ANZO announces higher distributions to investors

News release – February 5, 2009<>

ANZO announces higher distributions to investors

AMP NZ Office Trust (ANZO), New Zealand’s largest listed investor in prime commercial office property, has announced a solid operating result and higher distributions to unit-holders for the six-month interim period ending 31 December 2008.

ANZO chief executive Robert Lang confirmed that ANZO is on track to deliver higher distributions to its investors in the current financial year to June 2009.  Expectations remain that that the gross full-year distribution, funded from operating earnings,will be 4 percent higher than the previous year.

“The decline in the OCR (Official Cash Rate) and subsequent fall in bank deposit rates has now opened up a wide spread between returns available from bank deposits and the yield achievable from ANZO units, which are trading at an approximate gross yield of 12.5 percent,” he said.

ANZO proactively took the opportunity to renew 50 percent of its total bank debt facility of $485 million in November 2008 for an attractive term of three years, achieving favourable interest rate margins, and is now involved in discussions on the remainder with its incumbent banks along with others interested in joining its facility group. “ANZO’s business remains well funded and our balance sheet is strong: gearing is low at 28.7 percent,” Mr Lang said.

In announcing ANZO’s interim financial results,Mr Lang said ANZO investors will receive a net second-quarter distribution of 1.824cents per unit plus imputation credits of 0.273cents per unit. ANZO’s total gross distribution for the interim period is 4.3 percent higher than 2008 on a gross basis (or 1.4percent net).

The record date for the second-quarter distribution is 20 February 2009 and payment will be made on 27 February.

Mr Lang said ANZO’s rentals for the six months were 11.2 percent higher than the previous interim period, at $65.48 million.

Operating profit before current tax rose 5.5 percent to $30.07 million. Operating profit after current tax (ANZO’s distributable profit) showed a 1.8 percent increase to $27.09 million.

Based on the operating profit before current taxation,earnings per unit for the interim period were 5.6 percent higher at 4.37 cents. Earnings per unit based on operating profit after current taxation were3.94 cents, a 1.8 percent increase over the previous interim period.

According to the International Financial Reporting Standards (IFRS), which require ANZO to take into account non-cash items, ANZO reported a net loss of $4.97 million for the period.  This was largely due to an unrealised $39.68 million loss on its interest rate swaps as at the end of the interim period.  Mr Lang noted this loss is unrealised and not unexpected given the significant fall in the OCR and unusual capital market environment.  Importantly, the loss does not affect the profit available for distribution to investors.  

ANZO’s portfolio occupancy is steady at an attractive 98.2 percent. The portfolio weighted average lease term (WALT) remains a favourable 4.9 years, unchanged since June 2008.  As measured by area, only 1.0percent of ANZO’s portfolio remains subject to a lease expiry event in the current financial year, having reduced from 6.5 percent at June 2008 through active lease management and renewals.  Added to that is the high-quality tenant covenant, with more than 26 percent of ANZO’s net lettable area leased by the Crown.  Along with the Crown, ANZO’s tenancies comprise leading national and international businesses, providing stability and security to cashflows.  As measured by net income, ANZO’s top 25 tenants are responsible for 52 percent of the portfolio’s net income and lease 60 percent of the portfolio net lettable area.  ANZO has 226 tenants in its portfolio.

Mr Lang added that in the current financial year, ANZO is working through rent reviews on 125,500 sqm or 50 percent of its portfolio. So far 30,700sqm or about a quarter of the rent reviews has been completed,resulting in an average increase of 25.5 percent over the previous contract rentals.  ANZO’s portfolio is approximately 12.2 percent under-rented (where lease contract rents are below market levels), providing encouraging growth potential.

Mr Lang said a full revaluation of ANZO’s portfolio as at 31 March 2009 is now underway, with the outcome of this to be announced at its completion, which is expected in March 2009.  A number of other New Zealand listed property vehicles have also revalued their portfolios, resulting in reductions in value, and Mr Lang said negative market sentiment and the consequent movements in the capitalisation rates adopted by valuers meant that he expected the trend to besimilar for ANZO. “Asset classes have declined in value over recent months and real estate is not immune to this.  The early revaluation of the portfolio is a prudent step given the circumstances prevailing in investment markets around the world.”

The revaluation will also be updated for ANZO’s usual year-end portfolio revaluation in June.

Commenting on recent portfolio highlightsduring the interim period, Mr Lang said ANZO’s redevelopment of 21 Queen Street in Auckland remains on track forcompletion at the end of September 2009. The majority of the ground-floor retail space has been leased to a leading Australian and New Zealand retailer on an eight-year term, while active negotiations are underway with potential tenants requiring up to 6000 sqm of office space –  more than 40 percent of the building’s net lettable area.

Other highlights of the interim period included:

·       New lease commitments by longstanding tenant Buddle Findlay in both Wellington (State Insurance Tower) and Auckland (PricewaterhouseCoopers Tower). In Wellington, Buddle Findlay made a new commitment of nine to tenyears for 3,150 sqm over three floors, while in Auckland, its 4,050sqm lease was extended by six years to the year 2020.

·       Australian listed retailer JB Hi-Fi entered the Wellington market and has leased a total of 1,080 sqm for six years in the State Insurance Tower’s retail centre.  The retail centre is now 100 percent leased.

ANZO is managed by AMP Haumi Management Limited.

About ANZO

ANZO is New Zealand’s largest listed investor in prime and A-grade commercial office property. A unit trust listed on the New Zealand Exchange, ANZO currently owns 15New Zealand office buildings with a total gross value of more than $1.5 billion– Auckland’s PricewaterhouseCoopers Tower, ANZ Centre, IAG House, AMP Centre and 21 Queen Street; and Wellington’s State Insurance Tower, Vodafone on the Quay, HP Tower, 125 The Terrace, No. 1 and 3 The Terrace, Pastoral House, Mayfair House, AXA Centre, Deloitte House and 29 Willis Street.

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