Ann: ADDRESS: PCT: Precinct 2015 AGM Chairman and CEO Address

• Release Date: 18/11/15 09:55
• Summary: ADDRESS: PCT: Precinct 2015 AGM Chairman and CEO Address
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					PCT
18/11/2015 09:55
ADDRESS
NOT PRICE SENSITIVE
REL: 0955 HRS Precinct Properties New Zealand Limited

ADDRESS: PCT: Precinct 2015 AGM Chairman and CEO Address

Chairman's Opening address

Good morning everyone. I'm Craig Stobo, and as Precinct's Chairman it's my
pleasure to welcome you all to our 2015 AGM.
I am also pleased to say that it has been another busy, and good, year for
your company. We ended the year well-funded, with some great opportunities
ahead and a strong platform for earnings growth.

Board and Executive

Before reviewing the year, let me introduce you to the members of the board
and executive team here with us today.
We are also happy to have with us representatives from our auditors, Ernst &
Young, tax advisors, KPMG, our legal advisors, Russell McVeagh, along with
several Precinct staff.
As the company grows and changes we are also seeing change in the board. As
previously announced, Graeme Horsley has advised us he wishes to step down
from the board and accordingly he is not standing for re-election following
his retirement by rotation today. Graeme has made a significant contribution
to the company since he joined us as an independent director in 2005. We wish
him well.

We have been very pleased to welcome Launa Inman to the board. Launa is an
experienced director and former CEO. She brings valuable experience managing
operational businesses and strong experience in governance and retail. Launa
is standing for election by the shareholders today to ratify this board
appointment.

Results

We were pleased to see net profit after tax increase again this year - by
4.5% to $122.4 million.
Operating profit rose 7% to $68.3 million. This was the third consecutive
year our operating profits rose, and it came in a year when we also
significantly reduced the company's debt levels.

We had a $64.8 million gain in our portfolio valuation, which reflected both
yield compression and market rental growth, and it increased net tangible
assets per share up from $1.04 to $1.11.

Financial Position

We are focused on balancing risk and return and it is this focus that led to
several capital management initiatives being undertaken in the year. These
initiatives reduced gearing significantly from 33.8% to a low of 11.3% and
have put Precinct in a strong financial position.

During the year we secured $173 million of long term borrowings through a
successful United States Private Placement - this was the first-ever USPP for
the New Zealand property sector - and a New Zealand bond issue.

Importantly these two issues provide greater comfort around Precinct's
financing through a period when it is contemplating undertaking significant
development activity. Both transactions have diversified Precinct's funding
sources and added valuable tenor in a laddered approach.

As we progressed key developments, we also raised $174 million of equity from
shareholders though an entitlement offer in March which was well supported by
institutional and retail investors.
Last year we also completed sales of our non-core assets, and we are on track
to meet our vision for a portfolio of younger buildings. Our portfolio is now
all located in prime locations. And indeed our Downtown development site is
in the prime location in New Zealand.

Executing on strategy

As well as strengthening our balance sheet we also advanced key developments
and put the company in a good position to progress new opportunities. We
continued with a long term strategy that matches the long term nature of our
assets.
Everyone always agrees that "location" is the most important factor in
property. I agree and think that in every sense we are well positioned for
the future: both in the physical locations we occupy in Auckland and
Wellington, and the strong position we are in as a business to cement a
platform for increased earnings.

We have followed a strategy for transforming the company and growing value,
while continuing close management of risk and reward.

We have remained experts in CBD real estate and continued to build strong
business partnerships. We have focused our resources on key opportunities in
key precincts and shifted the balance of our portfolio towards Auckland.

Outlook and Dividend

We expect to maintain a dividend of 5.4 cents per share and dividends to rise
as we execute our development programme and reduce associated risk.

Payment of the first quarter dividend will be on the 10th of December.

I'd like to thank you for your continued support as shareholders. And I'll
close by saying what I said in the Annual Report: it's been a busy year and a
very good one - we look forward to more of the same between now and our next
AGM.
Thank you.

Scott Pritchard, our Chief Executive, will now take you through a more
detailed account of the year and how we executed the company's strategy.

Scott Pritchard, Chief Executive

Driving Value

Thank you Craig.

I agree with what the Chairman has said about our strategy, which I believe
is what sets us apart from our peers.

The company's gains this year reflect the hard work of a great team. The
bolstered senior team of George Crawford, Richard Hilder, Davida Dunphy,
Andrew Buckingham, Kym Bunting and Nicola McArthur have assisted me greatly
in positioning the business and our team into a very strong position.
It's the existence of such a clear and defined strategy that enables us as
management to be able to move forward with certainty.

To remind you, our Strategy is built upon an ideal of having concentrated
ownership of assets in truly strategic locations. This strategy has seen us
acquire Bowen Campus in Wellington, HSBC House and Downtown Shopping Centre,
on Auckland's CBD waterfront, and secure a unique development opportunity at
Wynyard Quarter.

The key feature of the strategy is having ownership of a number of buildings
in one party's hands in the best locations, and for Precinct to then be able
to influence the tenancy mix, the associated amenity, and importantly the
quality of the real estate.

Key Metrics

It has been an active year, property markets have performed well and are in a
growth phase. We have taken advantage of the market cycle. We purchased $244
m of real estate in 2012 when the market was soft and have sold $274m of
assets in the last 12 months when the market has been very strong. The assets
we acquired are now worth $45m more than what we paid. Similarly, the assets
we have sold were sold for $42m more than what they were worth 3-4 years ago.
This represents a $87m creation of value. Following these sales and the
capital management initiatives identified by the Chairman we are very pleased
to both reduce gearing and advance new developments while also maintaining
dividends.

We enjoyed high occupier demand and hit 100% occupancy in Auckland for the
first time. Pleasingly, we are seeing strong demand from current clients who
want to expand or, in some cases, want more space because their businesses
are growing and they are hiring more people.
We are also happy with Precinct's position in Wellington. Our asset sales
helped right-size our portfolio in this market. Clients remain keen to get
quality corporate space which remains at a premium.

Portfolio occupancy across both cities was 98%, with weighted average lease
term of five years.
An evolving portfolio

Over time we see our portfolio evolving around three distinct precincts: the
Downtown and Wynyard precincts in Auckland, and the Government precinct in
Wellington, while retaining other core CBD assets in Auckland and Wellington
markets.

In Auckland we are enjoying the benefits of strong population growth, leading
to vacancy levels at all time lows ensuring that our portfolio is fully
occupied. Global research also shows that employees and residents worldwide
are moving back to the cities as urban areas are regenerated.

Recent research by CBRE confirms that in Auckland the large majority of
occupiers have a preference for space near the waterfront.

Auckland's CBD will grow by around 1,750 new workers every year for the next
six to seven years. An estimated 200,000 square metres of new space will be
needed to meet this demand.
Wynyard Quarter: Key milestones

At Wynyard Quarter we finalised terms with ATEED and Warren and Mahoney who
are the first occupiers of our development in this location.

We will invest around $84 million in stage one developing two buildings,
which are already 70% leased. The 8,100 square metre Innovation building is
entirely pre-leased to ATEED on a 12 year term, housing Grid AKL which is an
exciting opportunity for Auckland City. The Mason Brothers building which is
pictured here is 25% pre-leased to architects Warren and Mahoney on a 10-year
term.

The expected annual rental, fully leased, is $6.7 million, representing an 8%
yield on cost, with an expected valuation of $98 million on completion.

We expect to begin construction this month with the Mason Brothers building
finished by December next year, and the Innovation Centre at the site
completed in July 2017
Wynyard Quarter: next steps

We remain happy with the way this development has been structured so that
additional leasing obligations are only triggered when we identify further
investment opportunities. This allows us to match the pace of further
investment according to identified market need.

It is worth noting that this site is not only a superb opportunity in itself,
but represents the last new quality waterfront commercial development space
left in Auckland.
Downtown: development update

Staying on Auckland's waterfront, we were really pleased to record several
milestones at the Downtown shopping centre.
We further advanced the design work and secured resource consent. We signed
an agreement with Auckland Transport for work on the City Rail Link and for
our development to proceed at the same time. We conditionally acquired Queen
Elizabeth Square and lodged plans for its rezoning. We completed the
construction tendering process and have selected Fletcher Construction as our
preferred contractor.

Downtown remains the country's best development opportunity, and one that I
believe only comes along once in a generation.
Both this development and Wynyard are targeting the increasing interest in
waterfront space as the city shifts to a new east-west axis along its
shoreline. And for Precinct, of course, the opportunity is especially good,
as we own the surrounding buildings. This gives us a unique contiguous
footprint, and unique opportunities to create value.

Downtown: leasing and next steps

We were very pleased with the response we received for the first images we
released during the year. We have always seen this as an opportunity that
will put new life, and business activity, back into the heart of Auckland
city and at the edge of the harbour which was its traditional home.
Pre-leasing for the office tower remains on track to receive around 50%
commitment prior to proceeding with the development.

As per our commentary in August when we announced our annual results, we
remain focused on achieving this outcome prior to Christmas 2015. This
outcome will see us commit to the project this year and for construction to
commence around mid 2016.

Bowen Campus update

In Auckland, we are focusing on the advantages of the waterfront; in
Wellington we are positioned well having Bowen Campus right next to
government.
During the year we were pleased to see Bowen Campus selected by the Crown as
part of the Government's Wellington Accommodation Project process, which also
approved Pastoral House, Mayfair House and 3 The Terrace for the process,
while 1 The Terrace remains under consideration.

Good progress is being made on this, and we remain confident that these
assets, once repositioned, will be high quality real estate providing good
value to shareholders.

Outlook

The key theme emerging from both the year just gone and the outlook for the
future is that the company is in a strong position to grow and continue to
reshape its portfolio in a strong market.

We have a clear strategy which has been well articulated to the market and
understood by our shareholders.

We think the economic environment remains positive. We have seen some risk
from lower commodity prices and rising construction costs and we always need
to allow for global financial shifts. But Precinct is in a good positon. We
are well funded, well placed in strategic, central locations and have a
quality portfolio. The occupier market is strong with demand expected to
remain high for some time. The Auckland CBD retail market continues to go
from strength to strength with pedestrian counts up, new entrants arriving
and more established retailers returning.

I would like to add my thanks to you, our shareholders, for your support
during the year, and acknowledge the board and a very strong, committed
Precinct team. Thank you all for helping make this another good year. I will
now hand you back to Craig.

Thank you.
End CA:00273624 For:PCT    Type:ADDRESS    Time:2015-11-18 09:55:08