Precinct Properties affirms dividend guidance

Precinct Properties opened its long awaited Commercial Bay development this week. Photo / Alex Burton

Precinct Properties New Zealand is paying a third quarter dividend of 1.575 cents today and is confident it will meet its full year dividend guidance of 6.3 cents, up 5 per cent on 2019.

In its latest market update, the inner-city A-grade commercial office specialist said while there had been challenges resulting from the Covid-19 pandemic, its "high quality client base, high occupancy and long term weighted average lease term" gives the board enough confidence to stick with guidance.

This week the company opened its long awaited Commercial Bay development, although last month deferred construction of the linked $300 million One Queen St development.

Chair Craig Stobo said the deferral will "enable us to more reliably assess the long terms on the tourism market and broader economy" and to ensure the eventual redevelopment generates maximum return.

At March 31, Precinct's portfolio value was $2.9 billion, boasting overall occupancy levels of 98 per cent and an average lease term of 8.6 years. Dividends declared for the year to date are 4.725 cents a share, from a net asset value of $1.50 a share.

During the quarter Precinct finalised the $77m sale of Pastoral House in Wellington to property funds manager Oyster Group.

Shareholder returns for the quarter, down 6.2 per cent, were still better than listed property average which was down 20.4 per cent, it said.

Neutral rating

Forsyth Barr analyst Rohan Koreman-Smit rates the stock 'neutral' with a target price of $1.52, for a gross yield of 4.4 per cent.

He said with questions around medium term rents, occupancy and capitalisation, his targeted sector investments included Investore Property, Property for Industry and Vital Healthcare Property Trust, largely for their defensive weightings "in this time of uncertainty."

Precinct shares dropped 2.4 per cent to $1.62, off early March highs of $1.94.