Commercial property investor’s net income down prior to major development phase in Auckland.
Commercial property investor’s net income down prior to major development phase in Auckland.
Precinct Properties reported net property income down $8.4 million and net profit after tax and unrealised gains up only $3.2 million in the six months to December 2015, compared to the previous year.
Net profit rose to $34.8 million, or 2.87 cents per share from $31.6 million, or 2.98 cents, a year earlier, the Auckland-based company said in a statement. Profit before tax increased to $44.2 million from $35 million as the interest expense dropped to $6.2 million from $17 million.
Revenue fell 13% to $74.9 million, with income from property down 13.5% to $53.7 million.
Last year, the company engaged in a string of asset sales in Wellington to emphasise its Auckland presence, raising $177 million from the sale of three central-city properties. Having paid off debt, Precinct’s gearing fell to 12.8% from 20.1% in June.
Precinct has taken a more cautious view on near-term revenue growth. Its rating is neutral.
Precinct attributes a softer first-half year in 2016 to $274 million of asset sales and the previous half-year as capital raising as it positions for significant development.
Distributable profit, up one percent, was below expectations, with revenue down 13% due to asset sales and increased vacancies at Downtown and in Wellington.
The 2.7 cents per share dividend was uninspiring.
The company expects full-year operating earnings after tax to be about six cents per share, before performance fees, with dividend guidance for the 2016 financial year unchanged at 5.4 cents per share.
Occupancy is approximately 97% and the weighted average lease term is 4.7 years or 5.8 years, including new development leasing.
The balance sheet remains well positioned to fund its developments, with only 13% gearing.
The development cost is around $450 million for Commercial Bay and excludes land/funding versus a total cost of $680 million.
Fletcher Construction will build the tower, commencing in June, with the shops scheduled for completion in October 2018 and the office space by June 2019.
Some 67% of Precinct’s portfolio is now in Auckland, from 60% in June. Its Auckland portfolio was almost fully occupied in the first half, and the company expects to benefit from rental growth in the city this year as occupiers compete for limited vacant office space. 
