Stockland (ASX:SGP) reported a higher first-half FY2026 result, with management pointing to increased residential settlement volumes, growing development partnership activity and continued performance from its investment management portfolio as key drivers. The group also reaffirmed full-year guidance for funds from operations (FFO) per security and reiterated expectations for a second-half weighting in both settlements and cash flow.
First-half FFO rises nearly 30% as residential volumes increase
Managing Director and CEO Tarun Gupta said first-half FY2026 FFO was AUD 325 million, up “almost 30%,” with FFO per security of AUD 0.135. Gupta attributed the increase to a “significant lift” in master-planned communities (MPC) settlement volumes, higher fee income from development partnerships, and a “strong underlying performance” from the investment management portfolio.
Gupta said net tangible assets increased to AUD 4.25 per security, while gearing ended the half at 28.1%, which management said was anticipated. McHutchison said Stockland expects gearing to “moderate back towards the midpoint” of its target range by 30 June 2026, reflecting the expected second-half weighting of residential settlements and group operating cash flow.
Balance sheet and funding update
McHutchison reported weighted average cost of debt was 5.2% for the half, compared with 5.3% for FY2025, and said Stockland expects it to “trend up slightly” in the second half to average 5.3% for FY2026. The fixed hedge ratio averaged 74% during the period.
Stockland issued AUD 400 million of 10-year medium-term notes during the half, extending weighted average debt maturity to 4.8 years. The company ended the period with AUD 2.1 billion of liquidity, which management said comfortably covers approximately AUD 1.25 billion of drawn debt maturing in calendar year 2026 and provides funding flexibility.
Adjusted funds from operations (AFFO) per security was AUD 0.108, above the distribution per security of AUD 0.09 for the period. Management reiterated that FY2026 distribution per security is expected to be AUD 0.252, in line with FY2025 and within Stockland’s payout ratio range of 60% to 80% of FFO.
Cash flow negative in first half as development spend increases
Operating cash flow was negative AUD 315 million for the half. McHutchison said the result reflected increased development expenditure across MPC, land lease communities (LLC), and build-to-sell commercial development pipelines, “in line with increased pipeline activation and in advance of completions and settlements.”
In the Q&A, McHutchison said development net funds employed increased by about AUD 400 million between June and December, contributing to the cash outflow. He also noted working capital movements and cash retained in partnerships for future deployment. He said Stockland expects second-half operating cash flow to be “materially stronger,” indicating that at the midpoint of MPC and LLC settlement guidance this could equate to about AUD 1.5 billion plus additional operating cash flow in the second half, subject to settlement and development spend outcomes.
Investment management: comparable growth, leasing spreads, and revaluation uplift
CEO of Investment Management Kylie O’Connor said the investment management portfolio delivered comparable FFO growth of 3.7%, supported by solid performance across all sectors. She cited positive leasing spreads ranging from 3.3% in retail to 32% in logistics.
O’Connor described logistics as a standout, delivering comparable FFO growth of 7% and leasing spreads of 32% on leases and renewals during the period. She said portfolio WALE was 3.3 years and the logistics portfolio was 12% under-rented, which she said provides access to positive reversions over time.
In town centers, O’Connor said comparable FFO growth was 3.2% with leasing spreads of 3.3%. She said occupancy remained high at 99%, with occupancy costs at 15.1%. She also pointed to delivery of a new neighborhood town center within the Gables MPC community, which she said was delivered fully leased to Woolworths and 24 specialty stores.
For workplace assets, O’Connor said a small FFO increase was driven by completion of the final two buildings in stage one of M Park in New South Wales. She said 8,000 square meters of leasing was completed across the precinct, bringing overall occupancy to 74%, with Eleven Cartoom Road at 87%.
O’Connor also highlighted growth in community rental income (including established LLC assets and an emerging portfolio of childcare and medical centers). She said sector income increased 10%, supported by completed LLC and community real estate assets. The LLC operational portfolio reached more than 3,300 home sites under management, with a pipeline of more than 7,500 home sites.
During the half, approximately 29% of the portfolio was independently revalued, resulting in an increase of AUD 81 million versus the 30 June 2025 book value. O’Connor said this reflected positive movements in logistics and town centers, partly offset by devaluations across workplace assets held for repositioning.
Development: settlements up, second-half skew remains, and new partnerships expand
Whitson said MPC settlements were up 60% over the half, while net sales across residential platforms were up 87%, reflecting higher project activation, improved conversion and integration of the Lendlease portfolio. He reported a development operating profit margin of 18.1% for the half, reflecting price growth in Queensland and Western Australia, and said the company continues to expect full-year margins in the low 20% range.
Stockland ended the half with 5,458 contracts on hand at an average price “slightly above” first-half settlement pricing, which Whitson said provides visibility for FY2026. He said the focus is now on building contracts-on-hand for FY2027.
On LLC, Whitson said settlement volumes were broadly in line with the first half of FY2025, with a “significantly higher” volume expected in the second half as new communities deliver first settlements. Contracts on hand increased to 637, up around 60% versus June, at a higher average price, while land lease sales were up 81% over the half.
Commercial development delivered no profits in the first half, but Whitson said Stockland expects earnings contribution in the second half from completion of build-to-sell projects. Gupta said the company completed about AUD 420 million of build-to-hold projects and commenced a further AUD 620 million of developments across logistics, town centers and community real estate.
Stockland also outlined several strategic initiatives discussed on the call:
- Data centers: Gupta said Stockland secured about 350 megawatts of power at two Victorian logistics assets, bringing total secured power bank to about 450 MW. Management said it is progressing final documentation for a data center partnership with EdgeConneX, with timing updates expected in future periods and activity more likely from FY2027 onward. Gupta said Stockland plans to allocate about 5% to 10% of group capital over the plan period to the data center opportunity and described a funding approach involving a 50/50 partnership structure.
- Land lease partnerships: Gupta said Stockland formed a new 50/50 land lease partnership with an existing investor, to be seeded with two development projects with an initial gross asset value of about AUD 200 million. In Q&A, management said the partnership is new to the land lease sector for Stockland and separate from its existing Invesco partnership.
- Sustainability: Gupta said Stockland has met its target of net zero Scope One and Two emissions, citing initiatives including a rooftop renewable energy partnership.
Management reaffirmed FY2026 guidance for FFO per security of AUD 0.36 to AUD 0.37. In the Q&A, executives emphasized that residential settlements and earnings remain weighted to the second half, with outcomes influenced by settlement timing and the completion and approval process for registrations.
About Stockland (ASX:SGP)
We are a leading creator and curator of connected communities with people at the heart of the places we create. For more than 70 years, we have built a proud legacy, helping more Australians achieve the dream of home ownership, and enabling the future of work and retail. Today, we continue to build on our history as one of Australia’s largest diversified property groups to elevate the social value of our places, and create a tangible sense of human connection, belonging and community for our customers.
