Precinct Properties Nz Ltd & Precinct Properties Investments Ltd · NZX:PCT
Precinct Properties Nz Ltd & Precinct Properties Investments — Precinct Properties New Zealand — FY2014 Earnings Presentation
41 slides from Precinct Properties Nz Ltd & Precinct Properties Investments's earnings presentation, Aug 13, 2014
Slide 1: Annual results year ended 30 June 2014
Annual results year ended 30 June 2014 13.08.2014
Slide 2: Agenda
Agenda Highlights Page 3 Section 1 – Financial Results and capital management Page 4 Section 2 – Market and portfolio overview Page 13 Section 3 – Strategy Page 21 Section 4 – Active Opportunities Page 25 Section 5 – Conclusion and Outlook Page 32 Precinct Properties New Zealand Limited Scott Pritch
Slide 3: Highlights
Highlights Financial performance $117.2m net profit after tax $63.8m net operating income +9.4% increase in net operating income $47.5m revaluation gain Strong results and Portfolio performance operational 98% gains occupancy Wynyard Central Development agreement with Waterfront Auckland PRECINCT AN
Slide 4: Section 1: Financial Results and Capital Management
Section 1 Financial Results and Capital Management
Slide 5: Financial performance
Financial performance For the 12 months ended Jun-2014 Jun-2013 ($m) Audited Audited D Net property income $118.3 m $104.0 m + $14.3 m Indirect expenses ($2.2 m) ($1.9 m) + $0.3 m Performance fee ($2.2 m) ($3.4 m) ($1.2 m) EPS Reconciliation Base fees ($8.3 m) ($7.5 m) + $0.8 m EBIT $105.7 m $91.2 m
Slide 6: Net property income
Net property income $m FY14 FY13 D ■ Overall net property income (NPI) was AMP Centre $9.0 $7.5 + $1.5 $14.4 million or 14% up SAP Tower – Excluding acquisitions NPI was 5.7% up. $6.4 $5.5 + $0.9 PwC Tower – Increased occupancy within ANZ $13.6 $15.1 ($1.5) ANZ Centre Centre, AMP Centre, SAP Tower a
Slide 7: Taxation impacts
Taxation impacts ■ Higher tax charge: Tax expense reconciliation – Reflecting higher pre-tax profit and the 2013 deduction for assets 2014 2013 Reconciliation of tax expense $m $m scrapped at ANZ Centre Net profit before taxation $130.9 $122.7 redevelopment Less non assessable income – Offset by a t
Slide 8: Balance sheet
Balance sheet Financial Position as at Jun-2014 Jun-2013 ($m) Audited Audited D Reconciliation of NTA movement (cps) Assets Reconciliation of NTA movement cps Property Assets $1,632.5 m $1,640.4 m ($7.9 m) NTA 30 June 2013 99 Fair Value of Swap's $6.0 m $3.8 m $2.2 m Revaluation 4 Deferred Tax - Fai
Slide 9: Capital management
Capital management ■ Reduced bank borrowings to Key metrics June 2014 June 2013 $572m through equity initiatives Debt drawn $572m $603m totalling $62.5m Gearing - Banking Covenant 33.8% 37.3% Weighted facility expiry 3.1 yrs 4.0 yrs – Gearing fell to 33.8% Weighted average debt cost (incl fees) (WAC
Slide 10: Valuation outcome
Valuation outcome ■ Revaluation of $47.5 million or 2.8% Change in property assets ■ Valuation increases equally attributable to both market capitalisation rate compression and increases in net market rentals ■ Underlying portfolio cap rate compressed from 7.5% to 7.3% Portfolio valuation movement 2
Slide 11: Insurance
Insurance Comparison to prior year ■ A saving of 26% has been achieved FY14 FY13 %D when compared to last year’s costs, Total Premium $3.7 m $5.0 m -26% and the scope of cover has not been Wellington (m²) $16 /m² $22 /m² -26% compromised. Auckland (m²) $6 /m² $8 /m² -25% – Over the previous two year
Slide 12: Earnings outlook
Earnings outlook Earnings consistent with FY15 Assumes mid year asset sales reducing gearing to mid to high 20% range 6.2 cents per share FY15 net operating income after tax, before performance fees 5.4 cents per share FY15 dividend guidance Adding value beyond FY15: ■ Portfolio repositioning throug
Slide 13: Section 2: Market and Portfolio Overview
Section 2 Market and Portfolio Overview
Slide 14: Portfolio activity
Portfolio activity Leasing events ■ 61 leasing transactions totalling 57,000m2 or $17 million in New Leasing Number Area contract rent Auckland 34 14,363 m² Wellington 11 8,013 m² – Secured on a 4 year WALT Sub Total 45 22,376 m² – 2.9% Premium to valuation RoR and Extensions ■ 22,000m2 of new leasi
Slide 15: Events in review
Events in review ■ Compared with previous contract Major new leasing transactions during year rent Property Client Area m² Term years – ROR and extensions were 4.1% Zurich House NZX Ltd 914 m² 7.5 years higher than passing PwC Tower ICBC 1,020 m² 8.0 years – An increase of 2.6% achieved PwC Tower Cr
Slide 16: Portfolio metrics
Portfolio metrics Seismic performance rating (by value) Weighted average lease term (by NLA) % of NBS score Occupancy (by NLA) PRECINCT ANNUAL RESULTS, 30 JUNE 2014 Page 16
Slide 17: Portfolio composition
Portfolio composition Composition other 82% proportion of office revenue 60% weighting (by value) to Auckland 40% weighting (by value) to Auckland waterfront precinct Value Classification Description $m Active 150 Development or redevelopment potential Strategic 585 Well located strategic assets
Slide 18: Auckland CBD office market
Auckland CBD office market Forecast vacancy (CBRE, June 2014) Historically low vacancy for Occupier prime stock with strong Demand ▲ forecasted CBD employment growth Stable with no quality CBD office development Supply ► expected in next 2-3 years. Some fringe supply expected Forecast net effective
Slide 19: Wellington CBD office market
Wellington CBD office market Forecast vacancy (CBRE, June 2014) CBD based employment Occupier remains static. Quality Demand ► buildings expected to attract occupiers Obsolete stock removed from market. Some new Supply ▼ builds being considered albeit the required rents are 20% above market Gross fa
Slide 20: FY15 lease events
FY15 lease events ■ 43% of portfolio (by NLA) subject ■ Around 19,000m2 or 6% of to lease event in FY15 portfolio expiring ■ 14% of portfolio subject to – Two thirds of expiries are in market review Wellington ■ Approximately half the Auckland portfolio subject to a structured growth review Major ex
Slide 21: Section 3: Strategy
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Slide 22: Strategy
Strategy ■ Precinct actively manages its assets and continuously re- assesses its portfolio and the markets it operates in ■ Remains a specialist investor in city centre office ■ Precinct has established a long term plan (20:20 Vision) which sits within the strategy. ■ In order to execute the 20:20
Slide 23: 20:20 Vision
20:20 Vision Portfolio transition Precinct’s 20:20 Vision: ■ Improve the quality of the portfolio 2014 20201 ■ Create unrivalled precincts in Total Assets (billion) $1.75 $2.1 unrivalled locations Weighting to Auckland 60% 70% ■ Provide end to end property solutions WALT 5.4 years +6 years ■ Increas
Slide 24: The 20:20 pathway
The 20:20 pathway ■ Precinct intends to organically fund the portfolio transformation ■ FY15 should yield 2-3 asset sales leading to reduced gearing ■ Strategy relies on – Strength of the occupier market, – Strength of economy, and – Performance of residual portfolio to maintain earnings in the shor
Slide 25: Section 4: Active Opportunities
Section 4 Active Opportunities
Slide 26: Downtown Shopping Centre
Downtown Shopping Centre Status update ■ Masterplanning phase now complete ■ Concept design has commenced – NH Architecture from Melbourne has been appointed as the Retail concept architect – Woods Bagot has been selected as the preferred Commercial architect – Local firm Warren and Mahoney – Execut
Slide 27: Downtown Shopping Centre
Downtown Shopping Centre ■ Intention to restore Downtown and lower Queen Street as the heart of Auckland City ■ Leverage public transport as the site is bordered by rail, ferry and bus services ■ Precinct will have 5 office towers with around 12,000 workers amongst 130,000sqm of office space ■ Retai
Slide 28: Downtown Shopping Centre
Downtown Shopping Centre Commercial update Next steps ■ Current intent to develop: ■ Conclude Development – 20,000 sqm of retail NLA Agreement and negotiations – 35,000 sqm of office NLA relating to City Rail Link ■ Increased allowance for ■ Conclude concept design phase development spend to around
Slide 29: Wynyard Quarter
Wynyard Quarter Status update ■ Development agreement (DA) – signed with Waterfront Auckland ■ DA grants Precinct exclusive opportunity to develop commercial office over 5 stages ■ Land is drawn (and paid for) at each stage once pre- commitment obtained ■ Precinct acquires 125 year leasehold tenure
Slide 30: Wynyard Quarter
Wynyard Quarter Development overview ■ 1.1 hectares of land ■ Potential to provide a predominantly office development of 46,000 sqm of gross floor area ■ Five staged development ■ Current design for two sites separated by a public laneway Next steps ■ Undertake design and development phase ■ Leasing
Slide 31: Bowen Campus
Bowen Campus Status update ■ Site offered to Government under the WAP2 RFP – Expectation successful parties will be notified in next 2-3 months ■ Site also offered to corporate occupiers ■ 1 hectare site with very few town planning restrictions allowing range of uses ■ Maximum allowable GFA likely t
Slide 32: Section 5: Conclusions and Outlook
Section 5 Conclusions and Outlook
Slide 33: Conclusion
Conclusion ■ New Zealand economy continuing to outperform through: – Population growth – Christchurch rebuild, and – Historically low interest rates ■ Some risk exists from lower commodity prices and rising construction costs ■ Property market improving: – Auckland vacancy at historic lows with sign
Slide 34: Outlook
Outlook ■ Precinct well positioned given strong market conditions ■ Strategy designed to reposition portfolio during a period of market strength and limited supply ■ Short term impacts expected to be managed due to: – Quality of residual portfolio – Strength of occupier market ■ Precinct to consist
Slide 35: Appendices
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Slide 36: Asset level valuations
Asset level valuations Cap rates % Valuation Fair value movement FY14 FY13 FY14 FY13 $ % 125 The Terrace 7.9% 7.9% $63.8 m $66.8 m ($2.7 m) -4.4% 80 The Terrace 8.4% 9.5% (110 bps) $36.6 m $26.4 m $3.2 m 38.4% Deloitte House 8.1% 8.1% $50.6 m $48.4 m $1.7 m 4.5% 171 Featherston Street 7.4% 7.7% (30
Slide 37: Auckland Property Portfolio
Auckland Property Portfolio 01. 02. 03. 04. 05. 06. PwC Tower ANZ Centre AMP Centre SAP Tower Zurich House Downtown Shopping Centre Occupancy 98% Occupancy 97% Occupancy 100% Occupancy 99% Occupancy 100% Occupancy 97% WALT 5.9 years WALT 10.5 years WALT 5.7 years WALT 3.7 years WALT 4.8 years WALT 1
Slide 38: Auckland Property Portfolio
Auckland Property Portfolio 07. HSBC House Occupancy 100% WALT 4.1 years Clients HSBC Bank, NZTA Limited, Baldwins Limited, Auckland Transport Queen Street, Auckland HSBC House comprises a 21 level commercial office tower situated on a prime waterfront CBD site. This is a landmark building occupying
Slide 39: Wellington Property Portfolio
Wellington Property Portfolio 01. 02. 03. 04. 05. 06. State Insurance Tower Vodafone on the Quay No. 1 The Terrace 171 Featherston Street 125 The Terrace Pastoral House Occupancy 97% Occupancy 88% Occupancy 100% Occupancy 99% Occupancy 98% Occupancy 100% WALT 4.4 years WALT 4.3 years WALT 4.8 years
Slide 40: Wellington Property Portfolio
Wellington Property Portfolio 07. 08. 09. 10. 05. 06. Bowen Campus Deloitte House Mayfair House 80 The Terrace PwC Tower PwC Tower Occupancy 100% Occupancy 98% Occupancy 100% Occupancy 89% Occupancy 87% Occupancy 87% WALT 2.3 years WALT 3.0 years WALT 4.9 years WALT 5.5 years WALT 6 years WALT 6 yea
Slide 41: 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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