Slides
Page 1
FY25 Interim Result 20 February 2025
Page 2
Precinct Properties – FY25 Interim Result 2 Agenda Section 1: Highlights and key themes Section 2: Financial performance Section 3: Capital partnering Section 4: Portfolio update Section 5: Development update Section 6: Summary Appendices
Page 3
Operational highlights 3 Financial performance • $72.7 million investment portfolio Funds from Operations (FFO), consistent with prior comparable period (pcp) after adjusting for one-off income • $76.6m Operating Profit before Indirect Expenses, up $3.2 million (4.4%) on pcp on a like-for-like basis • 3.23 cps Adjusted Funds from Operations (AFFO) (1H24: 3.26 cps; 2H24: 3.43 cps) • NTA $1.25 per share (FY24: $1.29) • FY25 dividend guidance remains at 6.75 cps Operational performance • 96% portfolio occupancy (FY24: 98%) • 6.3 years WALT (FY24: 6.6 years) • 22.8% spread on 5,720sqm of office lease deals in the period (+5.4% vs. June 2024 valuation market rents) • Living sector progress with three projects now under construction and six pipeline sites secured 1 • Commercial Bay sales performance stabilised • Beca House, Wynyard Quarter sectionally completed with Beca taking occupancy post balance date Active capital management • Refinanced $165m of maturing retail bonds and USPP notes with $200 million new bank debt and a new $75 million wholesale bond • Return of capital from the post balance date sale of Precinct’s 20% interest in BILP (40 and 44 Bowen Street, Wellington), with proceeds to be reinvested into strategic growth initiatives • Improving investment market is providing opportunities for capital recycling Precinct Properties – FY25 Interim Result Note 1 : Pipeline sites include residential and PBSA sites
Page 4
Key themes Precinct Properties – FY25 Interim Result 4 Economy • Ongoing weak domestic conditions as the impacts of interest rate reductions are yet to flow through • Impacts differ by sector – occupier demand for premium office remains strong, consumer discretionary spend is reduced • Economic headwinds likely to remain in place over the next ~12 months Office occupier market • Market is benefiting from limited supply and a return-to-office trend • Occupancy is holding near 100% for Premium, and good levels of enquiry for Precinct’s Downtown development provides ongoing confidence in this submarket • A-Grade vacancy increasing in general across the Auckland market, particularly in mid-town • Wellington business and consumer confidence is noticeably weaker, but Precinct’s WALT and tenant covenants remain strong Construction market • Activity indicators, including architects’ own- office activity1, signal a continued weak pipeline over the year ahead • Weaker demand continues to put downward pressure on prices in the sector • Near-term outlook for construction demand remains weak Living sector • Some positive signs are emerging with prices levelling and volumes up slightly in Auckland, and lending volumes increasing nationally • Confidence remains in the medium-term outlook for the build-to-sell sector • An undersupply of rooms remains in central Auckland’s student accommodation market Note 1 : NZIER Quarterly Survey of Business Opinion (QSBO)
Page 5
Financial performance Precinct Properties – FY25 Interim Result 5
Page 6
Financial performance 6 +1.0% Entity-level fair value movement on $0.9b of externally valued JV investment and development properties $1.25 NTA per security For the 6 months ended 31 Dec 2024 31 Dec 2023 1 Δ $ millions Unaudited Unaudited Operating profit before indirect expenses $76.6 m $73.4 m +$3.2 m Corporate overhead expense ($2.4 m) ($2.7 m) +$0.3 m Net interest expense ($29.1 m) ($16.4 m) ($12.7 m) Operating profit before income tax $45.1 m $54.3 m ($9.2 m) Net change in fair value of investment and development properties ($0.8 m) ($5.5 m) +$4.7 m Share of profit / (loss) in equity-accounted investments $5.6 m ($3.1 m) +$8.7 m Net gain / (loss) on sale of investment properties ($16.1 m) ($10.3 m) ($5.8 m) Net realised gain / (loss) on disposal of investment in joint venture $2.8 m +$2.8 m Other non-operating expenses ($38.8 m) ($17.7 m) ($21.1 m) Net profit before taxation ($2.2 m) $17.7 m ($19.9 m) Current tax benefit / (expense) $3.7 m ($0.8 m) +$4.5 m Depreciation recovered on sale ($0.5 m) +$0.5 m Deferred tax expense / (benefit) $7.7 m ($1.1 m) +$8.8 m Net profit after income tax attributable to equity holders $9.2 m $15.3 m ($6.1 m) Other comprehensive income / (expense) ($6.0 m) ($2.4 m) ($3.6 m) Total comprehensive income after tax attributable to equity holders $3.2 m $12.9 m ($9.7 m) Net tangible assets per security $1.25 $1.35 ($0.10) Precinct Properties – FY25 Interim Result +$3.2m Increase in operating profit before indirect expenses 1 Note 1: Prior period figures include adjustments made to present on a like-for-like basis with the current period, and do not reconcile with the financial statements
Page 7
Operating income 7 • +7.4% investment portfolio FFO , underpinned by one-off income, otherwise consistent with the prior period 1 • Commercial Bay retail down $0.3m, consistent with broader underlying retail trade conditions 1 • +2.8% underlying FFO growth across the office investment portfolio on a like-for-like basis • Operating businesses up $0.9m , supported by the InterContinental hotel trading up in H1 • Net management expense down ($0.6m) due to insourcing of residential management business Note 1: Prior period figures include adjustments made to present on a like-for-like basis with the current period, and do not reconcile with the financial statements. Note 2 : IFRS 16 rent expense is eliminated from operating profit as required by accounting standardsPrecinct Properties – FY25 Interim Result For the 6 months ended 31 Dec 2024 31 Dec 2023 1 Δ % $ millions Unaudited Unaudited Directly held property funds from operations (FFO) Auckland office $42.0 m $37.2 m +$4.8 m +12.9% Wellington office $21.7 m $21.3 m +$0.4 m +1.9% Commercial Bay retail $7.9 m $8.2 m ($0.3 m) (3.7%) Other properties $1.1 m $1.0 m +$0.1 m +10.0% Investment portfolio FFO $72.7 m $67.7 m +$5.0 m +7.4% Transactions and Developments $4.7 m $4.7 m - - Directly held property FFO $77.5 m $72.3 m +$5.2 m +7.2% Amortisations of incentives and leasing costs ($7.0 m) ($6.4 m) ($0.6 m) +9.4% Straight-line rents $0.9 m $2.5 m ($1.6 m) (64.0%) Net property income $71.4 m $68.4 m +$3.0 m +4.4% Operating businesses $1.9 m $1.0 m +$0.9 m +90.0% Management fee income $4.1 m $4.1 m - - Employment and admin expenses ($5.3 m) ($4.7 m) ($0.6 m) +12.8% IFRS 16 rent expense elimination $4.5 m $4.6 m ($0.1 m) (2.2%) Operating profit before indirect expenses $76.6 m $73.4 m +$3.2 m +4.4% $70 m $71 m $72 m $73 m $74 m $75 m $76 m $77 m $78 m $79 m 31 Dec 2023 Invest. portfolio Trans. & devs. Op. businesses Mgmt fee income Employment & admin. IFRS 16 31 Dec 2024 Operating income reconciliation
Page 8
FFO and AFFO 8Precinct Properties – FY25 Interim Result For the 6 months ended 31 Dec 2024 31 Dec 2023 1 Δ % $ millions Unaudited Unaudited Directly held property FFO $77.5 m $72.3 m +$5.2 m +7.2% Cornerstone distributions attributable to the period $2.3 m $1.6 m +$0.7 m +43.8% Property investments FFO $79.8 m $73.9 m +$5.9 m +8.0% Operating businesses $1.9 m $1.0 m +$0.9 m +90.0% Net management expense ($1.2 m) ($0.6 m) ($0.6 m) +100.0% Underlying FFO $80.5 m $74.4 m +$6.1 m +8.2% Net interest expense ($29.1 m) ($16.4 m) ($12.7 m) +77.4% Current tax benefit / (expense) $3.7 m ($0.8 m) +$4.5 m (562.5%) Other indirect expenses & adjustments ($0.1 m) ($1.9 m) +$1.8 m (94.7%) Funds From Operations (FFO) $55.0 m $55.3 m ($0.3 m) (0.5%) FFO per weighted security 3.47 cps 3.49 cps (0.02 cps) (0.6%) Dividend payout ratio to FFO 97% 97% 0% Adjusted Funds From Operations Maintenance capex ($1.1 m) ($1.9 m) +$0.8 m (42.1%) Investment portfolio - Incentives and leasing fees ($2.6 m) ($1.7 m) ($0.9 m) +52.9% Adjusted Funds From Operations (AFFO) $51.3 m $51.7 m ($0.4 m) (0.8%) AFFO per weighted security 3.23 cps 3.26 cps (0.03 cps) (0.9%) Dividend paid in financial year 3.38 cps 3.38 cps - - Dividend payout ratio to AFFO 104% 104% 0% Retained earnings ($2.3 m) ($1.8 m) ($0.5 m) +27.8% +8.2% Increase in underlying FFO 1 $4.1m Management fee income from partnerships and third parties 3.23cps Adjusted funds from operations Note 1: Prior period figures include adjustments made to present on a like-for-like basis with the current period, and do not reconcile with the financial statements.
Page 9
Capital management 9 Near-term focus on deleveraging initiatives to position balance sheet for next phase of growth • Refinanced $165m of maturing retail bonds and USPP notes with $200 million bank debt and a $75 million wholesale bond providing a new source of funding for Precinct • Return of capital ($48m) from the sale of Precinct’s 20% interest in BILP (40 and 44 Bowen Street) will be used to repay bank debt • Improving investment market and stabilising valuation environment providing opportunities for capital recycling with Precinct targeting further asset sales during 2025 • Given the early refinancing of the USPP notes Precinct was carrying $65m of excess capacity at 31 December. Adjusting for this the weighted average debt cost (incl. fees) was 5.5% • Hedging of around 70% for the balance of the year Key metrics 31 Dec 24 30 Jun 24 Debt drawn $1,485m $1,320m Total debt facilities $1,679m $1,704m Gearing1 (Covenant: 50%) 39.1% 35.2% Wtd. avg. term to expiry 3.1 yrs 3.3 yrs Wtd. avg. debt cost (incl. fees) 5.6% 5.4% Percentage of debt hedged 68.7% 99.2% Interest coverage ratio (Covenant: 1.75 times) 2.1 x 2.0 x Precinct Properties – FY25 Interim Result Note 1: Adjusted total liabilities to adjusted total assets $100 m $200 m $300 m $400 m $500 m $600 m $700 m Jun 25 Jun 26 Jun 27 Jun 28 Jun 29 >Jun 29 Debt facilities Year ending Debt facilities expiry profile Bank debt USPP NZ Bonds Convertible note Bank debt 52% USPP 15% NZ Bonds 24% Convertible note 9% Debt sources 48% Debt capital markets
Page 10
Capital partnering and investment market Precinct Properties – FY25 Interim Result 10
Page 11
Existing partnerships 11 Update on existing partnerships: • PAG agreed to acquire Precinct’s remaining 20% minority interest in 40 and 44 Bowen Street, Wellington for a total purchase price of $48 million. The transaction is expected to settle in Q2 2025. • Wynyard Stage 3 achieved sectional completion, adding to PPILP’s long-WALT core investment portfolio. • Valuation uplift of $8.6 million recorded for long WALT investment portfolio. • Refurbishment works nearing completion at 30 Mahuhu Crescent in the Te Tōangaroa joint venture. Leasing progress at 8 Tangihua. • Orams Group joint venture established, including a minority interest in Orams Marine Village and a 50:50 joint venture on a prime residential development site in Wynyard Quarter • Secured further investment from Kajima into the York House residential project, enabling construction start Value of capital partnerships 1 Dec-2024 value Completion value PCT share Commercial partnerships GIC long-WALT partnership (PPILP) $0.6 b $0.7 b 24.9% 40 & 44 Bowen Street $0.3 b $0.3 b 20.0% Others (various) $0.2 b $0.3 b 0-33% Commercial partnerships $1.1 b $1.2 b Residential 2 - $0.4 b Nil Total capital partnerships 1 - $1.6 b Precinct Properties – FY25 Interim Result Note 1 : Capital partnerships totalling $1.6 billion reflects the value of assets managed by Precinct and not directly owned by Precinct. As at 31 December 2024, Precinct is invested in $1.0 billion, with the balance being managed by Precinct. Note 2 : Residential completion value is presented exclusive of GST. Artist’s impression: Orams commercial development Wynyard Quarter innovation precinct (PPILP)
Page 12
Residential build-to-sell platform Existing projects • Pre-sale enquiries and conversion increasing but from a low base • All pre-acquisition projects now under construction Pipeline update • Strong progress on next phase of development: • Acquisition of a c.2,300 square metre site at 99 College Hill in Auckland, for a premium apartment offering • Settlement of the c.5,500 square metre Wynyard West residential site, a 50:50 joint venture with Orams Group • Residential pipeline is now established. Any future acquisitions will target medium to longer term delivery timing, consistent with average 150+ units per annum delivery target Funding update • Existing projects are being delivered without Precinct equity investment • Pipeline sites have been acquired by Precinct, with capital partners to be secured for construction delivery 12 Build-to-sell pipeline Project Status Timing 1 Units Completion value (incl. GST) Fabric Stage 2 Construction 2026 118 $125 m The Domain Collection Construction 2026 65 $172 m York House Construction 2027 44 $135 m Total existing projects 227 $431 m 99 College Hill RC lodged 2025 - - Dominion & Valley Roads RC lodged 2025/6 - - Wynyard West (Orams JV) Design 2026+ - - Downtown RC lodged 2028+ - - Total pipeline 2 550 - 600 ~$1.5 b Total existing + pipeline 750 - 850 ~$1.9 b Precinct Properties – FY25 Interim Result Forecast residential completions 2 Note 1: Completion timing for existing projects and commencement timing for pipeline Note 2 : Pipeline unit numbers are approximate only and are subject to change as design and planning progresses - 100 200 300 2026 2027 2028 2029 2030+ No. Units Existing Pipeline Pipeline (Downtown)
Page 13
Purpose Built Student Accommodation • Two sites now secured with design and consenting in progress, providing potential supply of around 1,600 beds • Resource consent has been lodged on both sites and uplift is anticipated shortly • Both university lease and operator models are currently under consideration • Working exclusively with a capital partner on one of the sites • University of Auckland continues to report strong accommodation demand from domestic and international students. Government supportive of international education sector growth. 13Precinct Properties – FY25 Interim Result Artist’s impression: 256 Queen Street (Lorne Street entrance) Artist’s impression: 256 Queen Street 5.6k 6.0k 6.4k 6.7k 7.4k 8.1k 8.7k 5.7k 4.7k 4.8k 9.1k 3.8k 3.9k 4.2k 4.4k 4.3k 4.5k 4.9k 4.3k 2.5k 2.1k 3.4k 0.k 5.k 10.k 15.k 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Est. * International students studying intramurally in Auckland Region University of Auckland AUTSource: educationcounts.co.nz * * 2024 figure is estimated by Precinct based on NZ-wide international student enrolment numbers for the first 8 months of 2024 as reported by Education NZ
Page 14
Auckland residential market 14 REINZ House Price Index – Auckland Region (Y/Y%)• Current market conditions remain subdued although some positive signs are emerging with prices levelling and volumes up slightly in Auckland • Lending volumes have accelerated since Aug-24 OCR cut, with affordability in Auckland now consistent with the long- term average • Fundamentals continue to lend confidence to the medium-term outlook due to: • Apartment undersupply continues with lowest consents in a decade • Demographic shifts and a growing down-sizer market support demand for premium, well-located and higher spec apartments • Lower interest rates will underpin recovery • Review of restrictions on overseas purchasers may support upper end of market Precinct Properties – FY25 Interim Result Mortgage payments share of mean HH income (Auckland) 1 Sales volumes and median days to sell – Auckland Region Note 1 . Mortgage payments based on a 25-year loan at 80% LVR, Auckland median house price (source: REINZ) and the prevailing 2- year mortgage rate (source: RBNZ). Auckland mean household income per Infometrics. Precinct calculations. -20 -15 -10 -5 0 5 10 15 20 25 30 35 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 Dec-23 Jun-24 Dec-24 Y/Y growth (%) Source: REINZ 20 25 30 35 40 45 50 55 600k 5k 10k 15k 20k 25k 30k 35k 40k Dec-04 Mar-06 Jun-07 Sep-08 Dec-09 Mar-11 Jun-12 Sep-13 Dec-14 Mar-16 Jun-17 Sep-18 Dec-19 Mar-21 Jun-22 Sep-23 Dec-24 Median days to sell No. of sales No. of sales (rolling 12m), LHS Median days to sell, RHS Source: REINZ 25% 30% 35% 40% 45% 50% Dec-2004 Mar-2006 Jun-2007 Sep-2008 Dec-2009 Mar-2011 Jun-2012 Sep-2013 Dec-2014 Mar-2016 Jun-2017 Sep-2018 Dec-2019 Mar-2021 Jun-2022 Sep-2023 Dec-2024 % of mean HH income Auckland 20y avg. (37%) Total lending on property purchases $0b $1b $2b $3b $4b $5b $6b $7b $8b Jun-2017 Dec-2017 Jun-2018 Dec-2018 Jun-2019 Dec-2019 Jun-2020 Dec-2020 Jun-2021 Dec-2021 Jun-2022 Dec-2022 Jun-2023 Dec-2023 Jun-2024 Dec-2024 $ billions Monthly lending 12m moving avg. Source: RBNZ
Page 15
Investment and capital markets Domestic environment • Transaction activity remained muted in 2024 due to the ongoing effects of higher interest rates and more restrictive credit conditions • Conditions stabilising over the last six months with the reduction in funding costs and return of a positive yield spread relative to cost of debt • Level of interest in NZ is improving and supported by interest rate outlook, positive signals from the coalition government on overseas investment settings and weaker NZ dollar • Anticipating improved liquidity over the next ~12 months which will be supportive of capital management and capital partnering strategies Australian market • Australian transaction volumes in the first nine months of 2024 show office sales volumes of $6.1 billion in the first nine months of 2024, up 61% on the corresponding first three quarters of 2023 1 • The Sydney office investment market has recovered well, while Brisbane is improving • Positive lead indicator for investment interest in Auckland office market in particular Precinct Properties – FY25 Interim Result 15Note 1 : Source: JLL 4 5 6 7 8 9 10 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Dec-23 Dec-24 Dec-25 Dec-26 Dec-27 Dec-28 Dec-29 Yield (%) Office investment yields Auckland Premium Auckland A Grade Wellington Prime Source: Colliers Research Forecast 0 50 100 150 200 $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 Dec-23 Jun-24 Dec-24 No. of sales $ billions NZ Investment Sales $5m+ No. of sales, RHS Value of sales, LHS ($b) Source: CBRE
Page 16
Portfolio update and occupier market Precinct Properties – FY25 Interim Result 16
Page 17
Investment portfolio update Precinct Properties – FY25 Interim Result 17 11% Under-renting (vs. market rents)1 6.3yrs Weighted average lease term 96% Occupancy (by NLA) +5.9% Outperformance against Jun-24 valuation market rents (office & retail) +3.1% Growth in contract rentals from rent reviews (office & retail) +22.8% Uplift in contract rentals on new office leases • 6,451sqm of lease deals concluded across the portfolio in the period • Another solid leasing spread was achieved during this period: • +22.8% spread achieved across 5,720sqm of office leasing • Over 78,300sqm of rent reviews completed during the period (office and retail), with +3.1% uplift achieved vs. previous contract rents • Commercial Bay retail centre was 97% occupied as at 31 December 2024. Pleasingly, sales turnover for H1 FY25 was up 1.8% on the prior period 0k 5k 10k 15k 20k H1 FY20 H2 FY20 H1 FY21 H2 FY21 H1 FY22 H2 FY22 H1 FY23 H2 FY23 H1 FY24 H2 FY24 H1 FY25 NLA (sqm) Precinct Leasing Activity Auckland Office Wellington Office Comm. Bay Retail Note 1 : Based on internally assessed growth in market rentals across the stabilised office portfolio
Page 18
18 Auckland CBD office occupier market Precinct Properties – FY25 Interim Result • Premium assets are continuing to outperform the wider office market in terms of occupancy and rental growth • Return-to-office trends among corporate and public sector occupiers are benefitting well- located premium buildings • Prime vacancy rose to 10.3% as at Dec-24 as a result of increasing vacancy in A Grade buildings (15.2%), whilst premium vacancy remains low at 1.8% (80k) (60k) (40k) (20k) -- 20k 40k 60k Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 Dec-23 Jun-24 Dec-24 NLA (sqm) Net absorption, rolling 12m Secondary Prime Source: JLL 0 5 10 15 20 25 Jun-15 Jan-16 Aug-16 Mar-17 Oct-17 May-18 Dec-18 Jul-19 Feb-20 Sep-20 Apr-21 Nov-21 Jun-22 Jan-23 Aug-23 Mar-24 Oct-24 Vacancy rate (%) CBD office vacancy rate by grade Premium A Grade Secondary 0% 10% 20% 30% 40% 50% 60% 1 day 2 days 3 days 4 days 5 days NZ office attendance - average days in office 2023 2024 Source: CBRESource: JLL -20 -10 0 10 20 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Dec-23 Dec-24 Rent growth (Y/Y%) Net effective rental growth (Y/Y%) Premium A Grade Secondary Source: JLL
Page 19
19 Wellington CBD office occupier market Precinct Properties – FY25 Interim Result • Occupier demand remains subdued. Vacancy rates continued to rise over 2024; however, prime vacancy remains relatively low at 5% • Rental growth expectations are limited over the short to medium term. The prior half decade has seen solid growth, but ongoing increases in operating expenses have resulted in lower indexed growth rates • Sentiment indicators in Wellington are down, showing the impacts of public sector spending and headcount cuts -5% 0% 5% 10% 15% -- 5k 10k 15k 20k 25k 30k Y/Y change FTEs Wellington's public sector workforce Y/Y change, RHS Wellington FTEs Source: Public Service CommissionSource: JLL (100k) (50k) -- 50k 100k Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 Dec-23 Jun-24 Dec-24 NLA (sqm) Net absorption, rolling 12m Prime Secondary Source: JLL -5 0 5 10 15 20 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Dec-23 Dec-24 Rent growth (Y/Y%) Gross effective rental growth (Y/Y%) Prime Secondary Source: JLL 0 2 4 6 8 10 12 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 Dec-23 Jun-24 Dec-24 Vacancy rate (%) CBD office vacancy rate by grade Prime Secondary Source: JLL
Page 20
Development update Precinct Properties – FY25 Interim Result 20
Page 21
Wynyard Quarter Innovation Precinct complete With the delivery of Beca House, Precinct completes the third and final stage of the Wynyard Quarter Innovation Precinct, one of the largest urban regeneration projects undertaken in New Zealand • Five campus buildings encompassing 48,000 square metres of prime office space • Successfully managed the delivery of Beca House on time for Precinct’s largest corporate client • Demonstrating Precinct’s development expertise to deliver large-scale development projects on behalf of its capital partners in collaboration with local mana whenua and Council organisations • Total realisable value of circa $550m • Final stage impacted by cost overruns due to elevated construction market activity Precinct Properties – FY25 Interim Result 21
Page 22
61 Molesworth nearing completion Precinct Properties – FY25 Interim Result 22 Delivery of 6 Green Star development to deliver enhanced asset and income resilience • Construction on schedule with completion expected in Q4 2025 • Targeting 6 star ‘World Leadership’ Green Star Built rating and 5 star NABERSNZ rating • Highly attractive net lease to NZ government with fixed annual rent growth Office pre-commitment WALT on completion 100% 21 yrs
Page 23
Residential projects Precinct Properties – FY25 Interim Result 23 Artist’s impression: Wynyard West Precinct is making continued progress in the sector with three build-to-sell projects now under construction • Construction works at York House commenced in the period • FABRIC Stage 2 and the Domain Collection progressing well, with both projects on schedule for completion in 2026 and remaining on budget Key themes • Design build contracts are becoming increasingly common • A deep tier two contractor market provides competitive tension • Competitive pricing remains a feature of the market
Page 24
Precinct Properties – FY25 Interim Result 24 Progress update • Resource Consent has been lodged and notified under the conventional RMA process with the project included within Schedule 2 of the Fast Track Approvals Bill, providing an alternative consenting pathway. Resource Consent uplift is anticipated in the next ~12 months • Preliminary Design has commenced with a focus on optimising the scheme to maximise development optionality • Office leasing demand remains elevated with good interest in office component • Discussions with potential capital partners have commenced • Key focus on construction procurement with engagement underway with market participants Downtown Artist’s impression: Downtown West
Page 25
Summary Precinct Properties – FY25 Interim Result 25
Page 26
Summary and outlook Precinct Properties – FY25 Interim Result 26 • Precinct’s core office portfolio has continued to perform well, reflecting the underlying quality and resilience of our real estate • Economic conditions remain weak, but business confidence is improving as the impacts of lower interest rates are anticipated to flow through • Office market is benefitting from limited supply and a return-to-office trend, with the Premium market outperforming all other subsectors • Precinct has achieved strong rental growth through the cap rate softening cycle and will now look to maintain and enhance occupancy • Precinct remains optimistic about its medium-term outlook and is on track to deliver $4-5 billion of capital partnerships in the medium term • Focus for next period on progressing delivery and capital partnering initiatives for residential, PBSA, and Downtown • Confirming dividend guidance of 6.75cps for FY25, consistent with the prior period 85% 90% 95% 100% 105% 110% FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 Precinct 10 -year AFFO payout ratio AFFO payout ratio 10Y average (101%) 6.75cps FY25 dividend guidance $3bn Growth pipeline across living and commercial 11% Portfolio under-renting 5.40 5.40 5.60 5.80 6.00 6.30 6.50 6.70 6.70 6.75 1.0 cps 2.0 cps 3.0 cps 4.0 cps 5.0 cps 6.0 cps 7.0 cps 8.0 cps FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 10-year dividend history (cents per share)
Page 27
Appendices Precinct Properties – FY25 Interim Result 27
Page 28
A1: FFO contribution from directly held property 28Precinct Properties – FY25 Interim Result For the 6 months ended 31 Dec 2024 31 Dec 2023 1 Δ % $ millions Unaudited Unaudited AON Centre - AKL $5.5 m $6.1 m ($0.6 m) (9.8%) HSBC Tower $17.4 m $12.6 m +$4.8 m +38.1% Jarden House $3.6 m $3.3 m +$0.3 m +9.1% PwC Tower $15.5 m $15.1 m +$0.4 m +2.6% Auckland office FFO $42.0 m $37.2 m +$4.8 m +12.9% NTT Tower $4.3 m $4.0 m +$0.3 m +7.5% AON Centre - WGN $5.7 m $5.8 m ($0.1 m) (1.7%) Defence House $4.1 m $4.0 m +$0.1 m +2.5% No 1 The Terrace $3.6 m $3.5 m +$0.1 m +2.9% Bowen House $4.0 m $4.0 m - - Wellington office FFO $21.7 m $21.3 m +$0.4 m +1.9% Commercial Bay retail $7.9 m $8.2 m ($0.3 m) (3.7%) Other properties $1.1 m $1.0 m +$0.1 m +10.0% Investment portfolio FFO $72.7 m $67.7 m +$5.0 m +7.4% Transactions and developments2 $4.7 m $4.7 m - - Directly held property FFO $77.5 m $72.3 m +$5.2 m +7.2% Amortisations of incentives and leasing costs ($7.0 m) ($6.4 m) ($0.6 m) +9.4% Straight-line rents $0.9 m $2.5 m ($1.6 m) (64.0%) Net property income $71.4 m $68.4 m +$3.0 m +4.4% Note 1: Prior period figures include adjustments made to present on a like-for-like basis with the current period, and do not reconcile with the financial statements. Note 2: Transactions and developments includes: Deloitte Centre, Freyberg Building, Mason Bros. (prior period only), and 40 Bowen Street (prior period only).
Page 29
A2: AFFO reconciliation to operating profit 29Precinct Properties – FY25 Interim Result For the 6 months ended 31 Dec 2024 31 Dec 2023 1 $ millions Unaudited Unaudited Operating profit before indirect expenses $76.6 m $73.4 m Corporate overhead expense ($2.4 m) ($2.7 m) Net interest expense ($29.1 m) ($16.4 m) Operating profit before income tax $45.1 m $54.3 m Current tax expense $3.7 m ($0.8 m) Operating profit after tax $48.8 m $53.5 m Adjusted for: Cornerstone distributions attributable to the period $2.3 m $1.6 m IFRS 16 rent expense ($4.5 m) ($4.6 m) Share-based payments scheme $1.3 m $0.3 m Amortisations $7.8 m $7.0 m Straight-line rents ($0.9 m) ($2.5 m) Discontinued operating business $0.2 m Funds from Operations (FFO) $55.0 m $55.3 m FFO per weighted security 3.47 cps 3.49 cps Dividend payout ratio to FFO 97% 97% Adjusted Funds From Operations Maintenance capex ($1.1 m) ($1.9 m) Investment portfolio - Incentives and leasing fees ($2.6 m) ($1.7 m) Adjusted Funds From Operations (AFFO) $51.3 m $51.7 m AFFO per weighted security 3.23 cps 3.26 cps Dividend paid in financial year 3.38 cps 3.38 cps Dividend payout ratio to AFFO 104% 104% Retained earnings ($2.3 m) ($1.8 m) Note 1: Prior period figures include adjustments made to present on a like-for-like basis with the current period, and do not reconcile with the financial statements
Page 30
A3: Balance sheet 30Precinct Properties – FY25 Interim Result Financial Position as at 31 Dec 2024 30 June 2024 Δ $ millions Unaudited Audited Assets Investment properties $2,991.8 m $2,987.4 m +$4.4 m Development properties $273.6 m $201.2 m +$72.4 m Investment properties held for sale - - - Investment in equity-accounted investments $186.1 m $131.1 m +$55.0 m Property, plant and equipment $41.2 m $42.7 m ($1.5 m) Right-of-use assets $19.0 m $21.0 m ($2.0 m) Other assets $187.6 m $135.5 m $52.1 m Total Assets $3,699.3 m $3,518.9 m +$180.4 m Liabilities Interest bearing liabilities $1,537.2 m $1,334.6 m +$202.6 m Deferred tax liability - - - Lease liabilities $52.8 m $55.2 m ($2.4 m) Fair value of derivative financial instruments $42.3 m $25.4 m +$16.9 m Other liabilities $69.7 m $56.4 m +$13.3 m Total Liabilities $1,702.0 m $1,471.6 m +$230.4 m Equity $1,997.3 m $2,047.3 m ($50.0 m) NIBD (net interest-bearing debt) to Total Assets 40.2% 37.5% 2.6% Liabilities to Total Assets - Loan Covenants 39.1% 35.2% 3.9% Shares on Issue (m) 1,587.0 m 1,586.4 m +0.7 m Net tangible assets per security $1.25 $1.29 ($0.04) Net asset value per security $1.26 $1.29 ($0.03)
Page 31
Participation Overview Current 1 Target The overarching measure Precinct have chosen to use as its core ESG performance benchmark is the Global Real Estate Sustainability Benchmark (GRESB). It is considered the global standard for ESG benchmarking and reporting for real estate entities. Score 89 + Global Average 76 Public Disclosure A + Global Average B Forsyth Barr Carbon & ESG Ratings is an influential research and rating assessment specific to NZX companies A Top 4 A Morgan Stanley Capital International (MSCI) ESG Rating aims to measure a company's resilience to long-term, financially relevant ESG risk. A A or better NABERSNZ is a ratings scheme to measure and rate the energy performance of office buildings in New Zealand. 59% Portfolio: >100% 4 star by 2030 (Excellent) Green Star is an internationally recognised, rating system for the sustainable design, construction and operation of buildings, fitout and communities. 54% Portfolio: >60% 5 Star (Excellence) A4: ESG progress 31 Green assets (min. 4 Star NABERSNZ or 5 Star Green Star) Our strategy includes the integration of sustainability across all areas of our business. • $1.7b of green assets (excl. partnership assets) • Committed to set near-term company-wide emission reductions in line with climate science with the Science Based Target Initiative (SBTi) • Voluntarily reporting to the World Green Building Council Net Zero Carbon Buildings Commitment and a target that all assets be certified Green by 2030 • Offsetting upfront development carbon emissions on completion and continuing to prioritising adaptive reuse projects to reduce this impact • First real estate company in APAC to receive a WELL Equity rating for corporate real estate office verified by the International WELL Building Institute • Preparing our second year Climate Statement highlighting our efforts around mitigating and responding to climate-related risks and opportunities Note: GRESB metrics relate to those received in 2024 Precinct Properties – FY25 Interim Result Green Assets Green Development Assets Non-Green Assets
Page 32
Investment portfolio including cornerstone 1 Investment portfolio directly held Wellington Auckland WALT 6.4 years 6.3 years 7.4 years 5.7 years Occupancy 95% 96% 96% 95% Investment portfolio value 2 $3,007 m $2,835 m $831 m $2,004 m Weighted average cap rate 5.6% 5.8% 6.1% 5.7% NLA (sqm) 334 k 248 k 100 k 148 k A5: Investment portfolio overview 32 Note 1 : Investment portfolio metrics including Precinct cornerstone are weighted based on Precinct’s ownership interest except for NLA which reflects total unweighted lettable area. Note 2 : Investment portfolio value excludes: the InterContinental hotel at 1 Queen Street; the value of development properties; and IFRS16 right-of-use assets ($24.9m at 31 December 2024 for the directly held portfolio). 6.3 years Weighted average lease term 96% Portfolio occupancy Precinct Properties – FY25 Interim Result Key metrics Occupancy Portfolio metrics – directly held 0% 20% 40% 60% 80% 100% % of building NLA Auckland Wellington
Page 33
33 Retail • According to JLL research, city center prime retail vacancy has decreased to 7.3% as of December 2024 from a high of 8.6% in June 2022. This vacancy figure has remained relatively consistent from June 2023 to present. • Despite a challenging economic backdrop and the ongoing high costs of living, retail sales have remained largely constant and consumer confidence is beginning to rise. • Retail spend and pedestrian counts in the waterfront areas of the CBD remains largely consistent with last year. Hotel • International visitor arrivals to NZ totalled 3.3 million in the year to December 2024, up 10.2% over the prior year but still ~16% below the pre-covid peak. Arrival numbers continue to trend upwards but are currently around 2016 levels • After a softer winter trading period, the spring and summer seasons have been supported by events such as the Pearl Jam and Coldplay concerts, and SailGP in Auckland • Increasing supply backdrop, with the 300 room 5-star Horizon Hotel at Sky City having opened August 2024 and the 225 room 4.5-star Indigo Hotel set to open April 2025 • The opening of the NZ International Convention Centre in February 2026 is expected to create a positive demand impact on the market Precinct Properties – FY25 Interim Result 0.0% 4.0% 8.0% 12.0% (2k) (1k) -- 1k 2k 3k 4k Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 Dec-23 Jun-24 Dec-24 6-monthly net absorption (sqm) Auckland retail net absorption vs. vacancy rates CBD net absorption CBD vacancy (RHS) Source: JLL 40 % 50 % 60 % 70 % 80 % 90 % $200 $250 $300 $350 $400 $450 $500 Comparable hotel market KPIs ADR (LHS) Occupancy (RHS) Source: STR / CoStar A6: Other city centre markets
Page 34
Disclaimer 34 The information and opinions in this presentation were prepared by Precinct Properties New Zealand Limited or one of its subsidiaries (Precinct ). Precinct makes no representation or warranty as to the accuracy or completeness of the information in this presentation. Opinions including estimates and projections in this presentation constitute the current judgment of Precinct as at the date of this presentation and are subject to change without notice. Such opinions are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond Precinct’s control, and which may cause actual results to differ materially from those expressed in this presentation. Precinct undertakes no obligation to update any information or opinions whether as a result of new information, future events or otherwise. This presentation is provided for information purposes only. No contract or other legal obligations shall arise between Precinct and any recipient of this presentation. Neither Precinct, nor any of its Board members, officers, employees, advisers or other representatives will be liable (in contract or tort, including negligence, or otherwise) for any direct or indirect damage, loss or cost (including legal costs) incurred or suffered by any recipient of this presentation or other person in connection with this presentation. Precinct Properties – FY25 Interim Result