After much speculation on whether the new Stockland CEO Mark Steinart would abandon the retirement village sector as a core focus, he yesterday outlined his medium-term strategy for Stockland - and it firmly committed the Group to Retirement.

Ranked No. 2 in his five immediate business priorities is improving Retirement Living’s Return On Assets. He says this will be achieved by:

• reducing costs
• scaling up development, especially medium density (apartment style buildings)
• continued focus on resident satisfaction which, by word of mouth and referral, is recognised in driving demand
• In summary, he says, they want to create “full, happy villages and more of them” with a targeted return on assets of 6.5% by FY15 and 8% by FY18.

The three internal strategies highlighted to increase returns are:

• hold costs flat in real terms while expanding volumes to bring overheads down from 12% of revenue in FY13 to 8% in FY18
• increased centralisation of functions into corporate head office (Finance, HR and elements of Marketing)
• increased emphasis on conversion (leads to sales) to achieve reduced investment in lead generation - targeting reduced marketing spend by c25% in FY14

No official mention is made of Stockland’s intentions with Aveo except what they had previously acknowledged, namely they have had ongoing discussions with Aveo parent FKP about possible initiatives to reduce joint overheads. However in this newly released strategy they do mention their intention to “explore capital efficient opportunities to improve scale”. Could this be a hint about the management of the Aveo portfolio which would deliver HO and development efficiencies across both groups?