This article is from the Australian Property Journal archive
Like shifting sands, Australand’s strategic move away from the residential property sector – read apartments – focusing on commercial property development and trust investments over the past few years yesterday paid big dividends.
The group returned a bumper net profit of $201 million for the year ending December 31, 2005 – its 9th consecutive record profit.
The latest result is an increase of 78% compared to $113.1 million in 2004.
The success of Australand lies at the feet of property’s quiet achiever Brendan Crotty, who unlike many of his fellow developers, prefers to let his hard work speak rather than brash prognostications of his peers.
This is the first year Australand has reported its results under the Australian Equivalent to International Financial Reporting Standards.
Crotty said while the introduction of AIFRS has added significant volatility to reported results and accounts for the majority of the 78% profit increase, the 2005 results reflects the continuing strategy of growing the investment property portfolio and having a diversified property development business.
Crotty said the substantial contribution from the Perth and Melbourne residential markets, together with stronger Melbourne and Brisbane commercial and industrial results help offset weaker conditions in the Sydney and South East Queensland residential markets.
He added that 2006 will be a further year of consolidation for Australand with regard to the residential sector.
“As the rate of employment growth in Brisbane, Sydney and Melbourne weakened during the December quarter of 2005 and is not expected to increase in any capital city other than Perth and in any sector other than resources during 2006, this will limit increases in aggregate demand for new dwellings in most mainstream residential market segments, other than Perth,”
He added that Australand is also further reducing its exposure to the apartment market to $300 million over the next two years – while at the same time increasing capital to the Melbourne and Perth land and housing projects by $200 million.
Crotty said the focus will be the commercial and industrial division, which should deliver higher development profits during 2006, which together with increased property investment income should more than offset any reduction in profits from residential property development.
“It is anticipated that demand for new purpose-built industrial properties will remain at or about current levels in Sydney and Melbourne, but may be constrained by the sharp increases in the price of Brisbane industrial land that occurred during 2005,”
“The group will continue to source approximately $200 million of industrial property from the commercial and industrial division each year,” he added.
Crotty said the group will continue increase capital allocations to large scale industrial land estates and build on its suburban commercial office portfolio.
Australand’s gross revenue was $1,533.1 million compared to revenue of $1,124.4 million in the previous year.
Australand’s property portfolio comprises 49 investment properties with a value of $1.3 billion, contributed $128.7 million, compared to $60.9 million in the prior year – helped by the October merger of the Australand Property Trust No.4 and Australand Property Trust No.5 which added $400 million of investment properties.
Australand’s development operation which comprises 99 projects contributed $167.2 million compared to $149.5 million in last year.
The residential division generated revenue of $947.7 million, 15.3% higher than for the corresponding period in 2004, from the sale of 1,090 wholly owned lots, 1,045 dwellings and 461 apartments.
The commercial and industrial division generated a pre-tax operational profit of $31.7 million, compared to $17.8 million in 2004.
Meanwhile revenues including joint ventures of generated $663.8 million, compared to $276.4 million in 2004 – following a $265 million material recognition of the Freshwater Place Commercial Tower in June 2005, as a result of AIFRS.
Australand will deliver earnings per stapled security of 23.3 cents up from the previous year amount of 14.6 cents per stapled security.
Net tangible asset backing per stapled security increased to $1.41 compared to $1.35 per stapled security for the previous year.
The group has declared total dividends / distributions for the year of 16.5 cents per stapled security.
By Nelson Yap
