Archive | Customs St

Precinct Properties presents a long list of positives from development & in financial structure

Major commercial property owner – and nowadays developer – Precinct Properties NZ Ltd lifted its net profit after tax for the year to June by 57.2% to $254.9 million.

The NZX-listed company’s biggest project at the moment is the $1 billion Commercial Bay development, redeveloping the Downtown Shopping Centre site at the foot of Auckland’s central business district. It’s also developing Bowen Campus in Wellington and has completed developments in Auckland’s Wynyard Quarter.

Image above: The trio of buildings at the centre of Precinct Properties’ strong performance – the existing PwC Tower at right, the new PwC Tower under construction and the existing HSBC House at 1 Queen St, to be redeveloped into a hotel with office above.

Chief executive Scott Pritchard said yesterday Fletcher Building Ltd had provided revised completion dates at Commercial Bay of September 2019 for the retail & December 2019 for the new PwC Tower (across Albert St from the building currently called PwC Tower).

Precinct also announced its plans for 1 Queen St, sitting on the Quay St frontage of the redevelopment, to include a 244-room luxury hotel operated by the InterContinental Hotels Group (IHG) – see separate story.

9% revaluation gain

Mr Pritchard said the quality of Precinct’s portfolio had resulted in a $208.7 million (9%) portfolio revaluation gain to $2.5 billion.

Precinct Properties is the largest city centre real estate owner in New Zealand, and Mr Pritchard said it was committed to its long-term strategy as a city centre specialist.

“The last financial year has delivered another strong result for our business. As we move forward with our strategy, we progressed a number of initiatives and achieved key milestones during the year.

“We have continued to take an active management approach with our investment portfolio & our development pipeline, leveraging Precinct’s market position.”

“The long-term outlook for the Auckland market remains strong, with solid demand drivers for city centre real estate across the office, retail, hotel & residential markets.”

Mr Pritchard said the Wynyard Quarter & Bowen Campus also contributed to this growth, with works progressing well over the last 12 months.

The Precinct Properties precinct: From the ANZ Centre up Albert St, down to the waterfront via Commercial Bay where Precinct is developing the new PwC Tower across the street from the existing PwC Tower, and yesterday announced the redevelopment of 1 Queen St (at right) to contain a hotel with offices on the upper levels.  Other Precinct buildings in this precinct are Zurich House and the AMP Centre.

Commercial Bay update:

Precinct’s reinforced its vision & long-term commitment to the rejuvenation of the central city with the announcement of the $298 million development at 1 Queen St (currently HSBC House), which will include the hotel in the lower half of the building.

Commercial Bay, looking out between the Cloud & Princes Wharf.

This development has been designed to integrate seamlessly with Commercial Bay. Its upper floors will also be remodelled to contain high quality office space & unique food & beverage options, including a rooftop bar.

Commercial Bay & its retail wrap’s Customs St frontage yesterday.

Mr Pritchard said phase one of the Commercial Bay retail remained on schedule, with international powerhouse H&M opening its flagship 3800m² store fronting Customs St in a fortnight, on Thursday 30 August. Passersby have been able to watch H&M’s creation in the new lowrise building beside the 21 Queen St offices of Zurich House, as windows have started to be placed at lower levels of the 39-storey Commercial Bay tower at the corner of Customs & Albert Sts.

“This marks a significant milestone for the transformational development which is reinvigorating the heart of the central city,” Mr Prithcard said. “The superb 4-storey retail offering promises to be the country’s premier H&M destination.

“Phase 2 of the Commercial Bay retail & the new PwC Tower have revised estimated completion dates, following the confirmation of a completion programme from main contractor Fletcher Building Ltd.

The revised completion dates are September 2019 for the Commercial Bay retail & December 2019 the new PwC Tower.

“The programme provided by Fletcher Building has been independently reviewed by Precinct’s expert programmer, RCP, who confirm the revised dates are achievable, subject to the main contractor’s performance.

“Precinct remains confident with the provisions of its construction contract, which protect the business from losses due to contractor delay.

“While any delay in a project is disappointing, we believe Fletchers are maintaining a very high standard of quality during a very challenging period within the construction industry.”

Commercial Bay’s entrance on to Quay St.

The new timeframes also affect prospective tenants: “Precinct continues to work closely with retailers at Commercial Bay to communicate the revised occupation dates. For those occupiers coming into the new PwC office tower, all have lease terms which extend beyond the revised completion dates of the office tower.”

Mr Pritchard said Commercial Bay continued to achieve a good level of leasing enquiry. Precinct had secured retail commitments to 76% and office commitments to 78%: “The $1 billion Commercial Bay waterfront development & lifestyle district is destined to become Auckland’s newest shopping, dining & social hub, offering a vast range of food & beverage outlets.”

Links:
Precinct Properties
Precinct Properties annual report
Commercial Bay

Related stories today:
Precinct Properties presents a long list of positives from development & in financial structure
Precinct Properties valuations & profit up, debt low
The 1 Queen St redevelopment

Attribution: Company release.

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Rail tunnel excavation of Customs St intersection begins

Crossing the diagonal between the Old Customhouse & Quay Tower at Auckland’s downtown Customs-Albert St intersection, pedestrians can’t miss the rising Commercial Bay office tower and the barricades for tunnel construction.

But the barricades hide the excitement of the excavation involving both projects, which started this week.

Image above: The start of excavation to join the Albert St tunnel to the tunnel under Commercial Bay.

City Rail Link Ltd, the council-Government company undertaking the rail project, said in its latest newsletter this work would pave the way for construction of the rail tunnel box section linking the Albert St trench with the tunnels being built under the Commercial Bay development.

“Thanks to the concrete bridge deck constructed over the intersection about a year ago, traffic flow will be unaffected by the excavation occurring underneath. The spoil will be removed from the site using excavators & conveyors.

“Contractors will also be removing an old brick stormwater tunnel located under the intersection and replacing it with a temporary stormwater line that diverts water away from the location of the future CRL tunnels. The temporary line will be permanently diverted at a later date to connect with the Swanson St line, created during the Albert St stormwater realignment works last year.”

The rail link company expects construction of the tunnel structure to start in this area later this year, and a full connection made between the 2 construction sites by autumn 2019.

Crossing at Albert St intersections gives you an idea of the increasing depth of the tunnelling. CRL said the 6th section of tunnel wall had been poured below Albert St, meaning the first 132m of floor & 72m of the wall are complete.

The CRL website provides text, photos & drone views of the tunnelling programme.

Dr Sean Sweeney.

CRL’s new chief has Australian background in innovation

City Rail Link Ltd’s new chief executive, Sean Sweeney, a New Zealander who had been working in Australia, took up the position on Monday 2 July. His predecessor, Chris Meale, retired in March.

Dr Sweeney was educated at Wellington Polytechnic (NZCE), Auckland University (BE Honours), both in civil engineering, and Melbourne University (PhD in construction economics).

Since 2004, he’s been executive director at Major Projects Victoria, head of construction at major developer & builder Grocon Pty Ltd, managing director at Atelier Projects Pty Ltd – both companies which expound innovation – and chief executive at Ontoit Global Pty Ltd, a specialist in public-private partnerships.

Links:
City Rail Link newsletter
Watch drone footage of the Albert St trench construction works online.
Click to view

Attribution: CRL newsletter.

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52-storey Customs St tower gets consent

Architecture firm Peddle Thorp released details today of a 52-storey apartment tower on Customs St East, to be built within the next 3-4 years.

The tower on a 2729m2 site is part of Peddle Thorp’s design to redevelop the Customs St East block between Fort & Gore Sts and received resource consent from Auckland Council yesterday.

The development also incorporates 2 smaller buildings currently on the site – an 11-storey office block on the corner of Fort St which will be updated to integrate into the new tower. The heritage building’s facade on Gore St will remain unchanged and be incorporated into the new development.

The developer is Shundi Customs Ltd (directors Shao Huojun & Zhu Lijuan; shareholders Shundi Group Investment Ltd (60%), held by a Gilligan Sheppard trustee company, and Shanghai Shenshun Investment Co Ltd of Shanghai (40%).

Bradley Luke, Director of Peddle Thorp, said the tower would add a new dynamic to Auckland’s skyline and help to redefine the potential of apartment living in Auckland: “Every apartment in the development is north-facing and most have unencumbered views out to the Waitemata Harbour. We’ve designed them so they are liveable, high quality & maximise outdoor space.

“For residents & visitors, it features public walkways that will connect people to Gore St Lane and includes a selection of apartments with double-height balconies to maximise outdoor living space.

“The sharp angle at the top of the tower has been designed to avoid shading Emily Place and to give the tower a striking form.”

The main tower will house 221 apartments, including 11 floors of penthouse apartments, as well as a mix of 1-3 bedrooms & studios – 15 penthouses, 56 3-bedroom apartments, 10 duplexes of 2-3 bedrooms + study, 60 of one bedroom + study, and 80 studios. The base of the tower will have 4 floors of retail & restaurants. The smaller tower has been redesigned to house a new hotel.

All the apartments are at least 10% larger than Auckland Council’s minimum standards and have high studs of about 2.7m.

Mr Luke said this tower would be the tallest residential tower in Auckland and one of a handful of towers with more than 50 storeys.

Peddle Thorp’s previous building designs around central Auckland include the Lumley Building, Vero Centre, Stamford Residences, SAP building, the Westpac and Ernst & Young on Takutai square in Britomart and the redevelopment of the Auckland Museum.

Attribution: Peddle Thorp release.

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Pandeys buy Novotel Ibis at Ellerslie

CP Group Ltd (Charles Pandey) has bought the 247-room Novotel Ibis Auckland Ellerslie for a record price of just over $55 million.

Colliers International’s national director of hotels, Dean Humphries, who ran the tender opened in June, said yesterday it was the highest price achieved for a non-cbd hotel in New Zealand and was at a yield of 7.76%.

Dean Humphries.

Dean Humphries.

He said local company CP Group had strong competition from overseas interests for the 6-storey combination of Ibis & Novotel, at the entrance to the Ellerslie racecourse.

Former owner Host Hotels & Resorts LP of the US, owns 2 other Ibis hotels in New Zealand, in Christchurch & Wellington, and 3 other Novotels – Christchurch Cathedral Square, Queenstown Lakeside & Wellington. It owns one hotel in Australia, the Hilton Melbourne South Wharf, and is a major hotelier in the US.

Mr Humphries said the transaction bucked a trend of overseas buyers acquiring major New Zealand hotel assets. The last 3 big hotels on the market all went to overseas buyers.

He said CP Group had a strong local knowledge of New Zealand’s tourism & hotel landscape and was able to quickly identify the significant, current benefits & potential for this hotel: “These include record occupancy levels & revenue growth, culminating in greater profitability & rising hotel property values.”

CP Group owns hotels around New Zealand and in Australia & Fiji. It took control of the Westin Lighter Quay hotel on the Lighter Basin at the end of 2011 after a dispute between room owners and former management, and renamed it as the Sofitel Auckland Viaduct Harbour.

It owns the former Hyatt Regency on Waterloo Quadrant, now the Pullman Auckland, which includes management of apartments in the adjoining Pullman Residences. Other Auckland hotels are the Mercure on Customs St East, the Mercure Auckland Windsor on Queen St, and All Seasons hotels in the cbd and at Ellerslie.

The company began planning the hotel conversion of the former Reserve Bank building on the corner of Customs & Gore Sts about 7 years ago, but work on a Sofitel So hotel came to a halt last year over payment disputes, and the scaffolding was pulled down. The CP website now lists that conversion as a Novotel, with 272 rooms in a tower stretching from the bank’s original 10 storeys to 21 levels.

The liquidators of Pandey company & Rotorua motel owner NZ Properties Holding Ltd, Damien Grant & Steven Khov of Waterstone Insolvency, said in their latest report in May they were still involved in litigation with the principals & related entities over disposal of assets. 9 creditors have filed claims for $3.4 million. CP Asset Management Ltd lost a Supreme Court bid last year to overturn a Court of Appeal judgment which reinstated Mr Grant & Mr Khov, the original court-appointed liquidators, to NZ Properties Holding.

Attribution: Agency release, CP website, Companies Office.

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2 plush cbd apartments sell

Both cbd apartments taken to auction at Bayleys on Wednesday were sold under the hammer – one in the Galleries overlooking the Viaduct precinct and the other (pictured) atop the office building where Customs St meets Beach Rd, Emily Place & Fort St.

CBD

Customs St

2 Emily Place, unit 9A:
Features: 183m² penthouse above commercial units, 3 bedrooms, 30m² balcony, secure parking space, storage
Outgoings: rates $2287/year including gst; body corp levy $13,436/year
Income assessment: $/week
Outcome: sold for $1.48 million
Agents: Cheryl Regan

Victoria Quarter

The Galleries, 23 Graham St, unit 1:
Features: 178m², 3 bedrooms, 2 bathrooms, balcony, 2 secure parking spaces
Outgoings: rates $3155/year including gst; body corp levy $8876/year
Outcome: sold for $1.258 million
Agents: Any Hain & Chris Reeves

Attribution: Auction.

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Precinct QEII Square plan change up for notification

Precinct Properties NZ Ltd’s private plan change 79, to incorporate the 1892m2 Queen Elizabeth II Square into its Downtown Centre redevelopment, goes to Auckland Council’s Auckland development committee on Thursday for a decision on how it should progress.

The council options include taking over the plan change, but Precinct hasn’t asked for that to be done. The square is owned by the council, but is subject to a conditional sale agreement pending road closure and the change of zone to city centre zone to enable development. The applicant doesn’t have to own land subject to a plan change request.

The council must notify its request for submissions within 4 months.

The conditional development agreement announced in February involves land transfers, along with payment to Precinct for providing a laneway cutting east-west across the site and for the extra cost of building the tower above the rail tunnel.

Earlier story:
26 February 2015: Elation at Downtown rail, tower & square deal

Links: Proposed plan change 79
Proposed rules

Attribution: Council agenda.

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Spark Building D price settles at 7% yield

The price Shanghai Pengxin (Zhaobai Jiang) has paid for Spark City Building D (pictured) yoyo-ed for months before settling at a 7% yield.

Development company Mansons TCLM Ltd originally sold Building D last November at a 7.25% yield on the $4.92 million/year rent, pricing the deal at $67.86 million. However, real estate agency Bayleys put the building back on the market again briefly in March with a price tag of $72.88 million on it, representing a 6.75% yield, before the sale to Pengxin was confirmed at $70.15 million and a yield of 7% flat.

When the Overseas Investment Office released its decision consenting to Pengxin subsidiary Pengxin Holdings (HK) Co Ltd’s application to buy the building in March, the office withheld the consideration.

Building D was originally sold along with buildings A & B in a price range from just under $50 million to just under $70 million. The 2 buildings with leases to Spark, buildings A & D, both sold at 7.25% yields while building B, with a shorter lease to TVNZ, sold at an 8.5% yield. Augusta Funds Management Ltd bought the fourth building, C, last April for $65.2 million and has syndicated it.

2 other cbd sales Bayleys agents have completed are the long-vacant development site at 85 Customs St, to another Chinese developer, and a vacant showroom at Chancery.

CBD

Chancery

19 & 21 Chancery St:
Features: 76m2 showroom
Outcome: sold with vacant possession for $510,000
Agents: James Appleby, William Coates & Damien Bullick

Customs St

85 Customs St:
Features: 1667m2  north-facing site in 2 titles with dual access off Gore St; resource consent valid until 2017 for highrise commercial &/or residential development with a gross floor area of up to 35,305mplus just over 200 parking spaces; mostly undeveloped land plus the vacant Seatrans House, has been leased by Wilsons Parking for a number of years
Rent: holding income
Outcome: sold for over $30 million to mainland Chinese developer
Agents: John Halstead & James Chan

Victoria Quarter

Spark City, Building D, 167-169 Victoria St West, corner Hardinge St:
Features: 7592m6-level building, 75 underground parking spaces, fully occupied by Spark NZ Ltd on 10-year lease from 1 June 2014, contains a 300-person function venue & theatre; part of a strata-titled 4-building complex purpose-built by Mansons TCLM Ltd for Telecom NZ Ltd (now Spark) ­in 2010; 10-year defects & capex warranty
Rent: $4.92 million/year net + gst, with 3% annual increases
Outcome: sold for $70.15 million
Agent: Paul Hain

Earlier stories:
20 March 2015: One Spark City building back on market
10 November 2014: 3 remaining Spark City buildings sold
16 March 2011: AMP Office keeps ANZ & plans ANZ Centre refurb, lifts 21 Queen St leasing
27 January 2010: Developer looks for speedy rise of new Customs St bank building

Attribution: Agency release.

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Tracking ideas W25Mar15 – The art of making cities liveable

Tracking ideas is a Bob Dey Property Report section devoted to ideas on property questions such as urban strategies & design, many from overseas but with relevance to Auckland.

International Making Cities Livable LLC has produced a 14m 20s video expanding on philosopher & author Alain de Botton’s 6 principles for a more attractive city, which includes a frame showing the National Bank Centre on Auckland’s Queen St (pictured at right).

But the fleeting appearance doesn’t come with a bouquet. Instead, the building now referred to as 205 Queen St appears as the commentator reaches the point in the script: “…and most office buildings are brutally anonymous.”

No 205 was always an unusual development – 2 cylindrical towers over a single podium occupying an entire small mainstreet block, opened in 1987 with a lobby showing potential and a few shops facing the street, in an era when office tower developers didn’t like to mix uses.

From the utilitarian lobby of the past – a place to catch a lift, nothing more – the lobby has been turned into a more relaxed place, with a quality café and a range of places for a conversation – standing at long tables, or a variety of seating.

Mr de Botton’s liveable cities video calls on viewers to make city leaders accountable to the citizens, not just to the developers.

His 6 principles are: 1, order; 2, visible life; 3, compactness; 4, orientation & mystery; 5, scale; & 6, a sense of the local.

On scale, he said: “Our urban skylines have become dominated by tall buildings dedicated to banking & commerce. Instead, we should be building at an ideal height of 5 stories, resulting in dense & medium-rise cities, like Berlin & Amsterdam. If there are tall buildings in a city they should be dedicated to something ‘all of humanity can love.’

The possibility of bulky neighbours in residential areas, and of tall or bulky structures in local centres are 2 thoughts that worry plenty of Aucklanders, evidenced by campaigns such as the opposition to the Milford mall redevelopment proposal.

Britomart’s Customs St East face.

Britomart’s Customs St East face.

Height frequently is not an issue, except from a distance. Downtown Auckland has some tall buildings, but even in a comparison with Australia’s state capitals the number is low. But one example of revitalised grace which Mr de Botton would appreciate is the line of buildings in the Britomart blocks along Customs St East, all 4-5 storeys and demonstrating the human scale of allowing pedestrians to see the tops of the buildings without having to arch the neck.

Links: What makes cities attractive

Attribution: Livable Cities.

Regular leads: Planetizen

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Wynyard Quarter dominates next office growth

Just over half the 100,000m² of office space forecast to be developed in the Auckland cbd over the next 5 years will be in the district’s Wynyard Quarter extension.

Colliers International’s national research manager, Chris Dibble, said in his research report out on Friday the main projects coming up were Precinct Properties NZ Ltd’s Downtown Centre redevelopment & Wynyard Quarter projects, Goodman Group’s Fonterra headquarters & VXV3 buildings in the Wynyard Quarter, and 151 Victoria St West in a continuation of development in the Victoria Quarter.

Smaller developments would add about 20,000m² of floorspace over the 5 years.

After 2020, Mr Dibble said the Wynyard Quarter had more than 110,000m² of office development potential.

In a comparison of timeframes to build the last 300,000m² of office space in the Auckland cbd, Mr Dibble said it took from 1992-2000 (9 years) to build the first 100,000m², 2001-06 (6 years) to build the next 100,000m² and from 2007-14 (8 years) to build the last 100,000m².

Attribution: Agency release.

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Precinct working on Innovation Precinct deal as it plans Downtown project and lifts profit

Precinct Properties NZ Ltd increased net profit after tax by 67% to $39.5 million ($23.6 million) in the December half on net operating income up 22% to $32 million ($26.2 million) – up from 2.63c to 3.1c/share. The company has lifted its first-half dividend by 5.5%, from 2.56c to 2.7c/share.

Precinct also announced yesterday that it’s in exclusive negotiations with Waterfront Auckland to become its development partner for commercial office within the Innovation Precinct at the Wynyard Quarter, on the Auckland waterfront.

A big factor in the profit increase was the $10.6 million fair-value gain in interest rate swaps ($1.7 million a year earlier), which chief executive Scott Pritchard said reflected the increase in market interest rates since 30 June 2013 and the unwinding of interest rate positions.

Rental revenue for the 6 months was up 20% to $82.6 million ($68.9 million), primarily due to new rental income from recent acquisitions. Excluding that, rent was up 3%.

Portfolio occupancy rose from 95% to 97%. The weighted average lease term was unchanged at 5.5 years. Across the portfolio, Precinct completed 30 leasing transactions covering 38,700m².

Mr Pritchard said rental growth in the Auckland office market was strong. The company completed 24 leases & reviews at an average 6% premium to June valuations.

Precinct also entered into negotiations with Auckland Council to co-ordinate the timing of works for the city rail link and the Downtown Shopping Centre development. Mr Pritchard said this project would take advantage of strong growth in demand for city centre office space and would reinvigorate the heart of the city’s main transport hub & waterfront area.

“Planning is progressing well towards a 2016 start for work when current leases in the centre expire. Precinct has appointed a leading international master planner, Woods Bagot, to work closely with local architects, Warren & Mahoney, in planning for this development and the company looks forward to sharing its vision for this new precinct as planning work is completed in the second half of 2014.”

At the Wynyard Quarter, Precinct has agreed non-binding commercial terms with Waterfront Auckland and expected to sign a development agreement within a few months. Final approval remained conditional on Precinct board & Waterfront Auckland approval.

The sites in question have a land area of about 1.1ha and the potential to develop about 46,000m² of gross floor area. “The leasing strategy for the sites will build upon existing efforts to create a purpose-built information communication technology & digital media hub that brings together innovative entrepreneurs & larger-scale companies as part of Auckland Tourism Events & Economic Development’s (ATEED’s) plans for a multi-building innovation precinct.

“Since our inception we have retained a city centre office sector-specialist strategy. This has not changed. This opportunity will complement our existing core cbd offering and allow us to widen our client base to innovative businesses through ATEED’s planned initiatives for high-growth technology businesses. We will also be targeting occupiers whose preference is for lowrise, larger floorplate accommodation, but with all the benefits of a central city location.

“The proposed partnership structure provides for a staged approach, including a prepaid leasehold structure.”

Mr Pritchard said Precinct’s programme of recycling capital out of its existing portfolio would provide funding for this opportunity, taking advantage of strong investment market conditions & a lack of competing stock.

Property expenses were $23.8 million, up 12%, but representing a 3% reduction after adjusting for recent acquisitions.

Following the 2 earthquakes that struck Wellington, the company engaged Holmes Consulting Group to undertake comprehensive inspections of its buildings in the city. These found no material damage to their structural integrity and the non-recoverable cost to repair superficial damage was minor.

Interest expense increased $4.6 million to $16.7 million, reflecting higher debt levels following the purchase of the Downtown Shopping Centre & HSBC House and interest costs associated with the ANZ Centre redevelopment being fully expensed.

Other expenses increased by about 13% as the size of the portfolio grew. Precinct outperformed the benchmark New Zealand-listed property sector return (excluding Precinct) resulting in a performance fee of $1.3 million being payable in the second quarter.

Tax expense of $3.9 million was similar to a year earlier ($3.8 million) despite higher pretax profit. This period’s tax expense relating to the higher profit was offset by an increase in depreciation associated with acquisitions and recognition of a tax deduction relating to the sale of Chews Lane in 2011, which reduced tax expense by about $1.2 million.

Mr Pritchard said an internal review of the 30 June 2013 valuations indicated no material value movement in the period. The 31 December investment property book values were consistent with Precinct’s policy of carrying investment property at fair value.

NTA at balance date increased from 99c to $1/share, mainly reflecting the fair value gain in interest rate swaps and Precinct’s policy of retaining earnings.

Precinct used the proceeds from a $50 million placement and a $12.5 million share purchase plan to repay bank borrowings, reducing them to $556 million ($603 million), and reducing gearing to 34.1% (37.3% at 30 June 2013).

Precinct also reduced its bank debt facilities to $610 million ($660 million at 30 June 2013) as the company carried excess funding capacity following the equity issues. The 2016 tranche was reduced, resulting in a weighted average term to expiry at 31 December of 3.6 years (4 years at 30 June 2013).

67% of Precinct’s drawn bank debt (57% at 30 June 2013) was effectively hedged through the use of interest rate swaps. This hedging resulted in a weighted average interest rate including all fees of 5.8% (5.6% at 30 June 2013) and a weighted average term of 2.4 years (2.2 years at 30 June 2013).

Mr Pritchard said Precinct started the year in Auckland with income-generating occupancy of 97%, significantly higher than at the same time last year. “After allowing for recent acquisitions & the ANZ Centre redevelopment, this improved position led to a 19% increase in Auckland’s net property income.

“The Auckland portfolio is now almost fully occupied, with only 600m² of office space available in the city. HSBC House, which was acquired in May 2013 and had benefited from a 6-month vendor underwrite, is now 100% occupied. 2500m² of space within the building has been secured at a premium to 30 June valuations.”

In Wellington, Mr Pritchard said continued success at State Insurance Tower had led to the portfolio being 96% occupied. “With the strengthening works in the former Central Police Station and reinstatement works almost complete, further leasing progress is anticipated in the next 12 months.”

On the company’s outlook, Mr Pritchard said: “Precinct is well positioned to capture earnings growth in the medium term, with the portfolio no longer over-rented and an expectation in Auckland of sound market rental growth. Earnings growth, however, will lag behind the market due to a lower level of impending expiry and a higher weighting to structured leases.

“In Wellington, market awareness of seismic performance and our commitment to seismic upgrades are contributing to an increase in occupier demand and an improved occupancy outlook. Sustained low prime vacancy rates, and price stability returning to the insurance market, should provide for some modest rental growth in the medium term.”

The company has maintained its guidance for the 2014 financial year of full-year after-tax operating earnings around 6.2c/share (before performance fees) or 6c/share (assuming 50% of the maximum performance fee is payable). Dividend guidance also remains unchanged at 5.4c/share for the full year, consistent with the 90% payout dividend policy.

Attribution: Company release.

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