Precinct Properties Nz Ltd & Precinct Properties Investments Ltd · NZX:PCT
Precinct Properties Nz Ltd & Precinct Properties Investments — Precinct Properties New Zealand — FY2020 Earnings Presentation
54 slides from Precinct Properties Nz Ltd & Precinct Properties Investments's earnings presentation, 2020
Slide 1: Precinct Properties Annual Results 2020
Precinct Properties Annual Results 2020 PRECINCT PROPERTIES, ANNUAL RESULTS PRESENTATION - Page 1
Slide 2: Agenda
Agenda FY20 Highlights / Strategy / Major themes Pages 3 Section 1 – Financial results & capital management Page 11 Section 2 – Our markets Page 19 Section 3 – Operations Page 23 Section 4 – Developments Page 37 Section 5 – Outlook Page 42 Precinct Properties New Zealand Limited Scott Pritchard, CEO
Slide 3: FY20 Highlights
FY20 Highlights Financial Performance • 6.89cps or $90.5m FFO (+1.0% cps) • 6.29cps or $82.7m AFFO (+5.9% cps) • 6.30cps dividend • 100% pay-out ratio to AFFO • +5.0% uplift y-o-y Capital Management • Sale of Pastoral House for $77m • Successfully refinanced $150m bank debt facility • Strong balance
Slide 4: Our strategy
Our strategy Precinct is a specialist city centre real estate investment company. It invests in high quality strategically located city centre real estate with a focus on sustainability. Our strategy is focused on concentrated ownership of real estate in Auckland and Wellington creating spaces to th
Slide 5: 2020 Vision Complete
2020 Vision Complete Portfolio transformation AFFO and Dividend per share growth 2014 2020 7.00 cps 6.50 cps Size $1.75 b $3.0 b 6.00 cps Age 26 yrs 12 yrs 5.50 cps 5.00 cps Maint. Capex 0.60-0.80% p.a 0.20% p.a 4.50 cps AKL Weighting 60% 73% 4.00 cps 2014 2015 2016 2017 2018 2019 2020 2021F Quality
Slide 6: Our Strategy
Precinct’s strategy incorporates the following: Principles of success: - Focusing on concentrated ownership in strategic locations - Maintain and grow great client relationships - Investing in quality, both in assets and environments - Maintaining a long-term view Our Strategy Essential sustainabili
Slide 7: Major Themes
Work from home • Agile workforce increased from c.10% to c.20% • Importance of workplace for collaboration, creativity and culture Major Themes • WFH effective for processing roles/functions Occupier market • Remains resilient • AKL fully leased with minimal supply • WLG remains strong underpinned b
Slide 8: Working from home (WFH)
Working from home (WFH) • Workplace strategies have evolved significantly over the past 20 years • Density ratios increased from 1:20m2 to around 1:10m2 • Adaption of open plan and agile workplaces • Emergence of flex space and co-working • Highly tech enabled functions supporting agile work practic
Slide 9: Working from home (WFH) – Precinct Portfolio
Working from home (WFH) – Precinct Portfolio • Precinct has 161 clients occupying office space ranging from 200sqm to 22,000sqm • Most believe that they will offer a more agile work environment but that they will largely retain their current premises footprint Across our portfolio • Four occupiers h
Slide 10: City Centres
City Centres Auckland – Return to the city 2.50 m Auckland Metro Weekly Patronage 83% 2.00 m AKL waterfront ped counts risen to on 1.50 m comparable prior period 1.00 m 80% 0.50 m AKL Metro weekly patronage increased 0.00 m to on comparable prior period Notably, these charts exclude: International t
Slide 11: Section 1 Financial results & capital management
Section 1 Financial results & capital management
Slide 12: Financial performance
Financial performance For the 12 months ended 30 June 2020 30 June 2019 ($m) Operating income before indirect expenses Audited $105.8 m Audited $95.3 m Movement + $10.5 m $87.5 m Operating income before tax Indirect expenses including management fees ($13.3 m) ($15.8 m) + $2.5 m (+12.5% y-o-y) Net i
Slide 13: Operating Income
For the 12 months ended 30 June 2020 30 June 2019 D Operating $m AMP Centre $11.4 $10.0 $1.4 Income PwC Tower Zurich House $17.8 $5.6 $18.5 $5.2 ($0.7) $0.4 Mason Brothers $2.3 $2.3 ($0.1) +3.2% 12 Madden Street $4.5 $4.5 $0.0 Auckland total $41.6 $40.6 $1.0 NTT Tower $7.1 $7.4 ($0.3) Like-for-like
Slide 14: Adjusted funds from operations
Adjusted funds from operations 30 June 2020 30 June 2019 Total comprehensive income after tax attributable to equity $35.1 m $190.4 m 6.29 cps holders Unrealised net (gain) / loss in value of investment and $66.3 m ($161.7 m) development properties +5.9% y-o-y Net realised (gain) / loss on sale of i
Slide 15: Revaluations
Revaluations +5.8% -0.3% • Revaluation loss of $66 m or -2.2% • +2.2% investment portfolio increase Increase in Wellington Decrease in Auckland • -8.0% development portfolio decrease • Movement attributable primarily to COVID-19 impact on Commercial Bay ($80.6m) and HSBC House ($28.4m), offset by ga
Slide 16: Capital management
Capital management Capital management position remains strong supporting our long term strategy Key metrics June 2020 June 2019 Debt drawn ($ millions)1 951.7 710.4 • Settled sale of Pastoral House ($77m) on Gearing - banking covenant (%) 28.8 22.4 completion of works Weighted average term to expiry
Slide 17: Sustainability at Precinct
Sustainability at Precinct ESG Progress • Improved our key performance measures 2019 2020 • GRESB score above global average GRESB 69 77 • MSCI ESG rating of A MSCI ESG rating A A • 2020 GRESB & CDP submissions underway CDP N/A TBC • Verified emissions and obtained carbon zero Environmental performa
Slide 18: FY21 Earnings and dividend guidance
FY21 Earnings and dividend guidance 6.50 cps 6.50 cps +3.2% FY21 Adjusted funds FY21 dividend guidance Increase in dividend from operations Execution of long term strategic objectives continue to strengthen the earnings profile of the business • Enhanced AFFO profile and strengthened balance sheet t
Slide 19: Section 2 Our Markets
Section 2 ee oO} m4 — ie) 2 ee
Slide 20: Our markets
Our markets Prime CBD office (Auckland) • Market conditions remain resilient albeit potential sublease space emerging in secondary and fringe locations • Prime vacancy rates remain largely unchanged despite increase in stock following completion of new PwC Tower at Commercial Bay • Occupiers continu
Slide 21: CBD office markets
CBD office markets Auckland Wellington • Prime vacancy remains materially unchanged at • Government expansion and flight to quality 4.8% as at Jun-20 (Jun-19: 4.7%), compared to the continue to underpin historically low prime rolling 15-year average of 5.4% vacancy rates, which further declined to 0
Slide 22: Investment market
Investment market Investment sentiments have materially rebounded 6% since the on-set of COVID-19 • Liquidity crisis averted by monetary response 4% • While uncertainty remains, impact of COVID- 19 now better understood 2% • Increased preference for defensive assets backed by strong covenants drivin
Slide 23: Section 3 Operations
Section 3 Operations
Slide 24: Value drivers
Value drivers Investment Portfolio Operating activity Development activity • Highly secure cashflow • Commercial Bay retail • Improves quality • Defensive • Base rent highly • Reduces age of secure characteristics portfolio • Turnover provisions • Structural growth • Participation upside • Drives de
Slide 25: Supporting our strategy
Supporting our strategy • Adapting offering to cater for evolving occupier demands • Occupiers working differently and valuing flexibility and innovation • Wider range of offering and optionality now available Office space spectrum Long term lease Turnkey Office suites Flexi space Co-working Number
Slide 26: Portfolio activity
Portfolio activity Our investment portfolio continues to benefit from the 8.0% significant leasing activity and high occupancy achieved Growth achieved on in both Auckland and Wellington previous contract rentals across investment portfolio • Office leasing activity continued through and post the Ap
Slide 27: COVID-19
• Portfolio demonstrated significant resilience • Strong client relationships and high levels of communication • Support provided COVID-19 • Retail abatement • Cashflow support through deferral • Earnings security • Proactive management engaged all clients throughout lockdown • Deferrals of $1.3 m •
Slide 28: Earnings Quality
Earnings Quality FY21 Gross revenue by asset class Precinct’s well located buildings, high 9% 5% occupancy, and long WALT gives 11% confidence that our strategy will 5% continue to deliver in more challenging times. • Precinct has a high quality client base, including corporate 70% investment grade
Slide 29: Secured cashflow
Secured cashflow Earnings certainty 100% • Improved earnings certainty through extended WALT from development 75% activity WALT • Exposure to structured review profile 50% providing secured cashflow 25% • 72% of portfolio subject to review event in FY21. Of this 13% subject to market rent review 0%
Slide 30: Commercial Bay
Commercial Bay • Retail opened on 11 June • 100% leased • Tower opened on 30 June • 97% leased • Tower now has around 1,500 occupants with PwC, Jarden, MinterEllisonRuddWatts and Chapman Tripp moved in • In discussion to agree the Covid related costs and final account with Fletcher Construction • Re
Slide 31: Commercial Bay - Retail
Commercial Bay - Retail Catchment • Office Workers: Auckland CBD worker population is estimated to be nearly 120,000 workers • Residential: Over 1.57 million residents within the total trade area catchment, forecast to reach around 2 million by 2033 • Visitors: Domestic visitors estimated to be arou
Slide 32: Commercial Bay - Retail
Commercial Bay - Retail • Pedestrian count exceeded • Additional planned openings expectation with 2 million visitors over expected to continue momentum the past two months • Tommy Hilfiger, Calvin Klein & Furla • Sales performance ahead of • Ahi & Saxon & Parole valuation assumptions • Spark & BNZ
Slide 33: Commercial Bay - Retail Foot Traffic
Commercial Bay - Retail Foot Traffic • In June Commercial Bay Retail experienced around 800,000 entries. 3.7X • Peak periods for the month of June were from 10am until 3pm. More visitors in the weekend • Daily visitors are visibly different, with more visitors attending the than Downtown centre from
Slide 34: Generator strategy delivering portfolio benefit
Generator strategy delivering portfolio benefit • Total leasing across investment and development portfolio to Generator members or with Generator component of 7,000sqm • EY leasing of 1,700sqm at 40 Bowen St includes requirement for 50 desks in Generator space • Three portfolio leasing deals totali
Slide 35: Generator performance
Generator performance FY20 FY19 Revenue1 $18.6m $16.4m EBITDA $1.8m ($1.2m) 1Note: Generator performance shown at 100% before consolidation adjustments and excluding interest on intercompany loans ■ Business performing well despite Q4 impact from Covid-19 lockdown • Year-end occupancy 89% across all
Slide 36: Generator pipeline
Generator pipeline ■ Improve offering diversity • Opening Meeting Suites at: • Commercial Bay September 2020 • 188 Quay Street February 2021 • Improve virtual meeting capability ■ Wellington expansion • Generator expansion into 2,300 sqm of character flexible workspace at 30 Waring Taylor Street in
Slide 37: Section 4 Developments
Section 4 Developments
Slide 38: Development progress
Development progress Above: 40 and 44 Bowen Street • Developments currently underway: • 40 Bowen Street • 10 Madden Street • Consists of around 17,700 m2 of office NLA • 83% of office pre-committed to-date • Committed developments forecast to deliver blended ROC of 18% and blended YOC of 6.7% PRECIN
Slide 39: Wynyard Quarter Stage 2 – 10 Madden Street
Wynyard Quarter Stage 2 – 10 Madden Street • Construction remains on programme to achieve practical completion (base build) in Oct-20 +15% Targeted return on cost • Office floors fully pre-committed between Media Design School (4,760m2 or 65%) and a global tech company (2,590m2 or 35%) ~7.0% • Groun
Slide 40: Bowen Campus Stage 2 – 40 Bowen Street
Bowen Campus Stage 2 – 40 Bowen Street Committed to 40 Bowen Street during the +20% • period and commenced construction Jun-20 • Currently 72% pre-committed (by area) by EY, Targeted return on cost Fujitsu and Generator • Practical Completion programmed for Sep-22 • Advance works for 44 Bowen Street
Slide 41: Future pipeline
Future pipeline Est. Lettable Project Location Incremental Status Area spend 44 Bowen Street WLG $78 m 11,695 m² Actively marketing in preparation for commitment in FY21 Wynyard Quarter AKL $200 m 20,466 m² Developed Design completed and priced 1 Queen Street AKL $200 m 22,000 m² Evaluating optimal
Slide 42: Section 5 Outlook
Section 5 Outlook
Slide 43: Outlook
Outlook • Significant uncertainty remains: • Health crisis (COVID) • Economic crisis • Introduction of Alert level 3 for Auckland and Alert level 2 for remainder of NZ increases uncertainty • Precinct well positioned being: • Fully leased • Long WALT • Structured growth • High quality occupiers • Pr
Slide 44: Appendices
Appendices PRECINCT PROPERTIES FY20 ANNUAL RESULTS - Page 44
Slide 45: Financial summary
Financial summary (Amounts in $ millions unless otherwise stated) 2020 2019 Change (%) Rental revenue 151.8 135.7 11.9 Funds from operations (FFO) 90.5 85.1 6.3 Adjusted funds from operations (AFFO) 82.7 74.0 11.8 Total comprehensive income after tax attributable to equity holders 35.1 190.4 (81.6 )
Slide 46: Balance sheet
Balance sheet Financial Position as at 30 June 2020 30 June 2019 ($m) Audited Audited Movement Assets Development properties $190.6 $923.2 ($732.6) Investment properties $2,800.1 $1,870.5 + $929.6 Intangible assets $18.9 $19.2 ($0.3) Fair value of derivative financial instruments $95.2 $42.1 + $53.1
Slide 47: Total Interest Bearing liabilities
Total Interest Bearing liabilities Borrowing movement $1,200 m $1,000 m $800 m $600 m $400 m $200 m PRECINCT PROPERTIES FY20 ANNUAL RESULTS - Page 47
Slide 48: Tax reconciliation
Tax reconciliation Higher effective tax rate 30 June 2020 30 June 2019 for FY20 • Recognition of Net profit before taxation 33.2 201.8 liquidated damages revenue At the statutory income tax rate of 28.0% 9.3 56.5 Unrealised (gain) on value of investment and Reintroduction of development properties 1
Slide 49: Reconciliation from NPAT to Adjusted funds from operations
Reconciliation from NPAT to Adjusted funds from operations Dividends Net dividend (cents) 5.40 5.60 5.80 6.00 6.30 Net profit after taxation (NPAT) 138.2 162.1 254.9 190.2 30.2 Unrealised net (gain) / loss in value of investment and development (81.2) (77.5) (208.7) (161.7) 66.3 properties Unrealise
Slide 50: 5 year income summary
5 year income summary (Amounts in $ millions unless otherwise stated) 2016 2017 2018 2019 2020 Financial performance Gross rental revenue 146.0 126.2 130.7 135.7 151.8 Less direct operating expenses (41.5) (35.8) (35.4) (40.4) (46.0) Operating profit before indirect expenses 104.5 90.4 95.3 95.3 105
Slide 51: 5 year balance sheet
5 year balance sheet (Amounts in $ millions unless otherwise stated) 2016 2017 2018 2019 2020 Financial position Total investment assets 1,513.7 1,535.4 1,678.8 1,870.5 2,800.1 Total development assets 190.4 509.2 838.1 923.2 190.6 Other assets 34.5 34.6 44.8 97.7 194.5 Total assets 1,738.6 2,079.2
Slide 52: Investment portfolio overview
Investment portfolio overview Key metrics Portfolio metrics Investment Auckland Wellington portfolio WALT 8.0 years 8.0 years 10.7 years 8.0 years Occupancy 98% 99% 98% Weighted average lease term Investment Portfolio Value ($m) $2,800.1 m $2053.4 m $746.7 m Weighted average market cap rate 5.3% 5.0
Slide 53: Asset level valuations
Asset level valuations Cap Rates % Valuations Value Movement Additions / 30 June 2020 30 June 2019 Change 30 June 2020 30 June 2019 Revaluation % Disposals Investment Properties NTT Tower 6.4% 6.6% (25 bps) $124.0 m $122.5 m $2.5 m ($1.0 m) -0.8% Mayfair House 6.1% 6.5% (38 bps) $60.2 m $47.3 m $8.3
Slide 54: Disclaimer
Disclaimer The information and opinions in this presentation were prepared by Precinct Properties New Zealand Limited or one of its subsidiaries (Precinct). Precinct makes no representation or warranty as to the accuracy or completeness of the information in this presentation. Opinions including est
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