Precinct Properties NZ Ltd & Precinct Properties Investments Ltd · NZX:PCT
Precinct Properties NZ Ltd & Precinct Properties Investments — Precinct Properties — FY2023 Earnings Presentation
39 slides from Precinct Properties NZ Ltd & Precinct Properties Investments's earnings presentation, Aug 23, 2023
Slide 1: FY23 Annual Results
FY23 ANNUAL RESULTS 23 August 2023 PRECINCT PROPERTIES, ANNUAL RESULTS PRESENTATION - Page 1
Slide 2: Agenda
Highlights & Key Themes Financial Performance Capital Partnering Agenda Scott Pritchard Richard Hilder George Crawford CEO CFO Deputy CEO Investment Update Development Update Summary George Crawford Scott Pritchard Scott Pritchard Deputy CEO CEO CEO All figures provided in this presentation are as a
Slide 3: Highlights – Strategic execution
Highlights – Strategic execution Precinct has made significant progress on strategic initiatives with $1.8b of new capital partnerships (completion value) secured over last 18 months1 • Significant capital partnership activity with growth in partnerships of $1.4 billion1 during the year • Moved to a
Slide 4: Operational highlights
Operational highlights Operational excellence • Portfolio occupancy maintained at 99% with a WALT of 6.0 years • Over 53,000m2 of leasing completed in the period including over 35,000m2 of development leasing • Achieved 13.8% growth in contract rents on new leases • Generator delivered gross operati
Slide 5: Our business
Our business Precinct is a central city real estate Strategy encompasses three key areas of outperformance: investment business. It invests in high quality strategically located real 1. Investment estate with a focus on sustainability. ❖ Well-located prime assets have significantly outperformed lowe
Slide 6: Key themes
Occupier market • Continued occupier demand for well-located, premium quality office accommodation resulting in strong rental growth • Flight-to-quality trend continuing with net absorption for prime grade office space remaining elevated Key themes • Auckland and Wellington city centre prime office
Slide 7: Financial Performance
Financial Performance i} a
Slide 8: Financial performance
Financial performance For the 12 months ended 30 June 2023 30 June 2022 D ($m) Operating income before indirect expenses $141.0 m $129.4 m + $11.6 m +$11.6m Management fee income $5.4 m + $5.4 m Other expenses ($13.5 m) ($10.2 m) ($3.3 m) Net interest expense ($30.8 m) ($23.9 m) ($6.9 m) Increase in
Slide 9: Operating Income
Operating Income For the 12 months ended ($m) 30 June 2023 30 June 2022 D Auckland $81.1 m $77.9 m $3.2 m Operating Wellington $33.7 m $33.5 m $0.2 m Income Investment portfolio $114.8 m $111.4 m $3.4 m Transactions and Developments $15.5 m $21.4 m ($5.9 m) $141.0m Subtotal COVID-19 Impact $130.2 m
Slide 10: FFO & AFFO
FFO & AFFO For the 12 months ended ($m) 30 June 2023 30 June 2022 Operating income before indirect expenses (as per FS) $141.0 m $129.4 m Management fee income $5.4 m - AFFO Other expenses ($13.5 m) ($10.2 m) Net interest expense ($30.8 m) ($23.9 m) 6.69 cps Operating profit before tax (as per FS) $
Slide 11: Portfolio revaluation
Portfolio revaluation Well-occupied premium grade portfolio proving to be resilient despite cap rate headwinds Portfolio value bridge ❖ $255.4m or 7.1% reduction in portfolio value to $3.3b excluding $4,000 m right-of-use assets (FY22: $3.7b $3,500 m including assets held for sale) $3,000 m $2,500 m
Slide 12: Capital management
Capital management Further balance sheet positioning has occurred Key metrics 30 June 2023 30 June 2022 throughout the year following significant business activity Debt drawn ($m) 1,247 1,247 Gearing (Banking covenant: 50%) (%) 38.0 2 34.3 • Settled $680 million1 of asset sales during the period Wei
Slide 13: Precinct considering a convertible note offer
Precinct considering a convertible note offer Precinct is considering making an offer of between $150m and $200m of fixed rate subordinated convertible notes (SCN) Strategic benefits • Provides semi-permanent capital to help progress capital partnering strategy $150-200m and other opportunities such
Slide 14: Earnings quality and FY24 guidance
Earnings quality and FY24 guidance 6.75 cps FY24 dividend guidance Long-term AFFO growth is expected to be driven by: Contributions of PPNZ and PPIL to FY24 dividend guidance1 8.0 Cents per share 6.75 cps 7.0 ❖ Strong contracted cashflows with 84% of the 6.0 portfolio subject to structured rent revi
Slide 15: ESG progress
ESG progress Our strategy includes the integration of sustainability across all areas of our business. • $1.5b of green assets (excl. partnership assets) Green assets (4 star NABERSNZ or 5 Star Greenstar) • Committed to the World Green Building Council Net Zero Carbon Buildings Commitment and a targ
Slide 16: Capital Partnering
Capital Partnering
Slide 17: Capital partnerships – strategic approach
Capital partnerships – strategic approach Direct ownership (strategic assets) Capital partnerships City centre Office Hotel Investment management services Retail Investment – Development Development passive and active Key benefits ❖ Increases liquidity, diversifies capital sources, and Equity Return
Slide 18: Capital partnering – progress to date
Capital partnering – progress to date Precinct has established strong relationships with capital partners enabling continued execution of strategy through more challenging investment market conditions • Partnered with Singaporean sovereign wealth fund GIC to establish initial portfolio of Precinct-d
Slide 19: Building momentum
Building momentum Precinct is delivering on its strategy with $1.8 billion of capital partnerships formed since FY22 (completion value)1. Value of direct portfolio and partnerships now $5.2 billion. $6.0 $ billions +$0.4 b $5.2 b $5.0 +$0.6 b $0.4 b +$0.5 b $3.9 b $4.0 $3.7 b $1.3 b -$0.2 b $3.0 $2.
Slide 20: Partnership platforms positioned for growth
Partnership platforms positioned for growth Precinct continues to explore opportunities to Partnership opportunities ($b) scale its capital partnerships platform through: $1.0 $2.0 $3.0 $4.0 $5.0 1. Existing partnerships providing opportunities for further Existing partnerships $1.8b growth where Pr
Slide 21: Investment Update
Investment Update
Slide 22: Investment portfolio
Investment portfolio 99% 6.0 years c. 53,123m² 8.1% 10.6% Occupancy Weighted average Total leasing activity Valuation net Under-renting (by NLA) lease term (incl. developments) office market rent (vs. market rents) growth in FY231 +4.6% p.a. Key leasing update CAGR growth on new leases Strong activi
Slide 23: Auckland city centre office
Auckland city centre office Key themes Prime office market indicators (source: JLL) • Strong occupier demand despite economic headwinds with four consecutive halves of positive net absorption Jun-23 Jun-22 20Y avg. recorded for prime grade assets Annual net absorption (m2) +19.2k +22.7k +12.4k • Str
Slide 24: Wellington city centre office
Wellington city centre office Key themes Prime office market indicators (source: JLL) • Tightest city centre office market in Australasia despite ~32,900 m2 of prime grade supply being added to the Jun-23 Jun-22 20Y avg. market over the past 12 months Annual net absorption (m2) +21.4k +13.3k +9.2k •
Slide 25: Occupier market themes
Occupier market themes Obsolescence supporting tight market conditions Annual supply change (source: JLL) New Builds Refurbs Withdrawals 100K NLA (sqm) • Ongoing seismic and functional obsolescence is 50K underpinning demand for prime grade assets while at - the same time reducing overall supply thr
Slide 26: Occupier market themes
Occupier market themes 188 Quay St average tower net rent $/sqm (source: PCT analysis) Economic rents expected to restrict new supply $850 • Rising development costs, combined with easing cap $750 rates, are driving a material uplift in economic rents $650 $550 • New stock unlikely to eventuate exce
Slide 27: Development Update
Development Update Artist Impression – Wynyard Quarter Stage 3
Slide 28: Development overview
Development overview Secured ❖ Current work in progress total Development WIP PCT Interest Area % pre-let WALT ~53,300m2 with a total project cost 15,000 m² 92% Deloitte Centre1 100.0% 19 years (plus hotel) (incl. hotel) of $0.7b Bowen House 100.0% 14,300 m² 100% 15 years ❖ Total of $1.8b of develop
Slide 29: Development progress
Development progress One Queen Street Bowen House Completion Value Completion Value $358m (stabilised) $167m Completion Timing Completion Timing FY24 FY25 (client fitout) Status Status Construction nearing Seismic strengthening completion with client completed with client fitouts well underway. inte
Slide 30: Downtown Carpark update
Downtown Carpark update Redevelopment of Downtown Carpark will provide a remarkable, once-in-a-generation opportunity to reimagine the city centre of Tāmaki Makaurau Current Status • Exclusive negotiations with Eke Panuku and other stakeholders nearing completion • Core consultant team appointed wit
Slide 31: Residential development platform
Residential development platform Existing Pipeline Strategy Project Status Completion No. Units Onehunga Mall Club Construction 2023 102 • Multi-unit residential developments are a natural Fabric Stage 2 Procurement 2026 118 extension to Precinct’s core strategy, providing Domain Collection Procurem
Slide 32: Summary
Summary
Slide 33: Summary
Summary • High interest rate environment is impacting property values and transaction volumes • Global economy remains uncertain with NZ exposed to certain risks • Prime office occupier market remains very strong with low vacancy rates across Precinct’s submarkets • Work from office now clearly pref
Slide 34: Appendices
Appendices FY23 ANNUAL RESULTS - PAGE 34
Slide 35: A1: Operating income
A1: Operating income For the 12 months ended 30 June 2023 30 June 2022 D ($m) AON Centre - AKL $11.4 m $11.1 m $0.3 m HSBC Tower $20.7 m $18.2 m $2.5 m PWC Tower $25.4 m $24.8 m $0.6 m Commercial Bay Retail $14.3 m $14.4 m ($0.1 m) Jarden House $5.7 m $6.0 m ($0.3 m) Mason Brothers $2.3 m $2.4 m ($0
Slide 36: A2: Balance sheet
A2: Balance sheet Financial Position as at 30 June 2023 30 June 2022 D ($m) Audited Audited Assets Development properties $523.5 m $544.0 m ($20.5 m) Investment properties $2,604.7 m $2,549.0 m $55.7 m Investment properties held for sale $240.0 m $577.2 m ($337.2 m) Deferred tax asset $1.6 m $1.9 m
Slide 37: A3: Investment portfolio overview
A3: Investment portfolio overview Key metrics Investment Portfolio metrics – directly held Investment portfolio portfolio Auckland Wellington including 6.0 years directly held cornerstone1 WALT 6.2 years 6.0 yrs 5.5 yrs 7.3 yrs Weighted average lease term Occupancy 98% 99% 98% 99% 99% Investment por
Slide 38: A4: Other city centre markets
A4: Other city centre markets Auckland retail net absorption vs. vacancy rates (source: JLL) Retail 6-monthly net abssorption (sqm) 20,000 18% • City centre retail trading conditions continue to improve with tailwinds from return of office workers and increase 15,000 15% in tourist arrivals 10,000 1
Slide 39: 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