Precinct Properties Nz Ltd & Precinct Properties Investments Ltd · NZX:PCT
Precinct Properties Nz Ltd & Precinct Properties Investments — Precinct Properties New Zealand — H1 FY2021 Earnings Presentation
43 slides from Precinct Properties Nz Ltd & Precinct Properties Investments's earnings presentation, February 2021
Slide 1: Precinct Properties Interim Results 2021
Precinct Properties Interim Results 2021 PRECINCT PROPERTIES, ANNUAL RESULTS PRESENTATION - Page 1
Slide 2: Agenda
Agenda Highlights / Strategy / Major themes Pages 3 Section 1 – Financial results & capital management Page 9 Section 2 – Our markets Page 17 Section 3 – Operations Page 23 Section 4 – Developments Page 30 Section 5 – Outlook Page 36 Precinct Properties New Zealand Limited Scott Pritchard, CEO Georg
Slide 3: Highlights
Highlights Financial Performance • NPI of $60.2 million, 22.3% higher than pcp • Comprehensive income after tax of $167.9 million (1H20: $53.6 million) • 3.34 cps AFFO representing a payout ratio of 98% • 6.50 cps dividend guidance representing a 3.2% increase y-o-y Capital Management • $177 million
Slide 4: 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 Our strategy - Maintaining a long-term view Essential sustainabili
Slide 5: Strategy progress
Strategy progress Operational excellence • Active management driving significant portfolio outperformance with continued rental growth and limited vacancy • Precinct received a 2020 Global Real Estate Sustainability Benchmark (GRESB) score of 83 (Global average: 70) • Office portfolio and Generator
Slide 6: Major themes
Workplace trends • WFH established as part of workplace strategies with agile workforce increased from c.10% to c.20% with many employees working 1-2 days from home • Importance of working from office recognised for collaboration, creativity and culture Major themes • Businesses downsizing footprint
Slide 7: Working from office
Working from office While working from home provides an effective continuity strategy, the benefits of working from the office are increasingly recognised Benefits of working from the office • Higher productivity/increased collaboration • Enhanced culture, training/development and mentoring of staff
Slide 8: Community Club benefits
Community • Commercial Bay Club is exclusively available to Precinct occupiers in the Auckland portfolio • 2,000+ Club sign ups Club benefits • Exclusive invites to corporate, health and wellness, and social events including: • Fitness & yoga classes • Networking events • Monthly speaker series (com
Slide 9: Section 1 Financial results & capital management
Section 1 Financial results & capital management
Slide 10: Financial performance
Financial performance For the 6 months ended 31 December 31 December 2020 2019 $167.9 m Total comprehensive income after ($m) Unaudited Unaudited D tax Operating income before indirect expenses $62.5 m $54.0 m + $8.5 m Indirect expenses Net interest expense ($9.0 m) ($10.7 m) ($6.6 m) ($2.5 m) ($2.4
Slide 11: Operating income
Operating income For the 6 months ended 31 December 31 December D $m (unaudited) 2020 2019 Material increase due to completion of developments Auckland $20.8 $21.1 ($0.3) Active period with 37,000m2 of fitouts Wellington $17.2 $17.2 ($0.0) completed in Auckland Investment portfolio $38.0 $38.3 ($0.3
Slide 12: Adjusted funds from operations
Adjusted funds from operations 31 December 31 December For the 6 months ended Movement 2020 2019 AFFO Operating income before indirect expenses $62.5 m $54.0 m + $8.5 m 3.34 cps Indirect expenses ($9.0 m) ($6.6 m) ($2.4 m) Net interest expense ($10.7 m) ($2.5 m) ($8.2 m) +7.4% y-o-y Operating profit
Slide 13: Revaluations
Revaluations NTA movement 160.0 • Revaluation gain of $148.5 m or 5.1% attributable NTA per share primarily to cap rate compression • NAV per share of $1.55 (Jun-20: $1.45) • Wellington saw the biggest % change YoY with 140.0 ~60 bps of yield compression • +7.7% investment Wellington portfolio • +4.
Slide 14: Capital management
Capital management December June Capital management position remains Key metrics 2020 2020 strong supporting our long term strategy Debt drawn ($ millions)1 1,097.6 951.7 • Gearing as measured under banking Gearing - banking covenant (%) 29.9 28.8 covenants is 29.9% Weighted average term to expiry (
Slide 15: Sustainability at Precinct
Sustainability at Precinct ESG Progress Improved our key performance measure, GRESB, to 83 (Global average: 70) • Disclosed Climate-related Financial Disclosures document (TCFD) • Launched sustainable debt programme against $1.7bn of green assets • Precinct to benefit from occupier shift to 2019 202
Slide 16: FY21 guidance: 6.50 cps
FY21 guidance Historical AFFO and Dividend 7.00 cps +20% 6.50 cps 6.50 cps 6.00 cps 5.50 cps FY21 AFFO and dividend 5.00 cps guidance 4.50 cps 4.00 cps 2016 2017 2018 2019 2020 2021F Adjusted funds from operations Dividend (cps) Completion of developments and sale of non-core assets will underpin a
Slide 17: Section 2 Our markets
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Slide 18: City centres
City centres Auckland – Return to the city Auckland Metro Weekly Patronage 2.5 69% Millions 2.0 Average AKL waterfront pedestrian counts Oct – Dec 2020 to comparable 1.5 pre Covid-19 period 1.0 70% 0.5 Average AKL Metro weekly patronage increase Oct - Dec to comparable prior 0.0 period Notably, thes
Slide 19: Our city centre markets
Our city centre markets Prime office (Auckland CBD) • Auckland waterfront market conditions remain resilient however elevated sublease space availability in secondary locations have impacted the traditional submarkets • Occupiers are continuing to commit to new leases, albeit leasing decisions are t
Slide 20: Auckland CBD office
Auckland CBD office • Waterfront prime vacancy estimated at 2.9% despite 45,000m2 of stock added since Dec-19 • Reaffirms waterfront drift with occupiers attracted to improved amenities and public transport links • Increase in vacancy rate in traditional submarkets (Core / Midtown) • PCT waterfront
Slide 21: Wellington CBD office
Wellington CBD office Wellington prime yield vs. interest rates • Prime vacancy rates continue to remain below long term average despite new 12% supply 10% • Sublease availability in new builds 8% expected to be absorbed relatively 6% quickly 4% • Robust occupier demand driving rental 2% growth 0% •
Slide 22: Sublease market
Sublease market Broader market • Impact of subleasing post Covid-19 has been more prominent in secondary and fringe locations • According to CBRE research much of the potential sublease space has not translated into physical vacancy • Good quality sublease space is meeting strong demand and being ab
Slide 23: Section 3 Operations
Section 3 Operations
Slide 24: Portfolio activity
Portfolio activity 7.7 years Key leasing update Weighted average lease term 98% • Strong leasing activity continues with 11,300 sqm completed and solid rental growth achieved Portfolio Occupancy • New 9-year lease to Aon New Zealand over 2,200m² on levels 20, 21 and naming rights at AMP Centre 11,30
Slide 25: Earnings quality
Earnings quality Precinct’s well located buildings, high Gross revenue by asset class occupancy, quality client base, and long WALT gives confidence that our strategy will continue to deliver. 7% 5% 11% Carpark • Just 4% of portfolio by income is subject to 5% Retail expiry over the next 12 months F
Slide 26: Commercial Bay - retail
Commercial Bay - retail • Disruption due to Covid-19 lockdowns, city centre workforce patterns and major streetscape works make read through to underlying performance difficult • Food & beverage has been the strongest performer, particularly Harbour Eats. International fashion has also been strong w
Slide 27: Commercial Bay - retail
Commercial Bay - retail Centre composition All retailers are now open, and the centre is fully leased. With a carefully blended retailer composition, Commercial Bay is positioned to be the destination at the heart of the city. • International retailers: H&M, COS, Scotch and Soda, Hugo Boss, Tommy Hi
Slide 28: Operating businesses
Operating businesses • Commercial Bay Hospitality achieved successful openings however impact of lockdowns led to $800k loss for the half • Venues continue to adapt to create operational efficiencies • Generator performed well with result inline with expectations despite second lockdown • Event sale
Slide 29: Generator performance
Generator performance H1FY21 H1FY20 Revenue1 $7.5m $10.4m EBITDA ($0.4m) $1.3m 1Note: Generator performance includes intersegment revenue • Business exceeding expectations despite unforeseen impact from COVID-19 lockdown and on track for full year breakeven • Year-end occupancy 65% across all sites
Slide 30: Section 4 Developments
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Slide 31: Development summary
Development summary Current commitments • Developments currently underway: • 10 Madden Street, Auckland (base build PC Oct-20) • 40 Bowen Street, Wellington (PC Sep-22) • 44 Bowen Street, Wellington (PC May-23) • Total office NLA of 29,250m2 on completion • 60% pre-committed to date with a c. 11 yea
Slide 32: Wynyard Quarter stage 2 – 10 Madden
Wynyard Quarter stage 2 – 10 Madden • Base build practical completion achieved Oct-20 in line with programme • Income producing in March following completion of ~15% client fitout works Forecast return on cost • Office floors pre-committed between Media Design School ~7.0% (4,946m2) and a global tec
Slide 33: Bowen Campus stage 2 – 40 & 44 Bowen
Bowen Campus stage 2 – 40 & 44 Bowen • Committed to 44 Bowen during the half period with construction progressing well • Superstructure underway at 40 Bowen • Piling and ground anchors underway at 44 Bowen ~25% Forecast return on cost • On programme to deliver practical completion in Sep-22 (40 Bowe
Slide 34: One Queen Street
One Queen Street • Redevelopment of One Queen Street currently on hold due to market uncertainty and to evaluate long-term optimal use post- COVID • Anticipate to commit and re- commence development works in 2021 calendar year • Scheme now revised to provide circa 14,300m2 of premium grade office sp
Slide 35: One Queen Street
One Queen Street Previous scheme Revised scheme 7 7 2 11 6 3 PRECINCT PROPERTIES FY21 INTERIM RESULTS - PAGE 35
Slide 36: Section 5 Outlook
Section 5 Outlook
Slide 37: Outlook
Outlook Uncertainty remains • Health (COVID-19) and economic crisis • Workplace strategies However, Precinct’s outlook remains robust with growth expected due to: • High occupancy levels and a 7.7-year WALT providing lower leasing costs and incentives • ~55% of the portfolio benefiting from structur
Slide 38: Appendices
Appendices PRECINCT PROPERTIES FY21 INTERIM RESULTS - PAGE 38
Slide 39: App 1: Operating income
App 1: Operating income For the 12 months ended Unaudited six months Unaudited six months D $m ended 31 December 2020 ended 31 December 2019 AMP Centre $5.7 $6.1 ($0.4) HSBC Tower $9.0 $9.0 $0.0 Jarden House $2.7 $2.7 $0.0 Mason Brothers $1.2 $1.1 $0.0 12 Madden Street $2.3 $2.2 $0.0 Auckland total
Slide 40: App 2: Balance sheet
App 2: Balance sheet Financial Position as at 31 December 2020 30 June 2020 ($m) Unaudited Audited Movement Assets Development properties $249.7 $190.6 + $59.1 Investment properties $2,822.8 $2,800.1 + $22.7 Investment properties held for sale $178.2 + $178.2 Intangible assets $18.8 $18.9 ($0.1) Fai
Slide 41: App 3: Asset level valuations
App 3: Asset level valuations Value Movement Cap Rates %* 30 Jun 2020 Additions / 31 Dec 2020 30 Jun 2020 Revaluation Revaluation 30 Jun 2020 31 Dec 2020 Change Market Value Disposals Book Value Market Value % Investment Properties NTT Tower $124.0 m -$0.2 m $123.8 m $21.2 m $145.0 m 17.2% 6.38% 5.5
Slide 42: App 4: Investment portfolio overview
App 4: Investment portfolio overview Key metrics Portfolio metrics Investment Auckland Wellington portfolio WALT 7.7 years 7.1 years 9.1 years 7.7 years Occupancy 98% 96% 99% Weighted average lease term Investment Portfolio Value ($m) $3,001.0 m $2181.3 m $819.7 m Weighted average market cap rate 5.
Slide 43: 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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