High-quality office strategy delivers
$118 million revaluation gain for ANZO

June 10, 2008

AMP NZ Office Trust (ANZO), New Zealand’s largest listed investor in prime commercial office property, has announced an unaudited $118.1 million (1) or 8.14 percent increase in the independent valuation of its portfolio, driven entirely by rental growth.

Chief executive Robert Lang said the increase underlined the continued strength of ANZO’s high-quality portfolio and prime office fundamentals, and follows last year’s record $253 million or 22.7 percent increase. He said strong rental growth, both in the market and in ANZO’s portfolio, had more than offset the higher capitalisation rates adopted by valuers in response to a weaker economic climate and global capital market conditions.

“Office markets have the strongest sector fundamentals in the current New Zealand property environment,” said Mr Lang. “Tenant demand has been resilient, vacancy rates have been at historical lows for a number of years, and there is an ongoing shortage of prime and A-grade supply.”

ANZO’s portfolio is currently 99 percent occupied, with a weighted average lease term (WALT) of 4.9 years. The independent valuers assessed growth in ANZO’s market rents over the past 12 months at 17.2 percent in Auckland and 8.7 percent in Wellington.

“A revaluation gain driven by rental growth is good news for ANZO investors as it highlights factors that are directly linked to future earnings and distribution growth,” said Mr Lang.

The revaluation is expected to result in the value of ANZO’s investment portfolio rising to $1.569 billion, as at the end of the trust’s financial year on 30 June 2008.

ANZO’s net tangible assets (NTA) per unit under NZ IFRS is forecast to rise from $1.37 to approximately $1.46 per unit. Adjusted NTA (after excluding deferred tax on revaluation gains, which is not applicable to ANZO) is expected to show a 9.4 percent increase, from $1.49 to approximately $1.63 per unit.

Following settlement of the 29 Willis Street acquisition in early May, ANZO’s gearing (bank debt to total assets) is currently 26.1 percent and is expected to reduce further to approximately 25.5 percent as at 30 June 2008. Both figures are well below ANZO’s self-imposed ceiling of 40 percent.

The annual revaluation, part of ANZO’s statutory reporting requirements, was carried out by two firms of independent valuers – CB Richard Ellis and Colliers International.

The full-year gross distribution for the 2008 financial year has previously been confirmed at 8.385 cents per unit, 8.0 percent higher than in 2007 and ANZO’s highest-ever distribution derived from operating earnings. The outlook for next year’s gross distribution is also favourable, with an expected minimum year-on-year growth rate of 4 percent.

Mr Lang commented: “In recent years, ANZO has experienced the highest rates of rental growth since listing. While current market fundamentals indicate growth will continue, the rate of future growth is being closely monitored.”

“Notwithstanding this, the 2008 revaluation has confirmed portfolio under-renting at 12.2 percent (where lease contract rents are below market rents), and almost 34 percent or 85,900 sqm of the portfolio’s net lettable area is subject to reviews during the 2009 financial year. The outlook for these reviews is underpinned by low vacancy rates in both ANZO’s portfolio and the market, a shortage of high-quality stock and continued tenant demand – core drivers of rental growth.”

“As well as benefiting ANZO’s investors through increased earnings and distributions, higher net property income supports continued growth in capital values.”

Mr Lang said although the capitalisation rates used in ANZO’s revaluation had eased by 14 basis points to a weighted average of 7.04 percent, capitalisation rates internationally had weakened to a greater extent. UBS research indicated an increase of 70 basis points in capitalisation rates in the United Kingdom, 85 in the United States, 40 in Europe and 50 in Australia. The limited effect on New Zealand office property was a reflection of strong local office space supply-and-demand fundamentals, comparatively-lower tenant exposure to the US sub-prime mortgage crisis and therefore stronger occupier demand, and ongoing investor demand for strategic investment-grade assets with these investment characteristics. In addition, as evidenced by transactions, capitalisation rates in the New Zealand prime office sector had not previously compressed to the levels seen overseas, and as a result, were not now reversing to the same extent.

Four of ANZO’s 15 properties saw double-digit increases in value in the 2008 revaluation, with a fifth – Wellington’s Vodafone on the Quay – following close behind at 9.9 percent. HP Tower in Wellington recorded the largest percentage gain, at 16.31 percent. Auckland’s AMP Centre and ANZ Centre added 12.0 percent and 11.4 percent respectively. The value of ANZO’s flagship PricewaterhouseCoopers Tower in Auckland rose by 10.7 percent or $29 million to $300 million during the year.

The revaluation has been reviewed and approved by ANZO’s independent directors, is subject to audit and will be confirmed as part of ANZO’s full-year financial statements, due to be announced in August 2008.

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 15 New 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.

Media enquiries:
Robert Lang
Chief Executive Officer
AMP NZ Office Trust
Office: 04-494 2268
Mobile: 029-494 2268
Email: robert.lang@anzo.co.nz

Valuations carried out by Colliers International and CB Richard Ellis and subject to audit.
* Ground lessors’ interest
** Acquired by ANZO in May 2008