Precinct Properties NZ Ltd attributed its 25% fall in net profit to $190.1 million for the June year to lower revaluation gains & movement in financial instruments. The company released its annual results on Friday.
Revaluations, while still substantial, were down 6.1% to $161.7 million.
Precinct is developing the Commercial Bay office & retail project in downtown Auckland, and developing & managing office projects in Auckland’s Wynyard Quarter and 3 projects in the Bowen Campus in Wellington.
Chief executive Scott Pritchard said the company’s capital management initiatives would ensure Precinct had sufficient funding capacity to deliver all committed developments.
On Commercial Bay, where completion by the builder, The Fletcher Construction Co Ltd, has been delayed, Mr Pritchard said: “Precinct remains confident the provisions of the construction contract appropriately protect Precinct from losses due to contractor delay &/or breach of contractor obligations.”
On the Generator coworking space investment, he said Precinct expected to see continued growth & demand in this market in Auckland & Wellington.
Precinct put 2 Wellington buildings, Mayfair House & Pastoral House, on the market in April. Mr Pritchard said Pastoral House, at 25 The Terrace, had gone under contract post-balance date, conditional on due diligence.
The company expects to name a new independent director before the annual meeting on 20 November.
2 of its directors will retire next year. Don Huse announced his intention to retire last November, timed to occur in the second half of 2020, and the company said on Friday Chris Judd would retire early next year from both the Precinct board and the board of management company AMP Haumi Management Ltd (AHML).
- Pretax operating income, down 4.2% to $79.4 million ($82.9 million)
- Net operating income (adjusted for a number of non-cash items), up 3.7% to $79.4 million, ($76.6 million)
- Gross rental revenue, up 3.9% to $135.8 million ($130.7 million)
- Net property income, up 2.3% to $97.5 million ($95.3 million); after adjusting for development projects & sales, like-for-like was up 3.9%
- Total comprehensive income after tax, down 25.4% to $190.1 million ($254.9 million)
- Property revaluation, 6.1% gain to $161.7 million ($208.7 million)
- Adjusted funds from operations (AFFO), up 7% to $75.1 million ($70.2 million)
- Portfolio value, up 12% to $2.8 billion ($2.5 billion)
- Net tangible assets, up 5% to $1.47/share ($1.40)
- Net asset value, up 6.4% to $1.49/share ($1.40)
- Earnings/share based on operating income before tax, down 9.2% to 6.21c (6.84c)
- Earnings/share based on operating income after tax, up 0.8% to 6.37c (6.32c)
- Full-year dividend, up 3.4% to 6c/share (5.8c/share), matching adjusted funds from operations (AFFO) of 6.02c/share, consistent with Precinct’s intention to transition towards paying out about 100% of AFFO as dividends
- 2020 financial year dividend guidance, up 5% to 6.3c/share
- Debt drawn, $710.4 million ($751.4 million)
- Gearing – banking covenant, 22.4% (25.0%)
- Weighted average term to expiry, 4.4 years (3.3 years)
- Interest cover ratio, 2x (2.4x)
- Long-term funding secured via $162.8 million US private placement
- $151.8 million raised through equity issue
- Asset recycling – $191 million assets sold, including 50% interest in the ANZ Centre in Auckland for $181 million and the disposal of 10 Brandon St in Wellington; post-balance date, Precinct has agreed a conditional sale of Pastoral House in Wellington for $77 million
- Occupancy level unchanged at 99%
- Weighted average lease term 9.0 years (8.7 years)
- 27 office leases secured, totalling 23,330m² (21,900m²)
- 65,900m² of rent reviews at 2.4% premium to previous contract rental, 5.6% premium to 2018 valuations
- Like-for-like income up 6.1% in Auckland, Wellington flat
- Under-renting, 5.2% (6.4%)
- Acquired remaining 50% equity interest
- Occupancy 88% (73%), revenue up 116% to $16.4 million ($7.6 million)
Updates on Commercial Bay, Wynyard Quarter & Bowen campus development projects
- Retail leasing commitments 95% (76%), office 82% (78%)
- Targeted opening dates, revised in May to March 2020 for the retail centre, April 2020 for the new PwC Tower
- Forecast total project cost remains in the range of $690-700 million, yield on cost expected to be in the 7.4-7.5% range
- 1 Queen St in detailed design phase, precommitments lifted to 78%, construction scheduled to start in 2020
- 10 Madden St 62% committed, major leasing to Media Design School, rest of office space conditionally leased to 2 confidential parties (documentation under negotiation); project remains on budget & on schedule for practical completion at the end of 2020
Wynyard Quarter stages 3 & 4:
- Design programme allows for mid-2020 start
Bowen Campus, Wellington:
- Charles Ferguson Building reached practical completion in December 2018, now occupied by Ministry of Primary Industries
- At Defence House (previously Bowen State Building), base build works complete, integrated fitout progressing; project remains on schedule for Defence Force to occupy the building in October, rent has commenced
- Bowen Campus stage 2 – detailed design complete, resource consent granted for 2 more buildings, leasing discussions underway with a number of potential occupiers, construction procurement underway
9 July 2019: Precinct scores 6.2% revaluation increase
29 May 2019: Commercial Bay opening moves into 2020
16 April 2019: 21 Queen St to become Jarden House
15 April 2019: Precinct spreads debt profile with US placement
23 February 2019: Precinct buys rest of Generator
129 December 2018: Precinct secures tenants for Wynyard & 1 Queen St
2 November 2018: Precinct commits to Wynyard stage 2
13 September 2018: Precinct plans 2 new buildings for Wellington’s Bowen Campus
Attribution: Company release, annual report.