NZX-listed Precinct Properties NZ will form a new venture with a Singaporean government entity which has the potential to become a $1 billion business.
"Precinct has conditionally agreed the formation of a new real estate investment partnership with Singapore sovereign wealth fund GIC," the business just told the stock exchange.
"The partnership will initially acquire five assets from Precinct's existing portfolio in Auckland and Wellington totalling around $590m and has the ability to grow to around $1 billion over time."
GIC will buy three Wellington and two Auckland assets from Precinct: Defence House, Charles Ferguson Building and Mayfair House in the Capital and Auckland's 10 and 12 Madden St in the Wynyard Quarter.
Precinct will have a minority or 24.9 per cent share of the "partnership", to be geared 50 to 60 per cent loan to value ratio.
GIC already has a strong and growing presence in New Zealand.
Today's announcement follows Precinct selling a half-stake in the ANZ Centre on Albert St to a GIC entity.
GIC also owns half of New Zealand's largest retail shopping centre chain with ASX listed Scentre Group where a $1b investment was made two years ago at Newmarket to expand that mall.
The five GIC/Scentre malls in this country are all branded Westfields.
Scott Pritchard, Precinct CEO, announced the deal.
"Establishing a new collaborative and committed partnership with a global investor of this scale and quality represents a strategic step forward for our business. The partnership with GIC provides access to capital with an aligned partner and fully supports the execution of Precinct's future growth, further enhancing shareholder returns.
"We are leveraging our well-located premium assets, experienced team and Precinct's unique market position. The newly established partnership will target stable, secure low risk returns through investment in well-leased, premium-grade real estate."
Precinct will be the investment manager of the partnership and there is a market fee arrangement for the funds and property management of the assets. Proceeds from the asset sales of the seed portfolio will initially repay bank debt and provide funding for future growth, Pritchard said.
Today, Precinct also announced its interim result for the six months to December 31, 2021.
Revenue was down slightly from $97.1m a year ago for the six months to $96.9m. Operating income rose from $42.8m to $45.5m.
Net profit after tax was well down, from $163.2m to $42.2m, mainly due to the change in unrealised property revaluations.
Those boosted last year's half-year accounts for the same period by $148.5m but for this year, a nil amount was recorded which hit the bottom line.
"An internal review of the 2021 property valuations undertaken in December indicated no material value movement in the period. We would normally only undertake annual valuations," Precinct said in a somewhat surprising statement.
That contrasts with a massive revaluation gain of more than $392m at Property For Industry in its half-year results out this week. But Pritchard said PFI's result was annual and Precinct's was interim. No revaluations were being announced - it wasn't that buildings weren't increasing in value.
Precinct shareholders get higher dividends this half-year, up from 3.25cps to 3.35cps.
Jarden analysts flagged the pandemic as hitting the company financially.
"We have already made allowance for the impact of the long Auckland lockdown on Precinct, particularly on Commercial Bay retail, Generator and Commercial Bay Hospitality," wrote Arie Dekker and Vishal Bhula in a preview of today's result.
Omicron was likely to add some further pressure on the business in the second half of its financial year which it is now trading in, they said.
They estimated Covid could have a $7m impact on the full-year result.
Half-year accounts today revealed the impact.
Precinct's tenants were restricted to varying degrees during the 107-day Auckland lockdown.
The company provided support via a range of measures including rent abatements of $4.1m, rent deferrals of $100,000 and $400,000 in lease restructures.
Precinct did not claim the Government wage subsidy.
Commercial Bay Hospitality claimed a further $500,000 of subsidy during the period to enable hospitality staff to be retained. Short-term flexible leasing business Generator did not claim any further subsidy, the accounts said.
Precinct says it is New Zealand's only listed city centre specialist landlord owning premium and A-grade commercial office buildings.
It owns Auckland's HSBC Tower, AON Centre, Jarden House, Deloitte Centre, 204 Quay Street, Mason Bros. Building, 12 Madden Street, 10 Madden Street, the new $1b PwC Tower and Commercial Bay retail.
In Wellington, it has the AON Centre, NTT Tower, Central on Midland Park, No. 1 and No. 3 The Terrace, Mayfair House, Charles Fergusson Building, Defence House, Bowen House and Freyberg Building.
Precinct also has Generator, a specialist in short-term leasing, renting 13,600sq m in nine locations in Auckland and Wellington.
Shares have been trading around $1.52, giving a market cap of $2.4b.