Precinct Properties NZ Ltd & Precinct Properties Investments (PCT) H2 2024 earnings summary

Executive summary

• Portfolio occupancy remained high at 98% with a weighted average lease term of 6.6 years, supported by strong leasing spreads and resilient demand for premium office assets.

• Funds from operations (FFO) increased 2.9% to $126.9 million, and operating profit before income tax rose 1.5% to $103.6 million year-over-year.

• Strategic expansion into the living sector, including 100% ownership of the residential platform, entry into purpose-built student accommodation, and major development pipeline growth.

• Completed major developments such as One Queen Street, Deloitte Centre, and 44 Bowen Street, and launched a refreshed brand to support living sector activities.

• Dividend guidance for FY25 held at 6.75 cps, reflecting confidence in the medium-term outlook.

Financial highlights

• Net loss after tax was $22.1 million, a significant improvement from the $153.1 million loss in the prior year, mainly due to a smaller revaluation loss.

• FFO per security increased to 7.22 cps, AFFO per security held steady at 6.69 cps, and net tangible assets per share declined to $1.29.

• Full-year revaluation loss of $103.7 million (3.2% of portfolio value), driven by cap rate softening, partially offset by rental growth and development profits.

• Gearing reduced to 35.2%, well below the 50% covenant level.

• Net property income rose 5.8% to $139.3 million, with net property income up 7.0% in Auckland offices.

Outlook and guidance

• FY25 dividend guidance confirmed at 6.75 cps, with rent reviews forecast to generate a 3.7% uplift and stable or slightly lower weighted average cost of debt, supported by 85% hedging.

• Positive medium-term outlook underpinned by 11% underrenting and a robust $3 billion development pipeline across student accommodation, residential, and commercial sectors.

• Strategy focused on growing management fee income and realisable profits from residential and PBSA developments.

• Legislative changes removing tax depreciation on commercial properties will impact earnings, but the mid- to long-term outlook remains positive.