AMP NZ Office Trust interim distributable profit up 41 percentJanuary 31, 2008 New Zealand’s largest listed investor in prime commercial office property, AMP NZ Office Trust (ANZO), has delivered a substantial increase in net operating profit after tax (the distributable profit) for the first half of its 2008 financial year. ANZO chief executive Robert Lang said ANZO’s net operating profit after tax for the six months to 31 December 2007 was 41.0 percent higher than the previous comparable period at $26.61 million. The increase is again due to rental growth, higher occupancy and the full effect of previous acquisitions. ANZO’s rental revenues for the interim period rose 13.8 percent to $58.66 million. Meanwhile, total indirect expenses fell by 22.2 percent, with a 34.3 percent reduction in interest expenses as a result of the conversion of ANZO’s mandatory convertible notes in June, 2007, as well as lower average debt levels during the interim period. Earnings per unit for the interim period (based on operating profit before current taxation), were 6.2 percent higher at 4.14 cents per unit, reflecting the growth in underlying cashflows. After-tax earnings per unit were 3.87 cents (this is is not directly comparable with the previous corresponding period as ANZO has become a taxpayer for the first time this year). ANZO unit-holders will receive a net second-quarter cash distribution of 1.824 cents per unit plus a 0.204 cents per unit imputation credit. Gross investor distributions for the six months are 6.2 percent higher than the previous comparable period. The record date is 15 February 2008 and payment will be made on 22 February 2008. In addition, Mr Lang confirmed that growth in ANZO’s full-year gross investor distributions will be a minimum 4 percent higher than last year, and with the portfolio continuing to perform ahead of expectations, the prospects of exceeding this outlook are high. Mr Lang noted that ANZO investors have also been able to extract significant additional cash returns from their ANZO investment as a result of the recently-implemented Portfolio Investment Entity (PIE) regime. “ANZO investors in the 33 percent tax bracket (1) have seen their after-tax cash distribution grow by 42.4 percent in comparison to the previous interim period, while non-resident investors have received a 12.3 percent lift in their cash distribution.” ANZO’s portfolio occupancy currently stands at 99.2 percent (up from 98.1 percent at the end of June 2007), with eight of the 14 buildings in the portfolio fully occupied. The portfolio weighted average lease term (WALT) is 4.84 years, increasing to 5.4 years following settlement of 29 Willis Street in May 2008 (see below). The rent reviews, new leases and lease renewals completed during the interim period have delivered an annualised increase in contract rentals of $4.40 million. Twenty-six new leases and lease renewals were secured during the periond, while 29 rent reviews resulted in an average increase in contract net rents of nearly 30 percent. A further 44 reviews over 14.2 percent of the portfolio’s net lettable area are scheduled for the remainder of the financial year. Highlights of the interim period included December’s announcement of an unconditional contract to acquire a newly-built $77 million Wellington office and retail complex with 100 percent of the office space occupied by a Government tenant. The acquisition of 29 Willis Street is scheduled to settle in May this year. The complex is estimated to be under-rented by 8.5 percent, and the three-year average total return is expected to exceed 11.7 percent per annum. Meanwhile, ANZO’s redevelopment of 21 Queen Street in Auckland is progressing well. The demolition and strip out of the interior is effectively complete and removal of the exterior façade is now underway. Tenant interest remains strong and ANZO is actively working with tenants for the property, which is scheduled to be complete in mid-2009. ANZO’s bank gearing (bank debt to total assets) at 31 December 2007 was a conservative 22.5 percent and will reach approximately 26.1 percent following settlement of 29 Willis Street in May – both well below the self-imposed ceiling of 40 percent. As at the end of December, 90.4 percent of ANZO’s total bank debt was hedged through interest rate swaps for an average duration of more than five years. ANZO’s interest rate swap portfolio is not exposed to any swap maturities or unhedged swap maturities in the next 12 months. In addition, no more than 25 percent of ANZO debt cover matures in any 12 month period for the next four years. Post-balance date, ANZO welcomed Haumi as a new cornerstone investor in ANZO and partner to AMP Capital Investors in the Trust’s management company. A New Zealand subsidiary of a major international institutional investor, Haumi is a long-term investor that invests in high-quality assets with strong management, and has significant experience in the global real estate market. Haumi has entered into agreements with AMP Capital Investors under which Haumi will acquire 19.9 percent of the units in ANZO and a 50 percent share of ANZO’s management company from AMP Capital Investors. AMP Capital Investors has confirmed that it will continue to support and remain a long-term investor in ANZO. ANZO’s management team and business strategy will continue to focus on creating value for unitholders and drawing on the complementary strengths of AMP Capital Investors and Haumi.
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1. After-tax distributions to ANZO investors in the 19.5 percent tax bracket have been 18.5 percent higher than the previous interim period. For investors in the 39 percent tax bracket, the increase is 54.6 percent. |