E&P, Jarden hired for Stockland retirement business sale

Stockland is believed to be reviving attempts to sell at least a stake in its retirement business. Above, its Selandra Rise retirement community in Victoria.

The country’s largest residential developer Stockland has hired investment banks Jarden and E&P Corporate Advisory for a revived attempt to sell its $1.5bn-plus Retirement Living division.

Stockland, with a $10.3bn market value, is believed to be considering a partial or full sell down of the business, say sources.

The Australian housing market has soared amid a low interest rate environment brought on by the global pandemic which could see the developer secure top dollar for the Retirement Living unit.

It is believed the banks are running a discrete sales process where a select group of parties will be approached.

The move was alluded to by the company’s chief executive Tarun Gupta at its strategy day in early November when he signalled that Stockland was keen to optimise returns for the retirement living business through a capital solution.

This was part of a plan to reduce the group’s exposure to retail and retirement living where it would consist of less than 30 per cent of its net funds employed (NFE) compared to 50 per cent.

Mr Gupta said that the capital would be redeployed toward growth opportunities and hoped to increase NFE in residential, workplace and logistics properties to 70 per cent, up from 50 per cent currently.

Stockland owns 59 retirement villages, housing more than 10,000 residents throughout Australia with a development pipeline of 740 units.

For the year to June, the unit generated $54m in funds from operations, down 6.9 per cent on the previous corresponding period.

Stockland's target capital allocation as percentage of portfolio.

Stockland land bank percentage of total book value.

Stockland made attempts to sell its retirement unit in 2018 when the book value was $1.5bn but the plans were suspended when it was unable to find a buyer at the right price.

It also tried to sell down part of its retirement living division in 2015 but the sale did not proceed.

Mr Gupta was chief financial officer at Lendlease in 2017 when the group sold a stake in its $1.7bn retirement arm for $425 million to Dutch pension fund APG.

Pension and super funds are expected to be targeted buyers, along with strategic groups.

It will be interesting to see if Brookfield lines up for the business after it purchased retirement villages provider Aveo in 2019 for $1.3bn.

The sale is set to get underway in the new year and it comes after Stockland remains acquisitive under Mr Gupta’s leadership.

It purchased the lifestyle communities provider Halycon for $620m this year and had made efforts to gain control of the AMP Capital Wholesale Office Fund after a process was run to consider a new manager.

Under previous leadership, Stockland’s strategy had been to focus on retirement, retail and residential property but the group has been looking to unwind that strategy for some time.

The company, which has the country’s largest residential development business, has seen its earnings soar in the past year as it capitalises on the strength of the housing market.

For the year to June, Stockland posted a 5515 per cent lift in its net profit to $1.1bn.