Mirvac has expanded its retail portfolio with the purchase of the remaining half share in the East Village in Zetland, Sydney, and also inked an agreement to buy the proposed South Village Shopping Centre in Kirrawee, Sydney, from PAYCE Consolidated.
At the group's annual result on August 17, Mirvac chief executive Susan Lloyd-Hurwitz said retail was a growth sector for the diversified real estate investment trust.
"Our focus on urban markets with strong fundamentals ensured we realised all of our 2017 financial year targets, including occupancy of greater than 99 per cent; leasing spreads of 2 per cent and earnings before interest and tax growth of 25 per cent," Ms Lloyd-Hurwitz said.
Deutsche Bank analysts said of the annual results that they "continue to believe Mirvac's comparable speciality sales growth is sector leading at 5.6 per cent versus the sector average of 2.1 per cent".
"We believe the superior performance is due to Mirvac moving quickly and early to remix its portfolio away from department stores and discount department stores," the analysts said.
Mirvac said it would focus on the "urbanisation" of capital cities, where people want to live close to smaller malls and be able to walk more to do shopping.
The group recently spent $19 million upgrading the Birkenhead Point outlet centre in Sydney, where it replaced the former David Jones clearance centre with upmarket brands including Harrolds, Coach, Bally and Michael Kors.
Mirvac head of retail Susan MacDonald said she expected Birkenhead Point sales to reach $300 million within 12 to 18 months, up from $270 million in the 2017 financial year and $200 million when Mirvac acquired the centre in 2014.
Under the latest deal, Mirvac will buy a 50.1 per cent interest in East Village for $155.3 million, following the purchase of a 49.9 per cent interest in July 2016.
The group will also acquire the remaining interest in the proposed South Village Shopping Centre, following an agreement to purchase a 50 per cent interest in October 2016.
PAYCE will undertake development of the project, with Mirvac to pay an amount based on a 6 per cent capitalisation rate of the leased net income on completion.
Mirvac will provide development leasing services at South Village Shopping Centre, including tenancy co-ordination and retail design management prior to practical completion and will retain management rights and leasing services following practical completion.
"East Village in particular has proven to be an exceptional asset, delivering sales productivity of $14,950 per square metre after less than three years of trade, and ranking No.1 in the Shopping Centre News' Little Guns Awards in its first year of entry," Ms Lloyd-Hurwitz said.
"Moving annual turnover is also growing strongly at about 8 per cent per annum. Meanwhile, South Village Shopping Centre is set to benefit from its location in an undersupplied, densifying and affluent trade area, with household incomes well above the Australian average."
