Brisbane floods force $80 million downgrade for Mirvac

Brisbane floods force $80 million downgrade for Mirvac
Brisbane floods force $80 million downgrade for Mirvac

Mirvac has taken an $80.8 million balance sheet hit as a result of the Brisbane floods.

The listed property developer has announced a downgrade of its December 31, 2010 half-year results due to the impact of the floods on its $290 million Tennyson Reach residential development on the Brisbane River.

As a result of the sustained impact of the floods Mirvac has revised the carrying value of the development. It has also deferred development of the undeveloped portion of the site and will seek to offload it.

The impact on Mirvac’s previously disclosed December 2010 net tangible assets per security will be $0.02. Consequently, Mirvac’s pro-forma December 2010 NTA will now be $1.58.

“Since the January floods, the Tennyson residential market has been characterised by limited transactions, consequential pricing impacts and uncertainty in relation to the outcomes of the Queensland Floods Commission of Inquiry,” Mirvac says in an ASX update.

“The Group's continued assessment of these sustained market conditions has led the Group in taking a conservative approach to the reassessment of the carrying value of Tennyson Reach, including 43 unsold apartments and remaining undeveloped land. This has led to a provision of $80.8 million, resulting in zero residual value as at 31 May 2011,” Mirvac says.

Mirvac has also amended the project’s forecast settlement and pricing profile for the unsold lots of Farringford, stage two of development.

In its half-year results presentation on February 22, 2011, Mirvac had settled on 45 of the 92 lots of Farringford and 109 out of 115 of Softstone and Lushington.

Mirvac acquired the Tennyson Reach property in August 2005 with plans to build 185 apartments at a cost of $290 million to be completed between 2013 and early 2017.

In its half-year results presentation on February 22, 2011, Mirvac reported flooding to the basement of the building affecting nine ground-floor apartments and landscaped areas, one of which was still held by the company.

The company says it will spend $3 million to $5 million in the second half of 2011 to reinstate ground-floor flood-impacted apartments as part of its Queensland flood contribution. 

In its June 24 update, the company says it project managed the clean-up and has restored the apartments to their original state from the time when the apartments were finished in 2009. 

Mirvac expects to open the Tennyson Reach sales office before the end of 2011.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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