Property developer Precinct Properties' move to withhold payments to Fletcher Building over a delayed project on Auckland's waterfront has lifted its half-year profit.
Precinct Properties' PwC building at Commercial Bay is set to be New Zealand's largest tallest commercial building. Photo: Precinct Properties / PwC at Commercial Bay promotional video / Screengrab
Precinct's net profit doubled to $53.6 million for the six months ended December, from increased rental revenue of $77.8m.
The value of the property investor's portfolio fell, while its buildings were almost fully occupied.
"The high occupancy levels achieved across Precincts portfolio reflects the strong demand for city centre office space in the markets we are invested in, Auckland and Wellington," Precinct chief executive Scott Pritchard said.
Precinct withheld $52m from Fletcher over the delayed $890m Commercial Bay development, with $26.7m of that being added to its finances, and the rest to cover increased project costs.
The project - which includes the country's tallest commercial tower - faced cost blow-outs and a year of delays, causing friction between the companies, however Precinct said it had repaired its relationship with Fletcher.
"[We have a] good working relationship across the construction team with no outstanding disputes or claims, a collaborative focus on completion and quality, and with a high degree of cost certainty," Pritchard said.
Fletcher would not say if it was surprised that about half its money withheld went to Precinct's finances.
"We do not comment on individual contracts, and we remain comfortable with our overall provisions on the legacy projects," a Fletcher spokesperson said.
Most of the shops at the Commercial Bay development would open in late March as expected, however some were facing further delays as the Covid-19 coronavirus held back interior materials.
Precinct said it would expand its co-working office space chain Generator, with a launch planned for Wellington in mid-2021.
It had renewed a debt facility, increasing its total debt to $874m, but it had more cash on hand.
