The Group’s Retail division continues to focus on densely-populated urban catchment areas, with an overweight position to the strong performing Sydney market.
Mirvac’s strategy is to own and manage quality retail centres located in prime urban trade areas, in Australia's key eastern seaboard cities. The Group’s retail centres are individually branded, marketed and positioned to suit the specific needs of its customers in each of their unique catchment areas.
For the year ended 30 June 2016, the Retail division delivered earnings before interest and tax of $117m.
Retail’s continued focus on urban areas and on capturing organic growth across its portfolio ensured a solid performance in FY16. Highlights across the retail portfolio for the year ended 30 June 2016 included:
- maintained high occupancy of 99.4 per cent1;
- achieved comparable moving annual turnover (MAT) sales growth of 5.4 per cent and comparable specialty sales growth of 4.2 per cent;
- increased comparable specialty sales productivity by nine per cent to $9,623 per square metre;
- comparable specialty occupancy costs down 70bps to 15.3 per cent;
- executed 410 deals across approximately 52,400 square metres, with leasing spreads of 3.5 per cent;
- acquired Toombul Shopping Centre in Brisbane’s inner-north for a total consideration of $233m2, representing a core capitalisation rate of 6.5 per cent;
- entered into a joint venture with PAYCE Consolidated to purchase an interest in East Village, Zetland, Sydney NSW for a total consideration of $155m. Settlement occurred on 1 July 2016;
- disposed of the mixed-use Como Centre complex in South Yarra, VIC with the retail component sold for approximately $29m. Settlement occurred in June 2016; and
- Broadway Sydney ranked No.1 in Shopping Centre in News’ Big Guns Awards 2016 for MAT per square metre (MAT/m2) for the fourth consecutive year.
- Orion Springfield Central, Brisbane QLD: achieved practical completion of the Stage 2 expansion in March 2016, with the official opening held in April 2016. The centre, which has a gross lettable area of approximately 70,000 square metres, now encompasses a comprehensive fashion, leisure, casual dining and entertainment offer to service the growing Greater Springfield. The additional retail space in Stage 2 is 97 per cent leased;
- Greenwood Plaza, Sydney NSW: progressed with development works on the enhanced casual dining precinct, with completion achieved in July 2016. The project is 100 per cent leased;
- Tramsheds, Harold Park NSW: significantly advanced the restoration of the historic tramsheds, with completion expected in the first half of FY17. The 6,200 square metre boutique retail space is 100 per cent pre-leased; and
- Broadway Sydney, Broadway NSW: significantly advanced with the development of the Level 2 expansion, which is expected to complete in 1H17. The new casual dining precinct and enhanced fashion offering will be anchored by leading international brands, H&M and Sephora. The project is 100 per cent pre-leased.
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 FY16 included:
Consumer spending growth in New South Wales moderated slightly in the second half of FY16, but remains supported by solid levels of economic growth, continued house price growth and low unemployment levels. Australia’s major cities capture a high proportion of population growth, compared to regional areas. Together with a lower Australian dollar driving gains in service employment in major cities, retail centres in urban locations, which Mirvac continues to focus on, are well-positioned.
While retail sales have improved generally, leasing demand in the broader market is variable and a number of retailers remain under pressure. 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. In addition to its focus on key urban and metropolitan markets, Mirvac ensures it maintains a diversified tenancy mix, where no single specialty retailer contributes greater than 1.6 per cent of the total portfolio’s gross rent.
1. By area.
2. Includes adjacent land of approximately 2,800 square metres.
3. These future looking statements should be read in conjunction with future releases to the ASX.