While the economic and social impacts of the COVID-19 pandemic continue to evolve, the Group remains resilient and has made steady progress in building towards a recovery.
Mirvac’s CEO & Managing Director, Susan Lloyd-Hurwitz said, “COVID-19 has dramatically transformed society, however our people and our
business have adapted well to new ways of living and working. Throughout the crisis, our priority has remained the safety, health and wellbeing of our
people, customers and communities. We continue to deploy our skills, expertise and award winning innovation capability to find ways to bring people together and provide support to those who have been impacted by the pandemic.
“Despite disruptions, we have successfully maintained continuity across the business and set the foundations for recovery in the financial year ahead. Rent collection rates across the Group averaged 82 per cent for the quarter 1, with Retail the most impacted.”
Mirvac does not have sufficient certainty to provide earnings and distributions guidance for FY21. The Group is targeting a payout ratio of 65-75 per cent of FY21 operating earnings in line with the Group’s distribution policy to pay up to a maximum of 80 per cent of operating earnings.
Office Update
The COVID-19 induced slow-down in economic activity and weakening of business confidence has resulted in an increase in market vacancy and sub-lease activity. Within our portfolio leasing transactions are limited as many tenants hold off making significant new leasing commitments however there is mounting evidence that in locations where COVID-19 concerns have been sufficiently mitigated, confidence and leasing activity returns.
In summary;
- occupancy of 97.4 per cent and a WALE of 6.5 years;
- rent collection rate of 93 per cent ;
- transferred to a renewable electricity supply at 101 Miller Street, Sydney, with the asset’s cogeneration system switched to emergency generation. This will see carbon emissions reduce by approximately 1,750 tonnes per year, representing a further 2 per cent reduction in Mirvac’s Scope 1 and 2 emissions;
- commenced a trial of a Bintracker system at 275 Kent Street, Sydney that aims to enhance the monitoring and reporting of multiple waste streams, in line with Mirvac’s This Changes Everything sustainability target to send zero waste to landfill by 2030; and
- undertook Mirvac’s first physical climate resilience audit to review climate impacts and vulnerabilities at 8 Chifley, Sydney.
Construction further progressed during the quarter,
as follows:
- Olderfleet at 477 Collins Street, Melbourne is now complete with most leases due to commence in 1H21. The 58,000 square metre building is now 98 per cent leased to leading tenants, including Norton Rose Fulbright, Lander & Rogers, Urbis and anchor tenant Deloitte with the retail precinct due for completion in late 2020;
- The Foundry at South Eveleigh, Sydney is now complete, with lease commencement expected in 1H21. The building is 100 per cent leased to Commonwealth Bank for 15 years;
- The Locomotive Workshops redevelopment at South Eveleigh is progressing well and is on schedule for a 2H21 completion. 63 per cent of the office space is now pre-committed, as well as 90 per cent of the retail space; and
- 80 Ann Street, Brisbane, remains on track for practical completion in FY22. The building is 73 per cent pre-leased with Suncorp as its anchor tenant.
Industrial Update
Industrial markets remain resilient in the current environment. Many tenants’ businesses are performing well, particularly those with e-commerce exposure, and this is being evidenced by continued leasing
activity and rents holding up well in the current environment.
- occupancy of 99.4 per cent with a WALE of 7.3 years;
- rent collection rate of 95 per cent; and
- received rezoning approval for Elizabeth Enterprise, the 54-hectare (Stage 1) industrial estate in Badgerys Creek, Western Sydney in the NSW Government’s Planning System Acceleration Program. The site has the potential to deliver premium warehousing and logistics facilities forming a key component of the Western Sydney Aerotropolis – a precinct set to benefit from substantial infrastructure including a new airport, motorway and rail line.
Retail Update
Susan Lloyd-Hurwitz, CEO & Managing Director said, “The COVID-19 pandemic has presented immense challenges for the retail sector in 2020 and our retail portfolio has been heavily impacted. Encouragingly, we are seeing customers returning to those centres where they feel it is safe to do so. ”
In summary;
- comparable sales for the past quarter was -14.1 per cent below the same period last year and comparable specialty sales movement was -24.4 per cent below the same period last year;
- the quarter sales resulted in the comparable moving annual turnover sales movement being -7.8 per cent and comparable specialty sales movement being -15.6 per cent for the quarter;
- achieved comparable specialty sales productivity of $9,250 per square metre on speciality occupancy costs of 16.4 per cent;
- maintained high occupancy of 98.0 per cent;
- rent collection rate of 64 per cent;
- made solid progress on retailer support discussions within the parameters of FY20 provisions and expectations for FY21;
- store openings of 92 per cent (97 per cent excluding CBD and Victorian centres);
- executed 59 regular leasing deals across approximately 12,700 square metres in the financial year to date, with spreads slightly negative and incentives in line with FY20; and
- transferred to a renewable electricity supply agreement at Greenwood Plaza, North Sydney, on 1 July 2020. This aims to reduce carbon emissions by 1,895 tonnes per year, representing 2.2 per cent of total Group emissions.
Build to Rent Update
- officially opened our first build to rent property, LIV Indigo, Sydney Olympic Park with 27 per cent of leases signed as at 19 October 2020, with pricing per unit exceeding the underwrite; and
- Mirvac was selected as one of two proponents of the Queensland Government’s Build to Rent Pilot Project for our LIV Newstead proposal in Brisbane.
- The project is designed to facilitate build to rent projects in the State through the introduction of a ground-breaking housing model which has the potential to improve housing diversity. Through the Pilot Project, the Queensland Government has committed to provide a rental subsidy in return for the delivery of affordable rental housing within build to rent developments in Brisbane that meet certain criteria.
Residential Update
- settled 483 residential lots as at 30 September 2020 including 147 lots at Pavilions at Sydney Olympic Park, Sydney;
- defaults are 1.9 per cent;
- residential pre-sales at $921 million;
- exchanged over 660 lots during the quarter, a 40 per cent increase on the prior quarter. Sales were primarily driven by MPC projects benefiting
from government stimulus. Key exchanges during
the quarter included:
– 123 lots at Woodlea, Melbourne;
– 121 lots at Googong, Canberra;
– 80 lots at Gledswood Hills, Sydney; and
– 61 lots at Gainsbourgh Greens, Brisbane; - over 500 lots were on deposit or conditionally exchanged as at the end of quarter, primarily within MPC projects across WA, QLD and Vic;
- 65 per cent of lots released during the quarter were either sold or are on deposit;
- increased our holding at Smiths Lane, Melbourne with the acquisition of an additional land parcel which will deliver an additional ~600 lots;
- acquired Landcom’s ownership of the future stages of Green Square Town Centre, Sydney, anticipated to comprise ~800 apartments, ~7,600
square metres of retail space and ~47,500 square metres of commercial space - installed renewable energy systems on 18 Mirvac homes with our Woodlea, Melbourne project. These homes are the first stage of 76 homes being delivered as part of a funding agreement with the Clean Energy Finance Corporation at Woodlea; and began working with the Green Building Council of Australia to pilot their Green Star Homes standard at one of Mirvac’s future masterplanned community homes in NSW.
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