STOCKLAND — Interim / Quarterly Report 2013

Dec 3, 2012

133 Castlereagh Street T 02 9035 2000 Sydney NSW 2000 F 02 8988 2000

www.stockland.com.au

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4 December 2012

ASX/Media Release

STOCKLAND MARKET UPDATE

Stockland today updated investors on the current state of the market at its first quarter investor briefing in Townsville, highlighting in particular that there has been no improvement in the challenging Victorian residential market since the company’s AGM in October.

Unless the Victorian market improves soon, which seems unlikely, Underlying Earnings Per Security (EPS) for FY13 will be at the lower end of our previously guided range of 10-15 per cent below FY12. EPS decline will be even greater in the first half, primarily due to a large skew to the second half in the Residential business.

Chief Financial Officer Tim Foster reiterated that Stockland is confident earnings will improve from FY14, buoyed by the contribution of major, new retail developments and a strong residential pipeline with new projects commencing settlements in FY14 and FY15.

“Our confidence that FY13 will be the low point in our earnings with improvement from FY14 is demonstrated by the decision to hold our FY13 distribution at 24 cents per security, even though this will be above our target payout ratio,” Mr Foster said.

“We remain very focused on actively managing our capital to improve returns. We continue to make good progress with non-core asset sales, although we are seeing some softening in the market. We have made good progress improving our capital efficiency and lowering the impact of interest on our business, with residential finished goods inventory at its lowest level in 18 months.”

Mr Foster noted that lower residential settlement volumes and price growth had meant capitalised interest was having a larger impact on operating margins and was building up on the balance sheet.

“These trends have prompted us to review our capitalised interest policy with the aim of stabilising the capitalised interest balance and reducing it over time. We will announce the outcome of the review at our first half results and any change would not affect operating cash flows and would have no impact on the 24 cent distribution in FY13,” Mr Foster said.

Group Executive and CEO Commercial Property John Schroder outlined how Stockland has taken decisive steps to reweight its commercial property portfolio to high-quality retail assets to provide stronger, less volatile returns over time.

“FY13 is a key year in the delivery of the first stage our substantial redevelopment pipeline. We’ve clearly demonstrated both our intent and capabilities this year at Stockland Merrylands, Townsville and, soon, Shellharbour with early results at our completed shopping centres exceeding our expectations and substantial earnings benefits expected from all three centres in FY14,” Mr Schroder said.

“We’re taking an innovative, robust approach to defining our trade areas and retail mix so that we have real points of difference that will continue to deliver resilience and growth.”

Group Executive and CEO Residential Mark Hunter acknowledged recent interest rate cuts and the reintroduction of first home buyers’ grants in NSW and Queensland, but said market uncertainty and a lack of consumer confidence were continuing to present challenging market conditions, which were particularly apparent in the Victorian residential market.

Mr Hunter said: “Although the challenging market is impacting our performance in FY13, we have made good progress in diversifying our Residential portfolio and we are meeting the market with more affordable products. We have demonstrated our continued focus on larger, master-planned communities, which present better economies of scale and greater potential to deliver stronger returns over time.

“In the second half of FY14 and FY15 we will bring more projects to market that meet these core criteria and this will drive stronger returns. We will also finish a number of projects in FY13 and FY14 that don’t meet these criteria and are currently impacting our performance.”

Stockland will provide its next update to investors at its half-year results in February 2013.

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Stockland: Celebrating 60 years in 2012

Stockland is one of Australia’s leading property groups, owning, developing and managing a large portfolio of residential communities, retirement living villages, retail, office and industrial assets. Stockland was recognised as the Most Sustainable Property Company in the World in the 2011/12 Dow Jones Sustainability Index.

	For media enquiries Michelle Taylor General Manager - Stakeholder Relations Stockland T+61 (0)2 9035 2786 M+61 (0)400 356 692	Greg Spears Senior Manager - Media Relations Stockland T+61 (0)2 9035 3263 M+61 (0)406 315 014	For investor enquiries Ross Moffat Senior Manager - Investor Relations Stockland T+61 (0)2 9035 2480 M+61 (0)412 256 224	Annabelle Tait Investor Relations Analyst Stockland T+61 (0)2 9035 2773 M+61 (0)424 547 889

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.

~~Investor Update~~

4 December 2012

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Highlands, Vic
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Agenda

Overview

Matthew Quinn, Managing Director

Financial Update Tim Foster, Chief Financial Officer

Commercial Property

John Schroder, Group Executive & CEO Commercial Property

Residential

Mark Hunter, Group Executive & CEO Residential

Q & A

Matthew Quinn, Tim Foster, John Schroder, Mark Hunter, David Pitman

1

Overview

Orderly leadership transition

• Mark Steinert will commence as Managing Director on 14 January 2013

Key achievements in FY13 YTD

• Opened Merrylands and Townsville, Shellharbour to open by end of FY13

• $247m of non-core asset sales with more in due diligence to self fund Retail capex

• Positive leasing results in Sydney CBD Office – lower vacancy and longer WALE

• Maintained high residential market share in current projects

• Major new Residential projects on track to start in FY14/15 – eg East Leppington, Marsden Park, Caloundra, Lockerbie

• Retirement Living projects on track for higher new unit volumes than last year

Market conditions remain challenging

• Consumer spending subdued, but retail sales are still growing

• New housing market still very poor – negligible impact from recent interest rate reductions

• Office demand subdued – vacancies increasing and incentives remain high

• Reasonable demand to buy well-leased commercial property, but not as strong as last year

2

~~Financial Update~~

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Stockland Townsville, Qld
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4

Earnings low point in FY13; improvement expected from FY14

FY13 EPS

• No improvement seen in the Melbourne residential market since AGM

• Unless it picks up soon, which looks unlikely, FY13 EPS decline will be at lower end of -15% to

• -10% range for the full year

• EPS decline will be even greater in first half primarily due to Residential 30/70 skew

Confident in FY14 EPS growth – will maintain FY13 DPS at 24 cents

• Substantial FY14 earnings benefit from completed Retail developments: Merrylands, Townsville and Shellharbour

• FY13 is peak of impact from impaired and low margin NSW Residential projects

• New Residential projects in FY14/15 have high margins and will contribute positively to EPS

4

Commercial Property continues to provide a strong rental foundation

Solid comparable NOI growth

• Retail portfolio expected to achieve FY13 comparable NOI growth of 2-3%[1]

• Office comparable NOI growth will benefit from recent leasing results

• Industrial comparable NOI will decline due to reletting activities primarily at Yennora

FY13 total NOI will be lower than FY12 due to asset sales

• $964m of cash proceeds in FY12

• $247m YTD in FY13

• Post AIFRS

5

Challenging market conditions impacting Residential and Retirement Living

FY13 Residential results under pressure

FY13 Residential settlements more heavily skewed to low margin projects

• Expecting lower settlement volumes than FY12

• Lower contribution from high margin projects in Melbourne and higher contribution from impaired projects in NSW

• Cost of sales increasing in line with inflation with no offsetting price growth

• Operating profit margins at lower end of 12-14% range unless Melbourne picks up (EBIT margin 19-21%)

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>25% EBIT margin 15-25% EBIT margin

<15% EBIT margin

FY12

FY13F

• % projects by % projects by revenue revenue

• Margins even lower in 1H13 due to NSW settlements

Retirement Living expected to achieve modest profit growth in FY13

• Demand for new product remains strong, and on track to develop and sell circa 300 new units (268 in FY12)

• Settlements and pricing of established product impacted by soft residential conditions in Victoria

6

Focused on improving returns through active capital management

Non-core asset sales progressing well but investment market softening

• Identified a potential further $500m of asset sales for balance of FY13

Continue to focus on gearing and cash flow

• Balance sheet ratios remain well within A- metrics

• First half gearing will be higher due to Residential skew but within target range

• Expect to reduce FY13 cost of debt from previous guidance of 6.5% to 6.2%

Actively managing funds employed

• Reduced Residential finished goods inventory – lowest level in 18 months

• Focus on improving capital efficiency and lowering impact of capitalised interest

• Activating landbank

• Efficient project stage delivery

• Reducing production times

7

Residential capitalised interest policy under review

Increasing impact on Residential operating profit margins

• Applied consistent policy since new Borrowing Cost Accounting Standard introduced in 2005

• Growing impact of capitalised interest on operating margins and balance sheet due to lower volumes and lack of price growth

• These trends have prompted us to review our policy with the aim of stabilising the capitalised interest balance and reducing it over time

• Outcome of the review would not affect operating cashflows and would have no impact on 24 cent distribution in FY13

• Review outcome will be announced at 1H13 results

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29%
28% 28%
27%
25% 25%
Capitalised
26%
25% interest in
22%
21% 21% COGS
18%
FY07 FY08 FY09 FY10 FY11 FY12
Operating profit margin EBIT margin
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Build-up of Residential capitalised interest on the balance sheet

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$469m
$423m
$385m $396m
FY09 FY10 FY11 FY12
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8

~~Commercial~~ Property

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Stockland Townsville, Qld
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10

We are delivering on our strategy

Investing in our Retail property capabilities and assets for resilience and growth

• Established core capabilities in all facets of property development and project delivery

• Completing first phase of a significant redevelopment pipeline

• Opening three of the biggest retail developments in Australia in FY13

• Recycling capital into Retail development from non-core asset sales

Optimising Office and Industrial rental income and asset values

• Office:

• Executed ~11,000 sqm of leases in FY13; mostly in the Sydney CBD

• Occupancy improved to 96%; WALE 4.1 years

• Incentives remain high at 25-30%

• Industrial:

• Executed ~27,000 sqm of leases in FY13

• Industrial retenanting progressing well; FY13 income impacted by downtime at Yennora

• Occupancy 94%; WALE 2.6 years, anticipating improvement with new relets

10

Our Retail portfolio is resilient in a challenging market

Sales growth

• Retail sales growth above peer group

• Value and convenience specialty shop categories growing strongly:

• Food retail up 6.3% per sqm[1 ]

• Retail services up 10.8% per sqm[1 ]

• Proving resilient to on-line leakage

Moving annual turnover growth to 31 October 2012

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4.1%
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3.4%
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2.7%
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2.2%
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Strong lease profile

• High occupancy; over 99%

• Only 74 specialty shop leases on holdover (2% of total) – half by choice due to remixing

Total MAT growth Comparable Comparable Comparable MAT growth MAT per sqm specialty MAT per growth sqm growth

Financial security

• Minimal arrears

• Comparable MAT to 31 October 2012

11

Retail strategy to be market leader in each trade area

Strategic objectives

• Deliver stronger, stable returns by moving our assets up the retail hierarchy

• Own the number one shopping centre in the trade area or number two with a strong point of difference

• Be the landlord of choice for key national chains and local retailers

How we are delivering

• Develop our most productive retail assets into the best real estate in the trade area

• Continue to focus on the deep, mass market customer segment

Highly productive sub-regional centres ripe for development

Specialty MAT per sqm

$13,579

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$12,831
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$11,122 $11,053 $10,018 $9,857 $8,350 $8,322 Urbis Average: $7,800[1 ] Green Gladstone Wetherill Nowra Caloundra Hervey Rock- Wendouree Hills Park South Bay hampton Development commencement Development commencement expected pre-FY15 expected post-FY15

• Create true community and entertainment hubs

• Strong retailer relationships and long-term sustainable rents

• Urbis Retail Averages 2012 Sub-Regional Centres

12

Creating a portfolio of Regional and Major Regional centres

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Neighbour- Sub Major Super
Regional [1 ]
hood regional [1 ] regional [1 ] regional
Stockland’s
Our “Sweet spot”
sweet spot
Big enough to be “first choice” whilst still
offering convenience and community focus
Merrylands
Completed
Townsville Stage 1
Under
construction Shellharbour
Hervey Bay
Gladstone
Next Wave
Green Hills Stage 1
(FY13-15) Baldivis Stage 2
Wetherill Park 1
Jimboomba 1 Wetherill Park 2
North Shore 2 Nowra
In Preparation
Caloundra South Stage 1 Rockhampton 2
(FY15-17)
Wendouree Townsville 2
< 10,000 sqm 10,000 to 40,000 40,000 to 60,000 60,000 to 85,000
Typical GLA
sqm sqm sqm
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Initial yields 7 - 8%

Incremental development IRR average 14%

1. Property Council of Australia; Stockland. PCA definitions have been adjusted for accurate comparison

13

First wave of Retail developments performing well

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Merrylands Townsville Shellharbour
Opened: 5 Oct 2012 Opened: 25 Oct 2012 Forecast open: End FY13
Opened fully leased, in line with Opened ahead of program Development ahead of
feasibility program, in line with feasibility
Created the leading centre in
Trading exceeding expectations the entire region First two stages trading well
Trading very well
Total development
$395m $175m $330m
costs
Estimated value on
>$470m $380 - 390m $670 - 700m
completion
Estimated year one
6.5% 6.5% 7.6%
cash yield
Incremental IRR N/A - this project is a complete
14.0% 14.5%
rebuild
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14

~~Residential~~

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North Shore, Qld
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National housing approvals around 20% below long term average

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Qld market failing to respond to FHB boost Vic market declined 28% from Oct 2009 peak
4,000 4,000
3,000 3,000 -28%
2,000 2,000
-24%
1,000 1,000
0 0
1984 1988 1992 1996 2000 2004 2008 2012 1984 1988 1992 1996 2000 2004 2008 2012
NSW market improving off a low base Momentum starting to build in WA
4,000 2,000
3,000 1,500
-8%
2,000 1,000
-30%
1,000 500
0 0
1984 1988 1992 1996 2000 2004 2008 2012 1984 1988 1992 1996 2000 2004 2008 2012
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Source: ABS Cat. No.: 8731.0, monthly National Housing Approvals

16

Sales levels holding up, pricing under pressure

Volumes and market share

• Started FY13 with 30% fewer contracts on hand than FY12

• Interest rate cuts and government incentives yet to have an impact on demand

• Market share steady at 27% in contested corridors

Pricing

• Downward pressure in Melbourne and SE Qld

• Signs of improvement in Perth and SW/NW Sydney

Net deposits steady, but 20% below “normal” market

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1,174
1,125 1,127
1,092 1,082
WA
NSW
VIC
QLD
1Q12 2Q12 3Q12 4Q12 1Q13
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• Flat elsewhere in NSW

17

Our strategic focus gives us competitive advantage

1. Product innovation

2. Community creation

3. Speed to market and capital efficiency

4. Scale and cost efficiency

5. Portfolio management

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18

High market share through innovative products to meet customer needs

It’s not just about affordability

Getting out of the rental trap

Downsizer, goal to be debt free

Customers are shifting from “what can I afford” to “what debt am I willing to take on?”

Miss L wanted to buy her own house in a location close to shops and transport connections

Mr and Mrs M sold their property and were looking for a low maintenance and quality product for <$300,000

Our solution:

Our solution:

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115
110
105
100
95
90
85
2009 2010 2011 2012
Annual Household Disposable Income
Average Loan Size
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Bought for $350,000 at Vale, WA

Mortgage payments $47 per week less than rent

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Sold existing house for >$350,000 Bought for $292,500 at Highlands, Vic Debt free

Source: ABS Cat. Nos. 5609.0, 5206.0, 3101.0. 2001.0, Stockland Research

19

Investing in community infrastructure to increase revenue and returns

Early delivery of facilities

• For example schools, shops, playgrounds and community centres

• Often through strategic partnerships with governments and other organisations

Contributes to “liveability” for residents

• Personal wellbeing score at North Shore 85% vs Australian average 74%

• Positively influences resident satisfaction and referrals

Higher volumes after Stockland shopping centre opening

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+18%
Shopping
centre
opening
FY09 FY10 FY11 FY12
North Shore settlements
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Higher price per sqm vs major competitor

Enhances sales rates and pricing

• 18% uplift in land sales from North Shore shopping centre opening

• Customers willing to pay higher price for superior amenity

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$342
$262
Stockland North Shore Major Competitor
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20

Focusing on capital efficiency and speed to market

Buying on capital efficient terms

• Balance sheet strength is key

Buying on capital efficient terms and improving speed to market

• Vendors take certainty from corporate covenant – no bank guarantee for deferred payments

• Our delivery capability encourages some vendors to share risk eg royalties paid from sales

Early project delivery improves cash flow

• Minimises capitalised interest

		Actual SGP	Scenario: same project but on
		Melbourne project	cash terms and one year delay
	Acquired	Dec 2009	Dec 2009
	Paid for	Jun 2010	Dec 2009
	First settlements	Sep 2010	Sep 2011
	IRR	21%	15%

• Lowers funds employed

• Recycles capital to next project

Requires a collaborative approach

• Working closely with all levels of government

• Engaging with the local community

• Strong connections with land owners in key corridors

21

Focus on scale and cost efficiency

Benefits of scale

• One of only a handful of groups with capacity to acquire large land parcels and deliver masterplanned communities

• Buying power through State-wide agreements with key contractors and suppliers

Lockerbie concept plan

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Key:
Government facilities (schools
and community centres)
Private Sector (schools)
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• Lock in statutory charges under Infrastructure Agreements – only possible on large projects

Centralise functions for efficiency and lower cost

• Marketing

• Finance

• Project management

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Railway Station
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Streamlining systems and processes

• State of the art CRM platform

• Simplified and consistent development process

• Standardised contract management system

22

Actively managing the portfolio to improve returns

• Large •

• masterplanned Scale and competitive advantage communities

• Targeting our key Attractive demand-supply characteristics growth corridors and strong economic fundamentals

• Geographic Balanced exposure to major capitals diversity and key regional cities

Capital efficient terms

• Limit initial capital outlay for land

• Trade out of low margin/impaired projects and activate higher margin projects

Profitable projects

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Projects finishing Projects launching
FY13/14 [1 ] FY14/15 [1 ]
56% 92%
88% 100%
WA WA
NSW
NSW
Vic
Qld Qld
Caloundra
58% 56%
South
EBIT margin EBIT margin
~13% [2 ] ~25% [2 ]
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1. Calculation based on number of lots

23

1. EBIT is weighted based on total revenue over balance of each project’s life

The market will turn – it’s a question of when

Fundamentals remain strong

• Population growth ~1.5% p.a.

• Unemployment rate stable around 5.5%

• Household incomes growing around 4.5% p.a.

• Undersupply of housing

Market showing signs of recovery, but it’s early days

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Capital city house prices have stabilised and are
starting to increase [1 ]
20%
All capitals
10%
0%
-10%
2007 2008 2009 2010 2011 2012
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• Established house prices have stabilised

• Consumer confidence improving and “time to buy a dwelling” index near historic highs

• Sydney and Melbourne auction clearance rates have risen from 50% to 60% during 2012

• Interest rate cuts have improved affordability

• Housing finance approvals up, but still below long term average

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“Time to buy a dwelling” index near record high [2 ]
200
150 140
100
50
2007 2008 2009 2010 2011 2012
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1. Australian Property Monitors, Composition Adjusted House Price Series 2. Westpac Melbourne Institute Index of Consumer Sentiment

24

In summary, FY13 outlook challenging but FY14 more positive

Residential market remains soft

• Volumes around 20% below trend

• Downward price pressure in Melbourne and SE Queensland

The cycle will turn, but recovery is likely to be slow

• Consumers still concerned and deleveraging

• Interest rate reductions not yet working

We are resilient in the current environment

• Run rate around 4,500, still quite profitable

• We understand customers and deliver what they want – “a better way to live”

• Actively managing our portfolio and costs

Expect stronger returns in FY14 even without an improvement in conditions

• Continue to trade out of impaired and lower margin projects in FY13

• Launch new, higher margin projects in FY14/15

25

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Stockland Corporation Limited ACN 000 181 733

Stockland Trust Management Limited ACN 001 900 741

25th Floor

133 Castlereagh Street SYDNEY NSW 2000

DISCLAIMER OF LIABILITY

While every effort is made to provide accurate and complete information, Stockland does not warrant or represent that the information in this presentation is free from errors or omissions or is suitable for your intended use. The information provided in this presentation may not be suitable for your specific situation or needs and should not be relied upon by you in substitution of you obtaining independent advice. Subject to any terms implied by law and which cannot be excluded, Stockland accepts no responsibility for any loss, damage, cost or expense (whether direct or indirect) incurred by you as a result of any error, omission or misrepresentation in information in this presentation. All information in this presentation is subject to change without notice.