
Total comprehensive income
Summarised movement in consolidated accumulated losses
Year ended 30 June
$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/(Loss) for the year
Other comprehensive income
Total comprehensive income
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 2020 (2019: $nil).
PARENT ENTITY CONTINGENCIES
Closed Group
2020
121
(47)
74
–
74
Closed Group
2020
(817)
–
74
(743)
2019
129
(29)
100
–
100
2019
(917)
–
100
(817)
Stockland Corporation Limited
Stockland Trust
2020
2019
2020
2019
57
–
57
4,659
4,751
–
3,838
913
1,298
2
(387)
913
85
(6)
79
4,555
4,688
–
3,831
857
1,299
2
(444)
857
(62)
(81)
(143)
1,648
24,427
11,467
16,210
8,217
7,356
8
853
8,217
242
(6)
236
466
22,678
9,597
13,739
8,939
7,358
86
1,495
8,939
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There are no contingencies within either parent entity as at 30 June 2020 (2019: $nil).
PARENT ENTITY CAPITAL COMMITMENTS
Neither parent entity has entered into any capital commitments as at 30 June 2020 (2019: $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.
Year ended 30 June 2020
159
Other items
IN THIS SECTION
This section includes information about the financial performance and position of Stockland 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 FLOWS
27A. Reconciliation of profit after tax to net cash flows from operating activities
Stockland
2020
(14)
2019
311
Trust
2020
(62)
2019
242
23
86
(7)
(20)
4
(29)
–
17
(3)
38
604
11
9
(1)
38
9
(25)
47
334
77
(71)
1,127
7
133
(9)
21
–
(26)
1
16
(3)
38
297
12
–
(3)
(69)
(4)
(40)
48
(169)
43
(210)
394
23
86
(6)
(21)
4
–
–
–
(3)
–
466
–
–
(6)
(6)
10
–
–
(5)
–
–
6
134
(3)
21
–
–
–
–
(3)
–
210
–
–
7
(11)
(10)
–
–
(1)
–
–
480
592
$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 (gain)/loss 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)
Equity–settled security based payments
Provisions
Other items
Adjustments for movements in:
• Receivables
• Other assets
• Inventories
• Deferred tax assets
• Payables and other liabilities
• Resident obligations (net of impact of
• Other provisions
village disposals)
Net cash flows from operating activities
160
Stockland Annual Report 2020
27B. Reconciliation of movement in financial liabilities arising from financing activities
Stockland and Trust
Non cash movements
Net cash flow
Foreign
exchange
movements
Fair value
changes1 Closing balance
259
(140)
(100)
19
82
200
175
457
105
–
–
105
10
–
–
10
193
1
–
194
299
–
–
299
4,329
618
75
5,022
3,772
757
175
4,704
Opening
balance
3,772
757
175
4,704
3,381
557
–
3,938
As at 30 June
$M
Offshore medium term notes
Domestic medium term notes and
commercial paper
Bank facilities
2020
Offshore medium term notes
Domestic medium term notes and
commercial paper
Bank facilities
2019
1
Includes amortisation of capitalised transaction cost.
28. COMMITMENTS
CAPITAL EXPENDITURE COMMITMENTS
Commitments for acquisition of land and future development costs not recognised on balance sheet at reporting date are as follows:
As at 30 June
$M
Inventories
Investment properties
Capital expenditure commitments
29. CONTINGENT LIABILITIES
KEEPING IT SIMPLE
Stockland
Trust
2020
374
109
483
2019
395
106
501
2020
2019
–
65
65
–
30
30
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 2020 comprise bank guarantees, letters of credit, property indemnities and insurance bonds:
As at 30 June
$M
Bank guarantees, letters of credit, property indemnities and insurance bonds issued to local government
and other authorities against performance contracts, maximum facility $680 million (2019: $750 million)
Stockland and Trust
2020
419
2019
443
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Year ended 30 June 2020
161
30. RELATED PARTY DISCLOSURES
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
2020
315
239
2,039
–
–
2019
564
77
2,423
–
–
2,593
3,064
–
–
–
–
–
–
–
–
–
–
2020
2019
–
–
–
9,370
229,101
238,471
36,914
27,836
59,914
3,787
128,451
–
–
–
4,774
282,166
286,940
37,700
28,304
63,156
6,183
135,343
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 (2019: 0.3 to 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 $2,955 million (2019: $3,534 million) repayable in 2023. Interest on the
loan is payable monthly in arrears at interest rates within the range of 6.2 to 7.3% during the year ended 30 June 2020 (2019: 7.5 to 8.2%).
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
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. It is
calculated based on a fixed 4% 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% 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 $516,548 (2019: $382,800) due from the unlisted property funds.
As at 30 June 2020, the carrying amount of Stockland’s investment in unlisted property funds was $373,022 (2019: $8,323,291).
162
Stockland Annual Report 2020
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
Movement in annual and long service leave provisions
Redundancy provision
Personnel expenses
PERSONNEL EXPENSES
Stockland
Trust
2020
197
11
12
(1)
1
220
2019
210
12
14
3
6
245
2020
2019
–
–
–
–
–
–
–
–
–
–
–
–
The total personnel expenses for the year was $220 million (2019: $245 million), which includes $11,453,466 of equity-settled security based
payment transactions (2019: $12,407,197).
ANNUAL LEAVE
Accrued annual leave of $10 million (2019: $13 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 $12.4 million (2019: $14.3 million).
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
2020
5,797
234
97
–
4,199
10,327
2019
8,631
255
68
817
2,872
12,643
2020
2019
–
–
–
–
–
–
–
–
–
–
–
–
Information regarding individual Directors’ and Executives’ remuneration is provided in the remuneration report on pages 69 to 90 of the
Directors’ report.
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OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
There are transactions between Stockland 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 Stockland. These purchases are at market rates and on
an arm’s length basis. There was no purchase of Residential land lots during the current year. During the prior year, this amounted to $518
thousand, net of deposits received in 2018 of $58 thousand.
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
Remuneration for audit services
Other non–audit services1
Remuneration for non–audit services
Auditor remuneration
Stockland
Trust
2020
2019
2020
2019
1,812
104
687
2,603
530
530
3,133
1,942
112
647
2,701
199
199
2,900
570
–
410
980
–
–
980
561
–
393
954
–
–
954
1 Other non-audit services include agreed upon procedures for tenant claims under the Commercial Code of Conduct, economic, land and traffic analysis at masterplanned
communities, and an independent review of Stockland's remuneration process.
Auditor’s fees are paid by Stockland Development Pty Limited on behalf of Stockland.
34. EVENTS SUBSEQUENT TO THE END OF THE YEAR
STOCKLAND AND TRUST
The COVID-19 pandemic has resulted in a level of uncertainty in the real estate sector, both as at 30 June 2020 and in the period between
30 June 2020 and the date of this report. The estimated short-term impacts of this uncertainty have been factored into investment property
valuations and into the assessment of potential impairments of inventories and trade receivables at balance date. However, at the date
of this report, the duration of the impact of the pandemic, the pace of the subsequent economic recovery and the future effects on the
Group cannot be estimated with any degree of accuracy.
On 2 August 2020, the Victorian Government imposed Stage 4 restrictions for metropolitan Melbourne. Similarly, Stage 3 restrictions have
been in place in regional Victoria since 5 August 2020. As at 30 June 2020, 18% of Stockland’s assets are located in Victoria (8% Commercial
Property, 7% Residential and 3% Retirement Living). Only two of Stockland’s Retail Town Centres are in the metropolitan Melbourne area,
one of which, The Pines in Doncaster, was contracted for sale1 in the period since 30 June 2020. Although the independent valuers had not
specifically considered this level of lockdown in Victoria as likely prior to providing final valuations to the Group as at 30 June 2020, they
had adopted a range of adjustments across the entire portfolio to reflect an ongoing short term impact from COVID-19. These adjustments
were applied over a forward looking period of between six months to two years with an assumed return to long-term averages from that
point on. As a result, at the date of this report the valuers do not expect the Victorian restrictions to have a material impact on overall
valuations of Commercial Property.
Advice from the independent external valuers of our investment property portfolio in the period from 30 June 2020 up to the signing of
this report has confirmed that there has been insufficient transactional evidence to indicate material movements in the market since the
valuation date of 30 June 2020.
Given the above, the Directors have concluded that allowances made at 30 June 2020 in the investment property portfolio are reasonable
and there has been no subsequent changes to the valuations stated at balance date.
Negotiations are continuing between Stockland and its tenants under the terms of the Commercial Code of Conduct for small to medium
enterprises (SME) as well as those non-SME tenants seeking support. As at the date of this report, 52% of all relevant retail tenants by
number have formally agreed and signed, or agreed in principle, for the receipt of rental abatements. Workplace and Logistics tenants
(who are much less impacted than Retail tenants) are significantly further advanced in negotiating their agreements at approximately 64%
1
Subject to finance and FIRB approval
164
Stockland Annual Report 2020
and 98% by number respectively. In addition, rent collections across the portfolio continued to improve throughout July 2020 with over
70% of billed rent for the fourth quarter of FY20 and over 80% of billed rent for the second half of FY20 collected by 31 July 2020.
On 12 August 2020, Stockland announced it was renegotiating an existing arrangement to acquire land in Marsden Park, Sydney (Angliss).
As previously disclosed to the market on 20 December 2017, Stockland had entered into an agreement to acquire approximately 184
hectares of land for future residential development in Marsden Park for $398 million on deferred terms over five years. The acquisition
was conditional on land rezoning and additional terms. As these conditions remained outstanding, the parties have by mutual agreement
ended Stockland’s obligations under the original agreement on 12 August 2020 and entered into a new, exclusive arrangement to negotiate
terms in relation to the proposed acquisition. The associated land asset and liability continue to be reflected in the financial statements
for the year ended 30 June 2020.
Subsequent to the end of the year, contracts of sale were also exchanged for the following assets:
• Stockland The Pines, Doncaster East Vic for a gross consideration2,3 of $155 million
• Stockland Baulkham Hills, Baulkham Hills NSW for a gross consideration3 of $141 million
• Stockland Caloundra, Caloundra Qld for a gross consideration3 of $105 million
• North Shore Townsville, Townsville Qld for a gross consideration3 of $17 million
• Balcatta Distribution Centre, Balcatta WA for a gross consideration3 of $64 million
Other than disclosed in this note or 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 affairs in future years of Stockland and the Trust.
35. 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 Stockland's profit or loss and balance sheet categories
and are not specific to a single category.
35A. Principles of consolidation
CONTROLLED ENTITIES
The consolidated financial statements of Stockland incorporates the assets, liabilities and results of all controlled entities.
Controlled entities are all entities over which the parent entities, Stockland or the Trust, are exposed to, or have a right to, variable returns
from their involvement with the entity and have the ability to affect those returns through their 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.
Assets and liabilities denominated in foreign currencies are translated to Australian dollars at balance date using the following applicable
exchange rates:
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.
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Subject to finance and FIRB approval
3 Gross consideration is consideration before completion adjustments such as committed capital expenditures, incentives, rental guarantees and/or net working capital
Year ended 30 June 2020
165
35B. Reserves
SECURITY BASED PAYMENTS RESERVE
The security based payments reserve arises due to the rights and deferred securities awarded under the LTI and DSTI plans 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 and the cost to acquire the treasury securities is recognised in the security based payments 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.
HEDGING RESERVE
The hedging reserve captures both cash flow hedges and fair value hedges.
Cash flow hedging
The hedging 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 hedging
The hedging reserve comprises the cumulative net change in the fair value of available for sale financial assets until the assets are
derecognised or impaired.
36. ADOPTION OF NEW ACCOUNTING STANDARDS
36A. AASB 16 Leases
See note 10 for Stockland's accounting policy for leases. Stockland has adopted AASB 16 retrospectively from 1 July 2019 but has
not restated comparatives for the 2019 reporting period, as permitted under the specific transitional provisions in the standard. The
reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 July
2019. 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.
GROUND LEASES
On adoption of AASB 16 on 1 July 2019, a lease liability reflecting the leasehold arrangements of investment properties is separately
disclosed in the balance sheet and the carrying value of the investment properties adjusted (i.e. grossed up) so that the net of these two
amounts equals the fair value of the investment properties. The lease liabilities are calculated as the net present value of the future lease
payments discounted at the incremental borrowing rate. The weighted average incremental borrowing rate as of 1 July 2019 was 4.9%
per annum.
At 1 July 2019, $42 million of lease liabilities for ground leases at Durack Centre, 263 Adelaide Terrace, Perth WA and Export Distribution
Centre, Brisbane Airport Qld were recognised in the balance sheet.
ADJUSTMENTS RECOGNISED ON ADOPTION OF AASB 16
On adoption of AASB 16, Stockland recognised lease liabilities in relation to leases which had previously been classified as ‘operating leases’
under the principles of AASB 117 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted
using Stockland's incremental borrowing rate as of 1 July 2019. Stockland's weighted average incremental borrowing rate applied to the
lease liabilities on 1 July 2019 was 4.9% per annum.
The difference between the operating lease commitments disclosed at 30 June 2019 discounted using the incremental borrowing rate at
1 July 2019 and the balance of the lease liabilities recognised at 1 July 2019 reflects:
• the exclusion of leases committed to but for which the term had not yet commenced; and
• adjustments as a result of different treatment of extension and termination options.
166
Stockland Annual Report 2020
The impact of the adoption of AASB 16 on the financial report as at 1 July 2019 is summarised as follows:
$M
Right–of–use assets
Investment properties (non–current)
Other assets (non–current)
Lease liabilities
Other liabilities (current lease liabilities)
Other liabilities (non–current lease liabilities)
Net assets
Retained earnings (equity)
Trust
Corporation
Ground leases
Other leases
Stockland
36
–
–
(42)
(6)
6
–
5
(1)
(5)
(1)
1
36
5
(1)
(47)
(7)
7
A reconciliation of operating lease commitments previously disclosed under AASB 117 to the lease liabilities recognised under AASB 16 is
summarised as follows:
$M
Operating lease commitments disclosed as at 30 June 2019
Add: finance lease liabilities recognised as at 30 June 2019
Discounted using Stockland’s weighted average incremental borrowing rate of 4.9%
Less: lease commitments derecognised upon acquisition of 100% of Stockland Piccadilly
Less: short–term leases recognised on a straight-line basis as expense
Less: other adjustments on adoption of AASB 16
Lease liability recognised as at 1 July 2019
PRACTICAL EXPEDIENTS APPLIED
Stockland
39
86
(45)
(27)
(1)
(4)
48
In applying AASB 16 for the first time, Stockland used the following practical expedients permitted by the standard:
• the use of a single discount rate to a portfolio of leases with reasonably similar characteristics;
• reliance on previous assessments on whether leases are onerous;
• the accounting for operating leases with a remaining lease term of less than 12 months as at 1 July 2019 as short–term leases;
• the exclusion of initial direct costs for the measurement of the right–of–use asset at the date of initial application; and
• for leases previously classified as an operating lease under AASB 117, the right-of-use asset was measured as if the standard has
been applied since the commencement date, but was discounted using Stockland's incremental borrowing rate at the date of
initial application.
Stockland also elected not to reassess whether a contract is or contains a lease at the date of initial application. Instead, for contracts
entered into before the transition date, Stockland relied on its assessment made in applying AASB 117 and Interpretation 4 Determining
whether an Arrangement contains a Lease.
36B. Accounting standards issued but not yet in effect
Certain new accounting standards and interpretations have been published that are not mandatory for the year ended 30 June 2020.
Stockland’s assessment of the impact of these new standards and interpretations is set out below. Stockland has not elected to early adopt
any accounting standards during the period.
AASB 2019–1 AMENDMENTS TO AUSTRALIAN ACCOUNTING STANDARDS – REFERENCES TO THE
CONCEPTUAL FRAMEWORK
AASB 2019–1 Amendments to Australian Accounting Standards – References to the Conceptual Framework is an update to the Conceptual
Framework. Changes are applicable to annual reporting periods beginning on or after 1 January 2020. Key changes include revising the
definitions of an asset and a liability.
Stockland has assessed the revised definitions and has determined that there will be no material impact from the changes in the
definitions. Stockland has also assessed the other changes to the Conceptual Framework and determined there will be no material impact
upon adoption.
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Year ended 30 June 2020
167
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):
• the financial report and notes of the consolidated stapled entity, comprising Stockland Corporation Limited and its controlled
financial year ended on that date; and
entities, including Stockland Trust and its controlled entities, (Stockland) and Stockland Trust and its controlled entities (the Trust),
set out on pages 91 to 167, are in accordance with the Corporations Act 2001, including:
• giving a true and fair view of Stockland’s and the Trust’s financial position as at 30 June 2020 and of their performance, for the
• complying with Australian Accounting Standards and the Corporations Regulations 2001; and
• there are reasonable grounds to believe that both Stockland and the Trust will be able to pay their debts as and when they become
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.
due and payable.
3. Stockland Trust has operated during the year ended 30 June 2020 in accordance with the provisions of the Trust Constitution of
29 October 2013, as amended from time to time.
4. The Register of Unitholders has, during the year ended 30 June 2020, been properly drawn up and maintained so as to give a true
account of the unitholders of 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 2020.
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
Mark Steinert
Managing Director
Dated at Sydney, 25 August 2020
168
Stockland Annual Report 2020
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Year ended 30 June 2020
169
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. 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 2020 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 2020 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 flows for the year then ended the notes to the financial report, 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 (including Independence Standards) (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.
170
Stockland Annual Report 2020
Our audit approach 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 individually or in aggregate, they could reasonably be expected to influence the economic decisions of 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 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 industry in which they operate. Materiality Audit scope Key audit matters For the purpose of our audit of Stockland and the Stockland Trust Group, we used overall materiality of $41.3 million and $29 million, respectively, which represents approximately 5% of Funds from Operations. The metric is defined in note 2 of the financial report. We applied this threshold, together with qualitative considerations, to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial report as a whole. We chose Funds from Operations because, in our view, it is the primary metric against which the performance of Stockland and the Stockland Trust Group are most commonly measured in the industry. We chose 5% based on our professional judgement, noting that it is within the common range relative to profit-based benchmarks. Our audit focused on where Stockland and the Stockland Trust Group made subjective judgements; for example, significant accounting estimates involving assumptions and inherently uncertain future events. The audit team consisted of individuals with the appropriate skills and competencies needed for the audit, and this included industry expertise in real estate, as well as IT specialists, valuation, tax and treasury experts. Amongst other relevant topics, we communicated the following key audit matters to the Audit Committee: Valuation of Investment properties – Commercial Property Valuation of Investment properties - Retirement Living Carrying value of inventory and cost of property developments sold Recoverability of lease receivables These are further described in the Key audit matters section of our report. O
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Year ended 30 June 2020
171
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 are 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. Key audit matter How our audit addressed the key audit matter Valuation of Investment properties – Commercial Property (Refer to note 6) Stockland - $8,890 million Stockland Trust Group - $8,978 million Stockland’s and the Trust’s Commercial Property portfolio (“Commercial Property”) consisted primarily of retail town centres, logistics, and workplace investment properties, as well as properties under development at 30 June 2020. Commercial Properties were valued at fair value as at reporting date using a combination of the income capitalisation, discounted cash flow and the direct comparison methods. The value of Commercial Properties was dependent on the valuation methodology adopted and the inputs into the valuation model. Factors such as prevailing market conditions, the individual nature, condition and location of each property and the expected future income for each property, directly impact fair values. Amongst others, the following assumptions were key in establishing fair value: net market rent average market rental growth 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 6. Our procedures included, amongst others: Obtaining an understanding of Stockland’s process for determining the valuation of Commercial Property; Engaging PwC’s real estate valuation experts where relevant; Assessing the scope, competence and objectivity of the external valuation firms engaged by Stockland to provide external valuations at reporting date. We met with a sample of the external valuation experts across each of the asset classes to assess the reasonableness of the significant assumptions including COVID-19 specific adjustments; Assessing the appropriateness of the valuation methodologies utilised, and reconciling the fair value recorded in the accounting records to the external valuation reports for all the properties externally valued; Selecting a risk-based sample of properties to assess the reasonableness of significant assumptions with reference to market data where possible. We agreed the underlying lease terms to the tenancy schedule and traced the rental income used in the external valuation to the tenancy schedule. We assessed the reasonableness of income related assumptions including adjustments made in response to the impacts of COVID-19, and tested the mathematical accuracy of a sample of the valuations;
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Stockland Annual Report 2020
Key audit matter How our audit addressed the key audit matter This was a key audit matter because of the: relative size of the Commercial Property portfolio to net assets and related valuation movements, and inherent subjectivity of the key assumptions that underpin the valuations and the general market uncertainty arising from the outbreak of COVID-19. Considering the adequacy of the disclosures made in relation to the significant assumptions, including the sources of estimation uncertainty in note 6A in light of the requirements of Australian Accounting Standards. Valuation of Investment properties - Retirement Living (Refer to note 7) Stockland - $3,936 million 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 investment properties, as well as properties under development. Retirement Living investment properties are valued at fair value at the reporting date using a discounted cash flow analysis. The value of investment properties in this segment is dependent on the terms of the residents’ contracts and the inputs to the valuation model. Factors such as prevailing market conditions, the individual nature, condition and location of each property and the expected future income for each property directly impact fair values. Amongst others, the 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 provides for that all key valuation assumptions be Our procedures included, amongst others: Obtaining an understanding of Stockland’s process for determining the valuation of Retirement Living investment properties; Engaging PwC’s valuation experts where relevant; Assessing the scope, competence and objectivity of the external valuer engaged by Stockland to provide assurance on the key assumptions used in the valuation model. We met with the external valuer to assess the reasonableness of the significant assumptions and COVID-19 specific considerations; Assessing the appropriateness of the valuation methodology utilised; For a risk-based sample of retirement living villages, we assessed the reasonableness of significant assumptions. We also agreed the underlying resident information and terms to resident contracts for a sample and traced those to the inputs used in the valuation model and tested the mathematical accuracy of the valuations. Considering the adequacy of the disclosures made in relation to the significant assumptions, including sources of estimation uncertainty in note 7A in light of the requirements of Australian Accounting Standards. O
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Year ended 30 June 2020
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Key audit matter How our audit addressed the key audit matter externally appraised by an external valuer each reporting period as explained in note 7. 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 and the general market uncertainty arising from the outbreak of COVID-19. Carrying value of inventory and cost of property developments sold (Refer to note 5) Stockland - $3,530 million Stockland Trust Group – this KAM is not applicable as the Trust does not hold inventory assets. Carrying value of inventory Stockland has a portfolio of development projects that it develops for future sale, which are classified as inventory. Stockland’s inventory is accounted for at the lower of the cost and net realisable value for each inventory project, as assessed at each reporting date as outlined in note 5. The cost of the inventory is calculated using actual land acquisition costs, construction costs, development related costs and interest capitalised for eligible projects. Net realisable value is calculated based on the estimated selling price of the inventory, less the estimated costs of completion, including forecast capitalised interest, and associated selling costs. Each of these factors is impacted by expected future market and economic conditions which include sales prices, sales rates and development costs. Where an inventory project’s net realisable value is lower than its cost, the inventory project is written down to its net realisable value under Australian Accounting Standards. Our procedures included, amongst others: Obtaining an understanding of Stockland’s process for determining the net realisable value (NRV) of inventory and related considerations in response to the impacts of COVID-19; Reconciling the carrying value of each of the projects to the accounting records and comparing the carrying value to each project’s NRV; Selecting a risk-based sample of NRV assessments to assess the reasonableness of significant assumptions; Tracing a sample of additions included in the cost of the project (e.g. project development costs) to the relevant invoice to check the nature and amount of the costs capitalised. We also checked that interest was appropriately capitalised to inventory in accordance with AASB 123: Borrowing Costs; Tested a sample of sales recorded to the underlying sale documents and recalculated the related profit margin recognised; and Considering the adequacy of the disclosures made in relation to the significant assumptions, including the sources of estimation uncertainty in note 5 in light of the
174
Stockland Annual Report 2020
Key audit matter How our audit addressed the key audit matter Cost of property developments sold When inventory is sold by Stockland the carrying amount of the relevant inventory is recognised as an expense in the same period that the sale is recognised. The cost of property developments sold recognised is based directly upon the forecast profit margin for the relevant project as a whole, and results in the recognition of a profit margin in the period the inventory is sold. These were key audit matters because of the: relative size of the inventory balance to net assets, and inherent subjectivity of the key assumptions that underpin the net realisable value, and the profit margin recognised. requirements of Australian Accounting Standards. Recoverability of lease receivables (Refer to note 8, page 124) Stockland and Stockland Trust Group – $73 million ($102m gross of expected abatements of $29m - refer note 8, page 125) The impact of COVID-19 has resulted in an increased level of lease receivables at 30 June 2020. The introduction of the National Mandatory Code of Conduct - SME Commercial Leasing Principles During COVID-19 (the Code) also requires Stockland and its tenants share economic impacts arising from COVID-19 as outlined in note 8. As a result, judgement was required to estimate the expected amount of receivables which will be forgiven/abated through negotiation and for amounts deferred or in arrears the level of loss provisioning required. This was a key audit matter due to the: relative increase and amount of tenant receivables at 30 June 2020, Our procedures included amongst others: Obtaining an understanding of Stockland’s process for determining the Expected Credit Loss (ECL) allowance for lease receivables; Meeting with management to discuss the Code and the risk indicators developed and identified to categorise the tenants by high, medium or low risk of default and to determine the expected loss ratio for each category; Assessing the reasonableness of Stockland’s methodology and calculation of the ECL allowance at year-end against the requirements of AASB 9: Financial Instruments; Agreeing a sample of tenant specific inputs included in the ECL assessment, and a sample of rent abatements provided to tenants under the Code, to relevant supporting information; O
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Year ended 30 June 2020
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Key audit matter How our audit addressed the key audit matter the judgement required in assessing the expected level of abatements and loss provisioning required, and inherent subjectivity of the key assumptions that underpin the recoverability assessment arising from the outbreak of COVID-19. Recalculating the mathematical accuracy of the calculation of the ECL allowance at 30 June 2020; and Considering the adequacy of the disclosures made in relation to the significant assumptions in note 8 in light of the requirements of Australian Accounting Standards. Other information 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 responsible for the other information. The other information comprises the information included in the Annual Report for the year ended 30 June 2020, but does not include the financial report and our auditor’s report 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. 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. 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. 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 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 error. 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 intend to liquidate Stockland and the Stockland Trust Group or to cease operations, or have no realistic alternative but to do so.
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Stockland Annual Report 2020
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 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 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. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our auditor's report. Report on the remuneration report Our opinion on the remuneration report We have audited the remuneration report included in pages 69 to 90 of the directors’ report for the year ended 30 June 2020. In our opinion, the remuneration report of Stockland and the Stockland Trust Group for the year ended 30 June 2020 complies with section 300A of the Corporations Act 2001. Responsibilities 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 N R McConnell Sydney Partner 25 August 2020 Securityholder
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Amberton, WA
Securityholders
As at 31 July 2020, there were 2,384,351,503 securities on issue and the top 20 securityholders as at 31 July 2020 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 14 November 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. On 14 November 2019 Stockland announced the termination
of the on market buy-back program.
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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