Diversified group Mirvac has forged a relationship with the US based financial services company TIAA-CREF to co-invest in premium-grade office development projects sourced by Mirvac for a three year period.
Called the Australian Office Alliance (AOA), TIAA–CREF will have the first right to buy a 50 per cent stake in any prime-grade Australian office towers, but only in projects that are acquired by Mirvac from now on.
It will not include the new City Tattersalls project in Pitt Street, to be constructed by Mirvac.
Under the scheme, the US group will provide the funding, with Mirvac will retain development risk.
Mirvac’s business will also provide investment management services, property management services and development services in respect of the assets held through the Alliance.
The news comes on the eve of Mirvac’s interim result, with analysts forecasting a net profit after tax of $214.7 million and a distribution of 4.4¢.
That compares to the result for the December 31, 2012 half which was impacted by asset impairments of $273.2 million. Mirvac reported a profit of $194.2 million, down 4 per cent, for the six months to December 31, 2013.
After those impairments and other asset revaluations, the statutory profit was down 69 per cent to $55.2 million.
Analysts have said the relatively high exposures to NSW and medium density residential sectors place Mirvac in a strong position to meet increasing demand by pulling forward project commencements.
Mirvac’s chief executive, Susan Lloyd-Hurwitz, said, said she was pleased to have formed a strategic relationship to acquire core office properties with TIAA-CREF.
”The alliance with TIAA-CREF is in line with Mirvac’s strategy to sell-down up to 50 per cent of major assets and development projects to strategically aligned, long-term wholesale investment partners.”
The analysts at JP Morgan said Mirvac should comfortably meet its 11.7-12¢ earnings per security guidance (+7-10 per cent) and the stronger residential markets should allow it to push Harold Park, Sydney, settlements into the 2015 financial year.
”Mirvac will use third party capital to fund half its office development pipeline (699 Bourke Street and 664 Collins Street, Melbourne projects),” the analysts said.
Mirvac is also looking to sell 50 per cent of its 275 Kent Street, Westpac headquarters, worth about $410 million and a further $500 million of ”non-aligned” assets to help fund its office and retail projects and recent acquisitions.