Stockland chief Mark Steinert to exit

Stockland shares slump as it looks to replace CEO Mark Steinert, in one of the sector’s first big changes amid the virus crisis.

Mark Steinert has been CEO of Stockland for seven and a half years. Picture: Jane Dempster

Stockland chief executive Mark Steinert will step down, in one of the first major boardroom changes in corporate Australia in the wake of the coronavirus crisis.

The company is the largest listed residential developer, and has endured a rocky ride since March when virus concerns peaked and its shares crashed.

Mr Steinert will exit once a successor is identified and he serves a transition period in which he aims to lock in a recovery led by the company’s housing estates.

While he acknowledged the impact of higher unemployment, he predicted that by this time next year migration would also be tracking back up and interest rates would remain low.

“Australia is going to look like a paradox in the context of what’s happening in the world,” he said. “I think Australia is well positioned particularly if we keep focusing on cutting red tape, fast tracking delivery of infrastructure and really working, as one, to grow and compete with the rest of the world.”

But Stockland shares were sold off on Monday, falling almost 2.8 per cent as investors digested the news that the property veteran was leaving, and amid expectations the company will undertake a further strategy reset.

The announcement of Mr Steinert’s departure came without a successor in place, although Stockland said there would be a “flexible period of transition” to lock in the company’s coronavirus recovery strategy.

Mr Steinert’s seven-and-a-half-year stint running Stockland comes to an end as the company slashed its final distribution and lowered the value of its commercial portfolio, mainly due to drops in shopping centre values.

Stockland was hit hard by the crisis, with both its shopping centre portfolio and residential projects under pressure and its shares collapsing in March. It has partially recovered on the back of optimism about the housing market picking up.

The former UBS funds and property chief broadened Stockland’s strategy away from the previous focus on the 3Rs: residential, retirement living and retail property.

Stockland Group closed down 10c

It included logistics property and new office projects as well as its town centre style shopping centres. Before the crisis it also began securing more capital partners on major projects to lift returns.

Stockland said it is in a strong liquidity position but it has also faced reports that it would consider an equity raising in order to restore its balance sheet.

Boosting returns from the company’s long-dated residential portfolio, resolving uncertainty about its retirement division, and drawing in more capital partners for commercial projects are likely to be priorities for a new chief executive.

Market players suggested that a wide range of external candidates could pursue the role of Stockland chief executive, in addition to internal executives, led by residential head Andrew Whitson.

Prime among them are Lendlease chief executive, property, Australia, Kylie Rampa, Mirvac head of office and industrial Campbell Hanan and Abacus Property Group managing director Steven Sewell, analysts said.

A new chief executive would likely re-base distributions while Stockland deals with the impact of the coronavirus, undertake further asset writedowns and consider an equity raising.

Stockland’s commercial property portfolio dropped by 6 per cent since December 2019 and its retail portfolio was off by about 10 per cent, allowing it to keep gearing inside its 20-30 per cent range.

Macquarie Equities analysts said residential inquiry levels had improved back to above pre-COVID-19 levels and the sales rate had accelerated as the company benefits from stimulus measures, particularly the HomeBuilder package.

However, Citi analysts expect more falls in commercial property valuations in the next financial year and cautioned that earnings may take longer to recover than expected.

Stockland’s lot sales plunged in April as the coronavirus struck and it is yet to restore the earnings guidance it pulled in March, although it gave distribution guidance.

Stockland said its estimated distribution for the second half of 2020 would be 10.6c per share, equating to a full-year distribution payment of 24.1c per share. Pre-crisis the company had planned to pay a second half distribution of 14.1c per share.

It blamed the cut on the impact of COVID-19 during the last quarter and the timing of the expected recovery of operational cash flow, adding that cutting the distribution and retaining capital would protect its balance sheet and position it for the recovery.

The company said it had a strong liquidity position of around $1.6bn at the end of April.

Stockland chairman Tom Pockett said a “flexible period of transition” had been agreed with Mr Steinert to provide for a smooth handover and to ensure there was a strong focus on leading the organisation through the COVID-19 recovery period.

“A process will now commence to identify a successor from a field of internal and external candidates,” he said.

He said the departing chief executive had overseen the development of Australia’s leading residential business, reshaped and expanded the workplace and logistics portfolio and significantly repositioned the town centre business.

“My immediate priority is driving initiatives to take advantage of the COVID-19 recovery period and further accelerate the digitisation of our business and delivery of our strategic priorities,” Mr Steinert said.