This article is from the Australian Property Journal archive
MIRVAC has bought an interest in East Village in the Zetland urban renewal development, 3km from Sydney’s CBD, for $154.7 million.
Mirvac will jointly own the asset along with Payce Consolidated, which completed the East Village mixed‐use project in October 2014.
The 33,000 sqm centre is anchored by a Coles supermarket, an Audi service centre, Virgin Active Health Club and supported by over 40 specialty tenants with underground parking for approximately 700 cars. In 10 months of trade, East Village has achieved annualised specialty sales productivity in excess of $10,900 per sqm and specialty occupancy costs of 12.4%.
As part of the transaction, Mirvac will secure the management and leasing rights to the centre from December 2015.
“Payce is pleased to partner with Mirvac, a market leader in the Australian property sector, on this unique award winning mixed use retail and commercial asset,” Payce chairman Brian Boyd.
“East Village is performing well in excess of benchmarks and demonstrates Payce’s ability to successfully deliver complex and integrated developments which are now in demand by the community and investor groups alike,” Boyd said.
Mirvac managing director Susan Lloyd-Hurwitz said the off-market transaction was an excellent opportunity for the retail business to increase its presence in one of the fastest growing urban areas of inner Sydney, which enjoys an average per capita income 46% higher than the Sydney metropolitan average.
“This strategic acquisition aligns perfectly with our urban retail growth strategy of acquiring assets in densely populated trade areas with the potential to deliver superior returns over the long term, while further improving the quality of our retail portfolio,” she added.
Settlement of the transaction remains subject to conditions and is anticipated to occur in the first half of FY17. This acquisition is anticipated to deliver above Mirvac’s stated target IRR for retail and contribute rental income from FY17 onwards.
Mirvac yesterday reaffirmed its FY16 operating earnings guidance of 12.7 to 13.0 cents per stapled security (“cpss”), and its FY16 distribution guidance of 9.7cpss to 9.9cpss.
Lloyd-Hurwitz said the progress made during the first quarter has positioned Mirvac well to deliver for FY16.
“We have maintained positive metrics across our office, retail and industrial portfolios, and we remain focused on extracting value from our existing assets and managing our lease expiry profile.
“Within our residential business, we achieved a record level of pre-sales at the end of the quarter, which means we now have 79% of our expected development EBIT secured for FY16, and 66% for FY17,” she added.
Mirvac is expecting to exceed previous FY16 lot settlement target of 2,800 lots to over 2,900 lots, with a skew towards the second half of the financial year. Over $990 million of secured pre-sales is expected to settle in 2H16.
Mirvac secured a record $2.3 billion of residential pre-sales, up from $1.2 billion on the prior corresponding period, of which 43% will settle in FY16, 35% to settle in FY17 and 22% to settle in FY18.
“We remain focused on the delivery of our committed residential development pipeline, with approximately $1 billion of major projects expected to settle in the second half of the 2016 financial year.
“Our proven ability to deliver well-located, quality residential product, targeted at a diverse buyer profile means we remain comfortable with our settlement risk. This is demonstrated by a long-term average default rate of approximately one per cent,” Lloyd-Hurwitz said.
The group expects to achieve its target development ROIC of 12% by FY17.
Mirvac is on track to release over 3,700 lots in FY16, including new project launches at St Leonards, NSW (500 lots); Sydney Olympic Park, NSW (405 lots); Dallas Brooks Hall, VIC (259 lots); Waterloo, NSW (225 lots); Gledswood Hills, NSW (200 lots); and Brighton Lakes, NSW (155 lots).
Australian Property Journal
