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Mirvac property hit by $273m write-down

8 Feb 2013 THE AGE - CAROLYN CUMMINS



MIRVAC has set off alarm bells for the property sector after taking a $273.2 million write-down in its residential business following bad weather and weaker sales.

It brings the tally of write-downs for the group to $980 million over the past five years. The cuts were made from Perth and Queensland apartment projects and land and house packages.

Analysts at CLSA said write-downs in residential businesses would be a "recurring theme" for this reporting season.

But the new chief executive at Mirvac, Susan Lloyd-Hurwitz, said the impact of the cuts was not expected to change the group's forecast full-year earnings.

Ms Lloyd-Hurwitz reaffirmed that Mirvac remained on track to deliver 2013 earnings per security in line with guidance at 10.7¢ to 10.8¢ and a distribution of 8.5¢ to 8.7¢ per security. Mirvac releases its half-year result next Thursday.

She said the problem projects were now considered in the "old world" and were for sale. "Some of these projects decisions you would not make today, they were made in a different part of the cycle," she said.

"We are very focused on what we do today and how we create value for security holders. I will outline the strategy at next week's results."

The trigger for the cuts was falling prices and sales over the past six months, showing that a recovery was not likely any time soon.

Analysts said the majority of the write-downs were in the apartments sector, with the land impairment focused on one project between Brisbane and the Gold Coast.

Elsewhere, Australand on Thursday reported a rise in profits of 5 per cent to $142 million for the full year.

The result was marginally ahead of expectations, with analysts saying it reflected an improvement in margins in the residential operations.

Goldman Sachs analyst Peter Zuk said his earnings and price targets for Australand were under review.

Overall, earnings before interest and tax for the residential division were up 16 per cent, in line with guidance, and while sales volumes were down on the previous corresponding period, contracts on hand rose by 24 per cent.

Australand's managing director Bob Johnston said the full-year distribution was 21.5¢ and forecast the same for this year.

He said the results would be skewed to the second half as some residential projects were settled.

GPT made a non-binding and indicative offer in December for Australand's commercial and industrial assets. Mr Johnston declined to comment on whether other parties had approached Australand after the board rejected the GPT offer.

Australand's largest shareholder, CapitaLand, has said its holding is under review.

"We rejected the proposal as it did not adequately compensate security holders for the transaction costs, structural inefficiencies and uncertainty as to the trading value of the residential business," Mr Johnston said.