AMP NZ Office Trust acquires prime new Wellington property for $77 millionDecember 19, 2007 New Zealand’s largest listed investor in prime commercial office property, AMP NZ Office Trust (ANZO), has an unconditional agreement to acquire a newly-built $77 million Wellington office and retail complex with 100 percent of the office space occupied by a Government tenant. ANZO chief executive Robert Lang said 29 Willis Street enjoys a prime location one block from the Wellington waterfront, with dual frontages to Willis and Victoria streets. It is part of the wider Chews Lane precinct, which is currently undergoing an extensive $180 million office, retail and apartment redevelopment. The site also neighbours ANZO’s State Insurance Tower. Mr Lang said the office building comprises 7,286 sqm of prime-grade new office accommodation over six large floorplates, along with 16 ground-floor retail tenancies totalling 1,810 sqm and 59 carparks. The office space – comprising 80 percent of the net lettable area – and a number of the carparks are leased to Land Transport New Zealand for 15 years, contributing to the property’s weighted average lease term of 11.3 years. Fourteen of the 16 retail tenancies have been secured by strong national and international retail chains, mostly on eight-year lease terms. Mr Lang said the complex is estimated to be under-rented by 8.5 percent, with rent reviews scheduled on 80 percent of the net lettable area during ANZO’s 2009 and 2010 financial years. The initial 12-month running yield of 7.0 percent will rise to 7.45 percent in the second year. Included in the acquisition price is a $1.481 million income support allowance from the vendor that will support the property’s yield during the next three years. The investment performance outlook for this property is excellent, with the three-year average total return expected to exceed 11.5 percent per annum. The acquisition will lift ANZO’s net earnings marginally. “In combination with continued strong portfolio performance, this indicates a full-year gross distribution growth rate at least in line with last year’s 4 percent increase and is ahead of earlier expectations,” said Mr Lang. “29 Willis Street represents a rare opportunity to acquire a prime-grade, newly-built office and retail complex in New Zealand’s strongest office market. The building quality and large, efficient office floor plates of 1,100 sqm to 1,500 sqm, along with a 15-year lease to a Government tenant and opportunities for rental growth, make this a very compelling investment.” Less than 20 percent of the property’s net lettable area is subject to scheduled lease expiries over the next fifteen years, underpinning the security of cashflows. Mr Lang added that all tenancies are structured as unit-titled interests, providing ANZO with future ownership flexibility. The purchase price is $77.06 million (including vendor income support and acquisition costs), below the independent valuation of $77.75 million. ANZO is acquiring the 100 percent leasehold interest, with the Wellington City Council as lessor. The leasehold interest has a term of 250 years with an annual, non-reviewable peppercorn rent. Following the acquisition:
The acquisition will be funded by bank debt. ANZO maintains an active and conservative approach to bank debt management with gearing (bank debt to total assets) following settlement on May 1, 2008 reaching approximately 26.1 percent, well below the self-imposed ceiling of 40 percent. Following settlement approximately 92.6 percent of ANZO’s bank debt will be hedged through interest rate swaps for an average duration in excess of five years. ANZO’s interest rate swap portfolio is not exposed to any swap maturities or unhedged swap maturities in the next twelve months. In addition, no more than 25 percent of ANZO debt cover matures in any 12 month period for the next four years. ANZO’s existing bank debt facility is not due for review until October 2009. ANZO’s earnings remain well insulated from current interest rate market volatility. ANZO’s interim results for the six months to 31 December 2007 will be announced at the end of January. ANZO is managed by AMP Multiplex Management Limited.
About ANZO
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