A look at how Commercial Bay is faring almost a year after opening. Video / Supplied
A 93 per cent unrealised change in the value of Precinct Properties' portfolio pushed net after-tax profit down 29 per cent annually but revenue rose 3 per cent and operating income was also up.
The Commercial Bay owner gave $8.3 million rent relief to retailers during the pandemic restrictions, particularly Auckland's 107-day lockdown from last August.
But shareholders will still enjoy a better payout: annual dividends rose 3 per cent.
Revenue increased from $199.9m to $200.3m in the year to June 30, 2022, but last year's $282.9m unrealised revaluation gain was just $19.4m this year, meaning net profit after tax fell 29 per cent from $179.9m to $108.8m.
The company said its intended sale of Wellington's Defence House "may not proceed due to the occupier's consent not being received".
"The performance of Precinct's core office portfolio has been very robust, supported by our high-quality occupiers and a resilient office market. This has resulted in a pleasing full-year result for the business during a challenging period.
"While the first half of the financial period was impacted by lockdowns, net property income of $126.1m was achieved for the year. Notably, this level of net property income is after providing $8.3m of support predominantly through rental relief to our retailers and reflects the strong level of leasing performance throughout the year. This has contributed to net operating income before tax of $95.3m, up 14.8 per cent on the previous year," the company said.
Precinct's portfolio is now valued at $3.7b, up on last year's $3.3b, including assets held for sale.
Scott Pritchard, Precinct Properties chief executive. Photo / Babich Martens
Chief executive Scott Pritchard said the portfolio has continued to outperform in an exceptionally challenging operating environment.
"Acknowledging the extent of rental support provided to our retailers over the past 12 months, we are very pleased with our 2022 financial year result and the resilience Precinct's assets have demonstrated," he said.
That was the right thing to do for our business, he said.
"Following the internalisation in 2021, we have considered how our strategy might evolve in a way which is consistent with our focus on high-quality assets and large-scale developments. We want to leverage our strengths and apply our learnings of the past six years."
Partnering with the Singaporean government's wealth fund was an important step, he said.
"During the year, we have successfully progressed our revised strategy with the formation of a strategic investment partnership with GIC. Establishing a third-party platform and diversifying our capital sources is enabling our business to grow, providing flexibility for Precinct to take advantage of future opportunities in the market as they arise."
Precinct's plans for Wynyard Quarter, Auckland. Photo / supplied
Hawkins Construction is building a $157m office project in the Wynyard Quarter for Precinct and at One Queen St in the Deloitte Centre opposite the Ferry Terminal, construction by L.T. McGuinness is well advanced: "While an extended alert level 4 lockdown during the first half of the [financial] year has caused disruptions on site, the project remains on track to complete in late 2023. The project is currently 86 per cent pre-committed with the high-rise office floors fully leased," Precinct said today.
At Wellington's Bowen Campus stage two, projects at 40 and 44 Bowen St are progressing well despite the ongoing challenges with supply chain and sourcing materials. Bowen Campus Stage Two remains on programme and on budget. It is around 20,000sq m of office space with a combined entry lobby and large low-rise floor plates. After signing up more law firms, 96 per cent of the two buildings is now leased.
The annual report said the revaluation gains for the period were predominantly attributed to market rental growth and positive leasing activity but partially offset by capitalisation rates remaining flat or slightly softening year-on-year.
This outcome reflects greater confidence in the office market but is affected by rising interest rates over recent months, the company said.
