Commercial Bay owner Precinct Properties sees profit lift $290m on valuation gains

Precinct Properties NZ’s portfolio has been valued up by $282.9 million, helping push up net profit by 411 per cent.

Operating income before expenses also rose from $105m to $127.7m in the year to June 30, 2021 although the business did acknowledge the pandemic’s effects on a leasing business which runs events and shops in its new $1b Commercial Bay.

Precinct owns properties valued at $3.3b, up from $3b last year.

Last year’s $35.1m net profit rose to $179.9 m, with the unrealised valuation gains significantly boosting the bottom line.

“The business has delivered a strong result for the FY21 period illustrating the portfolio’s resilience in another year navigating the challenges from Covid-19,” it said today.

“Total comprehensive income after tax was $179.9m compared with $35.1m in the previous period with the movement attributable to a strong revaluation gain of $282.9m for the full year, offset by the termination payment of Precinct’s management services agreement,” the company said.

Shops in its new $1b Commercial Bay, were hit by the pandemic but that area is improving.

“While Commercial Bay retail performance has been impacted over the period, foot traffic and sales are showing significant improvement post the last lockdown in March with food and beverage continuing to be the strongest performer, particularly Harbour Eats,” it said.

Its high-end Generator leasing business suffered a loss due to the pandemic and lockdowns.

“Generator was also impacted by Covid-19 with a reduction in events and lower occupancy leading to a net operating income loss of $900,000 for the period. Occupancy and events bookings are now showing a solid recovery with Generator continuing to support Precinct’s portfolio leasing and long term strategic objectives. The reduction in profitability has led to the independent valuation of Generator recording an impairment of $9.8m,” it said.

But the company had met its bigger targets.

“Pleasingly, the business has continued to meet market guidance and deliver further growth for our shareholders despite the unusual year with adjusted funds from operations, which adjusts for several non-cash items, increasing by 3.1 per cent to $85.3m or 6.48cps,” today’s statement said.

“This strong result reflects the demand for Precinct’s premium grade portfolio, maintaining high occupancy levels during the year and generating income from high quality occupiers,” it said.

Full-year dividends paid to shareholders and attributed to the 2021 financial year totalled 6.50cps, representing a year on year increase of 3.2 per cent.

The company which is Google’s landlord for that web giant’s New Zealand offices, has a market capitalisation of $2.4b, has been trading around $1.67, down 4 per cent in the last year.

Earlier this week, Precinct announced it had leased three-quarters of a hectare of floorspace to Deloitte which plans to leave the BNZ building at 80 Queen St for the ex-HSBC Tower on the waterfront. The ex-HSBC Tower is now undergoing a $200 million refurbishment which started some months ago.

Levels six to 11 of One Queen Street will be the new 139-room InterContinental hotel.

Levels 12 to 20 will be 14,000q m of offices, capped by a rooftop bar on level 21. Bell Gully has leased 4400sq m, planning to leave Shortland St’s Vero Centre owned by Kiwi Property.

Precinct says it is New Zealand’s only listed city centre specialist landlord which owns premium and A-grade offices.

In Auckland, it owns HSBC Tower, AMP Centre, Jarden House, One Queen St which is undergoing a $200m refurbishment, 204 Quay St, Mason Bros. Building, 12 Madden St, 10 Madden St, the new $1b PwC Tower and Commercial Bay retail.

In Wellington, it specialises in owning buildings leased to various Government departments. There, it owns the AON Centre, NTT Tower, Central on Midland Park, No. 1 and No. 3 The Terrace, Mayfair House, Charles Fergusson Building, Defence House, Bowen House and Freyberg Building.

Precinct also owns the Generator flexible office space business with 13,600sq m of offices in Auckland around the Britomart and Wynyard Quarter.

Google, Contact Energy, Amex, Silver Fern Farms, Facebook, ASB, Expedia and a 5G Spark lab have leased Generator space.

The Herald reported last month that Google had leased space from Precinct: the finishing touches were being but on its new offices across around 1300sq m on the sixth floor of a new seven-story building at 10 Madden St, one of several properties developed by Precinct around Wynard Quarter.

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