This article first appeared on GuruFocus .
Release Date: August 26, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Record leasing activity with close to 40,000 square meters completed, an all-time high for the business, and solid leasing spreads.
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Investment portfolio maintained high occupancy at 97% and increased weighted average lease term to over 7 years.
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Completed over half a billion in developments, including 55 Molesworth Street and two build-to-sell residential projects for capital partners.
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Capital partnering strategy advanced significantly, with office platforms growing by around $800 million and total partnerships reaching $2.2 billion.
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Strong balance sheet position with pro forma gearing reduced to 29% and diversified funding sources, providing capacity for future opportunities.
Negative Points
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NTA per share declined from $1.18 to $1.13, largely due to valuation declines in development assets, particularly downtown.
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Auckland office FFO growth was modest at 0.8% due to lower physical occupancy from leasing timing, despite rental growth.
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Wellington office market remains subdued, with softer net rents and higher rates impacting valuations and rental growth.
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Total comprehensive income was a loss of $12.6 million, reflecting continued valuation declines in the second half.
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Dividend guidance remains flat at $6.75 per share, with FFO expected to be below the dividend in FY27, indicating limited near-term earnings growth.
Q & A Highlights
Q: Regarding the Downtown development, when is it realistic to secure a capital partner, and how would fee structures impact the 6.5% to 7% yield on cost? A: George Crawford (Deputy CEO) stated that a capital partner could come on board at three stages: pre-construction, during construction, or on completion. While demand for completed premium office buildings is high, return requirements during the construction phase are likely too high for Precinct to make the project work. The most likely stage for a partner is during construction, once investors can see the development progressing. Richard Holder (CFO) added that internal charges from the Precinct management business will be costed back to the project at market rates, but stripped of profit, and this is included in the total project cost.
Q: Can you bridge the gap in Auckland office FFO, which went backwards despite strong leasing metrics and rental growth? A: Scott Pritchard (CEO) explained that while the portfolio ended the year at 97% occupancy, actual physical occupancy during the year was slightly north of 96%, leading to long voids in Auckland. The strong leasing surge at the back end of the year brought occupancy back to 97%, but the income generation during the year was impacted. He noted that the lease expiry profile in the next 12 months bodes well for future performance.
Q: Regarding the stage one yields for Downtown, is the cost of basement works and piling to support the second tower allocated to stage one or stage two? A: Scott Pritchard (CEO) confirmed that all foundational costs, including basement works and piling for the future second tower, are allocated into stage one. There will be a small asset held on the balance sheet representing the option value above podium 2, but all costs are in stage one.
Q: What are the internal off-ramps for the Downtown project regarding return targets and tenant pre-commitment slippage? A: Scott Pritchard (CEO) declined to provide specific details due to commercial sensitivity but emphasized that return requirements are critical. He noted the volatility in bond markets and its correlation to cap rates. The company will monitor returns closely and engage with the board between now and April next year. Ultimately, a decision to proceed will require conviction that returns compensate for the risks taken.
Q: Why is FFO effectively guiding to flat underlying, and when will FFO start to grow and cover the dividend? A: Richard Holder (CFO) explained that the flat FFO was expected for FY26 and FY27, driven by de-gearing initiatives like the equity issue and asset sales, and the transition to the capital partnering strategy. The full accretion from these initiatives hasn't come through yet. There is also a drag from equity-accounted investments like Orums. He expects FFO to increase from FY28 onwards. Regarding tax, the company anticipates being in a tax expense position for FY27, but no cash tax will be paid due to available offsets.
Q: How is the student accommodation project at 256 Queen Street tracking regarding capital partnering? A: George Crawford (Deputy CEO) stated that the project is going well from a construction and market perspective. The comparable Lorne Street project opened with strong occupancy (over 90%) and good rates, providing a positive backdrop. Precinct is in the market with JLL and is in early-stage discussions with a potential partner, and is pleased with the progress.
Q: What is the NTA per share loss being attributed to the Downtown car park each period? A: Scott Pritchard (CEO) stated that the company has lost about 1 to 2 basis points of NTA in the last 12 months due to the valuation methodology, which treats it as a stabilized car park. Once development gets underway, they expect to recover this. The cost base, not the devalued holding, is used in the feasibility, so it is seen as a timing issue.
Q: Can you provide more detail on the strategy shift for residential projects, particularly regarding sites like Dover and Orums? A: Scott Pritchard (CEO) explained that the company has learned that buyer appetite, particularly at the downsizing and premium end, is focused on smaller boutique projects like Pillars and Your House. The Dover site, which was more mid-market, is under review as the company has an option to acquire it next year. For Orums, there are several solutions, including staging the development or exploring other uses for the site, and the company retains strong conviction in it.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
