Precinct Properties has reignited $200 million-plus plans for an Auckland waterfront block, after deferring its scheme last year when Covid struck.
But a revised plan is now more in line with pandemic conditions: the new hotel for the building is far smaller and more flexible office space will be offered to commercial tenants.
Scott Pritchard, Precinct chief executive, said plans were now in place to begin work in the next six months on the ex-HSBC House opposite the Ferry Building on Quay St.
All tenants had now been "decanted" or left, he said, ready for work to start.
"1 Queen Street remains the primary focus for the business over the next six months," the company said in the investor presentation along with the half-year result out last month.
Previously, Precinct planned a $298m scheme to convert the building into a flagship hotel, the InterContinental Auckland, managed and operated by InterContinental Hotels Group, to occupy 11 levels with 244 guest rooms and suites, restaurant, meeting suites, health club and club lounge facilities.
But last year, Precinct said the $298m project had been indefinitely deferred.
"Following a recent review of future development projects, Precinct advises that the One Queen Street redevelopment project in Auckland will be deferred," the business said last May.
But now a new scheme for the same block is imminent.
Pritchard said that since last year, a significant workstream had been underway in determining the preferred scheme for the site. The composition of the building had been changed to factor in the current market conditions and leverage off the surrounding amenity provided by Commercial Bay.
"The current revised scheme is expected to offer ground floor retail integrated into Commercial Bay, three levels of shared workspace and a reduced 139-room hotel when it was previously 244," the company said last month.
"The refurbished block will have two levels of private office suites, seven levels of premium-grade office and a rooftop bar.
"Key stakeholders have engaged positively with the revised scheme and continue to work closely with Precinct to determine the optimal outcome for all parties. Detailed design and outstanding workstreams are still to be finalised but it is anticipated a decision will be made on the development within the next six month," Precinct said.
Pritchard told the Herald after the half-year result in February: "We have no one left in it. Everyone is now out and it's good to go in terms of getting underway redeveloping it. We haven't committed but we hope to start in the next six months with a $200m-plus scheme: six floors of hotel, three floors at the bottom of flex space like our Generator business and nine floors of offices.
"We're taking the facade off and exposing the concrete and putting on a new facade," he said.
Rohan Koreman-Smit and Ashton Olds of Forsyth Barr said the company had out-performed expectations in its half-year result out last month.
"Precinct Properties' portfolio has fared well despite Covid-19 pressures, with portfolio fundamentals remaining solid and operations tracking broadly in-line with expectations. While we expect that the Auckland and Wellington office markets will experience some level of softness in coming year, Precinct is in good shape to withstand these pressures given its best in class offering, portfolio under-renting, high quality corporate and government tenants, structured rent growth, and a 7.7 year weighted average least term," the analysts said.
They lifted their rating from neutral to outperform, reflecting a better earnings outlook and attractive valuation metrics with the company trading at a 3 per cent premium to net tangible assets compared with the sector's 8.5 per cent.
Precinct itself last month announced big revaluation gains of $148.5m which boosted its half-year profit, with the company, which owns Commercial Bay, last month declaring a $167.9m net after-tax profit, up 213 per cent.
But revenue also rose 25 per cent to $97.1m for the six months to December 31, 2020.
The company said it had an active period of leasing and finishing developments which led to a 15.7 per cent increase in operating income before indirect expenses to $62.5, up on the previous $54m.
"A strong half-year portfolio revaluation of $148.5m has contributed to total comprehensive income increasing to $167.9m, up 213 per cent compared to the prior period of $53.6m. The solid performance was supported by an uplift in operating income following completion of developments and a positive tax outcome from the depreciation on structure and prior period contamination expenditure," the company said.
On February 25, Pritchard said "We are pleased to announce another strong result with the portfolio continuing to illustrate its resilience and performance in these uncertain times. While market conditions remain challenging in 2021, we continue to see demand for high quality, city-centre office space with surrounding amenity. With a further 11,300sq m of leasing transactions completed in the period, the portfolio continues to attract businesses who want to occupy premium assets and be in highly attractive locations.
"While the debate around workplace strategies continues, pleasingly almost all of Precinct's clients were back and working from their premises prior to the 15th of February 72-hour lockdown.
"Noticeably, some clients have increased their allowance for flexibility, however, this varies dependent on the role and industry. With a portfolio that is 98 per cent leased, and on floor occupancy levels averaging between 85 per cent and 90 or cent, our clients are clearly recognising the value of face to face working. Precinct's buildings encapsulate these benefits given their city-centre location, premium quality, and surrounding amenity," he said when the half-year was released.
It was a lifestyle of flashy opulence - until the money ran out.