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Real estate giant Mirvac has swung to a $165 million full-year loss after writing down the value of its retail and office property investments and battling the effects of wet weather, rising interest rates and higher inflation on its development arm.
The statutory loss came after the Sydney-based company posted a $906 million profit the year before, Mirvac said in a statement to the ASX on Wednesday. Excluding the writedowns, its operating profit after tax fell 3 per cent to $580 million, or 14.7 cents per stapled security, in line with its own forecasts.
“We delivered on our key strategic priorities despite a challenging economic backdrop,” chief executive officer Campbell Hanan said.
Mirvac faced a “challenging economic backdrop”: CEO Campbell Hanan.
The $9 billion ASX-listed company, which is the country’s largest mixed-use medium to high density housing developer, said its operations were hit by sustained wet weather on the east coast, supply chain constraints and labour shortages, along with increased construction costs. Profits from residential developments slumped 34 per cent to $156 million in the year to June 30.
With a $29 billion pipeline of projects in planning or under way, the developer still settled 2298 residential lots during the year, slightly ahead of its revised settlement target of about 2200 lots.
But the barrage of interest rate rises, lower first-home buyer activity and fewer product launches had taken their toll, Hanan said. “However, we continued to experience good demand from owner-occupiers focused on high-quality, well-located product with good amenity and delivery certainty, backed by a credible brand,” he said.
“We will continue to sell down non-core assets to optimise capital allocation across our portfolio and focus on unlocking the considerable value from our development pipeline over the next few years.”
Mirvac also owns and manages $26 billion worth of assets in its investment portfolio across office, retail, industrial and build-to-rent properties. The company said it increased its third-party capital under management by 64 per cent to $17.1 billion and plans to focus on growing that business to “deliver resilient cash flow streams to our securityholders” as it seeks to counter the more volatile development earnings.
It also boosted its activities in the growing build-to-rent (BTR) sector via a venture with cornerstone investors such as the Clean Energy Finance Corporation. The venture has around 2200 lots in its pipeline valued at an expected $1.8 billion, Mirvac said.
Under the BTR model, major building complexes – sometimes hundreds of units – are specially designed and constructed by a developer, which retains ownership of the properties after completion. The apartments are then rented to tenants and the developer manages and maintains the complex, giving it recurring earnings even after completion of the project.
“The establishment and capitalisation of our Build to Rent Venture supports our vision to increase our exposure to the build to rent sector, grow our portfolio to at least 5000 apartments in the medium term, and play a key role in helping to address Australia’s housing and rental shortfall,” Hanan said.
Mirvac declared a final distribution of 5.3¢ payable on August 31, taking its payout to investors for the year up 3 per cent to 10.5¢ per stapled security.
Its shares rose 1.5 per cent to $2.32 in midmorning trade.
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