New Zealand Professional Investment Services Firm

Forsyth Barr

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New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

Precinct Properties New Zealand / Equity Bottom-Up

<h2>Precinct Properties FY21 ­– Robust Demand Helps Deliver Solid Result</h2>
Precinct Properties (PCT) reported FY21 AFFO of NZ$85.3m, in line with our estimate of NZ$86.0m.&nbsp;The key variance was tax with a number of one offs in the year including the internalisation of management and prior period adjustments for the cost removal of contaminants. There has been no change to PCT’s FY22 AFFO and DPS guidance of 6.7cps.
Key takeouts:
<ul>
<li>Portfolio metrics remain solid: PCT’s portfolio is 98% occupied on a lease term of 7.7 years.</li>
<li>Rent growth solid: PCT achieved growth of +7% contract rental growth in the period. The portfolio remains 6% under rented.</li>
<li>Subleasing: Despite anecdotes of a large amount of Auckland CBD office space making its way to the sublease market, PCT highlighted 95% of its clients require at least the same amount of space to operate. Occupancy levels of PCT’s portfolio are at c.85% of employees back in the office.</li>
<li>Development pipeline 90% leased: Following the signing of a 20-year lease with Deloitte over 7,500 sqm of space at 1 Queen PCTs development pipeline is now 90% leased. There remains two floors at 1 Queen St that will likely be premium office suits (200-250 sqm) and 1.5 floors at 40 Bowen Campus remaining to be leased.&nbsp;</li>
<li>NTA -3cps to NZ$1.52/share: This movement was primarily due to the internalisation of management (-15cps) being partly offset by revaluation gains of NZ$136m (+10cps) which largely related to Commercial Bay Office (PWC Tower +NZ$66m) and HSBC Tower (+NZ$43m) as well as solid upward revaluations in Wellington Particularly at Bowen Campus (NZ$33m), No. 1 The Terrace (redevelopment completion NZ$34m) and NTT Tower (NZ$27m).</li>
<li>Gearing lifts: Gearing was +2ppts to 28% (was 26% at 1H21 after allowing for ANZ sale) with development spend and the internalisation of management was partly offset by PCT’s recent capital raise to fund two Wellington acquisitions.</li>
</ul>
Conference call at 10.00am
Webcast:&nbsp;<a href="https://edge.media-server.com/mmc/p/zrefpnu4" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://edge.media-server.com/mmc/p/zrefpnu4&amp;source=gmail&amp;ust=1628812780288000&amp;usg=AFQjCNG699sneeOo1EvU8_QBBOrJa82x_Q" rel="noopener">https://edge.media-server.com/mmc/p/zrefpnu4</a>
FY21 result summary
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.2&amp;permmsgid=msg-f:1707837041138264659&amp;th=17b374bd8b4cea53&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ-FAvOpSzuKJGlBZTLQ5H67eqqeeHHKuNybdQPGCT8gKgyyAeF4pfvu7Y3ZTLU5ZsV5EzwoQSN0Tw1JtfLHyi7OGwcmc1GTOiDXf-ygw_lMlFD1s-gBB13LdhQ&amp;disp=emb" width="522" height="494" class="editor-image img-responsive" data-image-whitelisted=""></figure>
Source: Forsyth Barr analysis, Company reports
Rohan Koreman-Smit Senior Analyst, Equities
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.1&amp;permmsgid=msg-f:1707837041138264659&amp;th=17b374bd8b4cea53&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ_0c_VhvfbuumpqMTbVQj4W62a6-oMzvohRNsYsDWydEByjnGFS0pbhM9dXKBLWhDrUTTCsXHNYDOsetQgIE6eDOcwL3QY4ML2sttZqPv9yBD5btYPHmex9gyI&amp;disp=emb" class="editor-image img-responsive"></figure>
 P:&nbsp;<a href="tel:+6493680085" target="_blank" data-sk="tooltip_parent" rel="noopener">+64 9 368 0085</a>&nbsp;| TF: 0800 367 227 Level 23, Shortland &amp; Fort, 88 Shortland Street, Auckland

Precinct Properties FY21 ­– Robust Demand Helps Deliver Solid Result
Precinct Properties (PCT) reported FY21 AFFO of NZ$85.3m, in line with our estimate of NZ$86.0m.&nbsp;The key variance was tax with a number of one offs in the year including the internalisation of management and prior period adjustments for the cost removal of contaminants. There has been no change to PCT’s FY22 AFFO and DPS guidance of 6.7cps.
Key takeouts:

Portfolio metrics remain solid: PCT’s portfolio is 98% occupied on a lease term of 7.7 years.
Rent growth solid: PCT achieved growth of +7% contract rental growth in the period. The portfolio remains 6% under rented.
Subleasing: Despite anecdotes of a large amount of Auckland CBD office space making its way to the sublease market, PCT highlighted 95% of its clients require at least the same amount of space to operate. Occupancy levels of PCT’s portfolio are at c.85% of employees back in the office.
Development pipeline 90% leased: Following the signing of a 20-year lease with Deloitte over 7,500 sqm of space at 1 Queen PCTs development pipeline is now 90% leased. There remains two floors at 1 Queen St that will likely be premium office suits (200-250 sqm) and 1.5 floors at 40 Bowen Campus remaining to be leased.&nbsp;
NTA -3cps to NZ$1.52/share: This movement was primarily due to the internalisation of management (-15cps) being partly offset by revaluation gains of NZ$136m (+10cps) which largely related to Commercial Bay Office (PWC Tower +NZ$66m) and HSBC Tower (+NZ$43m) as well as solid upward revaluations in Wellington Particularly at Bowen Campus (NZ$33m), No. 1 The Terrace (redevelopment completion NZ$34m) and NTT Tower (NZ$27m).
Gearing lifts: Gearing was +2ppts to 28% (was 26% at 1H21 after allowing for ANZ sale) with development spend and the internalisation of management was partly offset by PCT’s recent capital raise to fund two Wellington acquisitions.

Conference call at 10.00am
Webcast:&nbsp;https://edge.media-server.com/mmc/p/zrefpnu4
FY21 result summary

Source: Forsyth Barr analysis, Company reports
Rohan Koreman-Smit Senior Analyst, Equities

 P:&nbsp;+64 9 368 0085&nbsp;| TF: 0800 367 227 Level 23, Shortland &amp; Fort, 88 Shortland Street, Auckland

Precinct Properties: FY21 – No Surprises