Archive | Precinct Properties

Precinct plans 2 new buildings for Wellington’s Bowen Campus

Precinct Properties NZ Ltd outlined plans today for 21,000m² more office space in 2 new buildings in Wellington, taking the Bowen Campus beside Parliament to 4 buildings.

The company plans 2 new high performance buildings at 40 & 44 Bowen St, beside the Bowen State & Charles Fergusson buildings.

The 4 buildings will have a combined workforce of 5000.

Chief executive Scott Pritchard said today: “We’ve seen fantastic uptake in leasing from government agencies for the Bowen State & Charles Fergusson buildings, which are set for completion in quarter 4 2018 & quarter 3 2019, respectively, and are leased until 2037 & 2033.

Ewan Brown, director at the design firm, Wellington-based architects Tennent Brown, said providing an attractive & lively work environment would have a positive impact on productivity, staff retention & businesses’ ability to attract talent.

“40 and 44 Bowen St have been designed to cater to the demands of the modern workforce. Large, open floorplates allow tenants to tailor their fitouts to their needs and floor-to-ceiling glass, with ceiling heights of 2.95m, maximises natural light & views.”

Mr Pritchard said Precinct had seen demand for flexible workspace increase across its portfolios: “Flexible design allows businesses to quickly adapt & change. We’ve seen growing demand for businesses looking to implement agile working strategies, and we believe the layout for 40 & 44 Bowen St reflects & will accommodate this demand.”

New earthquake protection

He said the design had a number of features to minimise earthquake damage, and these would be the first new-builds in Wellington to employ ‘fluid viscous dampers’ in the structural frame. The dampers dissipate seismic energy to protect the building & fitout and prevent the accumulation of damage over time.

Structural engineers, Dunning Thornton, worked alongside Tennent Brown to deliver this seismic technology, to enable business resilience for the buildings’ tenants.

Dunning Thornton director Alistair Cattanach said: “In addition to resilient steel framing, the viscous dampers will increase the buildings’ performance significantly in a seismic event. The technology applied to these buildings will allow the structures to absorb seismic activity, meaning tenants are able to reoccupy the building shortly after the initial event and continue operating, even during the period of subsequent aftershocks.”

Attribution: Company release.

 

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Precinct confirms sale of quake-damaged Wellington building

Precinct Properties NZ Ltd confirmed on Tuesday that its sale of the former Deloitte House at 10 Brandon St in Wellington, for $10.2 million, has settled.

The 7.8 magnitude earthquake that hit Wellington in November 2016 badly damaged building services & fitouts in the 16-storey building.

Precinct took the property out of its investment portfolio last year, when its value had already plummeted, and called it a development property. Then it abandoned the idea of fixing the building up itself and looked for a buyer, which it found in April.

Deloitte House was valued at $62 million in 2008 but had dropped to $49.3 million, with a carrying value of $45 million, in 2015.

Following the November 2016 Kaikoura earthquake, the building needed to be remediated & seismically improved, and the valuation (and carrying value) dropped in 2017 from $49 million to $26.1 million, and then some more.

In Precinct’s report in March on the December 2017 half-year, the company said it had written the valuation down from $20.2 million in June to just $7 million in December.

Earlier stories:
23 April 2018: Precinct working on ANZ Centre deal, has conditional Wellington sale
19 March 2007: AMP trust buys Deloitte House in Wellington at 6.75% initial yield

Attribution: Company release.

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Precinct Properties presents a long list of positives from development & in financial structure

Major commercial property owner – and nowadays developer – Precinct Properties NZ Ltd lifted its net profit after tax for the year to June by 57.2% to $254.9 million.

The NZX-listed company’s biggest project at the moment is the $1 billion Commercial Bay development, redeveloping the Downtown Shopping Centre site at the foot of Auckland’s central business district. It’s also developing Bowen Campus in Wellington and has completed developments in Auckland’s Wynyard Quarter.

Image above: The trio of buildings at the centre of Precinct Properties’ strong performance – the existing PwC Tower at right, the new PwC Tower under construction and the existing HSBC House at 1 Queen St, to be redeveloped into a hotel with office above.

Chief executive Scott Pritchard said yesterday Fletcher Building Ltd had provided revised completion dates at Commercial Bay of September 2019 for the retail & December 2019 for the new PwC Tower (across Albert St from the building currently called PwC Tower).

Precinct also announced its plans for 1 Queen St, sitting on the Quay St frontage of the redevelopment, to include a 244-room luxury hotel operated by the InterContinental Hotels Group (IHG) – see separate story.

9% revaluation gain

Mr Pritchard said the quality of Precinct’s portfolio had resulted in a $208.7 million (9%) portfolio revaluation gain to $2.5 billion.

Precinct Properties is the largest city centre real estate owner in New Zealand, and Mr Pritchard said it was committed to its long-term strategy as a city centre specialist.

“The last financial year has delivered another strong result for our business. As we move forward with our strategy, we progressed a number of initiatives and achieved key milestones during the year.

“We have continued to take an active management approach with our investment portfolio & our development pipeline, leveraging Precinct’s market position.”

“The long-term outlook for the Auckland market remains strong, with solid demand drivers for city centre real estate across the office, retail, hotel & residential markets.”

Mr Pritchard said the Wynyard Quarter & Bowen Campus also contributed to this growth, with works progressing well over the last 12 months.

The Precinct Properties precinct: From the ANZ Centre up Albert St, down to the waterfront via Commercial Bay where Precinct is developing the new PwC Tower across the street from the existing PwC Tower, and yesterday announced the redevelopment of 1 Queen St (at right) to contain a hotel with offices on the upper levels.  Other Precinct buildings in this precinct are Zurich House and the AMP Centre.

Commercial Bay update:

Precinct’s reinforced its vision & long-term commitment to the rejuvenation of the central city with the announcement of the $298 million development at 1 Queen St (currently HSBC House), which will include the hotel in the lower half of the building.

Commercial Bay, looking out between the Cloud & Princes Wharf.

This development has been designed to integrate seamlessly with Commercial Bay. Its upper floors will also be remodelled to contain high quality office space & unique food & beverage options, including a rooftop bar.

Commercial Bay & its retail wrap’s Customs St frontage yesterday.

Mr Pritchard said phase one of the Commercial Bay retail remained on schedule, with international powerhouse H&M opening its flagship 3800m² store fronting Customs St in a fortnight, on Thursday 30 August. Passersby have been able to watch H&M’s creation in the new lowrise building beside the 21 Queen St offices of Zurich House, as windows have started to be placed at lower levels of the 39-storey Commercial Bay tower at the corner of Customs & Albert Sts.

“This marks a significant milestone for the transformational development which is reinvigorating the heart of the central city,” Mr Prithcard said. “The superb 4-storey retail offering promises to be the country’s premier H&M destination.

“Phase 2 of the Commercial Bay retail & the new PwC Tower have revised estimated completion dates, following the confirmation of a completion programme from main contractor Fletcher Building Ltd.

The revised completion dates are September 2019 for the Commercial Bay retail & December 2019 the new PwC Tower.

“The programme provided by Fletcher Building has been independently reviewed by Precinct’s expert programmer, RCP, who confirm the revised dates are achievable, subject to the main contractor’s performance.

“Precinct remains confident with the provisions of its construction contract, which protect the business from losses due to contractor delay.

“While any delay in a project is disappointing, we believe Fletchers are maintaining a very high standard of quality during a very challenging period within the construction industry.”

Commercial Bay’s entrance on to Quay St.

The new timeframes also affect prospective tenants: “Precinct continues to work closely with retailers at Commercial Bay to communicate the revised occupation dates. For those occupiers coming into the new PwC office tower, all have lease terms which extend beyond the revised completion dates of the office tower.”

Mr Pritchard said Commercial Bay continued to achieve a good level of leasing enquiry. Precinct had secured retail commitments to 76% and office commitments to 78%: “The $1 billion Commercial Bay waterfront development & lifestyle district is destined to become Auckland’s newest shopping, dining & social hub, offering a vast range of food & beverage outlets.”

Links:
Precinct Properties
Precinct Properties annual report
Commercial Bay

Related stories today:
Precinct Properties presents a long list of positives from development & in financial structure
Precinct Properties valuations & profit up, debt low
The 1 Queen St redevelopment

Attribution: Company release.

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Precinct Properties valuations & profit up, debt low

Precinct Properties NZ Ltd increased its net profit after tax by 57.2% to $254.9 million (2017: $162.1 million) in the year to June. The quality of Precinct’s portfolio including its active development pipeline has resulted in a portfolio revaluation gain of $208.7 million, or 9.0%.

Image above: The trio of buildings at the centre of Precinct Properties’ strong performance – the existing PwC Tower at right, the new PwC Tower under construction and the existing HSBC House at 1 Queen St, to be redeveloped into a hotel with office above.

Net operating income (distributable earnings), which adjusts for a number of non-cash items, has increased by 2.5% to $76.6 million ($74.7 million). This equates to 6.32c/share, in line with guidance (2017: 6.17c/share).

Revenue growth of 3.6% was primarily due to the completion of Wynyard Quarter stage 1, which was partially offset by foregone income related to development activity and 10 Brandon St, Wellington. After allowing for these transactions & activity, on a like-for-like basis gross rental income was 3.7% higher. This growth has driven an uplift in NPI by 5.4% to $95.3 million ($90.4 million).

As at 30 June 2018, Precinct’s portfolio value increased to around $2.5 billion following the strong revaluation gain. Precinct’s net tangible assets/share were up 12.9% to $1.40 (2017: $1.24).

Chief executive Scott Pritchard said yesterday: “The last financial year has delivered another strong result for our business. As we moved forward with our strategy, we progressed a number of initiatives and achieved key milestones during the year. We have continued to take an active management approach with both our investment portfolio and our development pipeline, leveraging Precinct’s market position.”

Focusing on a number of capital management initiatives during the year has resulted in $250 million of capital raised through the completion of a convertible notes offer & bond issue. Precinct also sold a 50% interest in the ANZ Centre in Auckland and sold 10 Brandon St in Wellington. These assets totalled $191 million of capital recycled.

“At year end our investment portfolio has continued to benefit from strong occupier markets. Achieving a high overall portfolio occupancy of 99% at year end and weighted average lease term of 8.7 years demonstrates this. Our Auckland portfolio has performed particularly, well with occupancy sitting at 100%, reflecting demand for premium inner-city office space. In Wellington, we have also reduced vacancy.

“In both Auckland & Wellington, we have successfully leased major expiries well ahead of vacancy. At the AMP Centre in Auckland, the QBE expiry has been fully leased at a premium of 17% to previous rentals. At Aon Centre in Wellington, 3 floors have been leased on the former IAG tenancy, with 2 remaining floors becoming available in early 2019.”

Mr Pritchard said the Auckland hotel market was experiencing unprecedented levels of growth in demand, which is forecast to persist through further growth in tourism numbers until at least 2025: “While a number of new hotel projects have been announced in the last 24 months, the increase in supply is expected to still fall short of demand over the short term and reach equilibrium over the medium to long term. This is expected to underpin robust room and occupancy rates.”

Commercial Bay

Commercial Bay remains on track to deliver a yield on cost of 7.5% and an increased profit on cost of 41% (June 17: 31%) or $283 million. Based on current project metrics, there remains a further $100 million of unrecognised development profit expected to materialise on completion.

Bowen Campus

In Wellington, construction works have continued to progress well over the last 12 months. We have now completed the facade installation at Charles Fergusson Tower with on floor works continuing. All works are targeted for completion late December 2018.

At Bowen State Building we have completed the majority of the structural works for the building including the north and south shear walls. The façade is now 90% complete for the building, installed from Level 1 to 10. On floor works are also underway to all levels.

Occupation of Bowen State Building by New Zealand Defence Force is expected in Q3 2019.

Financial highlights:

  • Net profit after tax increased by 57.2% to $254.9 million ($162.1 million)
  • Net property income, up 5.4% to $95.3 million ($90.4 million)
  • Net operating income, up 2.5% to $76.6 million ($74.7 million)
  • Full-year dividend, up 3.6% to 5.8c/share (5.6c/share), representing a 100% payout ratio (under AFFO – adjusted funds from operations)
  • Property revaluation gain of $208.7 million – 9% ($77.5 million)
  • Net tangible assets/share, up 12.9% to $1.40 ($1.24)
  • Earnings guidance for the June 2019 financial year, net operating income of about 6.60c/share, dividend expected to increase by 3.4% to 6c/share

Capital management:

  • $191 million of asset sales, providing capacity for new projects
  • $250 million of non-bank funding secured
  • Post-balance date refinancing of $760 million bank debt facility
  • Strong financial position, gearing of 25.0% (25.1%); pro forma gearing reduced to 19.4% at balance date following asset sales

Commercial Bay:

  • Advancing retail commitments to 76% (46% at June 2017) and office commitments to 78% (2017: 66%)
  • Yield on cost unchanged at 7.5%, with an increased profit on cost following the revaluation of 41% (June 2017: 31%), or $283 million
  • Phase 1 of the retail remains on schedule, with H&M opening its flagship 3800m² store on Thursday 30 August
  • A revised completion programme has recently been provided.

Bowen Campus:

  • Charles Fergusson Tower on track for completion in December & occupation by Ministry of Primary Industries
  • Bowen State Building to be occupied by NZ Defence Force, with lease starting April 2019
  • Yield on cost of 7.0%+, with an increased profit to 18%.

Future development opportunities:

  • Design has advanced for Wynyard Quarter development stages 2, 3 & 4; Precinct anticipates the second stage of the development will start in the next 6 months
  • Building design & marketing underway for precommitment leasing for the remaining development land at Bowen Campus.

Investment portfolio:

  • Auckland fully leased
  • Occupancy of 99% (2017: 100%) and a weighted average lease term across the portfolio maintained at 8.7 years (2017: 8.7 years)
  • 41 lease transactions completed, encompassing over 21,900m² & 598 parking spaces
  • Strong demand for space, with QBE expiring floors leased ahead of vacancy and 3 floors of IAG expiry leased at Aon Centre, Wellington
  • Strong like-for-like income growth of 3.0% – Auckland up 3.1%, Wellington up 2.9%
  • Generator occupancy of 73%, well above expectations; with 75% (9500m²) of its space launched during the year, the Generator business recorded a loss, as anticipated for this trading-up period.

Links:
Precinct Properties
Precinct Properties annual report
Commercial Bay

Related stories today:
Precinct Properties presents a long list of positives from development & in financial structure
Precinct Properties valuations & profit up, debt low
The 1 Queen St redevelopment

Attribution: Company release.

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The 1 Queen St redevelopment

Precinct Properties NZ Ltd announced the $298 million redevelopment of 1 Queen St – currently HSBC House – yesterday, to include a luxury hotel operated by the InterContinental Hotels Group (IHG), with office space above.

Images above & below: The redeveloped 1 Queen St, to contain hotel & offices, will sit alongside the Quay St frontage of the Commercial Bay development, which is dominated by a 39-storey tower now under construction.

Precinct chief executive Scott Pritchard said the premium waterfront redevelopment fronting the foot of Queen St, at the corner of Quay St, was designed to integrate seamlessly with Commercial Bay, which is being built on the former Downtown Shopping Centre site running up the rest of the first block of Queen St and facing Customs St East & Albert St, plus a small part of Quay St.

The overall project is 75% precommitted, with a management agreement entered into with IHG and a signed heads of agreement across 3700m² of the office premises. Precinct will fund the development through its existing debt facilities. On completion, the project is expected to generate a stabilised yield on cost of 7.0% and a profit on cost of 15%.

LT McGuinness will be the main contractor. Construction is scheduled to commence in the first quarter of 2020. LT McGuinness has been the contractor on Bowen Campus in Wellington & Wynyard Quarter in Auckland.

Project summary:

  • InterContinental Auckland will be a 244-room luxury hotel occupying levels 1-13 (excluding level 2)
  • Commercial office space will total 8700m², occupying levels 14-20
  • A rooftop bar & hospitality offering will feature on level 21
  • The lower levels of 1 Queen St are already being developed, to be included in the retail & hospitality offer of Commercial Bay
  • 1 Queen St will comprise a single-level basement & 22 upper levels, providing a total gross floor area of 27,500m².
  • The redevelopment will integrate with Commercial Bay from the ground level to level 2.
  • Signed heads of agreement over 3700m² of the office premises, which results in the overall project being 75% precommitted, with an expected yield on cost of 7.0% once complete
  • Entering into a 50% fixed price construction contract with LT McGuinness Ltd (the construction company owned by relatives of Mark McGuinness, head of Willis Bond Ltd, which is developing apartments in the Wynyard Quarter)
  • Construction is scheduled to start in 2020
  • The refurbishment is due for completion in 2022.

Links:
Precinct Properties
Precinct Properties annual report
Commercial Bay
LT McGuinness

Related stories today:
Precinct Properties presents a long list of positives from development & in financial structure
Precinct Properties valuations & profit up, debt low
The 1 Queen St redevelopment

Attribution: Company release.

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Precinct refinances early

Precinct Properties NZ Ltd has refinanced a large chunk of its $760 million bank debt facility over 2 years early – it was due to expire in November 2020.

Chief executive Scott Pritchard said yesterday the refinance extended $460 million of the existing facilities in 2 new tranches expiring in July 2022 & July 2023. The balance will still expire in November 2020.

“The new facility reduces refinancing risk to our business and provides sufficient funding capacity to deliver our committed developments,” he said.

The refinance extends the tenor of the existing facilities, reducing refinancing risk, and improves the weighted average term to expiry to over 4 years. Funding continues to be provided by Precinct’s existing lenders ANZ Banking Group, the Bank of NZ, Commonwealth Bank of Australia, Westpac & HSBC.

Attribution: Company release.

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Precinct deal on ANZ Centre is with US fund

Precinct Properties NZ Ltd has entered into a binding agreement with a fund controlled by US investment manager Invesco Ltd for the sale of a 50% interest in the ANZ Centre in Auckland for $181 million. The sale transaction remains subject to Overseas Investment Office approval.

Precinct chief executive Scott Pritchard said on Friday the sale price was consistent with the 30 June 2018 independent valuation and reflected a 12% premium to the 30 June 2017 valuation on a pro rata basis.

Precinct acquired the building on Albert St in 1997, and Mr Pritchard said it had generated a property level internal rate of return of 9.0%. Precinct completed a $76 million upgrade in 2013 and, Mr Pritchard said, it remained committed to maintaining the building as one of New Zealand’s premium office towers.

Following settlement of this sale and assuming the draft portfolio revaluation gain of $202 million, announced last Monday, Precinct will reduce its gearing to about 19.5%. Pro forma gearing will sit at about 29% after allowing for all commitments, including development of Commercial Bay in Auckland and Bowen Campus in Wellington.

Mr Pritchard said the sale “demonstrates our active management approach. It is in line with our business strategy and enables us to recycle capital out of assets like the ANZ Centre into higher yielding development opportunities.”

At the end of May, Atlanta-based Invesco had $US977 billion of assets under management

Earlier stories:
25 June 2018: Precinct Properties gets 8.8% revaluation lift
24 April 2018: Precinct working on ANZ Centre deal, has conditional Wellington sale

Attribution: Company release.

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Precinct Properties gets 8.8% revaluation lift

Precinct Properties NZ Ltd’s portfolio has been revalued upward by 8.8% to $2.5 billion.

The draft revaluation gain, to be confirmed in the annual result out on 16 August, was $202 million, compared to a $77.5 million gain last year.

Net tangible assets/share will rise from $1.23 to $1.41.

Chief executive Scott Pritchard said today the development portfolio contributed significantly to the revaluation gain, reflecting development profit recognition & cap rate firming on these projects.

On a like-for-like basis, Auckland asset valuations increased by about 13% and Wellington was largely unchanged. The increase recorded in Auckland was mainly attributable to a firming in cap rates supported by recent asset sales evidence, together with market rental growth.

In Wellington, while rentals & cap rates improved over the last 12 months, this had been offset by additional operating expenses, mainly insurance premiums & rates.

Mr Pritchard commented: “This strong result reflects Precinct’s active management approach, with the investment portfolio value increasing by around $100 million and the current development projects benefiting from a $100 million gain.

“Forecast net profit, which considers a project’s status & estimated cost to complete, from both Commercial Bay & Bowen Campus developments, has increased to $313 million. This follows Commercial Bay’s value on completion increasing to just over $1 billion. Pleasingly, based on current project metrics, there remains a further $125 million of unrecognised profit which is expected to materialise on completion of these projects, which would add a further 10c/share to pro forma NTA.”

Attribution: Company release.

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Precinct working on ANZ Centre deal, has conditional Wellington sale

Precinct Properties NZ Ltd says it’s working with one party on the sale of a 50% interest in the 39-storey ANZ Centre in Auckland and has an agreement to sell the quake-damaged former Deloitte House in Wellington (pictured) at a huge markdown.

Precinct chief executive Scott Pritchard said yesterday: “The half-share interest in the ANZ Centre has received very strong interest and we look forward to forming a long-term relationship with the preferred bidder.

“With several options for 10 Brandon St having been assessed to date, we believe the sale of this asset represents the best option for Precinct. Progressing these asset sales will enable Precinct to focus on and recycle capital into its future development opportunities.”

The company sought expressions of interest this year in a 50% interest in the ANZ Centre on Albert St in Auckland. The campaign has closed, and Mr Pritchard said pricing indications were at a premium to the June 2017 valuation of $324 million.

Precinct spent $76 million refurbishing the whole of the ANZ Centre after the bank committed to a new long-term lease in 2011. The building has a net lettable area of 33,520 m² and a weighted average lease term of 8.6 years.

Mr Pritchard said there’d been strong interest in the opportunity to take a 50% interest in the building. “Precinct has agreed to a period of exclusivity for one party to complete due diligence and enter into a binding sale & purchase agreement. At this stage there is no binding agreement for the sale & purchase of the property.”

Changing fortunes on Brandon St

Precinct took the former Deloitte House at 10 Brandon St, Wellington, out of its investment portfolio last year, when its value had already plummeted, and called it a development property. Then the company abandoned the idea of fixing it up itself and looked for a buyer.

It’s found one at $10.2 million, conditional on ground lessor approvals, and the sale is due to settle in August.

Deloitte House was valued at $62 million in 2008 but had dropped to $49.3 million, with a carrying value of $45 million, in 2015.

Following the November 2016 Kaikoura earthquake, the building needed to be remediated & seismically improved, and the valuation (and carrying value) dropped in 2017 from $49 million to $26.1 million, and the some more.

In Precinct’s report in March on the December 2017 half-year, the company said it had written the valuation down from $20.2 million in June to just $7 million in December.

The building had 14 storeys when it was constructed in 1983 and had 2½ new floors added during a retrofit in 2005-06. It also now has 34 basement parking spaces & ground-floor retail, and a total lettable area of 12,972m².

Attribution: Company release.

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Ex-BNZ & State Tower takes on third name

The former BNZ Tower in Wellington, more recently known as the State Insurance Tower, will become the Aon Centre on Sunday.

Its construction for the Bank of NZ began in 1973, but a demarcation dispute over who should weld its structural steel not only stopped work on this tower but tilted highrise developers heavily in favour of structural concrete.

A second construction contract was needed to complete it, in 1984. The BNZ moved its head office to Auckland in 1998 and State Insurance took on naming rights.

Insurance brokerage Aon has been a tenant since 2013.

Precinct Properties NZ Ltd owns & manages the building, which fronts Lambton & Customhouse Quays as well as Willis St. It has 22 office floors, 3 parking levels, underground & ground level retail arcades and a foodcourt.

Attribution: Precinct release.

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