Precinct Properties is pushing ahead with its nearly $300million development of 1 Queen St, in Auckland, the company confirmed yesterday.
The project would comprise about 50% in premium office space and the rest in a new luxury hotel for which Precinct had secured InterContinental Hotel Group as the operator on 15-year terms.
Forsyth Barr broker Lyn Howe said the total cost of the project had increased materially from the previous estimate of $150million.
Precinct expected to achieve an expected yield on cost of 7% on completion, which appeared ambitious at first glance.
Precinct also announced the Wynyard State Two and Bowen Campus Stage Two developments had both progressed, although neither had been committed at this stage.
Committed gearing lifted from 29% to 34%, she said.
Precinct announced a profit after tax yesterday of $254.9million, up 57.2% on the previous corresponding period.
Net property income increased by 5.4% to $95.3million and there was a revaluation gain of $209.7million, or 9%.
The full-year dividend of 5.8c per share was up 3.6% and represented a 100% payout ratio, the company said in a statement.
Precinct chief executive Scott Pritchard said the financial year had delivered another strong result.
Focusing on capital management initiatives during the year had resulted in a total of $250million of capital raised through the completion of a convertible notes offer and bond issue.
Progressing the sale of a 50% interest in the ANZ Centre, in Auckland, and the sale of 10 Brandon St, Wellington, were other examples demonstrating Precinct's active management approach, he said.
The assets totalled $191million of capital recycled during the period.
At balance date, Precinct's investment portfolio had continued to benefit from strong occupier markets.
Achieving a high overall portfolio occupancy of 99% at balance date and weighted average lease terms of 8.7 years was the proof, Mr Pritchard said.
"Our Auckland portfolio has performed particularly well with occupancy sitting at 100%, reflecting demand for premium inner-city office space. In Wellington, we had also reduced vacancy, increasing occupancy levels, through active leasing during the year."
Ms Howe said her main impressions from the report were both the office and retail stage two of Commercial Bay had been delayed by about six months from previous timing expectations. They were now December 2019 and September 2019 respectively.
Precinct remained "comfortable" with its contract provisions and highlighted lease terms for tenants moving in were all for longer than the completion dates.
Net tangible assets valued lifted 23cps to $1.40, driven by the revaluation gain. It was slightly ahead of expectations, she said.
Precinct shares last traded at $1.42, up 2.16%.
