The Mirvac Group has booked a $273 million write-down provision, as new chief executive Susan Lloyd-Hurwitz reviews the group’s poorly performing residential developments especially in Queensland and Western Australia.
“Price points and sales rates over the past six months, including the recent spring and summer sales periods, have shown that the velocity and extent of a market recovery are not likely to eventuate as previously expected,” she told the ASX market update.
Seeking $89 million, Mirvac will sell off some struggling englobo projects to generate cash inorder to avoid putting more capital into these under-performing projects.
The decision aims at avoiding $476 million of future cash commitments.
Queensland represents 72% of the provision and Western Australia represents 27%.
The poorly performing Queensland projects include Gainsborough Greens, Mariner’s Peninsula, and the balance of its Waterfront Newstead, Mackay and Hope Island inventory.
Smaller provisions were made on other Queensland projects in Hamilton, Waterfront Newstead Park and Brookwater.
In Western Australia, provisions were made on the second stage of Beachside Leighton and a Burswood project.
Earlier write-down provisions on some pre-GFC projects were taken under Susan Lloyd-Hurwitz's Nick Collishaw as the projects pre-date his 2008 appointment.
“Today’s announcement is disappointing, however our December project assessment process has shown that specific markets have remained subdued and are not expected to improve to the extent previously expected.
“The majority of the projects impacted today were initiated when the world was a very different place with significantly higher growth expectations. As a sector we have shifted to a new environment of
lower growth and it is our responsibility to ensure that the capital we invest going forward reflects this new paradigm."
Mirvac confirmed that it was on track to deliver fiscal 2013 operating earnings per security in line with guidance at 10.7 to 10.8 cents and a distribution per security of 8.5 to 8.7 cents.