Precinct Properties New Zealand : Annual General Meeting 2018

NZX announcement - 1 November 2018

Precinct Properties New Zealand Limited Annual General Meeting

11:30am (New Zealand time), Thursday 1 November 2018

The Maritime Room, Princes Wharf, Corner Quay and Customs Streets, Viaduct Harbour, Auckland 1142

Chairman's opening address

Good morning and welcome everyone. I'm Craig Stobo, Precinct's Chairman, and it's a pleasure to welcome you all here to our 2018 Annual General Meeting.

It is great to see so many of you, our shareholders present today at The Maritime Room.

2018 has been another successful year for Precinct. Significant progress has been made on our major initiatives and we have seen the business take substantial steps forward.

We have continued to enhance our portfolio. We have maintained occupancy in our portfolio, sold assets to recycle capital, progressed our developments, sourced non-bank debt to strengthen the balance sheet, and importantly, we have grown earnings and dividends for our shareholders.

I would now like to introduce the members of the Board and executive team joining us here today.

We also have with us representatives from our auditors, Ernst & Young, tax advisors, KPMG, our legal advisors, Chapman Tripp, along with Precinct staff.

On behalf of the Board and Executive team, I would also like to acknowledge, today, the recent resignation of Precinct's General Counsel and Company Secretary, Davida Dunphy.

Davida joined Precinct in 2014 and has been responsible for the provision of legal and compliance support to the business. She is leaving Precinct to return to the legal profession

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joining law firm DLA Piper New Zealand. Although we are disappointed to see Davida leave, we thank her for her contribution to Precinct and wish her well with her future endeavours.

Meeting agenda

We will shortly begin by reviewing the recent performance and activity of Precinct. We will then take any shareholder questions after concluding the presentation, before proceeding to the formal business of the meeting.

Today, we will consider four ordinary resolutions. This includes two resolutions relating to the re-election of Independent Directors, one resolution on fixing the remuneration of Precinct's auditors, Ernst and Young and lastly, one resolution that the directors be authorised to fix the remuneration of the independent directors of the company from 1 November 2018.

Today's forum provides an opportunity for you, our shareholders to communicate directly with those who are responsible for your investment in Precinct. We welcome any feedback you may have and on behalf of my fellow board members, I would like to acknowledge the good suggestions made thus far by shareholders for change.

As an example of changes made following your feedback, voting today will be conducted by way of a poll in accordance with NZX Corporate Governance recommendation 8.4, with voting results of the poll to be announced to the NZX later this afternoon.

We are also providing, today, full transparency of director fees including committee memberships. The proposed rates in resolution 4 on Directors remuneration have been independently benchmarked by Strategic Pay Limited, with a review of both the structure of payments and the current level of directors' fees having been completed.

We recognise an effective board comprises a balance of independence, tenure, skills, knowledge, experience and perspectives amongst directors. With this in mind, we are looking to proactively advance our board succession planning.

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Following the meeting, we hope you will stay and join us for some morning tea and refreshments after the meeting.

Delivering results

During the last financial year, we have delivered a strong result and we are pleased with the performance achieved across our business.

The quality of Precinct's portfolio including its active development pipeline resulted in a significant portfolio revaluation gain of $208.7 million or 9.0%, increasing the value of Precinct's portfolio to around $2.5 billion.

This contributed to a net profit after tax of $254.9 million, up 57.2%. Net tangible assets per share rose 13% to $1.40 and net operating income also increased by 2.5%, in line with guidance.

Full year dividends paid to shareholders and attributed to the 2018 financial year was 5.80 cents per share, representing a 3.6% increase.

Focused strategy

As we continue to focus on our long-term strategy as city centre specialists, we are particularly pleased with the strong position we are in. Our FY18 results reflect continued growth in earnings as well as the targeted lift in portfolio quality being achieved.

Precinct's strategy is a continual focus of the Board. It has continued to evolve over the last 20 years. Reviewed annually, our strategy is regularly refined, and we believe it provides clear direction for both the Precinct team and our shareholders.

Importantly, we are monitoring risk and applying sound capital management. This has resulted in a total of $250 million of capital raised in FY18 through the completion of a convertible notes offer and a bond issue. Asset sales totalling $191 million which Scott will talk more about has

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also been completed. These initiatives are providing the necessary available capital to match our development commitments.

FY19 Dividend

It has been five years since we fully transitioned our dividend policy to a sustainable AFFO based policy. Notably, our AFFO payout ratio has averaged around 101% over this period ensuring that what we pay in dividends is consistent with the cash generated in the business.

We continue to see dividend and AFFO growth through a sustainable dividend policy, an effective strategy and strong markets.

Following another good year for Precinct, I would like to confirm a first quarter dividend for the 2019 financial year of 1.50 cents per share, representing an increase of 3.4%.

We are delighted to be providing shareholders with dividend growth which is consistent with our previously published long-term earnings pathway.

The Board expect to pay a 6.00 cents per share dividend for the full 2019 financial year.

Leasing momentum, construction progress, the recent announcement of One Queen Street and the second stage of Wynyard Quarter which Scott will talk to you more about shortly, provides us confidence with our earnings outlook.

Payment of the 2019 first quarter dividend will be on the 3rd of December this year.

Increased Disclosure - Sustainability

Recognising sustainability is an important part of Precinct's business activities. It's strategy has been designed in parallel with Precinct's broader business strategy.

We have defined sustainability at Precinct as enabling sustainable and successful business, improving our operational performance and incorporating sustainable design across our portfolio of properties.

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The Board and team at Precinct are focused on our Environmental, Social and Governance

(ESG) issues, which extends beyond reporting on them. We are developing plans of action with targets to achieve our goal of creating sustainable value through city centre real estate.

Our sustainability committee leads this work and includes staff from key roles across the business.

In line with our long-term view we are seeking to deepen our understanding of sustainability and future-proof our business. We have undertaken a number of initiatives in the last year to strengthen how we define sustainability and clarify the related material risks and opportunities.

We are pleased with the progress we are making.

As you would have seen, this year Precinct prepared its annual report in accordance with the

Global Reporting Initiative (GRI) Standards. By reporting to GRI Standards we are providing greater clarity and accountability around our sustainability issues including how we are responding to them.

For those of you who haven't already, we encourage you all to read more about

"Sustainability at Precinct" in our 2018 Annual Report.

GRESB

Being able to measure Precinct's sustainability performance and having measurable long-term targets is just as important. The overarching measure we have chosen to use as Precinct's core ESG indices performance benchmark is the Global Real Estate Sustainability Benchmark

(GRESB).

GRESB assessments are guided by what investors and the industry consider to be material issues in the sustainability performance of real estate investments. It is considered the global standard for ESG benchmarking and reporting for real estate.

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