- Release Date: 25/02/15 08:42
- Summary: HALFYR: PCT: Interim Results, $174m equity issue & development progress
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PCT 25/02/2015 08:42 HALFYR PRICE SENSITIVE REL: 0842 HRS Precinct Properties New Zealand Limited HALFYR: PCT: Interim Results, $174m equity issue & development progress Interim Results, $174.1 million equity issue and development progress Operational and Financial Performance summary for the six months to 31 December 2014 Increase in net operating income (footnote 1) of 10.3% - Net profit after tax of $31.6 million (2013: $39.5 million) following fair value movement in interest rate swaps - Net operating income increased by $3.3 million to $35.3 million (2013: $32.0 million) or 3.33 cents per share (cps) (2013: 3.10 cps) - Half year dividend of 2.70 cps (2013: 2.70 cps) representing an 81% payout ratio Developments advanced in period - Downtown concept design completed and first imagery released - Signed conditional development agreement with Auckland Transport: - Enables City Rail Link tunnels to be constructed when Downtown is built - Includes conditional acquisition of Queen Elizabeth Square for $27.2m - Wynyard Quarter: commercial terms agreed in principle to house Grid AKL (Innovation precinct) (footnote 2) for a 12 year term over 8,000 square metres. Works are expected to commence in mid-2015 $174.1 million entitlement offer announced today - $174.1 million equity raising through an Accelerated Entitlement Offer, underwritten (less Haumi's participation) at an issue price of $1.15 and an entitlement ratio of 1 for 7 - The issue price reflects a 6.3% discount to the volume weighted average price (footnote 3) for the last five trading days prior to 25 February 2015 Details on the entitlement offer can be found on page 7 and at www.precinctrightsoffer.co.nz Non-core asset sales - Sold: SAP Tower in Auckland for $97 million, with settlement in February 2015 - Currently marketing: 80 The Terrace, Wellington Capital management - Successfully executed two long term debt issues: - a $98 million United States Private Placement - a $75 million New Zealand Retail bond issue - Refinanced existing secured bank debt facilities for material savings in finance costs - Extended the weighted average debt maturity profile to 4.9 years at 31 December 2014 (30 June 2014: 3.1 years) 98% portfolio occupancy, strong leasing and Auckland market rental growth - 20 leasing transactions totalling 11,400 square metres in the period - New leasing and market rental review activity in Auckland achieved at a 4.6% premium above to June valuations. Market reviews settled at a 6.3% increase above contract rental - Weighted average lease term across the portfolio of 5.3 years at interim balance date (2013: 5.5 years) Precinct Properties New Zealand Limited (Precinct) (NZX: PCT) reported its six-monthly results to 31 December 2014 today, with a net profit after tax (NPAT) of $31.6 million. This compared with $39.5 million for the same period last year, with the difference mainly attributable to a fair value change in interest rate swaps, while operating earnings were up 10%. Confirming progress on several fronts, Precinct also announced it intends to raise $174.1 million through an entitlement offer of ordinary shares. It released the first concept drawings of its Auckland Downtown development project and announced the entry into a conditional development agreement with Auckland Transport. The agreement enables the construction of the structural works relating to the City Rail Link to be built early when Precinct develops the Downtown site. The agreement also includes the conditional acquisition by Precinct of Queen Elizabeth Square for $27.2 million. "We have had an active and very good six months in working towards our long-term strategy to transform Precinct and keep adding value to our portfolio," Scott Pritchard, Precinct's CEO, said. "We are really excited about starting to show people more about what we have planned for the Auckland Downtown development project." "Around 18 months ago we set out to create a world class retail and office development that will bring new life to the heart of Auckland's waterfront. We believe the concept that has been created for the Downtown development project meets this ambition. The office tower is world class but designed with Auckland and New Zealand in mind. The curved design references the Waitemata Harbour while the retail design is a network of laneways which provide significant public space for Aucklanders and its visitors. This retail environment will provide for food and beverage, retail and elevated outdoor public spaces. We are looking forward to sharing more images as the design is finalised over the coming months." At Wynyard, we expect to commence works in the coming months. The first stage, Wynyard Stage 1, is expected to cost around $80 million. Importantly commercial terms have been agreed in principle for around 60% of the first stage for a term of 12 years. "Our long term strategy will uplift the quality of the Precinct portfolio through creating new high quality assets and the sale of some older existing assets. Our three key developments comprising Downtown, Bowen Campus in Wellington and the first stage of Wynyard have each progressed sufficiently to provide increasing confidence that a sound investment opportunity exists. The current proposed development activity is expected to occur over the next four to six years. Precinct intends to fund these development opportunities through the $174.1 million equity issue, further anticipated asset sales and the sourcing of additional debt facilities. "We remain focused on putting Precinct in a strong long term position, while maintaining stable and secure dividends for shareholders." INTERIM RESULTS OVERVIEW Net profit after tax for the six months ended 31 December 2014 was $7.9 million lower than the comparative period mainly due to the fair value change in interest rate swaps. Net operating income, which adjusts for a number of non-cash items, increased $3.3 million to $35.3 million (31 Dec 2013: $32.0 million). The increase was primarily due to improved occupancy levels in the Auckland portfolio and at State Insurance Tower in Wellington. This improvement saw rental revenue increase by 4.2% to $86.1 million (31 Dec 2013: $82.6 million). Other expenses fell by $1.2 million to $5.1 million. This reflected no performance fee being payable in the first half of the financial year. Tax expense increased by $0.9 million to $4.8 million. This period's tax expense was higher primarily due to a higher pre-tax profit. The fair value loss in interest rate swaps of $5.3 million compares with a $10.6 million gain for the same period last year. The change reflects the significant fall in market interest rates since 30 June 2014. An internal review of the 30 June 2014 property valuations indicated no material value movement in the period. The 31 December 2014 investment property book values were consistent with Precinct's policy of carrying investment property at fair value. The value of net tangible assets per share at interim balance date was $1.05, compared with $1.04 at 30 June 2014. CAPITAL MANAGEMENT Over the last six months two successful capital management initiatives added valuable funding diversity and term to company borrowings. A United States Private Placement and a retail bond issue secured total non-bank borrowings of $173 million for a term of 9.1 years. Existing secured bank debt facilities were refinanced, providing material savings from lower margins. Following the bank refinance and long term debt issuance the weighted average term to expiry increased to 4.9 years at 31 December 2014 (30 June 2014: 3.1 years). At interim balance date total borrowings were $579 million (30 June 2014: $572 million) and gearing was 33.7% (30 June 2014: 33.8%). Of Precinct's drawn debt, 62% (30 June 2014: 67%) was effectively hedged through the use of interest rate swaps. This hedging resulted in a weighted average interest rate including all fees of 5.9% (30 June 2014: 6.0%). PORTFOLIO PERFORMANCE Strong leasing meant portfolio occupancy was maintained at 98% with new leasing over the period at a 5% premium to valuations. Precinct secured 20 leasing transactions for 11,400 square metres maintaining a strong portfolio weighted average lease term of 5.3 years at 31 December 2014. In addition, 11,300 square metres of market rent reviews were settled at a 5.5% premium to valuation. Key leasing during the period included Regus committing to 1,050 square metres on level 33 at ANZ Centre on a 10-year lease term. In Wellington, 80 The Terrace is now 100% occupied and overall occupancy in the Wellington portfolio improved to 98%. Precinct expects to see further leasing at the former Central Police Station now that it has been strengthened and refurbished. OFFICE MARKET UPDATE Prime CBD office stock vacancy continued to fall to historically low levels. Jones Lang LaSalle reported the Auckland prime CBD office vacancy rate fell from 1.7% to 1.2% in the six months to December 2014. Most research houses forecast meaningful rental growth over 2015, consistent with recent leasing transactions in the Auckland portfolio. In Wellington Prime CBD vacancy dropped from 0.9% to 0.5%. Precinct's Wellington portfolio is well positioned given low levels of prime supply and demand for well-located, seismically strong buildings. SALES PROGRAMME OF NON-CORE ASSETS SAP Tower was successfully sold for $97 million representing a 1.5% premium to book value, with settlement expected to occur on 26th February. 80 The Terrace is being marketed for sale. Further non-core assets will be positioned for sale during the next 12 months. Precinct remains committed to progressing its non-core asset sales programme in order to improve its overall portfolio quality and to assist in funding its development opportunities. DEVELOPMENT HIGHLIGHTS The concept design is now complete for Auckland's Downtown development project. The consenting process is underway and Precinct is talking closely with potential occupiers. Precinct is pleased to release initial images of the development. Precinct has entered a conditional development agreement for the Downtown development to be constructed in advance of the proposed City Rail Link (CRL). This agreement will see all associated structural works for the CRL completed on-site at the same time the Downtown development is built. Auckland Transport will pay $9 million of compensation to Precinct for the loss of land on the site and pay a further $10.7 million reflecting the additional costs of constructing the office tower due to the CRL tunnels. Precinct's rights over 200 car parks within the Downtown car park have been extended to 2095, terminable for redevelopment after 2048 As a part of the development agreement, Precinct has conditionally agreed to purchase approximately 1,900 square metres of land described as Queen Elizabeth Square, for $27.2 million. This site is adjacent to Precinct's Zurich House, HSBC House and the Downtown Shopping Centre. The acquisition remains conditional on the land being re-zoned and settlement will occur once this is achieved. Wynyard Quarter has progressed with commercial terms agreed in principle for Grid AKL (Innovation precinct) which will provide approximately a 60% pre-commitment to Stage 1 of this development. The remaining uncommitted space is a 4,700sqm refurbishment of the Mason Brothers building located on Pakenham Street West. As previously announced, Bowen Campus has been short-listed by the Crown for the Wellington office accommodation process which is currently being undertaken. Discussions continue with the Crown for Bowen Campus, as well as 1-3 The Terrace, Pastoral House, Mayfair House and 125 The Terrace. EQUITY OFFER Precinct will raise $174.1 million through an Accelerated Entitlement Offer. The offer is underwritten (less Haumi's participation) at an issue price of $1.15. Under the Offer, Eligible Shareholders will be entitled (footnote 4) to acquire 1 new share for every 7 existing shares held on the record date. A shorter than usual offer period will be available to institutional shareholders under the institutional component of the Entitlement Offer as this will be accelerated and occur over two business days immediately after the Offer is announced with settlement and allotment of new shares to occur on 4 March 2015. The retail component of the Entitlement Offer will open to Eligible Retail Shareholders on 2 March 2015 and closes on 18 March 2015. Settlement and allotment of new shares of the Retail Entitlement Offer will occur on 25 March 2015. Together with the proceeds of the non-core asset sales and additional bank debt facilities, the net proceeds of the equity raising will allow Precinct to repay bank debt, reduce its gearing and assist Precinct in funding its development opportunities. DIVIDEND PAYMENT Precinct shareholders will receive a second-quarter dividend of 1.35 cents per share plus imputation credits of 0.3766 cents per share. Offshore investors will receive an additional supplementary dividend of 0.17089 cents per share to offset non-resident withholding tax. The record date is 31 March 2014. Payment will be made on 17 April 2015. Shares issued pursuant to the Entitlement offer will qualify for this dividend. OUTLOOK Precinct's 20:20 Vision Strategy is being executed with the development of new prime real estate and the sale of non-core assets. Confirmed improvements in the occupier and investment markets support this strategy. Short term earnings may be affected by reducing debt levels ahead of earlier guidance but Precinct is confident that owning a higher quality portfolio will deliver stronger earnings over the longer term. For FY16, Precinct also expects to maintain its current level of dividend, fully funded from operating revenue. Full-year operating earnings after tax is expected to be around 6.1 cents per share (before performance fees). Dividend guidance for the 2015 financial year also remains unchanged at 5.4 cents per share, consistent with the 90% pay out dividend policy. -ends- This announcement has been prepared for publication in New Zealand and may not be released or distributed in the United States. This announcement does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States or any other jurisdiction. Any securities described in this announcement have not been, and will not be, registered under the US Securities Act of 1933 and may not be offered or sold in the United States except in transactions exempt from, or not subject to, the registration of the US Securities Act and applicable US state securities laws. footnote 1 Net operating income is an alternative performance measure which adjusts net profit after tax for a number of non-cash items as detailed in the reconciliation provided at the end of this announcement. Precinct's Dividend Policy is based upon net operating income. This alternative performance measure is provided to assist investors in assessing Precinct's performance for the year. 2 Grid AKL (Innovation precinct) is an initiative of Auckland Tourism, Events and Economic Development (ATEED), an Auckland Council-controlled organisation and ATEED will be the lessee. 3 The volume weighted average price is $1.227 4 Entitlements will not be rounded up to a minimum holding. The number of new shares to which an eligible shareholder is entitled will, in the case of fractions, be rounded down Note 1 - Net Operating income reconciliation Net operating income is an alternative performance measure which adjusts net profit after tax for a number of non-cash items as detailed in the reconciliation below. Precinct's Dividend Policy is based upon net operating income. This alternative performance measure is provided to assist investors in assessing Precinct's performance for the year. $M 31-Dec-14 31-Dec-13 Net profit after taxation 31.6 39.5 Unrealised net (gain) / loss in value of investment properties - Realised loss / (gain) on sale of investment properties -0.2 - Unrealised interest rate swap (gain) / loss 5.3 -10.6 Deferred tax (benefit) / expense -1.4 3.1 Net operating income 35.3 32.0 For further information, contact: Scott Pritchard Chief Executive Officer Office: +64 9 927 1640 Mobile: +64 21 431 581 Email: [email protected] George Crawford Chief Financial Officer Office: +64 9 927 1641 Mobile: +64 21 384 014 Email: [email protected] End CA:00261095 For:PCT Type:HALFYR Time:2015-02-25 08:42:24
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- Ann: HALFYR: PCT: Interim Results, $174m equity issue & development progress
Ann: HALFYR: PCT: Interim Results, $174m equity issue & development progress
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