and how we should tackle them
Like any business, Landcom faces challenges that if left unresolved could potentially impact on our future performance. The best way to meet these challenges is, as always, to acknowledge, and develop strategies to manage them.
As we continue our drive to be a leader in sustainability, we acknowledge the plateauing of some sustainability results in the past year and our ongoing struggle to achieve other targets in areas such as moderate income housing. While this can be explained partly by prevailing economic conditions and in part by the fact that we are reporting on a higher proportion of “legacy” projects this year, it nevertheless serves as a reminder that we cannot become complacent. Our new sustainability indicator targets have been set as a specific – but realistic – challenge for Landcom. And our ability to rise to the challenge is a story that will unfold and be recorded in successive annual reports over the next five years.
A more immediate priority is to maintain our sustainability and design initiatives at a time of financial uncertainty. In this environment there has been some resistance to the investment in time and capital required to effect our ongoing sustainability improvements. In some partnered projects, we have experienced some resistance establishing social sustainability programs because of the upfront costs. In others, partners have had difficulty raising finance for development programs because of a tightening in lending criteria.
Fortunately, situations like this are the exception rather than the rule, but depending on the speed of the economic recovery, we may well face similar cases in the short to medium term. The regulatory environment in which we operate has been fast-moving in recent years, and the pace of change shows no sign of abating. Shifts in performance standards are difficult to manage in projects which, from inception to conclusion, can be in production for five to ten years. As well, the need to address issues associated with climate change may also change performance standards or affect the economic fundamentals of some projects in the future.
All of this can potentially have an adverse impact on the affordability of new housing. Landcom recognises it will need to work carefully with its development partners to ensure these shifts do not affect project outcomes.
We have also found that while our involvement in ventures such as New South Wales’ response to the Commonwealth’s nationbuilding initiatives and the construction of group homes for the Department of Ageing, Disability and Home Care are a positive reflection of our usefulness to Government, they do compete with our day-to-day business activities for time and resources. We will need to manage these activities carefully to ensure we don’t neglect our core business.
Finally, our continued push into urban renewal projects presents challenges on a number of fronts. These are complex projects which take more to pull together and which often need significant upfront investment in site rehabilitation and capital works to ensure they go ahead. These costs, together with the uncertainty caused by the global financial crisis, have contributed to the difficulties we’ve experienced in converting recent urban renewal opportunities into commercially viable projects. Our focus in the next 12 months will be to find ways to unlock the potential of these projects and bring them to the market.
Our urban renewal business is fundamentally a business that is concerned with changing established urban areas. Because established communities adjoin all our urban renewal sites, they are invariably affected by our developments. Our social due-diligence work and the innovative design of our projects can help us to manage the potential adverse impacts. Nevertheless, our urban renewal proposals – and those of other developers – are nearly always challenged by local communities. In some cases, this opposition has the potential to stop projects progressing
We have been successful in some projects, such as at Prince Henry, in gaining community support for our proposals from initial positions of opposition, however, our experiences show that we need to become more astute in communicating to existing residents the benefits of well planned and implemented urban renewal projects. Our failure to do so may inhibit our ability to implement the Government’s urban management objectives and, ultimately, impact on our intrinsic value to Government.