Rise and rise of Walker Corp fortunes

Profits surged 20 per cent last year at Walker Corporation, the property development company owned by Lang Walker, who put the firm's landmark $2.5 billion Collins Square project on the market last week.

Walker Corp reported a net profit of $104.83 million in the year to June 30, 2015, up from $86.89 million the previous year on the back of a sharp rise in revenue.

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The company's financial report shows it was a busy year. Property development sales increased a staggering 70 per cent to $225.62 million and revenue clocked in at $278.53 million– up 30 per cent from $212.58 million last year. A $147 million increase in the value of investment properties helped boost total revenue by 38 per cent to $432.83 million from $312.75 million.

The report shows Walker Corp holds total assets of $1.69 billion against total liabilities of $968 million, including $108.2 million in current debt and a further $405 million in non-current liabilities. The bank loans are secured by first mortgages over $833.8 million worth of property.

Collins Square in Melbourne is to be sold by Walker Corporation.

Expenses have risen in line with revenues and profits, with total expenses coming to $276,63 million, up 43 per cent on the previous year's $193.33 million. The company paid $51.37 million in tax, after receiving a $2 million refund on past overpayments. No dividends were paid this year ($550,000 was paid out in 2014).

Mr Walker said: "We had a strong year in 2014-2015, riding off the back of the strong commercial and residential property in Australia, as well as strong results achieved at our existing projects in Melbourne, Queensland, NSW, South Australia and Western Australia."

Walker Corp has a $23 billion development pipeline, including the recently won $2 billion Parramatta Square, but Mr Walker is preparing to sell the five-tower Collins Square project and the historic Goods Shed on Wurundjeri Way after receiving unsolicited offers from institutions keen to pump up their investment portfolios.

Two of the five office towers have been built, but the other three are not expected to be completed until 2016 and 2017. Tenants include the Commonwealth Bank, Penguin Random House and Pearson, Maddocks, KPMG, Link Group, AECOM, and Marsh Mercer. Once finished, the cluster at the bottom of Batman's Hill will have more than 45,000 people working in 250,000 square metres of lettable office space.

Mr Walker has hired UBS to market the portfolio, which is expected to sell to a single buyer. It's not the first time Mr Walker has sold up at what proved to be a market peak. In 1999, he sold up to Australand and in 2006 he offloaded a $1.5 billion portfolio to Mirvac just before the global financial crisis savagely corrected the debt-laden property market.

But this year, China Investment Corporation paid $2.45 billion for the Investa Property Trust portfolio on a passing yield of 4.9 per cent. That deal set a new benchmark for Australian office properties as the assets had a weighted average lease expiry (WALE) of barely six years. Yields are tipped to compress further with competition increasing from overseas buyers who have been prepared to accept lower returns than those traditionally accepted by local investors.

Colliers International research shows Hong Kong's prime office yields are about 2.8 per cent, while London's yields are about 3.5 per cent and New York's are as high as 4.7 per cent.