MARKETS SPECTATOR: Mirvac plays monopoly

Mirvac's capital raising comes as the S&P/ASX 200 property index continues to outperform the benchmark.

Macquarie Group will manage a share sale to institutional investors that is expected to raise $400 million by this afternoon for Mirvac Group to buy seven offices from GE Real Estate Investment Australia for $584 million.

The shares will be sold at $1.69, a 3.2 per cent discount to Mirvac’s $1.745 share price at the close of trading on May 9. Mirvac plans to sell as much as $50 million of stock to individual investors from May 24 to June 17 at $1.69 a share.

The seven properties Mirvac is buying have a total net letting area of 83,501 square metres and an initial passing yield of 7.8 per cent. Mirvac says across the acquired central business district office buildings, one in Perth, one in Melbourne and five in Sydney, the occupancy rates are 92 per cent. Their fully-let passing yield is 8.4 percent. 

The S&P/ASX 200 Property Accumulation index increased 8.2 per cent last month, outperforming the S&P/ASX 200 by 3.7 per cent. Mirvac said the office market will be underpinned by a lack of supply.

Sydney’s CBD vacancy rates have fallen. In other major Australian cities vacancy rates have increased because of new building completions. Mirvac expects rental growth to remain subdued.

Mirvac’s shares will not trade until May 14 or when an announcement is made.

Mirvac shares are up 41 per cent in the last 12 months compared to the 21 per cent gain in the S&P/ASX 200 Index.