Precinct Properties Nz Ltd & Precinct Properties Investments Ltd · NZX:PCT
Precinct Properties Nz Ltd & Precinct Properties Investments — Precinct Properties New Zealand — Investor Day (November 2017)
43 slides from Precinct Properties Nz Ltd & Precinct Properties Investments's investor day presentation, November 2017
Slide 1: Precinct Properties New Zealand Investor Day
Precinct Properties New Zealand Investor Day PRECINCT2017 November PROPERTIES, INVESTOR DAY- Page 1
Slide 2: Today we're focussed on
Today we’re focussed on ■ Our strategy – portfolio transformation ■ Portfolio and market overview ■ Hot topics – Auckland CBD office performance – Supply constraints – Construction costs – Economic rents – Density ratios – New Government – Co working ■ Developments – Commercial Bay and Bowen Campus
Slide 3: Section 1: Strategy
Section 1 Strategy PRECINCT PROPERTIES, INVESTOR DAY- Page 3
Slide 4: Business and strategy overview
Business and strategy overview Precinct is a specialist city centre real estate investment company. It invests in high quality strategically located city centre real estate. ■ Most recently reviewed in 2012, the strategy has Principles of success been continually refined since 1997 when the company
Slide 5: Achieving strategy
Achieving strategy Operational excellence Developing the future 2012 2017 2012 2017 Asset age 21 years 11 years Bowen Campus Quality A-grade Premium Downtown Shopping centre Acquisitions HSBC House WALT 5.9 years 9.0 years Queen Elizabeth Square Occupancy 94% 100% Wynyard Quarter Regeneration Bowen
Slide 6: Earnings pathway and quality shift
Earnings pathway and quality shift Portfolio WALT and Occupancy 9.00 100% WALT Occupancy ■ Earnings pathway maintained to 2021 ■ Forecast earnings growth expected to 7.00 95% provide CAGR of 3.5% between 2012 and 90% 2021 5.00 ■ Significant quality shift occurring 85% contemporaneously ■ Committed W
Slide 7: Comparison to A-REITs
Comparison to A-REITs PRECINCT PROPERTIES, INVESTOR DAY- Page 7
Slide 8: Section 2: Portfolio: Market Overview
Section 2 Portfolio: Market Overview PRECINCT PROPERTIES, INVESTOR DAY- Page 8
Slide 9: Portfolio overview
Portfolio overview Key metrics Portfolio metrics 76 % Investment Including Developments on Investment Portfolio Developments on completion completion weighting (by value) to Total Assets $1,535 m $1,174 m $2,709 m Auckland (inc. developments) % Wellington 28% 20% 24% WALT Occupancy 7.1 years 100% 11
Slide 10: Auckland Portfolio
Mason Brothers Auckland 12 Madden Portfolio Stanbeth Takutai Coming soon PRECINCT PROPERTIES, INVESTOR DAY- Page 10 Page 10
Slide 11: Auckland CBD market
Auckland CBD Midtown 2.7% market $365 6.9% Core 6.0% $485 6.2% Commercial Bay precinct 0.0% $525 6.1% Britomart 0.0% Key: $480 Vacancy 6.8% Rents PRECINCT Market PROPERTIES, yields INVESTOR DAY- Page 11
Slide 12: Auckland CBD public investment
Map Key: Auckland CBD Public investment public CRL / Light Rail Public regeneration investment Commercial Bay Aotea Station City rail link Light Rail Light Bus rail relocation Ferry Basin Redevelopment Bus relocation PRECINCT PROPERTIES, INVESTOR DAY- Page 12
Slide 13: Auckland CBD public investment
Map Key: Auckland CBD Public investment public CRL / Light Rail Public regeneration investment Commercial Bay PRECINCT PROPERTIES, INVESTOR DAY- Page 13
Slide 14: Auckland CBD private investment
NZICC Map Key: Auckland CBD Office (potential supply) private Non office(Hotel/Other) Part NZME Public investment 5-15 Albert Street investment Albert Street $49,000,000 $33,000,000 CRL / Light Rail 2,200sqm 1,134sqm / Public regeneration c.$22,000sqm 14,700sqm (13:1) Park residence $29,000psm Comme
Slide 15: Auckland CBD private investment
Map Key: Auckland CBD Office (potential supply) private Non office(Hotel/Other) NZME Albert Street Public investment (Mansons Approach) investment $42m (Original purchase) $9m cost net of divestment CRL / Light Rail Public regeneration 3,124sqm / $2,800psm Assuming 20,000 GFA Commercial Bay Net Face
Slide 16: Auckland CBD office market
Auckland CBD office market Office net rental - Colliers CBD office employee change 2011 to 2016 Government Administative Services Professional Services Rental, Hiring and Real Estate… Financial and Insurance Services Media and Telco 1,000 2,000 3,000 4,000 5,000 6,000 -1,000 - Employee count Total C
Slide 17: City centre drivers
City centre drivers Benefiting from city centre centralisation 95,000 ■ CBD market share of regional office employment Net migration over the increasing past 3 years into Auckland – CBD office employment grown by 12,000 people (18%) since 2011 ■ Increase in CBD public transport patronage – City rail
Slide 18: Auckland CBD retail market
Auckland CBD retail market ■ Auckland retail market is holding firm – Growing population is bolstering demand for goods and services ■ Vacancy rates remain tight – Strip retail reducing to 3.3% June 2017 (4.8% 2016) – Queen Street remained flat at 2.8% – Strong tenant demand remains for prime retail
Slide 19: Auckland Hotel market
Auckland Hotel market ■ Visitor arrivals to New Zealand are expected to grow 4.8% p.a. to 2023 – Auckland Airports international passengers were up 6.8% over the past 12 months – Auckland Airport’s second runway to be complete by 2025 – Auckland accounts for majority of tourism spend ■ Demand for ho
Slide 20: Wellington Portfolio
Wellington State Insurance Tower Portfolio Dimension Data House 10 Brandon St Pastoral House 1 -3 The Terrace Mayfair House Bowen Campus Bowen Campus Balance Land PRECINCT PROPERTIES, INVESTOR DAY- Page 20 Page 20
Slide 21: Wellington market
Wellington market ■ Post quake, total office stock reduced by c.100,000m2 reducing total stock to 1.4 million m2 – City wide vacancy fell to 7.8% (Nov 16: 10.5%) ■ Majority of stock withdrawals from A grade or better – Prime vacancy reduced to 0.1% (from c.3%) ■ Wellington Council required 80 buildi
Slide 22: Wellington CBD office market
Wellington CBD office market Office gross rental - Colliers ■ In the near term prime office space will continue to be tight ■ 80,000m2 currently under construction ■ Short term rental growth is expected to slow following the completion of new builds and Office CBD vacancy - Colliers seismic refurbis
Slide 23: Section 3: Hot topics
Section 3 Hot topics
Slide 24: Auckland CBD office market
Auckland CBD office market Historical forecast market yields ■ Some emerging concerns over future CBD office market performance due to supply pipeline ■ Underlying market drivers remain strong – Economic strength/activity – Employment intentions – Public / Private spend Historical forecast net face
Slide 25: Hot topic 1: Auckland supply outlook
Hot topic 1: Auckland supply outlook ■ NZ non residential construction costs increased by 19% over previous 5 years International development feasibility comparison ■ QS pricing suggests Auckland costs have risen by 25% over the past 3-4 years ■ Forecast construction cost inflation of 4.4% p.a. San
Slide 26: 1: Economic rents
1: Economic rents Historic cap rates ■ Strong investment market 10.0% Cap rate – Continued strength in Auckland 9.0% – Strengthening in Wellington taking 8.0% advantage of yield spread 7.0% 6.0% 5.0% ■ Auckland cap rates are below peak 4.0% levels reached in 2007 3.0% – Spread to 10 year swap rate r
Slide 27: 1: Economic rents (188 Quay St example)
1:Economic rents (188 Quay St example) PWC land and building rates (psm) $12,000 ■ Land and buildings rates now above $10,000 peak levels (10 years later) $8,000 ■ Market rental levels remain below $6,000 peak – 17% below 2008 peak inflation adj. $4,000 levels (5% below nominal) $2,000 $0 For a new
Slide 28: Hot topic 2: Density and TOC
Hot topic 2: Density and TOC Auckland TOC and Market NER Total Occupancy Cost per CBD employee $6,000 $600 /m² Market NER ■ While market rents are close to 2008 high $5,000 $500 /m² total occupancy costs are 15% lower ■ Based on JLL rental and stock forecasts, $4,000 $400 /m² TOC per CBD employee ar
Slide 29: Hot topic 3: Government impacts for Precinct
Hot topic 3: Government impacts for Precinct Policy Description Impact on Impact on Impact on Commercial construction construction commercial Investment cost capacity supply market Tax Potential tax changes including capital gains tax - - ▼ ▼ Kiwibuild Commitment to build 10,000 houses p.a. for 10 y
Slide 30: Hot topic 3: Co-working investment
Hot topic 3: Co-working investment Factors driving growth ■ Precinct have a 50% interest in 1. New business (startups and new entrants) Generator; 2. Flexibility, ease and speed of setup – Co working 3. Corporate market using space as part of – Dedicated desks and/or small suites real estate strateg
Slide 31: Hot topic 3: Co-working investment
Hot topic 3: Co-working investment APAC Multinationals’ current and planned use of third party space (CBRE) 70% 60% Co-working market forecast to grow by 51% (by area) % of respondents 50% 40% by 2018 30% 20% 10% 0% Overall Serviced offices Co-working Innovation Business space Centre incubator / acc
Slide 32: Section 4: Developments
Section 4 Developments
Slide 33: Development Summary
Development Summary 7.5% 70% Blended yield on cost Pre-leased by NLA on office and retail 27% $160m Blended return on cost Un-recognised development profit Key development metrics 2017 2016 Strong occupier covenant (of leased market rental) Development Pipeline $0.9 b $1.0 b Total development NLA 96
Slide 34: Commercial Bay
Commercial Bay $213M ■ Value on completion of $941 million of expected profit ■ $213m expected profit on completion ■ 46% of retail space committed ■ 66% of office space committed ■ Retail launch phased with two stage opening – c. 20% opening mid 2018 – Remainder opening in Q1 2019 Financial Metrics
Slide 35: Bowen Campus
Bowen Campus ■ Crown leased the remaining 4 floors 100% of Bowen State building Leased ■ NZDF is approved to occupy the Bowen State building ■ MPI lead agency on Charles Fergusson Tower ■ Construction works are progressing well ■ Bowen State lease extended to 18 years Financial Metrics Commencement
Slide 36: Wellington RFP update
Wellington RFP update Bowen Campus ■ 100% leased ■ Bowen Campus WALT increased to 16.9 years (June 17: 15 years) ■ Wellington portfolio WALT increased to 11.2 years ■ Annex currently being demolished Remaining RFP assets ■ No.3 The Terrace commencing as planned in May 2018 ■ Mayfair House works are
Slide 37: Section 5: Future Developments
Section 5 Future Developments
Slide 38: 1 Queen
1 Queen 1 Queen 2019 + Office or Expected project start Mixed use $160 million Proposed use Estimated incremental project spend PRECINCT PROPERTIES, INVESTOR DAY- Page 38
Slide 39: 1 Queen
1 Queen ■ Discussions on-going with preferred hotel operator ■ Likely mixed use – Hotel with office above ■ Supports Commercial Bay retail – Particularly food and beverage PRECINCT PROPERTIES, INVESTOR DAY- Page 39
Slide 40: Wynyard Quarter
Wynyard Quarter ■ 3 remaining sites ■ c.30,000sqm of GFA to be developed ■ In discussion with occupiers for stage 2 (site 5b) ■ Target to commit Stage 2 within the next 6-12 months ■ Timing determined by: – Strength of occupier market (supply) – Growth of Innovation Precinct (future stages) Above: A
Slide 41: Bowen balance land
Bowen balance land 2018 + Expected project start $150 million Estimated incremental project spend Office Potential use PRECINCT PROPERTIES, INVESTOR DAY- Page 41
Slide 42: 10 Brandon Street
10 Brandon Street ■ A number of options for the building have been explored to date: – Strengthen existing – Strengthen with façade upgrade – Full office redevelopment – Student accommodation – Apartments – Office/Apartment hybrid ■ Preferred option expected to be finalised by February 2018 Full red
Slide 43: Conclusion
Conclusion ■ Precinct has a clear strategy to provide long term outperformance ■ Strategy provides certainty for: – Investors – Staff – Market ■ Strategy retains focus on city centre real estate ■ Precinct continuing to be well positioned with supportive market PRECINCT PROPERTIES, INVESTOR DAY- Pag
Precinct Properties New Zealand — Investor Day (November 2017) on 6ix