In a week where the Reserve Bank of Australia turned even more hawkish on interest rates and the national media continued its generally bearish view of residential property, WA’s leading apartment developer Finbar Group provided guidance that its net profit for the just-ended financial year would be about $11 million – up 15% on the previous year.
For those lucky enough to live and work in WA, reading the NSW and Victoria-centric media views suggests a disconnect between the local residential market and the eastern states.
Scarce supply and solid demand remain constants in the WA residential sector and Finbar (ASX: FRI) – with its strong balance sheet and exclusive relationship with builder Hanssen – continues to deliver apartments while other potentially competing projects remain vacant lots.
Finbar told shareholders this week it had its best sales year since 2015, with 444 lots sold to the value of $293.7 million.
During FY22, Finbar benefited from the completion and settlement of 89 sold lots to the value of $41.5 million at its wholly owned Dianella apartment project along with the selldown of all remaining residential lots across other completed projects.
The WA apartment market has typically differed from NSW and Victoria in that off-the-plan sales of apartments, where construction is yet to be commenced, have been more difficult to achieve. Many potential apartment buyers in WA prefer to wait until a project is complete – when they can see and feel the apartment and move in straight away.
This is where Finbar expects to have a competitive advantage in coming years, an expected backed up by evidence from the Property Council of Australia showing WA faces limited supply of new apartments being developed.
Finbar has about $32.9 million in cash which, coupled with the cash commitments from partners for JV projects, ensures it is adequately capitalised to fulfill all working capital commitments and contingency provisions for all projects under construction.
Finbar also recorded 327 sales to the value of $227.8 million of off-the-plan sales for projects under construction (AT238, Civic Heart, Aurora, The Point) and as well as Garden Towers, where construction is due to commence within six months.
The group has 32 remaining completed apartments available at Dianella and, later this calendar year, will complete major project AT238, with settlements likely to occur in the second half of FY2023. Finbar expects FY2023 revenue to be weighted towards the second half as a result.
After AT238, the development pipeline sees Finbar complete both Civic Heart and Aurora – in South Perth and Applecross respectively – towards the end of calendar 2023 as well as The Point apartments in Rivervale.
If construction goes to plan, FY24 will likely see the completion of $657 million in project value in the first half.
Finbar anticipates releasing its full audited results on or around 24 August.
