STOCKLAND — Capital/Financing Update 2009

Apr 22, 2009

133 Castlereagh Street Sydney NSW 2000

T 02 9035 2000 F 02 8988 2000

www.stockland.com.au

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23 April 2009 Media Release

MARKET UPDATE

Stockland has conducted a review of its business operations, asset carrying values and distribution policy.

Residential sales performance has remained extremely strong, particularly due to first home buyers. Despite this, FY09 Residential pre-tax profit is expected to be $60 million below previous guidance. This is due to a range of factors including allowance for increased cancellation rates, slippage of settlements into FY10 and a further reduction in expected super lot sales.

As a result, Stockland has revised its FY09 Earnings Per Security (EPS) guidance to 39.8 cents before inventory impairment.

A further review of inventory carrying values has highlighted the need for impairment in the Residential Communities business of $150 million to $160 million pre-tax; in the Apartments business of $100 million to $120 million pre-tax; and in the UK business of $100 million to $120 million pre-tax. Revised EPS guidance post inventory impairment is around 10 cents.

RESIDENTIAL UPDATE

Stockland Managing Director Matthew Quinn said: “While the further impairment in our Residential Communities business is disappointing, our sales performance remains strong and we continue to gain market share in our key market segments.”

The first home buyer market remains buoyant and there are signs of recovery in the second and third home buyer segments for competitive house and land packages. Stockland achieved a monthly average of 510 Residential Communities net deposits in the March 2009 quarter, a 63% increase on the monthly average for the previous six months.

The $60 million reduction in Residential EBIT reflects four factors:

• allowance for increased cancellation rates between deposit and settlement due to banks tightening lending criteria ($15 million)

• allowance for the potential slippage of settlements from FY09 to FY10, driven by the large volume of settlements ($15 million)

• development and settlement delays in Retirement Living pushing profit out to FY10 ($10 million)

• further reduction in super lot sales as potential buyers find it increasingly difficult to obtain finance ($20 million).

Residential contracts on hand at 30 June 2009 are likely to be very high (settling in 1H10) as first home buyers bring their buying decisions forward to receive the First Home Owners Boost (FHOB) pre 30 June. (To receive the FHOB, buyers must sign building contracts pre 30 June but land settlements can occur later).

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Stockland’s Residential Communities net margin for FY09 will be around 18%, due to price reductions to clear aged inventory. Inventories of finished stock have been significantly reduced during FY09 and Stockland maintains a target 20% net margin on new stock being developed.

A review of Residential Communities inventory carrying values has highlighted the need for impairment of $150 million to $160 million pre-tax in 2H09. This is primarily attributable to major issues with the Wallarah project in New South Wales, which has resulted in an impairment of around $110 million.

The high-end residential market remains soft and continues to impact Stockland’s Apartments business. Apartments projects currently underway will be completed by FY11, while work will also proceed on stage one of Tooronga Village in Melbourne and certain stages at Prince Henry in Sydney.

Stockland will continue to secure development approvals for its remaining apartments sites and may sell them as vacant land rather than proceed with development. Stockland will reassess its Apartments strategy once market conditions improve.

As a result of these factors, there has been a further impairment in the Apartments business of $100 million to $120 million.

COMMERCIAL PROPERTY UPDATE

Stockland’s Commercial Property business remains on track to achieve FY09 profit targets and 4.0% to 4.5% comparable rental growth.

In the retail sector, recent sales performance in Stockland’s shopping centres is encouraging but some retailers face pressure on margins and retailer demand for new space is patchy.

The office leasing market remains challenging, with vacancies and incentives increasing. However, Stockland’s portfolio is resilient with few lease expiries before the fourth quarter of FY10.

Discussions with Stockland’s external valuers indicate a further increase of, on average, around 50 basis points in Commercial Property capitalisation rates in 2H09. This would result in a valuation decrement in the order of $650 million to $700 million.

UK UPDATE

Economic conditions in the UK continue to deteriorate. Stockland’s current projects underway will be completed, but no further capital will be committed to new projects. Stockland will continue to manage its UK portfolio through the downturn, with a view to selling properties when market conditions improve. As a result, an additional $100 million to $120 million impairment will be necessary in 2H09. The remaining balance of UK goodwill of $33 million will also be written off. This is a below-the-line, non-cash item.

Stockland UK’s break even operating performance is expected to continue in FY10.

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FY09 GUIDANCE

	1H09 guidance and movement	Apr 09 revisions	Current guidance
Original FY09 EPS guidance	46.7c		46.7c
Shortfall in Residential operating profit: • Reduced super lot sales • Provision for retail lot cancellations and settlement slippage	(3.2) -	(1.0) (1.5)	(4.2) (1.5)
Dilution from: • October share placement • Strategic stakes (low dividend yield) • DRP underwrite and smoothing of 1H v 2H distributions	(0.3) (0.6) (0.3)	- - -	(0.3) (0.6) (0.3)
FY09 EPS guidance pre inventory impairment	42.3c	(2.5c)	39.8c
Inventory impairment: • Residential land and apartments • UK	(6.8) (3.7)	(12.1) (7.2)	(18.9) (10.9)
FY09 EPS guidance post inventory impairment	31.8c	(21.8c)	10.0c

DISTRIBUTION

Stockland’s current distribution policy is to effectively pay out 100% of Trust operating income and 90% of Corporation operating profits.

As previously flagged, the Stockland Board has reviewed the current policy, and determined that it is prudent to move to a policy which aligns distributions with funds generated from its operations.

Under the revised distribution policy, from FY10 Stockland will pay out the greater of its Trust Taxable Income (TTI), or 80% of its Adjusted Funds from Operations (AFFO).

This approach aims to rebase distributions to a more sustainable level to provide steady growth over time.

FY09 DPS guidance remains at 34 cents as this approximates FY09 TTI. Distributions in FY10 will be dependent on a number of factors impacting TTI such as capital gains on asset sales.

CAPITAL MANAGEMENT AND LIQUIDITY

Stockland has maintained its sound capital position, with estimated key balance sheet metrics as at 30 June 2009 as follows, after allowing for the flagged impairments and revaluations:

• Gearing: Total Liabilities / Total Tangible Assets (TL / TTA) – 38.9%

• Headroom within debt covenants – $1.3 billion

• Committed available undrawn facilities – $0.7 billion

• Net tangible assets per security – $4.10

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SUMMARY

Stockland Managing Director Matthew Quinn said: “Current operating and capital market conditions are challenging and we will continue to manage our business prudently through the downturn.

“As such, we have conducted a rigorous review of our business operations and carrying values, adapted our strategy in response to the changing market dynamics and revised our future distribution policy.

“Our continued focus on the property fundamentals of sales, management and leasing will ensure we are well positioned for an even more profitable future.”

For media enquiries contact		For investor enquiries contact
Karyn Munsie EGM – Corporate Affairs Stockland	Katie Lennon Media Relations Manager Stockland	Karyn Munsie EGM - Corporate Affairs Stockland	Joanne Trimboli Investor Relations Manager Stockland
T +61 (0)2 9035 2180	T +61 (0)2 9035 2552	T +61 (0)2 9035 2180	T+61 (0)2 9035 2553
M+61 (0)421 050 430	M+61 (0)406 316 907	M+61 (0)421 050 430	M+61 (0)403 972 736

Stockland Corporation Ltd ACN 000 181 733 Stockland Trust Management Ltd ACN 001 900 741 AFSL 241190 As Responsible Entity for Stockland Trust ARSN 092 897 348.

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