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STOCKLAND is in an ''orderly transition'' to making commercial retail investment two-thirds of the company's portfolio within five years, according to managing director Matthew Quinn.

Mr Quinn, in a third-quarter update to the market this week, said that by 2017, retail investment would constitute about 65 per cent of Stockland's assets, followed by residential 23 per cent and retirement 12 per cent.

''These businesses are a natural fit and we have competitive advantage,'' he said. ''Retail centres grow with the local communities we create. Residents can remain in the local area as they grow older.''

In 2009, Stockland's asset mix was office and industrial 35 per cent, retail 36 per cent, residential 18 per cent, retirement 4 per cent and UK investments 8 per cent.

Today, it is office and industrial 24 per cent, retail 42 per cent, residential 22 per cent, retirement 11 per cent and UK 2 per cent.

Mr Quinn said the growth would be funded by non-core asset sales. ''There is no need for new equity or significant additional debt,'' he said. A total of $2.9 billion would be released from quitting the UK and apartments by next year, and by selling office and industrial assets by 2017.

''Core businesses will not require all of this capital to fund organic growth. We will continue to return surplus capital to shareholders over time,'' he said.

Mr Quinn said an orderly transition was preferable to a ''big bang''. Earning more income through retail development generated an internal rate of return (IRR) of 14 per cent - a much better approach than buying assets on market with a 10 per cent IRR.

''There is a time lag of two to three years between loss of rental income from asset sales and new rent from retail developments,'' he said. ''Selling assets too quickly would result in more volatile earnings.''

Mr Quinn said this three-pronged strategy - retail, residential and retirement - was built on population growth. There was bipartisan political support for population growth of 330,000 people per annum.

This in turn would create 160,000 new dwellings annually, more than 500,000 square metres of new retail floor space and up to 5000 retirement homes.

Mr Quinn said Stockland was responding to changes in retail, where discretionary spending was declining and online retail was growing. ''High-end clothing sales are most at risk from online,'' he said.

Mr Quinn said Stockland was investing to create leading centres in population growth corridors. At this stage, the maximum would be 75,000sqm with about 250 specialty stores, he said.