This article is from the Australian Property Journal archive
ASX-listed diversified developer Mirvac has called the beginning of a market turnaround as it recorded a more than 50% gain in residential sales in the first half, which was impacted by softer earnings from the commercial property business.
Mirvac posted a $236 million interim operating profit after tax and operating earnings per security of 6.0c, both slightly down on the prior corresponding period (pcp), while it pinched a $1 million statutory profit result after hefty portfolio valuation writedowns in the pcp took it to a $201 million loss.
Devaluation losses in 1H25 came in at $139 million after hitting $396 million a year earlier.
Across its residential business, a number of successful project launches grew its pre-sales balance to $1.9 billion – the highest level since 2018 – helping to underpin its future earnings outlook, said Mirvac’s CEO and managing director, Campbell Hanan.
Residential lot sales came in at 947, 51% higher on the pcp. Settlements dropped from 1,131 to 685, with a significant second-half skew expected.
“There is strong momentum as we move into the second half, with higher sales volumes and increased leads, driven by our middle-ring projects including Highforest, Riverlands and Harbourside,” Hanan said.
At Harbourside Residences, it achieved a record $700 million in pre-sales over the launch weekend, with more than 40% being repeat Mirvac customers.
“Our diversity of product in the right locations ensures we are well placed to benefit from an expected pick-up in market activity.”
Mirvac expects margins to return to the through-cycle target of between 18% and 22%, as it rolls off lower-margin apartment projects in the second half.
“Our successful restocking, together with our current launch profile of well-located product with good amenity, provide good visibility of settlements across master-planned communities and apartments over the near term,” Hanan said.
“Our results today signal the beginning of a market turnaround, and we are starting to see real benefits from the execution of our strategy. We have multiple drivers for earnings growth in FY26 and beyond, including a strong pipeline of projects to deliver over the next few years, a high-quality investment portfolio that will continue to generate income for the group, and earnings through our established funds.
“We are well positioned to capitalise on a recovery across all parts of our business, supported by falling inflation and signs that interest rates will start to ease in the near future.”
Mirvac reaffirmed operating earnings per stapled security guidance of 12.0c to 12.3c per security in FY25 and distribution per stapled security of 9.0c. The outlook is based around achieving between 2,000 and 2,500 residential lot settlements, executing more than $0.5 billion in non-core asset sales, and securing capital partners at key development projects, with the weighted average cost of debt expected to remain at around 5.7%.
Half-year distribution was $178 million, representing distributions per security of 4.5c, level with the pcp.
Moody’s Ratings analyst Mariano Ferreyra said Mirvac’s results weaker than a year ago but in line with the firm’s expectations.
“The group’s weaker earnings were driven by lower investment property income from the sale of non-core assets and softer commercial and mixed used development profits. However, this was partially balanced by positive like-for-like operating income, new developments completions and stronger residential development earnings.
“We expect Mirvac to report weaker earnings in fiscal 2025 before resuming growth in 2026. This recovery will be driven by stronger residential volumes and margins, income from new development completions, continued solid performance from its property portfolio and an overall improvement in the operating environment with lower interest rates.”
The commercial and mixed-use portfolio delivered of EBIT of $8 million, down from $19 million, driven by earnings contributions from its 55 Pitt Street, Sydney office project and partially offset by construction loss at its LIV Anura build-to-rent project in Brisbane, with a material second half skew to EBIT expected.
During the half it completed the 474-lot LIV Aston build-to-rent project in Melbourne’s Docklands, taking its build-to-rent portfolio to 1,280 operational lots. It has a further 900 lots under development, which are expected to complete in next 12 months, and is in “active engagement on new pipeline opportunities”.
Mirvac finalised a project delivery agreement with Pioneer Fortune for a $2 billion master-planned community with 7,300 residential lots in the City of Logan, south of Brisbane.
The site comprises three lots over 1,000 hectares at Monarch Glen is located within 38 kilometres from Brisbane’s CBD, close to Mirvac’s Everleigh project in Greenbank.
It acquired three new communities in its land lease portfolio. Living sector EBIT increased to $26 million from $2 million in 1H24.
Mirvac completed its second and third warehouses at Aspect Industrial Estate in Sydney, 100% leased to Winnings and B Dynamic respectively, and increased precinct pre-leasing to 67%.
Balance sheet position improved, with pro forma headline gearing of 26.3%, underpinned by around $340 million in non-core asset sales and the execution of capital partnering initiatives across three residential projects, it said.
Net tangible assets came down to $2.31 from $2.56.
