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Mirvac Update

October 24, 2018

Mirvac released its update for the 1st quarter of the 2019 financial year with progress on track with earlier announcements despite competitive retail environment and a normalised/softening residential market. A focus on development of commercial and industrial properties has shifted the portfolio to a younger less capex intensive book.

 

Guidance

Mirvac have re-affirmed operating EPS guidance of between 16.8 to 17.1 cpss for FY19, which represents an increase in earnings of between 2 to 4 per cent, and distribution guidance of 11.6 cpss, which represents DPS growth of 5 per cent.

 

Office highlights:

  • maintained high occupancy at 97.2 per cent¹ (97.5 per cent at 30 June 2018), with a long WALE of 6.2 years;

  • completed approximately 11,000 square metres of leasing activity;

  • achieved positive leasing spreads of 11.3 per cent;

  • incentives remained low at 17.9 per cent;

  • secured leading financial services provider, Suncorp, at 80 Ann Street in Brisbane QLD, with Suncorp pre-committing to over 39,600 square metres of office and retail space (66 per cent of the building’s total net lettable area) for a 10-year term. Mirvac concurrently announced it had sold a 50 per cent interest in the development to M&G Asia Property Fund for a total consideration of $418 million; and

  • acquired 383 La Trobe Street in Melbourne, VIC for a total consideration of $122 million, representing an initial yield of 5.7 per cent. The asset offers a development opportunity in a well-located part of Melbourne’s CBD, while providing the Group with secure income over the medium term.

 

Mirvac progressed its $3.1 billion office development pipeline during the quarter, which is 83 per cent pre-leased. Project updates are as follows:

  • 477 Collins Street, Melbourne VIC: an agreement for lease was executed with Norton Rose for 5,000 square metres across levels 35-38. Heads of agreement have also been signed with three separate tenants, which if executed will take the building to 85 per cent pre-leased. The project remains on track to reach practical completion in FY20;

  • Australian Technology Park at South Eveleigh Sydney NSW: Buildings 1 and 3 are on track and scheduled for completion in the second half of FY19. Building 2 is expected to achieve structural top-out by the end of this calendar year; and

  • 80 Ann Street, Brisbane QLD: received planning approval for the development of a 60,000 square metre tower over 31 levels. The Group is undertaking demolition works to commence construction on site next year. Practical completion is targeted for FY22

Industrial highlights: 

  • occupancy remained high at 100.0 per cent 4. (100.0 per cent at 30 June 2018), with a WALE of 6.8 years;

  • completed approximately 2,400 square metres of leasing activity;

  • entered into an agreement to acquire Stage 1 of a future 244-hectare industrial estate at Badgerys Creek in Western Sydney, NSW for a total consideration of $71 million, under a put-and-call option arrangement. Located just 800 metres from the proposed new Western Sydney airport and close to the M7 motorway and the proposed M12 motorway, Stage 1 is a 54-hectare site set to benefit from approximately $20 billion of infrastructure improvements in the Western Sydney area; and

  • Calibre, Eastern Creek NSW: on 31 August 2018, Mirvac announced it sold a 50 per cent interest in Calibre at Eastern Creek, NSW to the Mirvac Industrial Logistics Partnership (MILP). Practical completion was achieved on Building 4 in June 2018, with Sheldon & Hammond committing to the 31,000 square metre facility for a 10-year term. In September 2018, Mirvac secured ACFS Port Logistics for the fifth and final building (Building 5) at Calibre. Construction is on track, with practical completion targeted for the second half of FY19.

Retail highlights: 

  • maintained high occupancy of 99.2 per cent  (99.2 per cent at 30 June 2018);

  • comparable moving annual turnover sales growth of 3.2 per cent and comparable specialty sales growth of 3.1 per cent;

  • achieved comparable specialty sales productivity of >$10,000 per square metre on sustainable occupancy costs of 15.2 per cent;

  • executed 112 leasing deals across approximately 16,900 square metres, with leasing spreads remaining positive;

Residential highlights:

  • settled 560 residential lots, in line with expectations. Defaults remain below 2 per cent;

  • maintained a high level of residential pre-sales at $2.1 billion;

  • Released 428 lots during the quarter, with strong sales at Masterplanned Communities, including:

    • Woodlea, VIC: 81 per cent of released lots pre-sold

    • Olivine, VIC: 57 per cent of released lots pre-sold

    • Crest, NSW: 57 per cent of released lots pre-sold

  • over 1,500 lots yet to be released during FY19, subject to planning approvals and market conditions;

  • on track to settle over 2,500 lots; and

  • 69 per cent of FY19 EBIT is now secured, reflecting the shift to Masterplanned Communities and away from Apartments.

 

 

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