This article is from the Australian Property Journal archive
MIRVAC is planning to sell off $1.3 billion worth of office and retail assets this financial year in a bid to optimise its portfolio, after the diversified developer booked a small increase in statutory annual profit to $906 million.
Mirvac posted an operating profit increase of 8% to $596 million, while EBIT lifted 10% to $773 million.
Full-year distributions totalled $404 million, representing 10.2c per stapled security, while operating earnings per security was up 8% to 15.1 cpss.
The group is targeting operating earnings in FY23 of at least 15.5 cpss and distributions of at least 10.5 cpss.
Mirvac’s commercial and mixed use division delivered EBIT of $90 million, up 173%, driven by earnings from $1.3 billion of development completions. Practical completion was reached at the Locomotive Workshop in Sydney’s South Eveleigh and Heritage Lanes in Brisbane, anchored by Suncorp, both of which were almost fully leased on completion.
Mirvac has become one of the most active build-to-rent players in the country and has about $1 billion worth of assets under construction. It has also received development approval for a project in Melbourne’s inner north suburb of Brunswick that it is undertaking with developer Milieu.
It has a $12.4 billion commercial and mixed-use pipeline that also includes the Switchyard Industrial estate in Sydney’s Auburn and Aspect Industrial Estate at Kemps Creek.
The integrated investment portfolio EBIT was down 1% to $570 million. Strong demand for industrial and office assets drove a revaluations uplift of $305 million, although this was partially offset by a $216 million write-down of Toombul in Brisbane following this year’s floods.
“Our planned disposal of an additional $1.3bn of office and retail assets over the coming financial year will see a further improvement in portfolio quality, while our development activity underway increases our exposure towards the industrial and build to rent sectors, where underlying fundamentals remain attractive,” Lloyd-Hurwitz said.
Mirvac has just won the management rights to AMP Capital Wholesale Office Fund.
“The fund’s modern, sustainable, high-quality $7.7 billion investment portfolio is aligned with our portfolio and investment approach, and we look forward to driving future returns for investors,” Lloyd-Hurwitz said.
Matthew Moore, senior vice president, Moody’s Investors Service, said Mirvac’s strong results are credit positive.
“We expect that over the next 12-18 months Mirvac’s high-quality office assets will continue to outperform the broader market and its retail portfolio will further recover from the pandemic fallout. In addition, its industrial properties will continue to benefit from structural tailwinds and the strong performance of the Sydney market, where all of Mirvac’s assets are located.”
“We expect Mirvac’s metrics to remain within our tolerance levels for the rating over the next 12 to 18 months as operating earnings continue to grow and its balance sheet benefits from its targeted asset sales.”
Residential target reached
Mirvac hit its target of 2,500 residential lot settlements, settling 2,523, and is targeting above that figure again in FY23. Its residential divisions 16% increase in EBIT to $195 million was driven by settlements being weighted towards stronger EBIT-contributing projects across master-planned communities. Gross margins of 25% was above target.
It exchanged 2,898 lots over the year and residential pre-sales increased to about $1.6 billion.
Six major apartment projects were launched including Nine Willoughby in Sydney and Forme at Tullamore in Melbourne, and 2,000 lots were released across master-planned communities.
“While conditions have normalised following 18 months of heightened demand, the underlying fundamentals of the residential market in which we operate remain solid, including low unemployment, tight vacancy levels, rising rents, restricted supply, and the return of overseas migration,” Hurwitz said.
“Our apartment projects are expected to complete into an undersupplied market, positioning us well to capture demand. Our brand, focus on owner-occupiers, diversity of product, and reputation for quality, will help us to remain resilient in a rising interest rate environment.”
