This article is from the Australian Property Journal archive
MIRVAC has posted a bumper first half year, increasing its profit by 26% to $290 million. CEO Susan Lloyd-Hurwitz said the group continues to see consistent demand for its residential properties and defaults remain below 2%.
The group’s statutory profit was $648 million compared to $465 million in the previous corresponding period. Mirvac announced a half-year distribution of $193 million, representing 5.3 cents per stapled security.
Lloyd-Hurwitz said despite the challenging residential market, she believes Mirvac’s high-quality residential product will continue to outperform the wider market.
“The resilience of our residential division along with the robustness of our Investment portfolio, means we remain confident in our ability to deliver operating earnings growth of between 3 and 4% and distribution growth of 5% in FY19.”
Mirvac has also secured 83% of expected residential earnings secured for FY19. In the first half, it achieved 1,067 residential lot settlements, with defaults remaining below 2% and is on track to achieve over 2,500 settlements in FY19. It also recorded residential pre-sales of $2 billion with an existing pipeline that supports over 12,000 lot releases over the next four years.
The office division delivered operating earnings before interest and tax of $265 million, up 40.2% on pcp. The portfolio achieved like-for-like net operating income growth of 5.4% and leased over 66,000 sqm of space during the period.
“With over 95% of our office assets either prime or A-grade, and an 84% overweight to the Sydney and Melbourne CBD markets, our office portfolio is ideally placed to take advantage of the favourable office market conditions, including vacancy rates at their lowest in 30 years in Sydney and Melbourne,” Lloyd-Hurwitz said. “Looking forward, our committed $3 billion development pipeline provides significant earnings potential. We expect to deliver more than $95 million of additional annual NOI, $200 million of development profit and $200 million of fair value uplift by FY23.”
The industrial portfolio currently boasts occupancy rate of 100% with a long WALE of 7.6 years, during the first half, over 50,600 sqm was leased.
“The industrial sector in Sydney is benefiting from the significant growth of e-commerce, with strong levels of occupier demand relative to supply resulting in low levels of vacancy and upward pressure on rental rates. The 100% weighting of our Industrial portfolio to Sydney means it is well-placed to take advantage of the high demand from both retail and wholesale tenants, as well as the capitalisation rate compression we are seeing in the sector,”
Mirvac has tightened operating EPS guidance for FY19 to between 16.9 cents and 17.1 cents per stapled security (growth of between 3 and 4%), and confirmed distribution guidance of 11.6 cents per stapled security (5% growth).
Lloyd-Hurwitz said although residential markets continue to deteriorate, there is consistent demand, predominantly from the owner-occupier target market, particularly for in masterplanned communities, which will bolster the residential division as the cycle plays out.
“Our strong pipeline, which supports the potential of over 12,000 lot releases over the next four years, will enable us to build the right product at the right time to take advantage of the next cycle. At the same time our strong balance sheet will enable us to capitalise on future development opportunities as they become available,” she concluded. “Our urban strategy, diversified and integrated business model, and our proven asset creation capability sets us up for continued growth in FY19.”
Australian Property Journal
