MIRVAC GROUP — Interim / Quarterly Report 2019

Apr 29, 2019

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3Q19
OPERATIONAL
UPDATE
30.04.2019
Reimagine Urban Life
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Mirvac Group (ASX: MGR) today provided an operational update for the third quarter of the 2019 Financial Year (FY19). Its outperforming investment portfolio continues to benefit from favourable office market conditions, putting the Group on track to deliver on its full-year earnings and distribution targets.

“ Elsewhere, construction is forging ahead at 477 Collins Street in Melbourne and 80 Ann Street in Brisbane where we are bringing to life dynamic and sustainable workplaces for some of Australia’s leading brands,” said Ms Lloyd‑Hurwitz.

“ In Sydney and Melbourne, we are now poised to take advantage of an expected fall in completions in the near term and the resulting undersupply, by restocking our pipeline and launching new projects when the time and prices are right,” Ms Lloyd‑Hurwitz said.

Mirvac’s CEO & Managing Director, Susan Lloyd‑Hurwitz, said, “The strength of our diversified model and our asset creation capability are driving high‑quality recurring passive earnings, shoring up the business against the deteriorating housing market. In light of these strong metrics, we are confident of achieving our earnings guidance for FY19 of between 3 to 4 per cent growth.

“ Our retail portfolio is strategically weighted to urban and metropolitan areas that are experiencing robust population growth and low levels of unemployment. While the retail landscape remains challenging, we continue to find new ways to excite and inspire our customers through creative and strategic partnerships, and the active management of our assets.

During the quarter, Mirvac issued A$665m US Private Placement Notes with tenors of 11, 13, 15 and 20 years. Proceeds will be received in June 2019.

“ Our Office business continues to show significant strength. Thanks to our high exposure to Sydney and Melbourne, we are perfectly placed to capitalise on the buoyant office markets’ rising rents and the lowest vacancy rates for three decades. The passive, secure and stable income growth from the portfolio provides resilience and visible future earnings for the business.

“ Mirvac remains focused on prudently managing its capital position by drawing on diversified sources of capital, including equity, domestic and international debt and wholesale capital. The issuance was well received by debt investors and is in line with our strategy to diversify our risk and extend our debt maturity profile.”

“ In our Residential business, while house prices decline across Australia’s capital cities and credit conditions remain tight, our focus on the domestic owner‑occupier market and our commitment to superior customer service have seen defaults remain within 2 per cent. These factors, combined with sustained demand for our well located, high‑quality residential product, are protecting our business against the full effect of the slowdown.

Mirvac reaffirms operating EPS guidance of between 16.9 to 17.1 cpss for FY19, which represents an increase in earnings of between 3 to 4 per cent, and distribution guidance of 11.6 cpss, which represents DPS growth of 5 per cent.

“ At South Eveleigh (our reimagined Australian Technology Park) the first two buildings have achieved practical completion. A staged move‑in by Commonwealth Bank of Australia is now underway, as we welcome a 10,000‑strong workforce to their new home.

EY Centre wins CIBSE Awards

Mirvac’s headquarters, EY Centre at 200 George Street in Sydney, has received multiple awards for its design and sustainability achievements and the industry accolades continued during the quarter. The building was named International Project of the Year and Building Performance Champion at the prestigious Chartered Institution of Building Services Engineers (CIBSE) Performance Awards, held in London in February. Both awards recognised Mirvac’s commitment to improving the building’s performance while achieving a significant measurable reduction of energy consumption and carbon emissions.

Features at 200 George Street include the world’s first automated closed‑cavity façade and timber blind system, LED lighting throughout the entire building, and a comprehensive metering and monitoring system, all of which enhance the building’s energy efficiency while improving the comfort, health and wellbeing of its occupants.

200 GEORGE STREET INTERNATIONAL PROJECT OF THE YEAR

200 George Street, Sydney

Mirvac Group 3Q19 Operational Update 30 April 2019 1

OFFICE AND INDUSTRIAL

Office Highlights:

• occupancy of 97.9 per cent[ 1] with a WALE of 6.5 years[ 2] ;

• completed approximately 78,500 square metres[ 3] of leasing activity as at 31 March 2019;

• achieved positive leasing spreads of 14.3 per cent;

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• incentives at 15.8 per cent;

• 477 Collins Street in Melbourne is now 94 per cent pre‑committed including Heads of Agreement. During the quarter Urbis signed a lease for 4,100 square metres across three levels, joining Norton Rose Fulbright, Lander and Rogers and anchor tenant, Deloitte, in the premium‑grade office tower;

– extended the lease of existing tenant, The Department of Health and Ageing (DOHA) at Sirius House, 23 Furzer Street, Woden ACT. DOHA will occupy 100 per cent of the approximately 46,000 square metre building until 2035, which represents the largest single building renewal for a Federal Government agency in Australian history; and

– facilitated the acquisition of a 50 per cent interest in 10‑20 Bond Street, Sydney by an investment vehicle sponsored by Morgan Stanley Real Estate Investing (MSREI). The transaction saw Mirvac’s capital partnership with MSREI grow to approximately $1.5 billion in co‑owned assets. Mirvac retained a 50 per cent interest in the asset and was appointed as both trust administrator and property manager.

$3.1bn ACTIVE OFFICE DEVELOPMENT PIPELINE

OFFICE LEASE EXPIRY PROFILE

(by gross income)

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59%
13%
9% 8% 8%
2% 1%
Vacant 4Q19 FY20 FY21 FY22 FY23 FY24+
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Mirvac’s $3.1 billion active office development pipeline is 90 per cent pre‑committed[ 4] . Construction further progressed during the quarter including:

• Buildings 1 and 3 at South Eveleigh achieved practical completion in March, with Building 2 scheduled for practical completion in mid‑2020. Mirvac secured approval from the NSW Independent Planning Commission for the redevelopment of the historic Locomotive Workshops. This will deliver a vibrant new destination within the South Eveleigh precinct while preserving and celebrating the site’s rich heritage; and

• at 80 Ann Street demolition continues and a signed Heads of Agreement is in place for 4,700 square metres across three floors, taking the building to 74 per cent pre‑committed. 66 per cent of the building’s net lettable area is committed to Suncorp for a 10‑year term. Practical completion is targeted for FY22.

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Yerrabingin founder Clarence Slockee (left) and
NSW Governor, The Hon. David Hurley (right) at the
opening of South Eveleigh’s Indigenous rooftop farm
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Ms Lloyd-Hurwitz commented, “Vacancy in Sydney and Melbourne has continued to tighten and is now below 4 per cent in both CBDs[ 7] . While both markets will see new stock completing over the next few years, vacancy is not expected to rise steeply. As a result, our young, low-capex portfolio significantly overweight to these locations means our strong O&I division performance is set to continue.

“ In addition, the delivery of premium, innovative assets such as South Eveleigh and Calibre, and a strong pipeline including flagship headquarters for our valued partners Deloitte, Suncorp and Commonwealth Bank, provides visibility and confidence in a stable future income stream.”

Industrial Highlights:

• occupancy remained high at 99.7 per cent[ 5] with a WALE of 7.8 years[ 6] ; and

• – completed approximately 81,700 square metres of leasing activity as at 31 March 2019.

Ms Lloyd-Hurwitz commented, “Our Industrial division is an important growth area for the business. Our premium industrial estate, Calibre at Eastern Creek, is now complete and fully leased. We see sustained demand for industrial assets in Sydney and are focused on converting the next of our development opportunities, including Stage 1 of a future 240-hectare industrial estate at Badgery’s Creek.”

INDUSTRIAL LEASE EXPIRY PROFILE

(by gross income)

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67%
11% 11%
5%
1% 2% 3%
Vacant 4Q19 FY20 FY21 FY22 FY23 FY24+
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1. By area, including investments in joint ventures and excluding assets held for development.

2. By income, including investments in joint ventures and excluding assets held for development.

3. Excludes assets under development.

4. Includes signed Heads of Agreement.

5. By area.

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Calibre Industrial Estate, Sydney
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1. By income.

Mirvac Group 3Q19 Operational Update 30 April 2019 2

1. JLL Research REIS.

RETAIL

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Retail Highlights:

• maintained high occupancy of 99.2 per cent[ 8] ;

• solid comparable moving annual turnover sales growth of 2.3 per cent and comparable specialty sales growth of 2.6 per cent;

• achieved comparable specialty sales productivity of over $10,000 per square metre on speciality occupancy costs of 15.5 per cent; and

– executed 286 leasing deals across approximately 43,300 square metres, with leasing spreads remaining positive.

During the quarter Mirvac also progressed its asset management initiatives including:

– continued construction works at Toombul, Brisbane, QLD where a $43 million new food, entertainment and lifestyle precinct is taking shape. The project will add 1,600 square metres of GLA and includes the refurbishment of existing space, totalling 5,100 square metres. Archie Brothers Cirque Electriq will make their QLD debut as anchor tenant of the new rooftop destination alongside 10 other incoming food and beverage operators and an upgraded cinema. The development is 70 per cent leased and due for completion in mid FY20;

– at Orion Springfield Central, QLD a new state of the art playground is under construction. The new playground will feature a custom built 11‑metre tower and 16‑metre elevated walkway and provide an inclusive and stimulating play experience for all age groups; and

– at Birkenhead Point, NSW we have improved carpark circulation, egress and introduced ticketless technology to enhance the customer journey to and from the centre. Additionally, the completion of a Guest Services Lounge and expanded coach bay will facilitate further growth in the important tourist market.

2.6% COMPARABLE SPECIALTY SALES GROWTH

99.2% RETAIL OCCUPANCY

Ms Lloyd-Hurwitz commented, “There is no doubt that the retail landscape is rapidly evolving as consumers and investors become more discerning in their choices. However, our sustained investment in assets within key strategic locations ensures we offer the right retail in the right markets to meet those changes, driving growth in the value of the portfolio.

“ As the function of shopping centres moves beyond a market place, our focus on improving customer experiences and commitment to positively impacting people’s lives means our centres will remain relevant and continue to thrive.”

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|||||
|---|---|---|---|
|3Q19 comparable|1H19 comparable|
|Retail sales by category|3Q19 total MAT|MAT growth|MAT growth|
|Supermarkets|$1,139m|2.5%|2.3%|
|Discount department stores|$235m|2.8%|4.6%|
|Mini‑majors|$548m|0.6%|1.7%|
|Specialties|$1,204m|2.6%|2.9%|
|Other retail|$215m|4.4%|0.2%|
|Total|$3,341m|2.3%|2.5%|
|3Q19 comparable|1H19 comparable|
|Specialty sales by category|3Q19 total MAT|MAT growth|MAT growth|
|Food retail|$138m|0.7%|0.2%|
|Food catering|$343m|2.4%|2.4%|
|Jewellery|$31m|(2.7%)|(0.7%)|
|Mobile phones|$39m|0.0%|5.3%|
|Homewares|$45m|13.8%|9.1%|
|Retail services|$130m|5.2%|5.8%|
|Leisure|$48m|(1.6%)|(1.4%)|
|Apparel|$326m|3.8%|5.0%|
|General retail|$104m|(1.0%)|(1.4%)|
|Total specialties|$1,204m|2.6%|2.9%|

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Birkenhead Point’s new guest services lounge
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Mirvac Group 3Q19 Operational Update 30 April 2019 3

1. By area.

RESIDENTIAL

Residential Highlights:

• settled 1,290 residential lots as at 31 March 2019 and on track to achieve over 2,500 settlements for FY19. Defaults remain within 2 per cent;

• maintained a high level of residential pre‑sales at $2.0 billion[ 9] ;

• released over 200 lots during the quarter, with steady sales at masterplanned communities, including:

• Woodlea, VIC: 89 per cent of FY19 released lots to date pre‑sold

• Olivine, VIC: 68 per cent of FY19 released lots to date pre‑sold

• Crest, NSW: 59 per cent of FY19 released lots to date pre‑sold

• Everleigh, QLD: 42 per cent of FY19 released lots to date pre‑sold

• 87 per cent of FY19 EBIT is now secured; and

• released the Group’s first Social Return on Investment Report, which outlines findings from Mirvac’s first endeavour at measuring its social impact in the residential communities it has helped to create.

• Adjusted for Mirvac’s share of JV agreements and Mirvac managed funds.

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Ms Lloyd-Hurwitz commented, “Average house prices are falling across the country, however we are seeing marked differences in the rates of decline within sub-markets. For us the differences are our heavy focus on the domestic owner-occupier market who remain active, our commitment to premium product and a reputation for exceptional customer service forged over 47 years.

“Looking forward, our Residential earnings in FY20 are expected to benefit from significant apartment project completions, namely St Leonards Square, The Eastbourne and Marrick & Co. When the time is right, our diverse capability, strong balance sheet, focus on quality and exposure to Sydney and Melbourne will provide us with opportunities to restock in order to take advantage of the next phase of the cycle.”

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Woodlea, Melbourne
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Building strong communities Mirvac’s Olivine masterplanned community Melbourne’s northern corridor is booming and,
in Victoria was the scene of much excitement with so many young families moving into the
area, there is increasing demand for high quality
and anticipation this quarter as it welcomed
education. Many school families have bought
130 Hume Anglican Grammar students to
lots and homes at the 465‑hectare Olivine
the newly-built Donnybrook Campus for the
community, although the first residents won’t
start of the 2019 school year. The children, move in until early 2020.
their families and teachers gathered with
the Mirvac team for coffee and pastries Olivine is an example of Mirvac’s commitment
to drive social connectivity and deliver critical
before school on the first day to celebrate infrastructure at the outset of a project, in order
and explore the new campus. to enable new communities to grow and thrive.
The first piece of amenity to be delivered On completion, Olivine will be home to around
as part of the new Olivine community, the 11,000 people. A range of additional amenities
campus offers a co-educational program will follow the new campus, including the
for Prep to Year Three in 2019 and will Olivine Café, a General Store, Gumnut Park
and Adventure Playground, walking and bike
see an expansion of year levels from 2020,
trails, a sports precinct with two full sized ovals
ultimately delivering a Prep to Year 12 school.
and a pavilion, and a future local town centre
with two supermarkets among other specialty
retail. Olivine will also offer a range of education
HUME ANGLICAN GRAMMAR AT OLIVINE choices for parents and families, with Hayes Hill
Primary School set to open in the coming years.
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Mirvac Group comprises Mirvac Limited (ABN 92 003 280 699) and Mirvac Property Trust (ARSN 086 780 645). This document has been prepared by Mirvac Limited and Mirvac Funds Limited (ABN 70 002 561 640, AFSL number 233121) as the responsible entity of Mirvac Property Trust (collectively “Mirvac” or “the Group”). Mirvac Limited is the issuer of Mirvac Limited ordinary shares and Mirvac Funds Limited is the issuer of Mirvac Property Trust ordinary units, which are stapled together as Mirvac Group stapled securities. All dollar values are in Australian dollars (A$). This document is not financial advice or a recommendation to acquire Mirvac stapled securities and has been prepared without taking into account the objectives, financial situation or needs of individuals. Before making an investment decision prospective investors should consider the appropriateness of the information in this document and the Group’s other periodic and continuous disclosure announcements lodged with the Australian Securities Exchange having regard to their own objectives, financial situation and needs and seek such legal, financial and/or taxation advice as they deem necessary or appropriate to their jurisdiction. Mirvac Funds Limited is entitled to receive ongoing fees in connection with the authorised services provided under its Australian Financial Services licence to Mirvac Property Trust. Mirvac directors and employees do not receive specific payments of commissions for the authorised services provided under Mirvac Funds Limited’s Australian Financial Services licence. The information contained in this document is current as at 31 March 2019, unless otherwise noted.

For further information please contact

Investor enquiries:

Bryan Howitt General Manager, Investor Relations +61 2 9080 8749

Media enquiries:

Kate Lander General Manager, Communications +61 2 9080 8243

mirvac.com

Mirvac Group 3Q19 Operational Update 30 April 2019 4