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Mirvac Group released an operational update for the third quarter ended 31 March 2023 this week, announcing an earnings downgrade as slowing sales eat into margins.
Mirvac’s Group CEO & Managing Director, Campbell Hanan, said: “We continued to execute against our strategy during the quarter, despite ongoing economic uncertainty. Our modern, sustainable investment portfolio is well occupied at 97.5 per cent, with elevated leasing activity, particularly in Build to Rent, with our newly opened asset, LIV Munro in Melbourne, already 54 per cent leased.
“We made strong progress on our asset sales program, with 60 Margaret Street/Met Centre in Sydney expected to be finalised and settle in Q4, while capital partnering and development initiatives are progressing across Office, Industrial and Build to Rent. Residential sales were slower during the quarter, however, an acutely undersupplied market, strong population growth, and stabilisation of established house prices and interest rates are expected to support ongoing demand in the medium term.”
As a result of sustained adverse weather conditions impacting residential settlement timelines and delayed settlement expectations at Aspect North into FY24, operating FY23 EPS guidance has been adjusted to at least 14.7cpss from at least 15.5cpss previously. FY23 residential settlements are now expected to be around 2,200 lots (previously >2,500), with the remaining lots now expected to complete and settle in FY24. Distribution guidance is 10.5cpss, representing 2.9% growth.
As part of his business update, Mr Hanan outlined the future focus for the business to leverage Mirvac’s key competitive advantages and reflects the current market conditions and major structural trends that are expected to persist over the next decade. It includes:
- retaining balance sheet flexibility to take advantage of future opportunities
- expanding the Funds Management offering across a broader suite of asset classes and product types including living sectors
- further improving the cash flow resilience of its high-quality $13.4bn Investment portfolio, with higher exposure to living sectors and Sydney-based industrial expected over time
- leveraging Mirvac’s integrated development capability to drive a more efficient allocation of capital,
- better utilisation of skills, and superior returns and risk management
- maintaining ESG leadership to future-proof the business against changing stakeholder requirements.
Mr Hanan said: “With ~$18bn of external AUM and a clear strategy to grow our funds management platform, third-party capital will play a critical role in our business into the future, as we look to unlock the substantial value embedded in our development pipeline and increase scale in living sectors and industrial. Our end-to-end development, management and investment expertise, our willingness to co- invest, and our ability to create best-in-class property investments are key to attracting aligned capital partners.
“We’ve had a clear focus on increasing the quality of our investment portfolio over the past ten years, and we now have one of the most modern, sustainable portfolios in the country. It is essential we continue to improve the cash flow resilience of our investment portfolio so that we can deliver superior investment returns and growing dividends to our security holders”
Mr Hanan said the Group has been restructured into Investments, Funds Management and Development, which will operate as separate EBIT divisions to reflect the growing scale of the Funds Management platform. Asset Management has been established as a separate business unit to Investment Management to remove any conflicts in the structure and provide independent service and support to both Mirvac and its third-party capital partners.
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