Precinct gets first-half profit boost

Listed property investor and developer Precinct has reported a higher net profit for the six months to December, compared to a year earlier.

Precinct, which recently changed its name from AMP NZ Office, reported profit after tax of $23.6 million.
Despite operating income slipping 1.5 per cent to $26.2m based on increased tax, its net profit was a $3.2m improvement from $20.4m in the half year to December 2011.  

Rental revenue had risen 6.8 per cent in the period to $68.9m. Property expenses shot up 10.9 per cent to $21.3m thanks to higher insurance and council rates costs across its increased portfolio. 

Its total insurance expense rose $1.7m to $12.1m.

For the first time in four years it would be increasing the amount of first-half dividend being paid to shareholders, based on its expectation earnings would remain positive. 

Investors would receive 1.6 per cent more than last year at 2.56 cents a share.

The occupancy of its commercial building portfolio rose 3 per cent to 95 per cent.  

Chief executive Scott Pritchard described the first half of the current financial year as an "active period" for the company.

In September, it spent $90m buying Auckland's Downtown Shopping Centre from mall operator Westfield, giving it ownership of a significant chunk of the city's waterfront properties. The shopping centre was adjacent to its existing assets Zurich House office tower, PWC Tower, ANZ Centre and AMP Centre.

"Our new corporate identity has been greeted positively," Pritchard said in a statement to NZX this morning. 

"We ... 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 [at 171 Featherston St]." 

In November, it lost out on a contract to lease up to 60,000sq m of Wellington office space to the Government, after spending $50.4m on buying the Bowen Campus behind parliament in April, that it hoped could be rented to public-sector tenants.

However, during the interim period it signed several lease transactions, including five at its 125 The Terrace property, to tenants such as Telecom, seven at its SAP Tower in Auckland, and two at its AXA Centre in Auckland.  

Its debt gearing was at 33.5per cent, within its 50 per cent limit. Late last year it secured a new $125m tranche of bank funding expiring 2017.

Pritchard said its outlook for prime CBD office space continued 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 4per cent and 4.5per cent over 2013,"he said.

"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's share price was unchanged at $1.04 late this morning.