Mirvac Retail Boost as Residential Settlements Slow

As a result of the restrictions in place since mid-March, Mirvac has seen a sharp change in sales performance across its retail and residential portfolio.

In its quarterly results, the company highlighted its robust balance sheet heading into the crisis after withdrawing its guidance earlier this year.

The company's balance sheet, with gearing at 20.8 per cent, the lower end of its 20-30 per cent target range, is also supported by a weighted average debt maturity of 7.7 years.

Mirvac reported “healthy” settlement numbers over the beginning of the quarter and maintained a high level of residential pre-sales at $1.1 billion, but warned its metrics would not yet reflect the full impact of the coronavirus pandemic on the business.

During the quarter, Mirvac extended the number of residential lots settled in the financial year to date to 1,818 with defaults remaining below 2 per cent.

The developer returned 270 settlements in January and 189 in February but saw a contraction in March, with numbers falling to 127.

Settlements included 537 at St Leonards Square, Sydney, 206 at Woodlea, Melbourne and 28 lots at Verde, the first building at Pavilions, Sydney Olympic Park.

The company also highlighted its willingness to “prepare for the recovery to come”, restocking its portfolio by snapping up Nine's former headquarters at Willoughby on Sydney's north shore for $249 million, with plans in place for 460 new dwellings.

“In March, the landscape became significantly more challenging, with the Covid-19 outbreak causing our sales offices to close and sales leads to fall off the back of a general decline of consumer confidence,” Mirvac chief executive Susan Lloyd-Hurwitz said.

“We continue to work on our development pipeline, exploring a range of additional opportunities and improving our capabilities, in order to expedite the recovery process.”

Looking at its retail portfolio, Mirvac said its comparable moving annual turnover in sales growth lifted 2.5 per cent while specialty sales growth fell to just 0.6 per cent.

Across the trading period, Mirvac's diverse retail portfolio collected total retail sales to $3.4 billion while speciality stores captured $1.42 billion.

Over the quarter, Mirvac's discount department store sales grew by $263 million, a lift of 5 per cent, while its supermarkets reeled in $1.2 billion equating to a lift of 4.8 per cent.

Mirvac noted a lift in activity across supermarkets, liquor, pharmacies, games and automotive as consumers stocked up, with fresh food and discount department stores “holding up relatively well”.

Mirvac's noted that its office and industrial portfolio was well placed going into the crisis with low vacancy, low capex, low exposure to smaller tenants, a low lease expiry in FY21 and a long weighted average lease expiry.

Mirvac now holds occupancy of 98.5 per cent and a WALE of 6.6 years while also managing 46,600sq m of leasing activity over the financial year to date.

The company is now focused on maintaining construction momentum across its $5.4 billion future development pipeline by fast tracking projects strategically weighted in the Sydney and Melbourne fringes.

“As we head into Q4, we are working to provide assistance to tenants across the portfolio, with a particular emphasis on SMEs, who we are supporting with a range of measures,” Lloyd-Hurwitz said.

Mirvac also entered into $440 million of new debt facilities over the period and now has cash and undrawn debt facilities of $984 million.

Only $200 million in debt is due for repayment between now and early 2022 but the group has been touted as a potential equity raiser holding a A3/A- credit ratings with stable outlooks from Moody’s and Fitch.