Larry Schlesinger | 6 February 2013

Australand profits up 5% in 'interesting times', with strong demand for Melbourne apartments

Australand profits up 5% in 'interesting times', with strong demand for Melbourne apartments

Property developer Australand has reported a 5% rise in full-year operating profits to $142.1 million, with strong sales in its residential communities in NSW and a more resilient performance in some of its Melbourne apartment projects due to growth in demand for medium-density housing.

Australand reported 97 sales at its Local project in Carlton in Melbourne (pictured below), with an average price of $500,000, making it the top-selling medium-density project for the year, now 72% sold out. The project is in partnership with Citta Property Proup.

This was followed by its 333 Burwood apartment project near Camberwell junction, which recorded 93 sales with an average price of $720,000.

Sales of residential land on the outskirts of Melbourne remain “fairly subdued” due to softer trading conditions at the lower end of the market.

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Overall, the developer is “cautiously optimistic” about 2013 with the resurgence in Sydney “very pleasing”

The top selling land project was Greenhills Beach in Cronulla in Sydney’s Sutherland Shire with 136 sales and an average price of $830,000 per lot.

Australand also reported strong sales at Cockburn Central in Perth (94 sales with average price of $440,000) as well as Kangaroo Point in Brisbane.

There were also strong levels of pre-sales at the NSW projects of Watervue at Wolli Creek (73% pre-sold), Air at Clemton Park (97% pre-sold) along with Melbourne apartment projects Hyde (98%).

At today’s full-year results presentation, anaging director Bob Johnston said it was “interesting times” for Australand given the recent GPT offer for the business and majority shareholder CapitaLand currently conducting a strategic review of its investment.

He said 2012 was a challenging year, but that there had been a “marked” pick-up in the fourth quarter of the year, particurlarly in residential sector.

Johnston noted the 16% rise in residential earnings from $587 million to $606 million driven by a stronger Sydney offsetting a weaker Melbourne market with an increase in margins and higher average sales prices.

This was a strong performance than its commercial property investment portfolio, where earnings rose 8% over the year, but with high occupancies and driven by government or ASX-listed tenants.

He said this portfolio remained in “good shape”.

There were also strong sales across its Greenhills Beach residential community project in Cronulla, with 136 sales at an average price of $840,000, and Greenvale residential community, 20 kilometres north of Melbourne.

Australand holds 1,169 contracts on hand for the full financial year with 64% expected to settle in 2013.

“While the consumer remains cautious, our residential division delivered strong growth in earnings and is well positioned with contracts on hand up 24% on last year,” says Australand managing director Bob Johnston.

Australand Executive general manager for residential, Rod Fehring reported that there had been 1,788 gross lot sales over 2012, which though down on 2011, had brought with it forward momentum.

Of these 1,788 sales, 1,202 were in the resurging Sydney market with the top 10 projects contributed 84% of residential earnings in 2012.

Fehring says demand is being supported by ongoing interest from offshore investors as well as “excellent presales”.

“Sales activity lifted by 41% in NSW and 33% in WA.

Fehring says Perth benefits from favourable population growth and a very tight rental market resulting in increased overall sales activity.

“Sentiment from mining sector will drive the market, but it is a balanced market. We don’t expect rises in prices, just an improvement in activity.”

Looking at the south-eat Queensland market, Fehring said that at the start of the year things seemed to be improving, with Brisbane holding a median price advantage over the other capital cities.

“But sentiment is weak, and the recent floods may impact further,” he said.

Considering the overall market, Fehring said Australand is “cautiously optimistic about 2013” with lower interest rates, new project commencements that will make substantial contributions and fundamentals in key markets looking “reasonably sound”.

Shareholders will receive distributions of 21.5¢ per share with a similar forecast for 2013 financial year.

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