Stockland Group aims to raise cash through the sale of its office assets as it focuses on residential and retail, which should help it to keep its forecast 2014 earnings growth of up to 6 per cent.
The diversified group has ear-marked for sale its interest in 135 King Street, which includes the Glasshouse shopping centre in Pitt Street Mall and is undertaking an expressions-of-interest campaign for its 50 per cent interest in 133 Castlereagh Street.
If all assets sell it would reap upwards of $600 million to reinvest in retail, industrial, residential and retirement businesses.
The group also recently divested its interest in FKP Property to focus on boosting its retirement assets. Stockland chief executive Mark Steinert said at an investor update the annual distribution per security would be maintained at 24¢ per security, assuming there was no material decline in market conditions.
Analysts at Moelis & Co said the update showed there was a modest and gradual recovery in residential business.
"While the share price has drifted back a little with broad-based selling in the real estate investment trust (REIT) sector, we think Stockland has come back to an attractive level and see the share price gradually tracking its way back to the $4 level," the analysts said.
Mr Steinert said the group, which traditionally had a profit skew to second half, expected the gains in earnings to be driven primarily by residential and retirement settlements.
The weaker office market has led the group to sell what it considers non-core assets in that sector while looking at new design and construction works for the industrial business.
"We have clear evidence of an improvement in the housing market across all our markets. Established house prices are rising in all capital cities, but market conditions for land sales are variable geographically," he said.
"Sydney is the strongest market and demand in Perth remains robust, albeit signs of slight moderation are emerging. Volumes in Melbourne have increased materially, rebates are declining, and early signs of price growth are emerging."
Stockland, one of the first developers to build smaller homes before the last dip in housing prices, will focus on improving its profit margin to 11-13 per cent by 2016 and the sale of the three assets that were written down in February has been settled. Mr Steinert said the retail sector was also maintaining its growth forecasts and to that end the group will continue to redevelop centres, such as the $222 million upgrade at Wetherill Park shopping centre.
"Australian retail sales were relatively flat in the first quarter of the 2014 financial year, while for October, sales growth showed some improvement and we are on track to achieve 2 to 3 per cent net operating income growth for the 2014 year," he said.