Stockland Retirement Living hit by $116M fair value decline – but 3.6% rise in settlements driven by village demand plus 420 land lease homes on the way. Capital partnerships still being explored

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Australia’s largest residential developer has reported a loss of $14 million – following a FY19 profit of $311 million – after COVID saw its retirement living division devalued by $116 million.

The fall in the division – which makes up 9% of Stockland’s portfolio – was driven by a reduction in near term growth rates thanks to COVID, increased discount rates to reflect the age of some villages and a reduction in the carrying value of some vacant established stock.

“Residual goodwill was also written off due to changes in our development strategy towards land lease,” the developer said in a statement.

The group recorded a Funds From Operations of $58 million – up 4.8% from $56 million in FY19 – on its villages with a 22% growth rate in established contracts on hand and a total of 860 settlements – up 3.6% on last year for a ROA of 5.1%.

The result is still better than expected. As we reported here in May, Stockland had seen its village unit sales slip to just 25 – a monthly drop of 66% – in April as a result of the pandemic.

Stockland also began the planning and construction of two land lease communities at Aura (QLD) and Minta (VIC) which are expected to deliver a total of 420 homes.

There was a 64% drop in development contracts compared to FY19, which the group attributes to the phasing out of its current projects and its realignment towards land lease.

However, Stockland has flagged that it remains on the hunt for investors, which they first did in 2015 before resuming their search in December 2018 – over 18 months ago.

“We will continue to explore options here in line with our broad strategic priority around capital partnering.”