Precinct Properties Nz Ltd & Precinct Properties Investments Ltd · NZX:PCT
Precinct Properties Nz Ltd & Precinct Properties Investments — Precinct Properties New Zealand — FY2013 Earnings Presentation
38 slides from Precinct Properties Nz Ltd & Precinct Properties Investments's earnings presentation, Aug 20, 2013
Slide 1: Annual results year ended 30 June 2013
Annual results year ended 30 June 2013 20.08.2013
Slide 2: Agenda
Agenda Highlights Page 3 Section 1 – Financial Results and capital management Page 4 Section 2 – Market and portfolio overview Page 14 Section 3 – Conclusion and Outlook Page 29 Precinct Properties New Zealand Limited Scott Pritchard, CEO George Crawford, CFO Note: All $ are in NZD PRECINCT ANNUAL R
Slide 3: Highlights
Highlights Financial performance $157.5m net profit after tax $58.3m net operating income +13.6% increase in net operating income $46m revaluation gain Strong results +5% and Forecast increase in FY14 dividend operational Portfolio performance gains 97% occupancy ANZ Centre Supreme Winner Property C
Slide 4: Section 1: Financial Results and Capital Management
Section 1 Financial Results and Capital Management
Slide 5: Financial performance
Financial performance For the 12 months ended FY13 FY12 ($m) Audited Audited D Net property income $104.0 m $90.9 m + $13.1 m Indirect expenses ($1.9 m) ($1.8 m) + $0.1 m EPS Reconciliation Performance fee ($3.4 m) ($3.2 m) + $0.2 m Base fees ($7.5 m) ($6.6 m) + $0.9 m EBIT $91.2 m $79.3 m + $11.9 m
Slide 6: Net property income
Net property income $m FY13 FY12 D ■ Overall net property income (NPI) was $13 AMP Centre $7.5 $7.2 + $0.3 million or 14% up SAP Tower $5.5 $6.6 ($1.2) – Excluding transactions and the ANZ PwC Tower $15.1 $12.3 + $2.9 Centre redevelopment NPI was 1.8% Zurich House $5.4 $4.2 + $1.2 up Auckland $33.6
Slide 7: Taxation impacts
Taxation impacts ■ Lower tax charge: Tax expense reconciliation – Higher depreciation following acquisitions and ANZ Centre redevelopment Reconciliation of tax expense $m – Deduction for assets scrapped at ANZ Net profit before taxation $122.7 Centre redevelopment Less non assessable income Unrealis
Slide 8: Balance sheet
Balance sheet Financial Position as at 30 June 13 30 June 12 ($m) Audited Audited D Reconciliation of NTA movement (cps) Assets Reconciliation of NTA movement cps Property assets $1,640.4 m $1,332.1 m $308.3 m NTA 30 June 2012 88 Fair value of swaps $3.8 m - $3.8 m Revaluation 5 Other $14.3 m $18.3
Slide 9: Capital management
Capital management ■ Gearing of 37.3% Key metrics June 2013 June 2012 Debt drawn $603m $347m – $256m debt drawn funding Gearing - Banking Covenant 37.3% 27.0% acquisitions and ANZ Centre Weighted facility expiry 4.0 yrs 3.2 yrs – Increases to 38% post Weighted average debt cost (incl fees) (WACD) 5.
Slide 10: Strategic capital management
Strategic capital management ■ Current gearing levels comfortable given: – Stage of valuation cycle – Outlook for occupier markets – Sustainable dividend policy not reliant on debt funding capital expenditure ■ Gearing levels not expected to increase materially from here ■ Medium term development op
Slide 11: Valuation outcome
Valuation outcome ■ Revaluation of $46 million or 2.9% Change in property assets ■ Valuation increases due to yield compression, leasing success and increase in market rentals ■ Underlying portfolio cap rate compressed from 8.0% to 7.7% (ex ANZ and acquisitions) ■ Over renting of 1.8% compared to 3%
Slide 12: Insurance update
Insurance update Comparison to prior year ■ Reviewed and restructured our property FY13 FY12 %D and general liability insurance program Total Premium $4.7 m1 $5.3 m -11.6% – Engaged directly with a wide range Wellington (m²) $22 /m² $25 /m² -11.9% of insurers Auckland (m²) $8 /m² $9 /m² -10.5% – A s
Slide 13: Earnings outlook
Earnings outlook 6.2 cents per share FY14 net operating income after tax, before performance fees 5.4 cents per share FY14 dividend guidance +5% Forecast increase in dividend Adding value beyond FY14: ■ Occupancy improvements driving earnings growth ■ Market rental growth, particularly in Auckland ■
Slide 14: Section 2: Market and Portfolio Overview
Section 2 Market and Portfolio Overview
Slide 15: Portfolio activity
Portfolio activity Leasing events ■ 60 leasing transactions totalling 35,000m2 or $11 million in New Leasing Number Area contract rent Auckland 25 9,317 m² Wellington 25 18,147 m² – Secured on a 6 year WALT Sub Total 50 27,464 m² – 1% Premium to valuation ROR and Extensions ■ 27,000m2 of new leasing
Slide 16: 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 2% 171 Featherston Street ANZ 4,070 m² 12 years lower than passing 80 The Terrace NZFS 2,700 m² 6 years – Settled rent reviews were 2% 80 Th
Slide 17: Transactions in Review
Transactions in Review Waterfront Precinct ■ Strategy to secure value add opportunities on Auckland's CBD waterfront ■ Almost 2 hectares of contiguous Ferry Building land under common ownership Downtown Shopping Centre ■ Settlement October 2012 ■ Purchase price $90 million Britomart HSBC House Stati
Slide 18: Downtown development
Downtown development ■ In negotiations with Auckland Council to coordinate: – Timing of City Rail link (CRL) – Development of site ■ Phase 1 – Research and masterplanning – Retail research is now complete and ahead of expectations – Office demand research supportive of timing – Masterplan RFP in pro
Slide 19: ANZ Centre redevelopment
ANZ Centre redevelopment Context Outcome Financials and key metrics ■ PCT faced with falling market ■ Supply risks mitigated and Book Value June 2010 $170m rents, additional new supply stable occupier market Potential Value if ANZ departed $153m and trending upward vacancy provided growth in market
Slide 20: 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 2013 Page 20
Slide 21: Portfolio composition
Portfolio composition Composition other 80% proportion of office revenue 59% weighting (by value) to Auckland 38% weighting (by value) to Auckland waterfront precinct Classification Value $m Description Active 148 Assets with significant development or redevelopment potential Assets required in
Slide 22: FY14 lease events
FY14 lease events ■ 34% of portfolio (by NLA) subject ■ Around 17,000m2 or 5% of to lease event in FY14 portfolio expiring ■ 11% of portfolio subject to – 67% of expiries are in Auckland market review – 4% relates to Ministry for Primary Industry rent review % of expiries FY14 event profile Major ex
Slide 23: Auckland CBD office market
Auckland CBD office market Forecast vacancy (CBRE, June 2013) Occupier options continue Occupier to dwindle in prime space. Demand ▲ Strong CBD employment growth forecasts Stable with no quality CBD Supply ► office development expected in next 3-5 years Forecast net effective rent growth (CBRE, June
Slide 24: Auckland office employment
Auckland office employment ■ Office and CBD experiencing strong employment growth – 10,000 new workers since 2010 ■ CBRE forecast that CBD office employment will increase by 10,000 workers over the next 5 years. This equates to around 150,000sqm of office space Auckland employment trends by property
Slide 25: Wellington CBD office market
Wellington CBD office market Forecast vacancy (CBRE, June 2013) Market uncertainties over stock quality, Government Occupier Demand ► continue to focus on targeting optimistic density ratios Obsolescence accelerated due to seismic concerns Supply ▼ leading to reduction in existing supply Forecast ne
Slide 26: Historical performance
Historical performance Historical cap rate ■ Occupancy back to historical average ■ Negative rental reversion largely complete and market rent growth returning Occupancy and WALT by NLA Under / over renting PRECINCT ANNUAL RESULTS, 30 JUNE 2013 Page 26
Slide 27: Historical values
Historical values Market cap rate movement from peak ■ Limited yield compression in Wellington ■ Over the past year Auckland has experienced a good level of yield compression ■ Auckland ahead of Wellington in cycle ■ Historically Wellington values have been more stable Average historical values PREC
Slide 28: Yield cycle
Yield cycle ■ Prime industrial and suburban prime office yields back to 2007 levels ■ CBD Office yields 15% off peak Yield Cycle - CCycle Yield hange Since Market – Change Peak in cap rate since market peak (CBRE) 30% 25% 20% 15% 10% % change 5% 0% -5% -10% -15% -20% CBD Office Prime Suburban Office
Slide 29: Section 3: Conclusions and Outlook
Section 3 Conclusions and Outlook
Slide 30: Conclusion
Conclusion ■ New Zealand economy growing and is well positioned: – Population growth – Christchurch rebuild, and – Low interest rates ■ Property market improving: – Auckland very active and generating rental growth – Wellington resilient with flight to quality – Investment market active as investors
Slide 31: Outlook
Outlook ■ Earnings growth continuing underpinned by growth in occupancy ■ Expiry risk very low supporting further earnings growth ■ Leasing activity remains elevated in prime and A grade in Auckland ■ Focus in wellington intensified upon seismic integrity ■ Investment market divergent with prime and
Slide 32: Appendices
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Slide 33: Asset level valuations
Asset level valuations Asset level valuations Cap rates % Valuation Fair value movement FY13 FY12 FY13 FY12 $ % 125 The Terrace 7.9% 8.0% (13 bps) $66.8 m $64.0 m $2.0 m 3.0% 80 The Terrace 9.5% 9.5% $26.4 m $26.1 m ($2.8 m) -9.6% Deloitte House 8.1% 8.5% (38 bps) $48.4 m $47.0 m $1.1 m 2.3% 171 Fea
Slide 34: 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 92% Occupancy 100% Occupancy 100% Occupancy 96% Occupancy 94% Occupancy 99% WALT 5.9 years WALT 11.5 years WALT 6.0 years WALT 4.2 years WALT 5.6 years WALT 2
Slide 35: Auckland Property Portfolio: HSBC House
Auckland Property Portfolio 07. HSBC House Occupancy 100% WALT 4.1 years Clients HSBC Bank, NZTA Limited, Baldwins Limited 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 one of the most pro
Slide 36: 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 88% Occupancy 100% Occupancy 100% Occupancy 100% Occupancy 100% Occupancy 100% WALT 5.1 years WALT 5.1years WALT 5.3 year
Slide 37: 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 97% Occupancy 100% Occupancy 100% Occupancy 78% Occupancy 87% Occupancy 87% WALT 1.7 years WALT 3.3 years WALT 2.9 years WALT 4.7 years WALT 6 years WALT 6 yea
Slide 38: 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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