Full Year 2026 Precinct Properties New Zealand Ltd Earnings Call

August 26, 2026

Speaker #1: Thank you for standing by, and welcome to the Precinct Properties 2026 full-year results. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session.

Operator: Thank you for standing by, and welcome to the Precinct Properties 2026 full-year results. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number 1 on your telephone keypad. I would now like to hand the conference over to Mr. Scott Pritchard, Chief Executive Officer. Please go ahead.

Operator: Thank you for standing by, and welcome to the Precinct Properties 2026 full-year results. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Scott Pritchard, Chief Executive Officer. Please go ahead.

Speaker #1: If you wish to ask a question, you will need to press the star key followed by the number 1 on your telephone keypad. I would now like to hand the conference over to Mr. Scott Pritchard.

Speaker #1: Chief Executive Officer, please go ahead.

Speaker #2: Thank you, Drew, and good morning, everyone, and welcome to the 2026 annual results briefing for Precinct. I'm joined today by George Crawford, Precinct Deputy CEO; Richard Hilder, Precinct Chief Financial Officer; and Anthony Randall, our General Manager of Property.

Scott Pritchard: Thank you, Drew, and good morning, everyone, and welcome to the 2026 annual result briefing for Precinct. I am joined today by George Crawford, Precinct's Deputy CEO, Richard Hilder, Precinct's Chief Financial Officer, and Anthony Randell, our General Manager of Property. The agenda for today's call is outlined on page 2 of the presentation. I will shortly provide an overview of the highlights of the result and the key themes our business is facing before providing an overview of our strategic progress. I will then hand over to Richard, who will detail the financial result before George provides an overview of our capital partnerships and the investment market. Ants will provide an update on our portfolio performance, and following that, I will spend some time on our development projects, including some more detail on the proposed Downtown development.

Scott Pritchard: Thank you, Drew, and good morning, everyone, and welcome to the 2026 annual result briefing for Precinct. I am joined today by George Crawford, Precinct's Deputy CEO, Richard Hilder, Precinct's Chief Financial Officer, and Anthony Randell, our General Manager of Property. The agenda for today's call is outlined on page two of the presentation. I will shortly provide an overview of the highlights of the result and the key themes our business is facing before providing an overview of our strategic progress. I will then hand over to Richard, who will detail the financial result before George provides an overview of our capital partnerships and the investment market. Ants will provide an update on our portfolio performance, and following that, I will spend some time on our development projects, including some more detail on the proposed Downtown development.

Speaker #2: The agenda for today's call is outlined on page 2 of the presentation. I will shortly provide an overview of the highlights of the result and the key themes our business is facing before providing an overview of our strategic progress.

Speaker #2: I'll then hand over to Richard, who will detail the financial results, before George provides an overview of our capital partnerships and the investment market.

Speaker #2: Ants will provide an update on our portfolio performance, and following that, I'll spend some time on our development projects, including some more detail on the proposed downtown development.

Speaker #2: Finally, I'll provide some concluding comments and will be happy to answer any questions you may have. Turning to page 3, we are pleased with the achievements over the past 12 months.

Scott Pritchard: Finally, I will provide some concluding comments and will be happy to answer any questions you may have. Turning to page 3. We are pleased with the achievements over the past 12 months. In particular, our investment portfolio, which has retained occupancy at 97% and has materially increased our weighted average lease term to over 7 years. Most notably has been the extent of leasing in the period, with close to 40,000 square meters of leasing completed, an all-time high for the business, while achieving solid leasing spreads. From a development perspective, we have completed over half a billion in developments, including 55 Molesworth Street in Wellington on behalf of Precinct and two build-to-sell residential apartment buildings for our capital partners. We have also advanced our capital partnering strategy with the growth across our office platforms of around NZD 800 million in the period.

Speaker #2: In particular, our investment portfolio has retained occupancy at 97% and has materially increased our weighted average lease term to over seven years. Most notably has been the extent of leasing in the period, with close to 40,000 square meters of leasing completed—an all-time high for the business—while achieving solid leasing spreads.

Speaker #2: From a development perspective, we have completed over half a billion in developments, including 55 Molesworth Street and Wellington on behalf of Precinct, and two built-to-sell residential apartment buildings for our capital partners.

Speaker #2: We have also advanced our capital partnering strategy with growth across our office platforms of around $800 million in the period. Funds from operations of $7.31 per share were in line with our forecasts.

Scott Pritchard: Funds from operations of NZD 0.0731 per share was in line with our forecasts. An NTA reduction from NZD 1.18 to NZD 1.13 is largely attributable to development assets, mainly Downtown, which we expect to recover if we commit to the project. Page 4 sets out our key achievements in the period, including the PwC Tower transaction with PAG, the growth in our portfolio alongside GIC, where we acquired the ASB Bank building in Auckland, and the completion of Molesworth Street in Wellington, which offers us a 25-year net lease from government. These transactions, alongside our equity issue in October and the settlement of the InterContinental Hotel and our PBSA development at 22 Stanley Street, contribute to more than NZD 1 billion in capital management initiatives, positioning our balance sheet to be able to take advantage of accretive opportunities in the future.

Speaker #2: An NTA reduction from $1.18 to $1.13 is largely attributable to development assets, mainly downtown, which we expect to recover if we commit to the project.

Speaker #2: Page 4 sets out our key achievements in the period, including the PWC Tower transaction with PAG; the growth in our pulp portfolio alongside GIC, where we acquired the ASB Building in Auckland; and the completion of Molesworth Street in Wellington, which offers us a 25-year net lease from government.

Speaker #2: These transactions, alongside our equity issue in October, the settlement of the Intercontinental Hotel, and our PBSA development at 22 Stanley Street, contribute to more than $1 billion in capital management initiatives, positioning our balance sheet to take advantage of accretive opportunities in the future.

Speaker #2: Page 5 sets out a summary of the key themes that we are observing in our markets. After an encouraging start to the year, the last four months have been volatile following a broader set of market impacts.

Scott Pritchard: Page 5 sets out a summary of the key themes which we are observing in our markets. After an encouraging start to the year, the last 4 months have been volatile following a broader set of market impacts. Pleasingly, we are seeing a range of signs which suggest the market is beginning to improve, with demand for premium office remaining robust, retail sales at Commercial Bay growing, and appetite from capital partners remaining elevated. The office market, in particular, has been very resilient, with occupiers prioritizing their workplace and continuing to encourage employees back to the office. This has led to continued demand for premium stock, underpinning further growth in market rents. It has been very satisfying over the past 12 months to see continued demand from offshore capital to invest in New Zealand.

Speaker #2: Pleasingly, we are seeing a range of signs which suggest the market is beginning to improve, with demand for premium office remaining robust, retail sales at Commercial Bay growing, and appetite from capital partners remaining elevated.

Speaker #2: The office market, in particular, has been very resilient, with occupiers prioritizing their workplace and continuing to encourage employees back to the office. This has led to continued demand for premium stock, underpinning further growth in market rents.

Speaker #2: It has been very satisfying over the past 12 months to see continued demand from offshore capital to invest in New Zealand. Investors continue to be attracted to world-class real estate, along with attractive investment settings in New Zealand.

Scott Pritchard: They continue to be attracted to world-class real estate, along with attractive investment settings in New Zealand. This demand is expected to remain as the economy begins to grow. Now turning to page 7 and an overview of our business and strategy. Precinct has grown its total assets under management, including its owned assets, to around NZD 5.2 billion, comprising NZD 4.2 billion of office assets, NZD 0.5 billion of student accommodation assets, NZD 200 million of residential build to sell assets. Precinct also owns a NZD 300 million pipeline of land or brownfield development sites, which scales to around NZD 4 billion on a fully completed basis. Capital partnerships now total NZD 2.2 billion, which George will discuss further shortly. Turning to page 8, which sets out our strategic targets in terms of capital partnerships and portfolio exposures.

Speaker #2: This demand is expected to remain as the economy begins to grow. Now, turning to page 7, an overview of our business and strategy.

Speaker #2: Precinct is growing its total assets under management, including its owned assets, to around $5.2 billion, comprising $4.2 billion of office assets, $0.5 billion of student accommodation assets, and $200 million of residential built-to-sell assets.

Speaker #2: Precinct also owns a $300 million pipeline of land or brownfield development sites, which scales to around $4 billion on a fully completed basis. Capital partnerships now total $2.2 billion, which George will discuss further shortly.

Speaker #2: Turning to page 8, which sets out our strategic targets in terms of capital partnerships and portfolio exposures. With $3.1 billion of invested capital, Precinct is targeting having 25% of its capital invested in partnerships, and we currently have around 10% allocated.

Scott Pritchard: With NZD 3.1 billion of invested capital, Precinct is targeting having 25% of its capital invested in partnerships, and we currently have around 10% allocated. Within that 25%, we are now focused towards having 20% allocated in commercial office, with 5% allocated in the living sector. For clarity, the living sector exposure includes both PBSA and build to sell residential apartments. Notably, this represents a moderate down weighting to residential apartments, while exposure to PBSA remains constant. With regards to build to sell residential, we continue to review and refine our target market, with projects now anticipated to be smaller, more premium, and focused towards the downsizer market. These will predominantly be undertaken on balance sheet unless where we have a joint venture partner such as Orams.

Speaker #2: Within that 25%, we are now focused on having 20% allocated to commercial office, with 5% allocated to the living sector. For clarity, the living sector exposure includes both PBSA and built-to-sell residential apartments.

Speaker #2: Notably, this represents a moderate downweighting to residential apartments, while exposure to PBSA remains constant. With regards to built-to-sell residential, we continue to review and refine our target market, with projects now anticipated to be smaller, more premium, and focused toward the downsizer market.

Speaker #2: These will predominantly be undertaken on balance sheet, unless where we have a joint venture partner such as Aurum. And finally, before I hand over to Rich, page 9 sets out some reflections after the progress we have made in the past few years.

Scott Pritchard: Finally, before I hand over to Rich, page 9 sets out some reflections after the progress we have made in the past few years. We are pleased with the growth in capital partnerships and the support provided by our third-party investor base. We have now completed 2 build-to-sell residential projects on behalf of capital partners, which has provided significant learning opportunities. We have successfully entered the PBSA market and see more potential for growth given the continued supply, demand, and balance. Perhaps most importantly, we are continuing to adjust our settings to ensure we manage risk and return on behalf of our shareholders. This is most observable in the decision today to reduce our residential exposure and target smaller, more accretive projects while still adopting our successful approach of securing development opportunities.

Speaker #2: We are pleased with the growth in capital partnerships and the support provided by our third-party investor base. We have now completed two built-to-sell residential projects on behalf of capital partners, which has provided significant learning opportunities.

Speaker #2: We have successfully entered the PBSA market and see more potential for growth, given the continued supply-demand imbalance. Perhaps most importantly, we are continuing to adjust our settings to ensure we manage risk and return on behalf of our shareholders. This is most observable in the decision today to reduce our residential exposure and target smaller, more accretive projects, while still adopting our successful approach of securing development opportunities.

Speaker #2: Ultimately, based on encouraging feedback from our third-party investor base, we continue to believe that we need to keep building world-class real estate through our well-established development platform, to be able to keep attracting partner capital.

Scott Pritchard: Ultimately, based on encouraging feedback from our third-party investor base, we continue to believe that we need to keep building world-class real estate through our well-established development platform to be able to keep attracting partner capital. I would now like to hand over to Rich to take you through the financial results.

Speaker #2: I'd now like to hand over to Rich to take you through the financial results.

Speaker #3: Thank you, and good morning, everyone. If FY26 was a year of strong operating performance, significant balance sheet strengthening, and continued progress across the business, operating profit before indirect expenses and income tax increased to $162.7 million. Long-term operations increased to $7.31 per share, in line with guidance and up 3% on the prior year.

Richard Hilder: Thank you, and good morning, everyone. FY26 was a year of strong operating performance, significant balance sheet strengthening, and continued progress across the business. Operating profit before indirect expenses and income tax increased to NZD 162.7 million. Fund from operations increased to 7.31 cents per share, in line with guidance and up 3% on the prior year. During the year, we completed NZD 1.2 billion of capital management initiatives through the equity raise, strategic asset sales, and capital partnering transactions. Total comprehensive income was a loss of NZD 12.6 million. NTA per share reduced from NZD 1.21 to NZD 1.13. Turning to directly held property FFO. The core investment portfolio delivered another resilient result. Investment property FFO was NZD 149.9 million and broadly consistent with the prior year. After adjusting for surrender payments and other one-off income received last year, underlying earnings from the investment portfolio increased by 1.3% on a like-for-like basis.

Speaker #3: During the year, we completed $1.2 billion of capital management initiatives through the equity raise, strategic asset sales, and capital partnering transactions. Total comprehensive income was a loss of $12.6 million. NTA per share reduced from $1.21 to $1.13.

Speaker #3: Turning to directly held property, FEFO, the core investment portfolio delivered another resilient result. Investment property FEFO was $149.9 million, broadly consistent with the prior year.

Speaker #3: After adjusting for surrender payments and other one-off income received last year, underlying earnings from the investment portfolio increased by 1.3% on a like-for-like basis.

Speaker #3: The Auckland office portfolio continued to benefit from rental growth and strong leasing activity. However, earnings growth was a modest 0.8%, as lower physical occupancy due to leasing timing partially offset the positive contribution from rental growth.

Richard Hilder: The Auckland office portfolio continued to benefit from rental growth and strong leasing activity. However, earnings growth was a modest 0.8% as lower physical occupancy due to leasing timing partially offset the positive contribution from rental growth. Wellington delivered good earnings growth despite softer market conditions. The year benefited from earnings from the recently completed Molesworth development and from the acquisition of the Downtown car park. As a result, directly held property FFO increased 7.6% to NZD 161.7 million. Turning to the next slide. Underlying FFO increased 7.6% to around NZD 174 million. The largest driver of growth was the contribution from transactions and development activities, including earnings recognized from 22 Stanley Street. Importantly, NZD 15 million of profit and risk allowance remains, which is expected to be released over the balance of the development.

Speaker #3: While Wellington delivered good earnings growth despite softer market conditions, the year benefited from earnings from the recently completed Molesworth development and from their acquisition of the Downtown Car Park. As a result, directly held property FEFO increased 7.6% to $161.7 million.

Speaker #3: Turning to the next slide, underlying FEFO increased 7.6% to around $174 million. The largest driver of growth was the contribution from transactions and development activities.

Speaker #3: Including earnings recognized from 22 Stanley Street. Importantly, $15 million of profit and risk allowance remains, which is expected to be released over the balance of the development.

Speaker #3: The outlook for management fee income has improved following the establishment of the PwC Tower partnership, the acquisition of ASB North Wharf, and continued growth in capital partnering activities.

Richard Hilder: The outlook for management fee income has improved following the establishment of the PwC Tower partnership, the acquisition of ASB North Wharf, and continued growth in capital partnering activities. This earnings stream was lower than the prior year due to the completion of Beca House in Auckland and disposal of the remaining interest in 40 and 44 Bowen Street. The increase in employment and administration expenses was primarily driven by Precinct Flex employees being brought into Precinct's management business. Turning to the next slide. Funds from operations increased to NZD 129.5 million, representing 7.31 cents per share and a dividend payout ratio of 92%. Net interest expense remained broadly consistent with the prior year, despite significant changes to the balance sheet during the period. Interest expense associated with equity accounted development investments increased to NZD 1.3 million, creating an earnings headwind equivalent to 8 basis points.

Speaker #3: This earnings stream was lower than the prior year due to the completion of Becker House in Auckland and the disposal of the remaining interest in 40 and 44 Bowen Street.

Speaker #3: The increase in employment and administration expenses was primarily driven by Precinct Flex employees being brought into the Precinct Management business. Turning to the next slide, funds from operations increased to $129.5 million, representing 7.31 cents per share and a dividend payout ratio of 92%.

Speaker #3: Net interest expense remained broadly consistent with the prior year, despite significant changes to the balance sheet during the period. Interest expense associated with equity-accounted development investments increased to $1.3 million, creating an earnings headwind equivalent to 8 basis points.

Speaker #3: And lastly, the current tax benefit increased, largely reflecting the investment boost deduction associated with the Molesworth development. Turning now to NTA and valuations. NTA per share reduced from $1.18 as at December, to $1.13, following a further valuation decline in the second half of $77 million.

Richard Hilder: Lastly, the current tax benefit increased, largely reflecting the investment boost deduction associated with the Molesworth development. Turning now to NTA and valuations. NTA per share reduced from NZD 1.18 at December to NZD 1.13 following a further valuation decline in the second half of NZD 77 million. Valuation performance across the portfolio is mixed. Auckland office values remained relatively resilient with rental growth helping offset some softening in cap rates. Wellington remained weaker, reflecting softer net rents, due in part to higher rates across many of the buildings. The largest valuation impacts occurred within the development assets, particularly relating to Downtown. These valuation movements were expected and reflect the current stage of the developments and are occurring before the value anticipated from leasing, construction, and project delivery is realized. Turning to capital management. FY26 was a significant year from a capital management perspective, with significant initiatives executed in the period.

Speaker #3: Valuation performance across the portfolio is mixed. Auckland office, with rental growth, is helping offset some softening in cap rates. Wellington remained weaker, reflecting softer net rents, due in part to higher rates across many of the buildings.

Speaker #3: The largest valuation impacts occurred within the development assets, particularly relating to downtown. These valuation movements were expected and reflect the current stage of the developments, and are occurring before the value anticipated from leasing, construction, and project delivery is realized.

Speaker #3: Turning to capital management, FY26 was a significant year from a capital management perspective, with major initiatives executed during the period. With the HB convertible notes maturing in late September, we intend to repay these in cash using the proceeds from the recently issued $65 million wholesale bond.

Richard Hilder: With the HB convertible notes maturing in late September, we intend to repay these in cash using the proceeds from the recently issued NZD 65 million wholesale bond. Following the PwC Tower transaction and the repayment of the convertible notes, pro forma gearing reduces to 29% at year-end. Liquidity remains good, funding sources remain diversified, and all financial covenants were comfortably set aside. The weighted average cost of debt remains around 5%, while lower debt levels position the business to benefit from the deployment of capital. The next slide outlines our approach to capital management. The actions undertaken during the year materially strengthened the balance sheet and reflect our disciplined approach to capital management. Our financial risk management policy provides the framework for ensuring commitments are appropriately funded, liquidity is maintained, and gearing remains aligned with our risk settings.

Speaker #3: Following the PwC Tower transaction and the repayment of the convertible notes, pro forma gearing reduces to 29% at year-end. Liquidity remains good, funding sources remain diversified, and all financial covenants were comfortably set aside.

Speaker #3: The weighted average cost of debt remains around 5%, while lower debt levels position the business to benefit from the deployment of capital. The next slide outlines our approach to capital management.

Speaker #3: The actions undertaken during the year materially strengthened the balance sheet and reflect our disciplined approach to capital management. Our financial risk management policy provides the framework for ensuring commitments are appropriately funded, liquidity is maintained, and gearing remains aligned with our risk settings.

Speaker #3: This discipline is particularly important as we move towards key development and investment decisions, including downtown. Importantly, the pathway to a downtown decision is well understood.

Richard Hilder: This discipline is particularly important as we move towards key development and investment decisions, including Downtown. Importantly, the pathway to a Downtown decision is well understood. The de-gearing completed during the year and continued progress on further funding initiatives give us several ways to support a commitment. We have a broad set of capital levers available, including partnering, asset recycling, and capital markets funding. As part of that toolkit, subordinated convertible notes remain available where they provide efficient capital and align with shareholder outcomes. Overall, the framework provides the resilience and flexibility to fund future opportunities while maintaining balance sheet discipline. Turning to earnings outlook. Looking ahead, the business enters FY27 from a position of strength. Operationally, occupancy remains at 97%. Leasing activity has been at record levels, and rental growth continues to support earnings across the portfolio. At the same time, initiatives completed during FY26 provide additional earnings opportunities.

Speaker #3: The degearing completed during the year and continued progress on further funding initiatives give us several ways to support a commitment. We have a broad set of capital levers available, including partnering, asset recycling, and capital market funding.

Speaker #3: As part of that toolkit, subordinated convertible notes remain available, where they provide efficient capital and align with shareholder outcomes. Overall, the framework provides the resilience and flexibility to fund future opportunities while maintaining balance sheet discipline.

Speaker #3: Turning to the earnings outlook. Looking ahead, the business enters FY27 from a position of strength. Operationally, occupancy remains at 97%, leasing activity has been at record levels, and rental growth continues to support earnings across the portfolio.

Speaker #3: At the same time, initiatives completed during FY26 provide additional earnings opportunities. These include income from recently established partnerships, management fee growth, development management activity, and future development earnings as projects progress.

Richard Hilder: These include income from recently established partnerships, management fee growth, development management activity, and future development earnings as projects progress. While market conditions remain mixed, improving economic activity, stronger leasing conditions, and a substantially stronger balance sheet provide confidence in the medium term. The board has reaffirmed the dividend at 6.75 cents and remains focused on delivering sustainable earnings growth and long-term shareholder value. Based on current forecasts, this dividend is expected to be around the top of Precinct's dividend policy range of 80% to 95% of funds from operations. Thank you. I will now hand over to George.

Speaker #3: While market conditions remain mixed, improving economic activity, stronger leasing conditions, and a substantially stronger balance sheet provide confidence in the medium term. The board has reaffirmed the dividend at 6.75 cents and remains focused on delivering sustainable earnings growth and long-term shareholder value.

Speaker #3: Based on current forecasts, this dividend is expected to be around the top of Precinct's dividend policy range of 80% to 95% of funds from operations.

Speaker #3: Thank you. I will now hand over to George.

Speaker #1: Thank you, Rich. Good morning, everyone. We've seen solid progress over the last year, with co-invested capital partnerships growing to $2 billion. The most pleasing aspect has been our partners' appetite for follow-on investment, with the GIC partnership acquiring ASB North Wharf and a new 50/50 JV with PAG to own the PwC Tower, which will be our third co-investment with them.

George Crawford: Thank you, Rich. Good morning, everyone. We have seen solid progress over the last year with co-invested capital partnerships growing to NZD 2 billion. The most pleasing aspect has been our partners' appetite for follow-on investments with the GIC Partnership acquiring ASB North Wharf and a new 50/50 JV with PAG to own the PwC Tower, which will be our third co-investment with them. As we focus on achieving scale in our partnership strategy, we have recently appointed Padraig Brown to lead capital partner origination. We will be looking to leverage the strong relationships that Paddy holds with real estate investors across Australia and New Zealand to support continued growth. Moving to page 22, the capital partnership strategy is contributing real earnings growth for Precinct.

Speaker #1: As we focus on achieving scale in our partnership strategy, we have recently appointed Podrick Brown to lead capital partner origination. We will be looking to leverage the strong relationships that Paddy holds with real estate investors across Australia and New Zealand to support continued growth.

Speaker #1: Moving to page 22, the capital partnership strategy is contributing real earnings growth for Precinct. While growth can be lumpy as we build towards scale, as shown in the chart on the left-hand side, the transactions achieved this year will have a meaningful earnings impact for FY27 and going forward.

George Crawford: While growth can be lumpy as we build towards scale, as shown in the chart on the left-hand side, the transactions achieved this year will have a meaningful earnings impact for FY27 and going forward. Turning to page 23, a reminder of the benefits underpinning our capital partnering strategy. First and foremost, the goal is to improve the return on equity for Precinct shareholders relative to investing 100% on balance sheet. Secondly, it provides greater flexibility as to how we fund opportunities, providing us with liquidity and ability to transact through the cycle. The benefits of this have been demonstrated over the last three years, when we have had access to liquidity through a period when others have not. We remain committed to our capital partnering strategy and see it as highly complementary to our core investment and development strategies. Turning now to investment markets on page 24.

Speaker #1: Turning to page 23, a reminder of the benefits underpinning our capital partnering strategy. First and foremost, the goal is to improve the return on equity for Precinct shareholders, relative to investing 100% on balance sheet.

Speaker #1: Secondly, it provides greater flexibility as to how we fund opportunities, providing us with liquidity and the ability to transact through the cycle. The benefits of this have been demonstrated over the last three years, when we have had access to liquidity through a period when others have not.

Speaker #1: We remain committed to our capital partnering strategy and see it as highly complementary to our core investment and development strategies. Turning now to investment markets on page 24.

Speaker #1: Overall, New Zealand real estate investment conditions are good. Debt funding costs are low, occupier outlook is strong, the economic outlook is positive, and the benefits of New Zealand tax settings relative to Australia are increasingly recognized by investors.

George Crawford: Overall, New Zealand real estate investment conditions are good. Debt funding costs are low, occupier outlook is strong, the economic outlook is positive, and the benefits of New Zealand tax settings relative to Australia are increasingly recognized by investors. However, investor return requirements have been elevated over the last six months, and our expectation is that higher return requirements will persist for some time. Capital is available, but with a backdrop of market volatility and the returns being promised from the AI build-out, higher levels of returns are being sought and core capital is still more difficult to come by. Our portfolio of assets and opportunities can deliver value in these conditions. However, it reinforces the need for us to add value through strong asset management and development execution, rather than relying on an improvement in the investment market.

Speaker #1: However, investor return requirements have increased over the last six months, and our expectation is that higher return requirements will persist for some time.

Speaker #1: Capital is available, but with a backdrop of market volatility and the returns being promised from the AI build-out, higher levels of returns are being sought, and core capital is still more difficult to come by.

Speaker #1: Our portfolio of assets and opportunities can deliver value in these conditions. However, it reinforces the need for us to add value through strong asset management and development execution, rather than relying on an improvement in the investment market.

Speaker #1: Our track record of delivery and ability to add value is what capital partners are looking for, and it gives us confidence in the continued success of the strategy.

George Crawford: Our track record of delivery and ability to add value is what capital partners are looking for and gives us confidence in the continued success of this strategy. Thank you, and I will hand over to Ants to provide an update on the investment portfolio.

Speaker #1: Thank you, and I'll hand over to Ann to provide an update on the investment portfolio.

Speaker #2: Thank you, George, and good morning, everyone. The investment portfolio has delivered a strong operating result, with occupancy maintained at 97% and WALE extended to 7.1 years.

Anthony Randell: Thank you, George, and good morning, everyone. The investment portfolio has delivered a strong operating result, with occupancy maintained at 97% and WALT extended to 7.1 years. This reflects the benefit of the recently completed development at Molesworth Street in Wellington, together with a significant level of leasing completed. A key feature of the year was the depth of leasing activity across the portfolio, with approximately 38,000 square meters of transactions completed. As Scott Pritchard mentioned, this represented our strongest annualized leasing volume on record, driven by the management of a significant expired profile and continued success in securing new occupier demand. This leasing demand demonstrates clear confidence in our locations and assets and reflects the excellent work of our team in continuing to deliver for our clients, our occupiers. Our office portfolio remains around 3% under rented relative to current market rents.

Speaker #2: This reflects the benefit of the recently completed development at Moses Street in Wellington, together with a significant level of leasing completed. A key feature of the year was the depth of leasing activity across the portfolio, with approximately 38,000 square metres of transactions completed.

Speaker #2: As Scott mentioned, this represented our strongest annualized leasing volume on record, driven by the management of a significant expiry profile and continued success in securing new occupied demand.

Speaker #2: This leasing demand demonstrates clear confidence in our locations and assets, and reflects the excellent work of our team in continuing to deliver for our clients and our occupiers.

Speaker #2: Our office portfolio remains around 3% underrented relative to current market rents. During the year, rent reviews across office and retail delivered a 3.3% uplift on prior contract rents.

Anthony Randell: During the year, rent reviews across office and retail delivered a 3.3% uplift on prior contract rents. New office leasing spreads overall were positive, achieving a 9.9% uplift. This being split between Auckland at 10.9% and 7.2% in Wellington. Turning to page 27, the Auckland CBD office market conditions remain highly supportive with very low premium vacancy, sustained flight to quality, and occupiers increasingly prioritizing well-connected, high-amenity workplaces. We are seeing encouraging return to office momentum across Precinct's portfolio, alongside increased evidence of occupiers choosing to relocate back into the CBD from fringe locations. This recentralization trend reinforces the relative strength of premium CBD office and supports our long-held view that well-located, high-quality assets are best positioned to capture improving occupier demand as business confidence improves. We see this as a structural shift rather than a temporary trend, with further demand expected to flow into the CBD over time.

Speaker #2: New office leasing spreads overall were positive, achieving a 9.9% uplift. This was split between Auckland at 10.9% and 7.2% in Wellington. Turning to page 27, the Auckland CBD office market conditions remain highly supportive, with very low premium vacancy, sustained flight to quality, and occupiers increasingly prioritizing well-connected, high-amenity workplaces.

Speaker #2: We are seeing encouraging return-to-office momentum across Precinct's portfolio, alongside increased evidence of occupiers choosing to relocate back into the CBD from fringe locations.

Speaker #2: This recentralization trend reinforces the relative strength of premium CBD office and supports our long-held view that well-located, high-quality assets are best positioned to capture improving occupier demand as business confidence improves.

Speaker #2: We see this as a structural shift, rather than a temporary trend, with further demand expected to flow into the CBD over time. Affordability is also an important factor.

Anthony Randell: Affordability is also an important factor. While market rents have moved, Auckland premium office remains affordable relative to broader business costs, supporting confidence and continued rental growth where vacancy is constrained. Page 28 highlights a positive market shift. We are observing workplace density stabilizing after a prolonged period of contraction. Over the last decade, many occupiers have reduced the amount of space they require per employee, driven by hybrid working, efficiency initiatives, and broader office space reviews. We are now seeing evidence that this trend has stabilized. While AI may influence future employment growth, particularly in lower skilled and entry-level roles, stronger office utilization and stabilizing workplace density provide a more supportive backdrop for future net absorption. In the portfolio, a number of occupiers are now spatially constrained and are looking to grow their physical footprint.

Speaker #2: While market rents have moved, Auckland premium office remains affordable relative to broader business costs, supporting confidence in continued rental growth with vacancy as constrained.

Speaker #2: Page 28 highlights a positive market shift. We are observing workplace density stabilizing after a prolonged period of contraction. Over the last decade, many occupiers have reduced the amount of space they require per employee, driven by hybrid working, efficiency initiatives, and broader office space reviews.

Speaker #2: We are now seeing evidence that this trend has stabilized. While AI may influence future employment growth, particularly in lower-skilled and entry-level roles, stronger office utilization and stabilizing workplace density provide a more supportive backdrop for future net absorption.

Speaker #2: In the portfolio, a number of occupiers are now spatially constrained and are looking to grow their physical footprint. Encouragingly, leasing completed without the existing client base during the period has resulted in an 11% overall increase in their occupied footprint.

Anthony Randell: Encouragingly, leasing completed with our existing client base during the period has resulted in an 11% overall increase in their occupied footprint. Turning to Wellington CBD office. Market conditions remain more subdued than Auckland, largely reflecting the impact of central government expenditure settings and ongoing accommodation constraints. That said, the market remains highly segmented and demand continues to be strongest for high-quality functional and seismic resilient assets. While the broader market remains challenging, better quality stock is continuing to attract occupied demand, supported by limited new supply and a preference for assets that provide resilience, functionality, and long-term certainty. Our expectation is that any further material government consolidation is expected to be more limited from here, which should support stability across the better quality part of the market. For Precinct, the focus remains on owning and managing well-located, high-quality Wellington assets that meet these occupier requirements.

Speaker #2: Turning to Wellington CBD office, market conditions remain more subdued than Auckland, largely reflecting the impact of central government expenditure settings and ongoing accommodation constraints.

Speaker #2: That said, the market remains highly segmented, and demand continues to be strongest for high-quality, functional, and seismic-resilient assets. While the broader market remains challenging, better quality stock is continuing to attract occupier demand, supported by limited new supply and a preference for assets that provide resilience, functionality, and long-term certainty.

Speaker #2: Our expectation is that any further material government consolidation is likely to be more limited from here, which should support stability across the better-quality part of the market.

Speaker #2: For Precinct, the focus remains on owning and managing well-located, high-quality Wellington assets that meet these occupier requirements. Looking across office markets, the outlook is becoming more constructive, particularly in Auckland premium office, where demand remains strong.

Anthony Randell: Looking across office markets, the outlook is becoming more constructive, particularly in Auckland premium office, where demand remains strong, vacancy is low, and occupiers continue to focus on quality. The key drivers are improving business confidence, limited new supply, the return of people to the office, and the stabilization of workplace density. Together, these factors should support continued absorption and provide a stronger platform for rental growth over time. We expect growth across Precinct's portfolio to outperform market forecasts in the medium term for Auckland. Wellington remains more subdued and segmented, reflecting the impact of government expenditure settings, but demand continues to favor high-quality, functional, and seismic resilient assets. With limited new supply, property-level operating costs stabilizing, we expect better quality stock to remain supported while near-term rental growth is likely to be constrained. CommercialBay Retail continued to perform well through FY26, despite softer consumer conditions.

Speaker #2: Vacancy is low, and occupiers continue to focus on quality. The key drivers are improving business confidence, limited new supply, the return of people to the office, and the stabilization of workplace density.

Speaker #2: Together, these factors should support continued absorption and provide a stronger platform for rental growth over time. We expect growth across Precinct's portfolio to outperform market forecasts in the medium term for Auckland.

Speaker #2: Wellington remains more subdued and segmented, reflecting the impact of government expenditure settings. However, demand continues to favor high-quality, functional, and seismic-resilient assets. With limited new supply and property-level operating costs stabilizing, we expect better quality stock to remain supported, while near-term rental growth is likely to be constrained.

Speaker #2: Commercial Bay Retail continued to perform well through FY26, despite softer consumer conditions. Moving annual turnover increased 5.6% to $167.6 million, supported by strong sales from new retailers.

Anthony Randell: Moving annual turnover increased 5.6% to NZD 167.6 million, supported by strong sales from new retailers, while FFO was moderately impacted by provisions relating to a small number of exiting hospitality retailers, reflecting broader industry conditions. The center remains highly attractive to premium international and leading local brands, with 43 lease transactions completed during the year and nine new retailers welcomed. Several brands have selected CommercialBay for their New Zealand flagship presence, reinforcing the strength of the Precinct and its ability to attract high-quality retailers. Trading metrics also remain resilient with treasury sales increasing to NZD 12,900 per square meter and occupancy cost ratio improving to 14.7%. This provides a more sustainable base for retailers and supports continued operating income growth over time. Thank you, and I will now pass back to Scott.

Speaker #2: While FFO was moderately impacted by provisions relating to a small number of exiting hospitality retailers, reflecting broader industry conditions, the center remains highly attractive to premium international and leading local brands, with 43 lease transactions completed during the year and nine new retailers welcomed.

Speaker #2: Several brands have selected Commercial Bay for their New Zealand flagship presence, reinforcing the strength of the precinct and its ability to attract high-quality retailers.

Speaker #2: Trading metrics also remain resilient, especially sales increasing to $12,900 per square meter and the occupancy cost ratio improving to 14.7%. This provides a more sustainable base for retailers and supports continued operating income growth over time.

Speaker #2: Thank you, and I'll now pass back to Scott.

Speaker #1: Thanks, Hans. And turning to the development section, page 33 provides an overview of Precinct's development pipeline, which now sits at $4 billion, including close to $1 billion that is currently under construction.

Scott Pritchard: Thanks, Ants, and turning to the development section. Page 33 provides an overview of Precinct's development pipeline, which now sits at NZD 4 billion, including close to NZD 1 billion that is currently under construction. A large part of the uncommitted pipeline is the commercial office component of Downtown, which remains a major focus for the business. Page 34 provides more information about imminent completions at York House and the office at 164 Beaumont Street, both being completed on behalf of Capital Partners, as well as an overview of our entire development pipeline. One of the key benefactors for those undertaking developments in the current market is the competitive nature of construction pricing and contracting. We have now entered into six construction contracts over the past two years, all of which are fixed-price contracts on a design and build basis. Turning to page 35.

Speaker #1: A large part of the uncommitted pipeline is the commercial office component of downtown, which remains a major focus for the business. Page 34 provides more information about imminent completions at York House, and the office at 164 Beaumont Street, both being completed on behalf of Capital Partners, as well as an overview of our entire development pipeline.

Speaker #1: One of the key benefactors for those undertaking developments in the current market is the competitive nature of construction pricing and contracting. We have now entered into six construction contracts over the past two years, all of which are fixed-price contracts on a design and build basis.

Speaker #1: Turning to page 35, pleasingly, we have announced today that we are commencing construction at Pillars, located at 99 College Hill in Auckland. This is a boutique 20-unit apartment development with pre-sales equating to 33% of total cost and an incremental spend of $50 million.

Scott Pritchard: Pleasingly, we have announced today that we are commencing construction at Pillars, located at 99 College Hill in Auckland. This is a boutique 20-unit apartment development with pre-sales equating to 33% of total cost and incremental spend of NZD 50 million. We are encouraged by the strength of demand in other projects, most specifically York House, which offers a similar specification and quality, albeit in a different location. With construction commencing shortly, this project is anticipated to complete in calendar year 2028. We have signed a design-build fixed-price contract with GN Construction, who have recently completed Domain Collection in Newmarket and will bring the same team across to Pillars. Now moving to an overview of the Downtown project on page 36. Most significantly in the period, we are delighted to have received our fast-track approval for the project, providing us with the resource consent we need to get started.

Speaker #1: We are encouraged by the strength of demand and other projects, most specifically York House, which offers a similar specification and quality, albeit in a different location.

Speaker #1: With construction commencing shortly, this project is anticipated to be completed in calendar year 2028. We have signed a design-build, fixed-price contract with GE Construction, who have recently completed Domain Collection and Newmarket, and will bring the same team across to Pillars.

Speaker #1: Now, moving to an overview of the downtown project on page 36. Most significantly in the period, we are delighted to have received our fast-track approval for the project, providing us with the resource consent we need to get started.

Speaker #1: Negotiations with occupiers remain ongoing, and we have around 50% of the office space under exclusivity, all of whom are not currently Precinct clients. We have entered into a comprehensive ECI program with Built, a tier one main contractor out of Australia, and during the year we have progressed our funding plan to enable a decision around committing to the Downtown project.

Scott Pritchard: Negotiations with occupiers remain ongoing, and we have around 50% of the office space under exclusivity, all of whom are not currently Precinct clients. We have entered into a comprehensive ECI program with Built, a tier 1 main contractor out of Australia, and during the year we have progressed our funding plan to enable a decision around committing to the Downtown project. Most importantly for today's announcement, we have also made the decision to stage the development, meaning that should we commit to the project in early 2027, we will do so on the basis of committing to the basement car parks, the public and retail spaces and laneways, as well as the office component, which sits across 2 podiums and the large tower. This means we will complete the residential and hotel tower at a later date.

Speaker #1: Most importantly for today’s announcement, we have also made the decision to stage the development. This means that, should we commit to the project in early 2027, we will do so on the basis of committing to the basement car parks, the public and retail spaces and laneways, as well as the office component, which sits across two podiums and the large tower.

Speaker #1: This means we will complete the residential and hotel tower at a later date. This decision has not been taken lightly, but importantly reduces the complexity, scope, and scale of the project, providing the precinct with a lower risk profile that is more achievable.

Scott Pritchard: This decision has not been taken lightly, but importantly reduces complexity, scope, and scale of the project, providing Precinct with a lower risk profile that is more achievable. Consistent with best practice governance, we have now established a board subcommittee to support management as we progress the opportunity until such point as we make a decision. Page 37 sets out the detail of the composition of stage 1, including the podiums and office tower. Most importantly, on completion, stage 1 will present as a completed city block with the podium 2 building having the appropriate level of foundations and structure to enable the future construction of a tower above it. Page 38 provides an overview of the anticipated development program, with April 2027 being the earliest that the business will make a decision to proceed.

Speaker #1: Consistent with best practice governance, we have now established a board subcommittee to support management as we progress the opportunity until such point as we make a decision.

Speaker #1: Page 37 sets out details of the composition of stage one, including the podiums and office tower. Most importantly, on completion, stage one will present as a completed city block, with the Podium Two building having the appropriate level of foundations and structure to enable the future construction of a tower above it.

Speaker #1: Page 38 provides an overview of the anticipated development program, with April 2027 being the earliest that the business will make a decision to proceed.

Speaker #1: This enables a 2032 completion date, meeting the needs of our current office occupiers under exclusivity. Importantly, on this page we set out the expected returns of the project, which are net of any potential fee income that will arise with the introduction of a capital partner.

Scott Pritchard: This enables a 2032 completion date, meeting the needs of our current office occupiers under exclusivity. Importantly on this page, we set out the expected returns of the project, which are net of any potential fee income which will arise with the introduction of a capital partner. The project-level returns provide for a yield on cost in the mid to high sixes and a development margin north of 15%. Notably, the anticipated incremental spend is around NZD 1.5 billion. Turning to slide 39. The appointment of Built to an ECI program has been a key milestone in the period. Built sought a 12-month ECI timeframe and have committed around 35 of their people for the 12-month duration. The key driver of the timeframe is to provide pricing and program certainty to allow enough time to let sub-trades and to ensure sufficient opportunity to redesign parts of the project where desired.

Speaker #1: The project-level returns provide for a yield on cost in the mid- to high sixes, and a development margin north of 15%. Notably, the anticipated incremental spend is around $1.5 billion.

Speaker #1: Turning to slide 39, the appointment of Built to an ECI program has been a key milestone in the period. Built sought a 12-month ECI timeframe and have committed around 35 of their people for the 12-month duration.

Speaker #1: The key driver of the timeframe is to provide pricing and program certainty, to allow enough time to let sub-trades, and to ensure sufficient opportunity to redesign parts of the project where desired.

Speaker #1: This level of ECI has been significant in unlocking cost initiatives and program benefits, and ensures the appropriate balance of risk sharing between the contracting parties.

Scott Pritchard: This level of ECI has been significant in unlocking cost initiatives and program benefits and ensures the appropriate balance of risk-sharing between the contracting parties. Our expectation is that should we proceed, we will enter into a design-build fixed price contract with minimal provisional sums outstanding. The demand drivers for the Downtown development are set out on page 40. As Ants has already covered, we are seeing continued demand for prime grade office space as employers attract their employees back to the office. The axis of Auckland City has shifted and there is continued and increasing demand for a waterfront location. These factors, coupled with a stabilization in density ratios, bodes well for continued demand for such a premium and world-class office development. On page 41, we set out the remaining major areas of focus prior to a prospective project commitment.

Speaker #1: Our expectation is that, should we proceed, we will enter into a design-build fixed-price contract, with minimal provisional sums outstanding. The demand drivers for the downtown development are set out on page 40.

Speaker #1: As Hans has already covered, we are seeing continued demand for prime-grade office space as employers attract their employees back to the office. The axis of Auckland City has shifted, and there is continued and increasing demand for a waterfront location.

Speaker #1: These factors, coupled with a stabilization in density ratios, bode well for continued demand for such a premium and world-class office development. On page 41, we set out the remaining major areas of focus prior to a prospective project commitment.

Speaker #1: We have identified five key criteria, including planning approval, office pre-leasing of greater than 40%, sufficient funding capacity consistent with our financial risk management policy, an appropriately balanced construction contract, alongside a set of returns which reward the risk that Precinct may take on.

Scott Pritchard: We have identified five key criteria, including planning approval, office pre-leasing of greater than 40%, sufficient funding capacity consistent with our financial risk management policy, and appropriately balanced construction contract alongside a set of returns which reward the risk that Precinct may take on. Turning to our summary slide, I believe that Precinct is very well-placed to take advantage of New Zealand's, and in particular, Auckland's economic recovery. We now have a balance sheet with capacity to deploy and a market that is showing signs of growth. We have refined our strategic settings and are excited about the opportunities we have in front of us. Partner capital is available, but you need to create world-class real estate to attract it, and we feel well-placed to continue to do that.

Speaker #1: Turning to our summary slide, I believe that Precinct is very well placed to take advantage of New Zealand's, and in particular Auckland's, economic recovery.

Speaker #1: We now have a balance sheet with capacity to deploy and a market that is showing signs of growth. We have refined our strategic settings and are excited about the opportunities we have in front of us.

Speaker #1: Partner capital is available, but you need to create world-class real estate to attract it, and we feel well placed to continue to do that.

Speaker #1: Balancing all of these factors, we are pleased to confirm that our dividend guidance for the next financial period will remain at 6.75 cents per share. We look forward to further advancing our business strategy.

Scott Pritchard: Balancing all of these things, we are pleased to confirm that our dividend guidance for the next financial period will remain at NZD 0.0675 per share, and we look forward to further advancing our business strategy. Thanks everyone for dialing in today, and we are very happy to take questions.

Speaker #1: Thanks, everyone, for dialing in today. We're very happy to take questions.

Speaker #2: Thank you. If you wish to ask a question, please press star one (*) on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two (*2) if you are on a speakerphone.

Operator: Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you are on a speakerphone, please pick up the handset to ask your question. Your first question comes from Nick Marr with Macquarie. Please go ahead.

Speaker #2: Please pick up the handset to ask your question. Your first question comes from Nick Marr with Macquarie. Please go ahead.

Speaker #3: Good morning, guys. Just in terms of downtown, I guess as a starting point, from your perspective, when is it realistic that you'd be able to look at securing a capital partner for it?

Nick Marr: Good morning, guys. Just in terms of Downtown, I guess, as a starting point. From your perspective, when is it realistic that you would be able to look at securing a capital partner for it, and accordingly, how would you look at getting the fee structures on that and, how accretive do you think that should be to that 6.5% to 7% yield on cost?

Speaker #3: And accordingly, how would you look at sort of getting the fee structures on that and sort of how accretive do you think that should be to that sort of six and up to 7% yield on cost?

Speaker #1: Hey Nick, it's George here. Good morning. Look, in terms of when we think we expect a capital partner to come on board, there are basically three stages.

George Crawford: Hey, Nick, it is George here. Good morning. Look, in terms of when we think we expect a capital partner to come on board, there is basically three stages, pre-construction, during construction, or on completion. We are obviously highly confident around the demand for premium office investment for completed buildings, because we demonstrated that recently with PwC Tower and ASB. We think pre-construction, the return requirements that capital partners would be looking for are at a level that probably will be difficult for us to make work for Precinct. The number of capital partners looking for investment at that stage is also less. We think the most likely stage is during construction, when investors can see the development progressing. We think we can meet the return requirements that they would be seeking through that period.

Speaker #1: Pre-construction, during construction, or on completion. And we're obviously highly confident around the demand for premium office investment for completed buildings, because we've demonstrated that recently with PwC Tower and ASB.

Speaker #1: But we think, pre-construction, the return requirements that capital partners would be looking for are at a level that probably will be difficult for us to make work for Precinct.

Speaker #1: And the number of capital partners looking for investment at that stage is also lower. We think the most likely stage is during construction, when investors can see the development progressing.

Speaker #1: And we think we can meet the return requirements that they would be seeking through that period.

Nick Marr: Okay. In terms of fees, will you only start, I guess, accruing fees once you have that secured? There will not be any kind of notional accrual during a pre-capital partner period. If that is the case, how come the yield on cost is not higher if you are avoiding, I guess, what would otherwise be paid away as significant external consultancy fees or development management fees if someone else was running a project like this?

Speaker #3: Okay. And in terms of fees, will you only start, I guess, accruing fees once you have that secured? So there won’t be any kind of notional accrual during a sort of pre-capital partner period.

Speaker #3: And if that's the case, how come sort of the yield on cost isn't higher if you're sort of avoiding, I guess, what would otherwise be paid away as significant sort of external consultancy fees or development management fees if someone else is running a project like this?

Speaker #1: Hey, Nick. Roger here. There'll still be internal charges from the PPI outside of the business, so that will be a charge that costs back to the project.

Richard Hilder: Hey, Nick. That is Richard here. There will still be internal charges from the PPI, our side of the business. That will be a charge that cost back to the project.

Speaker #4: So, our total project cost, as indicated, includes an allowance for development management within that, Nick.

George Crawford: Our total project cost-

Nick Marr: Is that

George Crawford: As indicated, it includes an allowance for development management within that, Nick.

Speaker #3: And that market rates.

Nick Marr: At market rates?

Speaker #1: At market rates, but stripping out the profit. So it's back to cost base.

Scott Pritchard: At market rates, but stripping out the profit, so it is back to cost base.

Speaker #3: Okay. And then in terms of the deferral of the sort of precinct hotel tower on that, it's obviously on top of the podium. Do you have to defer that for pretty much 10 years, or when do you think you can kind of reopen that sort of potential development?

Nick Marr: Okay. In terms of the deferral of the resi and hotel tower on that, it is obviously on top of the podium. Do you have to defer that for pretty much 10 years, or when do you think you can reopen that potential development?

Speaker #1: Yeah, I mean, there's obviously a few constraints. The decision we've made is to sort of focus in on stage one. The market at the moment for residential city center large-scale projects is not that supportive.

Scott Pritchard: Yeah, there is obviously a few constraints. The decision we have made is to focus in on stage 1. The market at the moment for residential city center large-scale projects is not that supportive. I think the decision that we have made today is really about balancing risk and reward for the business in terms of taking on the project. Any decisions around when we might get underway with that second tower, first and foremost, you have got to wait for a market that is supportive. We are putting structure and foundations through the podium to support a tower in the future. There will obviously be an occupier in that podium, so that is a consideration as well. It is not in the short to near term, Nick. It is more likely in the mid to long term that we get underway with that. But it is a terrific option that the business will always hold.

Speaker #1: So, I think the decision that we've made today is really about sort of balancing risk and reward for the business in terms of taking on the project.

Speaker #1: Sort of any decisions around when we might get underway with that second tower—first and foremost, you've got to wait for a market that's supportive.

Speaker #1: We are putting structure and foundations through the podium to support a tower in the future. There will obviously be an occupier in that podium, so that's a consideration as well.

Speaker #1: So it's not in the short to near term, Nick. It's more likely in the mid to long term that we'd get underway with that.

Speaker #1: But it's a terrific option that the business will always hold.

Speaker #3: And if you accordingly costed the sort of full land value into the Stage One metrics, then you're essentially assuming that you're not going to use that airspace any time in the future?

Nick Marr: Have you accordingly costed the full land value into the stage 1 metrics then, essentially assuming that you are not going to use that airspace anytime in the future?

Speaker #1: Yeah, that's right. Yeah.

Scott Pritchard: Yeah, that is right. Yep.

Speaker #3: That's good. And then just elsewhere in the pipeline, please talk through the sort of strategy around sort of changing what you're targeting in Resy and sort of scale of it.

Nick Marr: That's good. Just elsewhere in the pipeline, could you talk through the strategy around changing what you're targeting in resi and scale of it and what that means to sites like DOVA? I think Orams probably sits under that capital partner one, so might still be able to go ahead despite the scale.

Speaker #3: And what that means precisely, Dover, I think Aurum probably sits under that Capital Partner one, so it might still be able to go ahead despite the scale.

Speaker #1: Yeah. I think what we've learned over the last few years is appetite from buyers in this market, particularly at that downsizer end, and particularly where you're sort of targeting premium kind of occupiers, they're more focused on sort of smaller boutique projects where they're not necessarily in a sort of a large-scale project.

Scott Pritchard: Yeah. I think what we've learned over the last few years is appetite from buyers in this market, particularly at that downsizer end, and particularly where you're targeting premium occupiers. They are more focused on smaller boutique projects where they're not necessarily in a large-scale project. Pillars is a really good example. I think York House is a good example. We're very focused on that, and we feel like there's a really good pathway there. Projects like DOVA, which was a bit more mid-market, that's a site that we're continuing to review and assess whether or not that fits our future strategy. As you'll know, we don't yet own that site. We have an option to acquire it, which is next year. We're working through that at the moment. In terms of Orams, we feel like there's a solution or there's several solutions there.

Speaker #1: Pillars is a really good example. I think your house is a good example, and so we're sort of very focused on that, and we feel like there's a really good pathway there.

Speaker #1: Projects like Dover, which was a bit more mid-market—that's a site that we're continuing to review and assess whether or not that fits our future strategy.

Speaker #1: As you'll know, we don't yet own that site. We have an option to acquire it, which is next year, and so we're working through that at the moment.

Speaker #1: In terms of Aurums, we feel like there's a solution, or there are several solutions there. Most notably, there's the opportunity to stage the development rather than complete it in a single stage.

Scott Pritchard: Most notably, the opportunity to stage the development rather than complete it in a single stage. There is also potential other uses for that site as well. So we still hold a great deal of conviction around the Orams site and continue to be quite excited about that.

Speaker #1: There is also potential for other uses for that site as well. So, we still hold a great deal of conviction around the Aurum site and continue to be quite excited about that.

Speaker #3: Great. I'll leave it there, and I'm sure there are plenty of other questions from others. Thank you.

Nick Marr: Great. I'll leave it there, and I'm sure there's plenty of other questions from others. Thank you.

Speaker #1: Thanks, Nick.

Scott Pritchard: Thanks, Nick.

Speaker #2: Your next question comes from Rowan Corman-Smith at Forsyth Barr. Please go ahead.

Operator: Your next question comes from Rohan Korman-Smith in Forsyth Barr. Please go ahead.

Speaker #5: Morning, guys. Hey, I'm just looking at your slide on FFO by building and region. Auckland office FFO went backwards, and I know there's been some tenants coming in and out. But maybe, can you help us bridge that?

Rohan Korman-Smith: Morning, guys. Hey, I am just looking at your slide on FFO by building and region. Auckland office FFO went backwards. I know there has been some tenants coming in and out, but maybe can you help us bridge that? You probably got 2% to 3% fixed increases. You got 11% leasing spreads up there this year and 16% last year, and occupancy has been pretty flat according to the headline number. I notice there is a bit more vacancy in 204 Quay Street. It just seems like you are not getting Auckland office FFO growth despite what appears to be some pretty good metrics that you are reporting.

Speaker #5: You probably got 2% to 3% fixed increases. You got 11% leasing spreads up there this year, and 16% last year, and occupancy has been pretty flat according to the headline number, I noticed.

Speaker #5: There's a bit more vacancy in 204 Quay Street. But it just seems like you're not getting Auckland office FFO growth, despite what appears to be some pretty good metrics that you're reporting.

Speaker #1: Yeah, good observation, Rowan. I mean, I think we ended it last year at 97. Actual physical occupancy during the year was slightly north of 96.

Scott Pritchard: Well, good observation, Rohan. I think we ended the last year at 97%. Actual physical occupancy during the year was slightly north of 96%. So we carried some quite long voids during the year in Auckland. Then we ended the year, we had a really good surge at the back end, getting back to 97% in terms of leasing activity. But actual physical income-generating occupancy during the year was around 96%, to be honest. The prior period also had some one-offs, which I think we identified at the time. So we have seen like-for-like growth. It has not been quite as strong as we would have liked, but I think we are in a really strong position given the leasing expiry in the next 12 months bodes well.

Speaker #1: So, we carried some quite long voids during the year in Auckland, and then by the end of the year, we had a really good surge at the back end, getting back to 97% in terms of leasing activity.

Speaker #1: But actual physical, sort of income-generating, occupancy during the year was around 96%, to be honest. The prior period also had some one-offs, which I think we identified at the time.

Speaker #1: And so we've seen like-for-like growth. It hasn't been quite as strong as we would have liked, but I think we're in a really strong position, given the leasing expiry in the next 12 months bodes well.

Speaker #5: Thanks. And just on the Stage One yields, you said a second ago land has been allocated. When you do this allocation, how do you think about the basement works and the piling that is required to support the second tower?

Rohan Korman-Smith: Thanks. Just on the stage 1 yields, you said a second ago land has been allocated. When you do this allocation, how do you think about the basement works and the piling that is required to support the second tower? My understanding is there is quite a big cost in the ground. Is the stage 1 yields allocating, I guess, foundational work to the stage 2 tower to get to those target yields and returns that you have presented?

Speaker #5: My understanding is there's quite a big cost in the ground. Is the stage one yields allocating, I guess, foundational work to the stage two tower to kind of get to those target yields and returns that you've presented?

Speaker #1: No, they're all into stage one, Rowan.

Scott Pritchard: No, they are all into stage 1, Rohan.

Speaker #5: Okay. Cool. That's good.

Rohan Korman-Smith: Okay, cool.

Scott Pritchard: Yeah.

Rohan Korman-Smith: That is good.

Speaker #1: Yeah. There'll be an asset that we'll likely hold on balance sheet in terms of the option value above Podium Two in the future. But it'll be very, very, very small.

Scott Pritchard: There will be an asset that we will likely hold on balance sheet in terms of the option value above Podium 2 in the future, but it will be very small. All of the costs are into stage 1.

Speaker #1: All of the costs are in to stage one.

Speaker #5: Okay, no, that's helpful. And also, off-ramps—you've got a few there—greater than 40% tenant actual pre-commit versus in negotiations. What are the, what sort of internal off-ramps do you have for yourself around targets for yield on cost, in terms of what's too low and potential returns?

Rohan Korman-Smith: Okay. No, that is helpful. Also off-ramps, you have got a few there greater than 40% tenant, actual pre-commit versus in negotiations. What sort of internal off-ramps do you have for yourself around targets for yield on cost in terms of what is too low and potential returns? Are they hard lines in the sand? Also for your tenants, how much slippage do they have in their exclusive negotiation type terms for them to walk away, just given there are some other smaller projects in the market?

Speaker #5: Are they hard lines in the sand? But also, for your tenants, how much slippage do they have in their exclusive negotiation-type terms for them to walk away?

Speaker #5: Just given there's some other, smaller projects in the market.

Speaker #1: Yeah, that's a good question. So I probably won't get into the details of the kind of arrangements with those guys. I know you'll appreciate the sort of commercial sensitivity.

Scott Pritchard: Yeah, good questions. I probably won't get into the details of arrangements with those guys. I know you will appreciate commercial sensitivity. Return requirements are really important. There is no doubt about it. We have seen a really volatile bond market in the last 2 or 3 years. Rates are obviously based off bond markets, and the in-place cap rates have a very high correlation, too. The purpose of today is to put some where we think that the returns or where they are sitting at the moment. We will monitor those very closely. We have got a range of engagements with our board between now and April next year. They will remain under review. Ultimately, should we decide to go ahead with the project, we are going to need to have conviction around those kind of return metrics and ensure that they compensate us for the risk that we are going to take on.

Speaker #1: I mean, return requirements are really important—there's no doubt about it. We've seen a really volatile kind of bond market in the last two or three years.

Speaker #1: Rates are obviously based off bond markets, and then cap rates have a very high correlation too. So, the purpose of today is to sort of put out where we think the returns are, or where they're sitting at the moment. We'll monitor those very closely. We've got a range of engagements with our board between now and April next year.

Speaker #1: They will remain under review. Ultimately, should we decide to go ahead with the project, we're going to need to have conviction around those kinds of return metrics.

Speaker #1: And ensure that they compensate us for the risk that we're going to take on.

Speaker #5: Perfect. And then just last one, another flat year dividends—appreciate that. But the kind of tone around FFO, effectively guiding to flat underlying, but it sounds like another—well, that effectively drives another year of AFFO below the dividend.

Rohan Korman-Smith: Perfect. Just last one. Another flat year of dividends, appreciate that. But the tone around FFO effectively guiding to flat underlying, but it sounds like that effectively drives another year of AFFO below the dividend. Can you just talk us through the key drivers of that, and then why are we not starting to see that gap close, get to full AFFO covered dividend, but also leverage, in terms of growth in FFO. Some color on when you move back to a tax-paying position would probably be helpful in assessing that.

Speaker #5: Can you just talk us through the key drivers of that? And then, why are we not starting to see that gap close and get to a fully FFO-covered dividend?

Speaker #5: But also, leverage in terms of growth and FFO—some color on when you move back to a taxpaying position would probably be helpful in assessing that.

Richard Hilder: Hey, Rohan. Rich here. This was expected over FY26, FY27. The main driver being the de-gearing that we thought we would be doing and are doing. Equity issue, asset sales, and also transitioning to the capital partnering strategy. That full accretion hasn't come through into the business. It's also a reflection of warehousing assets, for instance, 22 and 256, and those earnings are starting to come through now. There's a bit of timing just in transition to the strategy. Another example is the residential business in those equity accounted investments like at Aurum, which are creating a bit of a drag in the early term before we execute that strategy. The Pillars revenue will start coming through in FY28 and FY29. In terms of when we start returning to increasing that AFFO, I think FY28 onwards, we'd like to see that.

Speaker #3: Hey, Rowan. Rich here. Yeah, this was kind of expected over FY26, FY27—the main driver being the de-gearing that we thought we would be doing, and are doing.

Speaker #3: So, equity issue, asset sales, and also kind of transitioning to the capital partnering strategy. So, that full accretion hasn't come through into the business.

Speaker #3: It's also a reflection of kind of where housing assets, for instance, 22 and 256, and those earnings are starting to come through now. So there's a bit of timing just in kind of transition to the strategy.

Speaker #3: Another example is the residential business and those equity-accounted investments, like at Orons, which are creating a bit of a drag in the early term before we execute that strategy.

Speaker #3: The Pillars revenue will start coming through in FY28 and FY29. In terms of when we start returning to increasing that FFO, I think from FY28 onwards, we'd like to see that.

Speaker #3: And in terms of the tax expense question, we are anticipating this year to be in a taxpaying, tax expense position for FY27, just noting that there won't actually be any cash tax paid. Yeah, that's right.

Richard Hilder: In terms of the tax expense question, we're anticipating this year to be in a tax expense position for FY27, just noting that there won't actually be any tax paid.

Rohan Korman-Smith: Okay. Cash tax paid effectively.

Richard Hilder: Yeah, that's right.

Rohan Korman-Smith: because you have got buffers to work through.

Speaker #5: You've got buffers to work through.

Speaker #3: Yeah, that's correct. Yeah.

Richard Hilder: Yeah, that is correct. Yeah.

Speaker #5: Yep, cool. And then just on that one—the last, the student accommodation project—yeah, how's that tracking around capital partnering and discussions? This will be my final question.

Rohan Korman-Smith: Yeah. Cool. Then just on that one, the student accommodation project. How is that tracking around capital partnering and discussions? This will be my final question. Sorry for taking up so many.

Speaker #5: Sorry for taking up so many.

Speaker #1: That's okay, Rowan. It's George here again. Look, 256 Queens is going very well from a construction perspective. From a market perspective, the student market in Auckland is going well.

George Crawford: That is okay, Rohan. It is George here again. Look, 256 Queen is going very well, from a construction perspective. From a market perspective, the student market in Auckland is going well. The most relevant project that we look at, Lorne Street, that opened for this year and is reasonably similar to what we have, is running with really strong levels of occupancy. I understand over 90% now and good rates. So that is a really good backdrop for us in terms of attracting a capital partner in 256 Queen. We have been in the market with that through a process with JLL. We have a potential partner that we are in discussions with. It is at a fairly early stage, but we are very pleased with how that is progressing.

Speaker #1: The most sort of relevant project that we look at, Lawrence Street, that opened for this year and is reasonably similar to what we have, is running with really strong levels of occupancy—I understand sort of over 90% now.

Speaker #1: And good rates, and so that's a really good backdrop for us in terms of attracting capital partners into 256 Queen. We've been in the market with that through a process with JLL.

Speaker #1: And we have a potential partner that we're in discussions with. It's at a fairly early stage, but we're very pleased with how that's progressing.

Speaker #5: Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced.

Rohan Korman-Smith: Thank you.

Operator: Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Francois De Kretser with ANZ. Please go ahead.

Operator: Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Francois De Cannart with ANZ. Please go ahead.

Speaker #5: Your next question comes from Francois Descanard with Benz. Please go ahead.

Speaker #6: Hi there. Good morning. My question is on the DOT on the car park and the drag on NTA per period. So, every six months, what is the NTA per share that's being lost because of DOT on the car park?

Francois De Kretser: Hi there. Good morning. Question from me is on the Downtown car park and the drag on NTA per period. Every 6 months, what is the NTA per share that is being lost because of Downtown car park, if you just assume constant valuation?

Francois De Cannart: Hi there. Good morning. Question from me is on the Downtown car park and the drag on NTA per period. Every 6 months, what is the NTA per share that is being lost because of Downtown car park, if you just assume constant valuation?

Speaker #6: If you just assume constant valuation?

Speaker #1: Yeah, I get it, Francois. Scott here. So, I think today we've sort of lost about two basis points of NTA in the last, kind of, 12 months.

Scott Pritchard: G'day, Francois. Scott here. I think to date, we have lost about 2 basis points of NTA in the last 12 months. Sorry, 1 to 2. That is just because of the methodology with which they are valuing their asset at the moment as a stabilized car park. Once we get underway in terms of development, our expectation, should we get underway with development, our expectation is that we will recover that. We are not putting in devalued holding value into the feasibility. We will be putting in our cost base. There is no adjustment to feasibility inputs. We would see it as a timing issue.

Speaker #1: Sorry, one to two. That's just because of the methodology with which they're valuing that asset at the moment—as a stabilized car park.

Speaker #1: And once we get underway, in terms of development, our expectation—should we get underway with development—our expectation is that we'll recover that. We're not putting in devalued holding value into the feasibility.

Speaker #1: We'll be putting in our cost base, so there's no adjustment to feasibility inputs. We see it as a timing issue.

Francois De Kretser: Cool. Thank you.

Francois De Cannart: Cool. Thank you.

Speaker #6: Cool. Thank you.

Speaker #1: Thanks.

Scott Pritchard: Thanks.

Operator: There are no further questions at this time. I will now hand back to Mr. Pritchard for closing remarks.

Speaker #5: There are no further questions at this time. I'll now hand back to Mr. Pritchard for closing remarks.

Speaker #1: Thanks, Joe. Once again, I'd like to thank everyone for dialing into the call today. We're pleased with the progress we're making. It's been a tricky 12 months—a strong first half, with a slightly sluggish second half.

Scott Pritchard: Thanks, Joe. Look, once again, I would like to thank everyone for dialing into the call today. We are pleased with the progress we are making. It has been a tricky 12 months. Strong H1 with a slightly sluggish H2. Our strategy is very much a long-term strategy, and we are working our way through it, and we think we are incredibly well-placed to take advantage of the economic recovery. So thank you for your support, and we look forward to engaging with all of you over the next few weeks. Cheers.

Speaker #1: Our strategy is very much a long-term strategy, and we're working our way through it. We think we're incredibly well placed to take advantage of the economic recovery. So thank you for your support, and we look forward to engaging with all of you over the next few weeks.

Speaker #1: Cheers.

Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.