Strategy with a city heart
The diversified trust will also expand its office portfolio following the acquisition of seven GE Capital assets for $584 million.
Under that deal, Mirvac will have $400 million in capital to fund the acquisition and remain in line with its revised target gearing range of 20 per cent to 30 per cent.
At the investor day on Thursday, chief executive Susan Lloyd-Hurwitz said the group was concentrating on core office assets, boosting its mixed-use developments in and around the cities and apartments. She said the industrial portfolio could also be a source of properties that could be converted to residential.
"In maintaining a core capability across four sectors, we are able to deliver an appropriate balance of passive and active assets and can also unlock complex urban multi-use opportunities," she said.
"Applying our integrated and diversified model in a focused and disciplined manner is a powerful proposition to investors."
Ms Lloyd-Hurwitz reaffirmed the earnings guidance for the full year in the narrow range of 10.7¢ to 10.8¢ to June 30, 2013.
But after the briefing, head of property research at Goldman Sachs, Simon Wheatley, said his team would have expected that, this close to the end of the financial year, Mirvac would have enough clarity to be able to firm this guidance to a specific expectation.
"Overall, the strategic update did not provide the impact we were expecting and we make minimal change to our prior macro views on the group," he said. "We retain our buy rating and see potential for upside surprise to medium-term earnings estimates from project-specific contributions.
"We were, however, expecting to hear an update on the progress of capital-partnering initiatives for the investment properties [specifically for office assets] and further detail on the preferred structuring of residential projects."
Head of property research at Bank of America Merrill Lynch, Simon Garing, said Mirvac had reinstated its 80:20 capital mix between a diversified investment portfolio and development. He said the message to be taken from the briefing was that Mirvac would focus on its strong competitive advantages in asset management/refurbishment and inner-city medium-density/complex urban developments.
"Mirvac will also move out of non-metropolitan locations for both investment and residential, leading to the sale/wind-up of $900 million of non-aligned assets/projects," Mr Garing said.
"The next milestones for Mirvac will be the launch of both residential and office capital partnerships, and further office site acquisitions."
Mr Garing said further rate cuts and a lift in consumer sentiment should also provide a boost to its price-earnings rating.
Frequently Asked Questions about this Article…
Mirvac is refocusing on inner‑city, medium‑density and mixed‑use developments, plus core office assets and apartments. The article specifically mentions projects such as Harold Park in Sydney and Yarra's Edge in Melbourne as examples of the group’s city‑centric strategy.
Mirvac expanded its office portfolio by acquiring seven GE Capital assets for $584 million. The group will have about $400 million in capital available to fund the acquisition while staying within its revised gearing target range.
Mirvac has revised its target gearing range to 20%–30%. For investors, that range signals the company’s desired balance of debt and equity, and it helps explain why Mirvac is managing capital carefully when making acquisitions like the GE Capital deal.
CEO Susan Lloyd‑Hurwitz said Mirvac will maintain capabilities across four sectors (office, residential, industrial and mixed‑use) to deliver a balance of passive and active assets. She emphasised using an integrated, disciplined model to unlock complex urban multi‑use opportunities and grow mixed‑use and apartment developments.
Yes. Mirvac reaffirmed its full‑year earnings guidance in a narrow range of 10.7 cents to 10.8 cents per share to June 30, 2013.
Goldman Sachs’ head of property research, Simon Wheatley, said the update fell short of the clarity they expected so close to year‑end. Despite that, they retained a buy rating and see potential upside to medium‑term earnings from specific projects, while noting they had expected more detail on capital‑partnering and residential structuring.
BofA Merrill Lynch’s Simon Garing noted Mirvac has effectively reinstated an 80:20 capital mix between its diversified investment portfolio and development. He also said Mirvac will move out of non‑metropolitan locations, which will lead to the sale or wind‑up of about $900 million of non‑aligned assets and projects.
Investors should watch for the launch of residential and office capital partnerships, further office site acquisitions, updates on the $900 million of non‑aligned asset sales, and any additional detail on how residential projects will be structured. Also keep an eye on macro factors—further interest‑rate cuts and improved consumer sentiment were flagged as potential supports for Mirvac’s price‑earnings rating.
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