One of New Zealand's biggest listed landlords pushed up half-year profit 12 per cent from $34.8 million in the half-year to December 2015 to $39.1m in half-year to December, 2016 due to a massive tax bill cut.
Net property income for Auckland-headquartered Precinct Properties fell from $53.7m in the 2015 half-year to $45.9m in the latest period yet the bottom-line figure improved.
Precinct's tax bill fell from $6.9m in the half-year to only $600,000 in the more recent six months, pushing operating profit after tax up from $35.7m to $38.8m.
"There's a couple of one-off items which are driving that," said chief executive Scott Pritchard. "Principally it's due to the fact that we are now under way with about $1 billion of development activity. That affects tax because when you demolish a building, there's a whole lot of fixtures and fittings that are deductible for tax purposes.
"We are also capitalising our interest costs on development which is deductible for tax purposes. So the effective tax rate has come down because of the level of development activity. We expect to have a relatively low tax rate as we make our way through the projects, then it will revert to a more normal level," Pritchard said.
A detailed presentation has been released to the NZX, explaining progress on the $1b of development by the company which owns properties valued at $1.8b.
One of the more outstanding points made in that presentation was a revelation that Deloitte House at 10 Brandon St, Wellington has been devalued by $12m.
"We have done a lot of intrusive assessments of earthquake damage and found structural strength of that building is not as high as we thought it was. It needs strengthening and we will need to spend $10 million to $12 million on it," Pritchard said.
Retail tenants remained on the premises but all commercial tenants throughout 14 levels had left, he said.