Ann: HALFYR: PCT: Precinct announces improved res

• Release Date: 19/02/13 11:56
• Summary: HALFYR: PCT: Precinct announces improved result and positive outlook
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PCT
19/02/2013 09:56
HALFYR

REL: 0956 HRS Precinct Properties New Zealand Limited

HALFYR: PCT: Precinct announces improved result and positive outlook

Precinct announces improved result and positive outlook

Performance for six months to 31 December 2012

Financial Performance
- Net profit after tax: $23.6 million (2011: $20.4 million), after non-cash
deferred tax and interest rate swap movements

- Net operating income : $26.2 million (2011: $26.6 million) or 2.63 cents
per share (2011: 2.67 cents per share)

- 1.6% increase in shareholders' first-half dividend
Portfolio

- Portfolio occupancy increased to 95% (2011: 92%)

- Forty leasing transactions covering 18,000 square metres of net lettable
area

- Office space leasing secured at a 2% premium to June valuations

- An overall weighted average lease term of 5.5 years (2011: 6.2 years)

- Auckland Downtown Shopping Centre acquisition

- Completion of ANZ Centre lobby

AUCKLAND: Precinct  Properties New Zealand (NZX: PCT) today reported its
financial results for the six months to 31 December  2012, with a net profit
after-tax of $23.6 million up on $20.4 million for the same period last year.

Net operating income was $26.2 million. This was 1.5% lower than the
comparative period's $26.6 million mainly due to lower occupancy, foregone
income at ANZ Centre and an increase in tax expense. However, net operating
income was up 6.1% on the immediately prior six month period to 30 June 2012,
reflecting continued leasing momentum and the impact of the recent earnings
accretive acquisitions.

With earnings now improving, Precinct will increase shareholders' first-half
dividend for the first time since 2008, with a cash dividend of 2.56 cents
per share (cps) up 1.6% from the previous period. The increased dividend
reflects the expectation of continued positive earnings momentum in the
second half of the financial year, augmenting a strong first half result.

"It has been an active period. We are happy with the good progress we've made
on several fronts," Scott Pritchard, Precinct's CEO, said. "Our new corporate
identity has been greeted positively. We purchased a strategic asset
strengthening our Auckland waterfront portfolio and completed the ANZ Centre
lobby, a key phase of redevelopment at the site. Our relationship with the
ANZ continues to build with its commitment to 4,000 square metres of office
space with us in Wellington."

"Downtown Shopping Centre in Auckland is operating ahead of expectations and
the transition from Westfield has run smoothly. We have worked to make the
Centre more appealing from street level and continue to look at ways to
develop its brand."

He said the key operational focus over the next year will be on leasing space
in the State Insurance Tower and the AXA Centre, in Wellington. Planned
departures from the latter building affects about 2% of the total space in
the portfolio. The business will also be focused on advancing longer term
opportunities within the portfolio at Downtown Shopping Centre, Auckland and
Bowen Campus, Wellington.

During the period Precinct's total occupancy increased to 95% with around
18,000 square metres leased. It was encouraging to see firmer market
conditions reflecting leasing being secured at a 2% premium over June
valuations, Mr Pritchard said.

Financial Results

Precinct's rental revenue for the six months was up 6.8% to $68.9 million
compared with $64.5 million in the previous interim period. The additional
revenue was principally due to rental income from the Bowen Campus and
Downtown Shopping Centre acquisitions and leasing success at Zurich House
(now 100% leased), offset by lower occupancy in the portfolio. Allowing for
capital transactions and the ANZ Centre redevelopment, revenue was 1% higher
than the previous interim period.

Property expenses for the period were $21.3 million, 10.9% higher than the
previous period. The increase reflected the enlarged portfolio, as well as
higher insurance costs and council rates.

Interest expense increased $1.7 million to $12.1 million reflecting
investment in the ANZ Centre redevelopment and acquisitions, offset by the
benefit of lower interest rates.  Administrative expenses were 9.8% higher,
due to higher management fees as a result of an increase in portfolio values
and a higher performance fee being earned in the period.

Tax was $3.8 million compared with $3.4 million in the previous period due to
a lower level of deductible leasing costs.

The fair value gain in interest rate swaps of $1.7 million compared with a
$7.9 million loss for the same period last year. The reversal reflected an
unwinding of interest rate swap positions and more stable interest rates.

An internal review of the 30 June 2012 valuations was undertaken. It
indicated no material value movement in the period. The 31 December 2012
investment property book values were consistent with Precinct's policy of
carrying investment property at fair value.

Precinct's net tangible assets (value) per share at balance date was 87.8
cents per share, down marginally from 88.0 cents per share at 30 June 2012.
This reflected an increase in the provision for deferred tax on depreciation
recovered.

Capital Management

Following the Downtown Shopping Centre acquisition and investment in  the ANZ
Centre redevelopment, Precinct's gearing increased to 33.5% (30 June 2012:
27%).

The Downtown acquisition was funded through bank debt, with Precinct securing
a new $107 million tranche expiring in September 2017 and a new $53 million
tranche expiring in July 2015. The $535 million facility now has a weighted
average term to expiry of 3.5 years (30 June 2012: 3.2 years).

Of Precinct's drawn debt 68% (30 June 2012: 63%) was effectively fixed
through the use of interest rate swaps. This results in a weighted average
interest rate at 31 December 2012 including all fees of 6.2% (30 June 2012:
6.8%) and a weighted average term of 2.5 years (30 June 2012: 2.8 years)

Portfolio Performance

Following some challenging periods in previous years, particularly in
Auckland, Precinct continued to increase occupancy which rose to 95%. This is
reflected in a number of buildings being 100% leased including ANZ Centre and
Zurich House in Auckland and Vodafone on the Quay, 171 Featherston Street and
125 The Terrace in Wellington. Auckland occupancy, which had reached a low in
2009 of under 80%, now sits at 95%.

During the period 40 leasing transactions were secured at a 2% premium to
market rents adopted within the June valuations. In Auckland, office space
was let at a 3% premium to June valuations while Wellington's were at a 1%
premium. Across the 18,000 square meters secured, the weighted average lease
term was 6.2 years.

The key leasing achievement for the period was securing ANZ for around 4,000
square metres at Wellington's 171 Featherston Street.  Other major leasing
highlights in the period included:

o Two leasing transactions at AXA Centre, including one with the New Zealand
Fire Service,
o Seven leasing transactions at SAP Tower, and
o Five leasing transactions at 125 The Terrace, including a lease with
Telecom

At 31 December 2012 Precinct's weighted average lease term was 5.5 years
compared with 5.9 years at 30 June 2012.

The investment market in Auckland and Wellington continued to improve with a
number of large transactions over the period. The Wellington CBD office
market was particularly active with over $400 million in sales to local and
offshore investors.

The outlook for prime CBD office space also continues to firm. In Auckland a
significant reduction in prime vacancy coupled with no new supply in the near
term means most research houses are forecasting an increase in prime market
rents of between 4 and 4.5% over 2013. This is consistent with leasing
activity in Precinct's portfolio over the six month period.

Wellington leasing activity remains more subdued. Nonetheless we expect this
part of the portfolio to perform well, with a scarcity of prime grade
vacancies and a large number of expiries due later in 2013 and 2014.

Precinct continues to undertake seismic-related work. As previously outlined,
it expects to spend between $15 million and $25 million over the next five to
eight years.

In particular, seismic works at the former Central Police Station will start
shortly. They are expected to cost around $3 million. Demand for structurally
sound character office accommodation at this property is expected to be good.
Completion is expected in December 2013.

Earnings and dividend outlook

Guidance for the 2013 financial year remains unchanged with full-year
operating earnings after tax expected to be around 5.8 cents per share
(before performance fees), reflecting continued positive earnings momentum in
the second half of the financial year. This will be driven by the staged
completion of the ANZ Centre in Auckland and the impact of the Downtown
Shopping Centre acquisition.

Increasing occupancy continues to provide Precinct with the greatest
opportunity to increase earnings.  In the medium term the company sees good
potential for market rental growth, particularly in Auckland.

Precinct shareholders will receive a second-quarter dividend of 1.28 cents
per share plus imputation credits of 0.1197 cents per share. Offshore
investors will receive an additional supplementary dividend of 0.054335 cents
per share to offset non-resident withholding tax. The record date is 28
February 2013. Payment will be made on 14 March 2013.

-ends-

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]

About Precinct (PCT)
Precinct is New Zealand's only specialist listed investor in prime and
A-grade commercial office property. Listed on the New Zealand Exchange, PCT
currently owns 16 New Zealand buildings - Auckland's PricewaterhouseCoopers
Tower, ANZ Centre, SAP House, AMP Centre, Zurich House and Downtown Shopping
Centre; and Wellington's State Insurance Tower, Vodafone on the Quay, 171
Featherston Street, 125 The Terrace, No. 1 and 3 The Terrace, Pastoral House,
Mayfair House, 80 The Terrace, Deloitte House and Bowen Campus.

Net operating income reconciliation 31.12.2012___ 31.12.2011
$M___$M
Net profit after taxation  23.6___  20.4
Unrealised net (gain) / loss in value of investment properties       -___
-
Realised loss / (gain) on sale of investment properties  -___
0.3
Unrealised interest rate swap (gain)/loss   (1.7)___  7.9
Deferred tax expense/(benefit)       4.3___ (2.0)
Net operating income      26.2___  26.6
End CA:00233102 For:PCT    Type:HALFYR     Time:2013-02-19 09:56:36