GPT, Mirvac, Australian Property Trusts Report Profits on Return to Basics

Australian real estate companies including GPT Group and Mirvac Group have reported a return to profit after simplifying their businesses and exiting loss- making operations.

GPT, the nation’s third-biggest real estate investment trust by market capitalization, Charter Hall Group, which took over the management rights for property funds of Macquarie Group Ltd. this year, and Mirvac, a property developer and funds manager, today said they swung to profit from last year’s losses after selling off assets and raising capital to pay off debts incurred from overseas investments.

“The sector has met expectations, with no real surprises to the upside or downside, which is what it needs now,” said Winston Sammut, managing director of Maxim Asset Management. “Over the last 12 months or so, the sector’s been focusing on bring debt levels and gearing down, and going back to the traditional role of a REIT vehicle. That’s to be a rent collector.”

Australian REITs have exited most of their overseas investments and raised capital over the past year to return to their traditional roles after debt levels surged and they wrote down A$21.7 billion of assets in the 2009 financial year. Twelve of the 15 REITs that have reported results so far have seen a swing to net profit from a year ago, and two had narrower losses.

Results

GPT’s net profit for the six months to June 30 was A$145.2 million ($129 million), compared with a A$1.2 billion loss a year earlier. Mirvac’s net income in the 2010 financial year was A$234.7 million compared with a A$1.08 billion loss a year earlier, and Charter Hall’s net profit rose to A$207 million from an A$82.2 million loss a year ago.

Net profit at Aevum Ltd., the retirement village operator that’s the subject of a takeover bid by Stockland, Australia’s second-biggest REIT, advanced to A$28.6 million from a loss of A$12.2 million a year earlier.

Housing companies, including Stockland, which reported record lot settlements and contracts in its residential communities business, have had strong growth driven by a housing shortage and population expansion in Australia.

This could slow as rising interest rates and the end of government stimulus measures lead to declines in housing affordability, and keep growth in check, said Stuart Cartledge, who helps oversee A$100 million as managing director of boutique fund manager Phoenix Portfolios.

“A lot of residential stocks are priced for strong pickup in earnings growth,” he said. “But they will face some headwinds.”

The Reserve Bank of Australia has boosted the benchmark interest rate by 150 basis points from a half-century low of 3 percent, citing concern about rising house prices.

To contact the reporter on this story: Nichola Saminather in Sydney at Nsaminather1@bloomberg.net

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