Mirvac eyes residential property recovery

Property developer Mirvac’s residential portfolio is showing signs of recovery after a writedown on the value of some projects caused a 66 per cent fall in full year profit.

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The company reduced the value of several apartment projects in Queensland and Western Australia by $273 million six months ago due to weaker housing markets.

That reduced its net profit in the 2012/13 financial year to $139.9 million, down from $416 million in the previous year.

But chief executive Susan Lloyd-Hurwitz said the outlook for the company’s development division was strong, with major projects in inner-city Sydney and Melbourne set to deliver additional earnings in the next three years.

“Residential markets remain mixed in terms of current performance and outlook,” she said.

“However, we are seeing signs of recovery as a result of improving housing affordability, population growth and low rental vacancy.”

Mirvac’s residential division delivers less earnings than its office and retail divisions, but Morningstar analyst Tony Sherlock said it was the area with the most growth potential.

“That’s the bit that’s going to get some higher growth in the year ahead,” he said.

Mirvac has forecast earnings per security of between 11.7 cents and 12.0 cents in 2013/14, up from the 10.9 cents per security it achieved in 2012/13.

Mr Sherlock said most of that growth would come from Mirvac’s residential business.

“The very positive rhetoric from Mirvac, it really points to a much more favourable outcome.”

Mirvac’s office sector posted income growth despite softening market conditions, maintaining a high occupancy rate.

The retail division turned its focus towards supermarket chains, helping it maintain a 99.2 per cent occupancy rate.

Mirvac’s operating profit, which excludes one-off financial items such as project value writedowns, grew by three per cent in 2012/13 to $377.6 million.

Mirvac shares gained 2.5 cents to $1.665.