Record full-year result for AMP NZ Office TrustAugust 13, 2007 Chief Executive of New Zealand’s largest listed investor in prime commercial property, Robert Lang, in announcing the AMP NZ Office Trust’s (ANZO) annual result today said the operating profit before taxation (the distributable profit) was $41.03 million, a 14.0 percent (1) increase, and that the Trust was in a better than ever position to continue on its growth path. “Increasing office rentals and new acquisitions have led to a record annual result for New Zealand’s largest listed investor in prime commercial office property, ANZO,” said Mr Lang. ANZO’s operating profit before taxation, portfolio revaluation gain, investor distributions and earnings per unit for the 12 months to 30 June 2007 were all the highest in the trust’s history. ANZO’s total return (income yield plus unit price appreciation) for the year was 23.2 percent – higher than the NZX 50 Index and NZX Gross Property Index and exceeding 20 percent for the third consecutive year. ANZO’s compound average annualised total return over the past three years has been 25.0 percent. During the financial period ANZO’s rentals year passed the $100 million mark for the first time, rising 11.9 percent or $11.41 million to $107.12 million. Portfolio occupancy remained above 98 percent for most of the year and other key contributors were new properties (both acquisitions and development projects) and the year’s 34 rent reviews, which delivered an average increase in contract net rents of 25.0 percent. “The advantages offered by prime and A-grade office space have translated into strong demand and had a corresponding positive impact on rental growth,” he said. “It’s a story of consistent growth; the portfolio has evolved as we make the most of the market opportunities and that promises to spell a positive future for ANZO unit-holders.” Total direct expenses were up 5.2 percent on the previous year due to ANZO’s acquisitions – but on a like-for-like basis, a 2.4 percent reduction was achieved, reflecting ANZO’s continued focus on cost containment. Mr Lang said ANZO’s earnings per unit for the year were up 5.4 percent (1) to 7.96 cents per unit. The total distribution for the year is 4.02 percent higher than last year at 7.76 cents per unit, in line with the distribution upgrade announced in December 2006. ANZO unit-holders (excludes APTNB holders) will receive a fourth-quarter distribution of 1.99 cents per unit. The record date is 27 August, 2007 and payment will be made on 3 September. One of the year’s highlights was a $257.3 million (2) portfolio revaluation gain; double that of last year, which was itself a record. Along with acquisitions this lifted ANZO’s total assets by 38.3 percent to $1.43 billion, while adjusted(3) IFRS net tangible assets per unit (NTA) rose 31.9 percent to $1.49 per unit. ANZO’s bank gearing (total debt-to-total assets) ratio at balance date was 22.2 percent, well below the self-imposed 40 percent maximum. Excluding bank debt associated with the 21 Queen Street project, at balance date 96.3 percent of ANZO’s bank debt was fixed at a weighted average interest rate including margins of 6.97 percent for an average term of 5.7 years. This conservative gearing level, along with a well-hedged interest rate profile, has insulated ANZO from recent movements in market interest rates and substantially reduced future earnings risks and volatility. Mr Lang said portfolio occupancy stood at a steady 98.1 percent, while the weighted average lease term (WALT) was 5.2 years. Eight of ANZO’s 13 investment properties (4) are now 100 percent occupied, and only two properties have a full floor available for lease. Market vacancy rates are at historic lows, with vacancy in Wellington’s and Auckland’s top ten buildings at 0.4 percent and 1.3 percent respectively. The portfolio is more than 12.5 percent under-rented, with more than half of the portfolio area subject to rent reviews over the next two financial years – 69,600sqm (or 27 percent of net lettable area) in FY08 and 67,400 sqm (28 percent) in FY09. “Conversely, a very low proportion of the portfolio is subject to scheduled lease expiries – just 3.8 percent in FY08 and 9.6 percent in FY09,” said Mr Lang. “We have the ability to maximise all these opportunities, which can only enhance unit-holder returns further and in that regard ANZO’s future looks extremely positive.” Mr Lang said ANZO’s distributions had grown by a compound average of 3.5 percent each year for the past three years. “We expect the momentum of 2007 to continue throughout the current year, and assuming ANZO’s strong performance continues, the board will again consider similar distribution increases to that seen in 2007,” said Mr Lang. Other highlights of the 2007 year included:
Mr Lang said the majority of ANZO’s unit-holders can look forward to higher net distributions during the 2008 financial year due to the Portfolio Investment Entity (PIE) regime, which is scheduled to take effect from 1 October 2007. “This will significantly reduce the tax paid on their returns by the majority of ANZO unit-holders and will allow them to share in the benefits of tax-free capital gains, depreciation and other allowances. Under the new regime, the after-tax (net) distribution will rise by between five and 39 percent for most ANZO unit-holders,” he said. During the 2008 financial year, ANZO will also become a taxpayer for the first time. Until this point, deductions and tax losses carried forward from previous years have offset ANZO’s tax liability but these have now come to an end. ANZO’s effective tax rate for FY08 is expected to be in the 10-12 percent range. Note: Adoption of NZ IFRS and 2006 comparative figures ANZO is managed by AMP Multiplex Management Limited.
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