Mirvac’s urban strategy delivered excellent results in FY17, with operating earnings up 11 per cent and distributions up 5 per cent, at the top end of guidance provided.
The 2017 financial year was an outstanding year for Mirvac, and our ambition to reimagine urban life by creating, owning and managing high-quality assets in Australia’s largest cities has delivered strong results across the Group, positioning us well for the future.
Mirvac is an integrated, urban property group and a key contributor to Australia’s major cities.
Mirvac’s urban strategy and a strong focus on capital management delivered growth in FY17, and has ensured the Group is well placed for the year ahead.
In February this year, we launched Marrick & Co in Sydney’s inner west: a 220-apartment development on the old Marrickville Hospital site.
Mirvac has a priority focus on the health and safety of its employees, contractors and customers, and in FY17, we launched a refreshed policy and focus to strengthen our safety practices, behaviours and culture across our business, while supporting the wellbeing of our people, places and the communities in which we operate.
Developing a Reconciliation Action Plan (RAP) has been one of Mirvac’s key cultural goals over the past 12 months.
This Changes Everything is Mirvac’s sustainability strategy, comprised of four focus areas with long-term missions.
This Changes Everything FY17 at a glance
The Group’s Retail division continues to focus on densley populated urban catchment areas, with an overweight to the strong performing Sydney market.
Mirvac’s strategy is to own and manage quality retail centres located in prime urban trade areas with strong fundamentals.
Approximately 64 per cent of the portfolio is weighted to Sydney, and 70 per cent of the portfolio is weighted to inner/middle ring areas. Each retail centre is individually branded, marketed and positioned to suit the needs of customers in their unique catchment areas.
For the year ended 30 June 2017, Retail delivered operating earnings before interest and tax of $156m, driven by asset acquisitions and the contribution from development completions.
Retail delivered earnings before interest and tax of
Retail’s continued focus on urban areas and on capturing organic growth across its portfolio ensured a solid performance in FY17. Highlights across the retail portfolio for the year ended 30 June 2017 included:
maintained high occupancy of 99.4 per cent 1, in line with the Group’s target to have occupancy of greater than 99 per cent in FY17;
achieved total sales productivity of $10,048 per square metre, in line with the Group’s FY17 target to increase specialty sales productivity to $9,864 per square metre;
achieved comparable MAT sales growth of 4.1 per cent and comparable specialty sales growth of 5.6 per cent;
Maintained high occupancy of
executed 359 deals across approximately 54,300 square metres, with leasing spreads of 3.2 per cent;
specialty occupancy costs reduced to 15.0 per cent
(June 2016: 15.3 per cent);
entered into an agreement with PAYCE Consolidated to acquire an interest in the proposed South Village Shopping Centre in Kirrawee, NSW;
Broadway Sydney ranked No. 1 in Shopping Centre News’ Big Guns Awards for annual turnover per square metre (MAT/m2) for the fifth consecutive year; and
East Village, Zetland ranked No. 1 in Shopping Centre News’ Little Guns Awards for total sales productivity in its first year of entry. The acquisition of a 50 per cent interest in the centre was completed in July 2016.
Orion Springfield, QLD
The Group continued to create value across its Retail portfolio with a development pipeline that captures attractive, organic growth. Highlights across Mirvac’s retail development projects for FY17 included:
Completed the $19 million Flinders Gallery development in August 2017, which involved the reconfiguration of 3,500 square metres of retail space and the introduction of several premium international brands. The development was 100 per cent pre-leased on completion.
Received development approval for a 6,800 square metre expansion, delivering cinemas and an expanded dining precinct. The project, which is expected to commence in early FY18, is 85 per cent pre-leased 1. This follows the successful $85m expansion completed in 2014, which saw sales increase 28 per cent in the 12 months post completion. Mirvac has also commenced a campaign to sell down a 50 per cent interest in Kawana Shoppingworld, in line with the Group’s capital partnering strategy.
While the broader retail environment faces some challenges, shopping centres with strong catchment fundamentals continue to be well supported. Mirvac’s retail portfolio is located in the service-based economies of Sydney, South East Queensland and Melbourne, which continue to record stronger employment and population growth, and higher levels of housing equity than regional areas. In addition, well-performing centres continue to attract quality tenants who in turn offer great customer experiences. Mirvac’s focus on high-quality assets in urban catchments with strong fundamentals is expected to support a continued outperformance in the retail sector.
Retail sales in Mirvac’s portfolio continue to grow overall, however, certain retailer category performance has softened and leasing demand remains variable. To mitigate these risks, Mirvac is focused on continually refreshing its
retail assets (via refurbishment, redevelopment or
tenant remixing) to adapt to changing market dynamics. This active management has seen a reduced weighting to discount department stores and an increased weighting to more resilient and experiential categories such as food and beverage, entertainment and non-retail. Furthermore, Mirvac maintains a focus on key urban and metropolitan markets and having a diversified retailer mix, where no single specialty retailer contributes greater than 1.5 per cent of the total portfolio’s gross rent.
1. By area.
2. These future looking statements should be read in conjunction with future releases to the ASX.