Precinct Properties' operating income rose in the past year but net profit after tax fell due to devaluations from the pandemic, particularly on big inner-city Auckland office blocks.
The NZX-listed landlord with real estate valued at $3 billion made $35.1 million net after tax profit in the year to June 30, 2020 which included unrealised revaluation losses of $66.3m, compared to last year's $190.4m profit, which took in $161.7m from revaluation gains.
Operating income before expenses rose from last year's $95.3m to $105.8m.
"The impacts of Covid-19 on valuations contributed to total comprehensive income after tax reducing," Precinct said.
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The new Commercial Bay office/restaurant/shopping centre was hit hardest: its valuation fell 7.4 per cent or $80.6m to be worth $1.005b. The value of neighbouring HSBC House at 1 Queen St fell by $28.4m to be worth $102m today.
Adjusted funds from operations, adjusting for several non-cash items, rose by 11.8 per cent to $82.7m (previously $74.0m) or 6.29cps.
The business said result reflected the execution of its long-term strategy combined with the stable and secure income its portfolio generates from its tenants and asset base - in the last few years, Precinct has readjusted its property portfolio by selling lower-grade buildings.
Precinct pointed to losing 9 per cent of annual rent during the last lockdown, because it said it got 91 per cent but was "able to support those occupiers who needed assistance".
Full-year dividends were 6.30 cents a share, representing a year on year increase of 5 per cent and an adjusted funds from operation dividend payout ratio of 100 per cent.
New shops and restaurants in Commercial Bay opened on June 11 and were fully leased.
"Since opening, the centre has benefited from around two million visitors to August 9 and is performing ahead of expectations in terms of sales performance," the company said.
A cloud hangs over the popularity of inner-city shops and offices. Precinct said: "2020 has undoubtedly presented a number of unexpected challenges at both a local and global level as a result of the Covid-19 pandemic. Locally, economic conditions and demand drivers for city centre real estate are slowly becoming more apparent, however on August 12, Auckland returned to alert level 3 and the rest of New Zealand was placed in alert level 2 for three days. Uncertainty remains and the full effects of Covid-19 are still evolving."
Yet solid leasing levels across the portfolio has achieved increased net property income of 2.1 per cent to $97.2m (previously $95.3m).
The second stage of Wynyard Quarter at 10 Madden St is progressing, fully leased, on budget and on programme for completion end of this year.
The second stage of Bowen Campus project is underway in Wellington. That has a 72 per cent pre-committed with leasing to EY and Fujitsu. The expected total project cost of $90m.
The redevelopment of 30 Waring Taylor is underway and that will be the first Generator site in Wellington.
Precinct's expansion office/hotel plans for One Queen St or HSBC House remains on hold.
Auckland market conditions are "resilient albeit potential sublease space emerging in secondary and fringe locations. Prime vacancy rates remain largely unchanged despite increase in stock following completion of new PwC Tower at Commercial Bay," it said.
Occupiers continue to seek out high quality, well-located space albeit prime rentals will likely remain static in the short term due to increase in available options, Precinct noted.
On the outlook, Precinct cited the pandemic and economic uncertainty but said it aimed to grow its dividend by 3.2 per cent. It would look for opportunities to grow value and buy under-valued assets.
Shares are trading around $1.72.