Big property companies reporting strongly: Zoe Fielding
Retail property giants, Westfield Corporation and Scentre Group, were among the last companies to report their results in August, along with Lend Lease, Charter Hall Group and several smaller property companies.
Westfield Corporation and Scentre Group, which each reported half-year results to June 30, 2015, hit their funds from operations forecasts and said they were in line to meet their full-year targets.
Development works are expected to drive profits for Westfield Corporation, which owns and operates Westfield shopping centres in Europe and the USA. It plans to start $2.5bn worth of projects in the coming year with $1.6bn of redevelopments already started in the first half of 2015.
Scentre Group, owner-operator of the Australian Westfield shopping centre assets, is also spending up on redevelopment with $825 million of works announced. Some of the costs will be covered using proceeds from the sale of four smaller shopping centres that did not fit with the group’s long-term strategy.
Several listed property companies have noted the high prices that quality commercial assets are commanding.
“We expect quality Australian property to remain attractive to both domestic and off shore investors given the high Australian property yield spread to bond yields and that the cost of debt remains near record lows,” Charter Hall Group joint chief executive David Harrison said in announcing the fund manager’s results.
Charter Hall Group delivered a statutory after-tax profit of $117.9 million, up 43.6%. Its operating earnings were $98.8 million, up 21.7%.
Cromwell Property Group, which owns offices and operates property funds, said market conditions had lead it to be a net seller of assets.
“We believe some of the current sales activity represents peak of the cycle pricing for prime office assets, notably in Sydney and Melbourne,” Cromwell chief executive Paul Weightman said.
Cromwell reported statutory profit of $148.8 million, down from $182.5 million in 2014. It delivered operating earnings per security of 8.35 cents per share and distributions per security of 7.86 cents, up 3% on the previous year and in line with guidance.
While asset prices were up, trading conditions in commercial property have been mixed.
National Storage REIT, which owns and operates self-storage centres, said weak business and consumer confidence and high levels of discounting among its competitors had created variable trading conditions for its business.
The REIT, which listed at the end of 2013 and was admitted into the S&P/ASX 200 in June 2015, reported an after-tax profit of $48.7 million and underlying earnings of 8.2 cents per security in line with guidance.
Residential property markets are also variable across the country.
Lend Lease, like other major residential developers, reported revenue from its residential division was up dramatically. The group reported $5.2 billion in pre-sales revenue for the year, more than double the prior year’s result.
Sunland Group reported improving consumer sentiment in Sydney, Melbourne and south-east Queensland drove development margins higher and helped it deliver an after-tax profit of $30.1 million, 111% up on its 2014 result.
Peet Limited reported a statutory profit of $38.5 million, up 27% on the previous year’s result as lower sales at its developments in Western Australia and the Northern Territory were partly offset by the strong performance of its projects in Victoria.