Stockland chases fresh capital partners in retail play

New Stockland CEO Tarun Gupta is revamping the company’s strategy. Picture: Jane Dempster

Diversified property group Stockland is ­exploring bringing capital partners into its town centre portfolio and potentially other areas of its commercial property ­operations.

The move is part of new chief executive Tarun Gupta’s strategy of supercharging returns from the company’s portfolio by bringing in large capital partners to accelerate the development of new projects.

The focus of the latest review is on the company‘s $5.6bn of town centres, with about $1bn of those sporting an essential services and everyday retail theme targeted for partnership.

While at an early stage, the move could see other holdings drawn into the offering, with logistics sites that fit the convenience theme also being considered.

Mr Gupta has dramatically revamped Stockland’s strategy.

He has already set up two major investment partnerships, in life sciences and land lease, with big international pension funds, and is keen to replicate the move in convenience-based assets.

Meanwhile, Stockland has sold off its retirement division to EQT infrastructure for $987m in a deal advised by investment banks E&P Corporate Advisory and Jarden.

The latter bank is understood to be providing advice on the latest move, but Jarden and the company declined to comment.

Overall, Stockland’s town centres generated funds from operations of $153m in the last half, a 2 per cent lift on last year, and Covid-19-related rental abatements hit a net $27m.

But performance is picking up.

Town centres rent collection rates were strong at 96.5 per cent, with high portfolio occupancy of 99.1 per cent.

Stockland had positive average spreads of 1.2 per cent across 313 ­leasing transactions as conditions strengthened in a marked turnaround from the depths of the pandemic.

Sales performance in the states less affected by Covid-19 was particularly strong, with specialty stores strong in Queensland and Western Australia.

The centres benefit from their high level of exposure to low discretionary categories, and they have been extensively remixed and repositioned.

The value of town centres not only held up during the coronavirus crisis but has since increased as customers shifted their preferences.

There is also fierce demand for individual assets that come on the market and for larger-style deals, with superannuation fund-backed manager ISPT in December investing up to $330m in a convenience shopping portfolio run by E&P Financial.

Releasing more capital could allow Stockland to accelerate its rollout of more centres and give it the firepower to pick up new sites.

Capital partnering is a big shift from Stockland’s previous regime, which emphasised developing for the balance sheet.

Stockland last week unveiled a deal with Canada’s Ivanhoe Cambridge, which will acquire a 49 per cent interest in a trust developing a major life sciences facility in Sydney’s Macquarie Park.

The first stage comprises three buildings along with a data centre, and Ivanhoe Cambridge will have the opportunity to invest in future stages of the overall $2bn-plus project.

When unveiling the deal, Mr Gupta said the formation of the capital partnership at M_Park delivered on the company’s “strategy to expand our third party capital platform and accelerate the delivery of our $9.1bn commercial property development pipeline”.

Stockland also struck up a deal with Japan‘s Mitsubishi Estate Asia for a long-term partnership to ­develop and own land lease ­communities.

The pair will look to scale up Stockland’s land lease business, which sports a $4bn development pipeline. It is starting with six land lease estates, mainly in Queensland, which will be worth about $500m.