ANZO investor distributions continue to climb

October 22, 2008

AMP NZ Office Trust (ANZO), New Zealand’s largest listed investor in prime commercial office property, has posted a strong first-quarter performance and continues to deliver the promised increase in investor distributions.

ANZO’s gross distribution for the full year to June 2008 was its highest-ever to be derived from operating earnings, and the trust has committed to lifting that by a minimum of 4 percent in the current year to June 2009.

Announcing ANZO’s financial results for the first quarter of the 2009 year, ANZO chief executive Robert Lang said the trust has continued to enjoy strong portfolio performance and operating cashflows. ANZO investors will receive a net distribution for the first quarter of 1.839 cents per unit plus imputation credits of 0.257 cents per unit, 3.0 percent higher than the previous corresponding period on a net basis (or 5.0 percent gross).

“The macro economic environment continues to present challenges for New Zealand businesses, with the outlook for immediate improvement remaining uncertain. ANZO’s defensive business remains a strong attribute in such times,” he said. “A high-quality portfolio, high-quality tenants, a clear and transparent investment strategy and low gearing are all contributing to our performance.”

Although worldwide sharemarkets – including New Zealand – continued to experience falling values, ANZO was faring better than its peers and the wider sharemarket, with the best total return in the New Zealand listed property sector for the calendar year to date and outperforming the NZX 50 Gross and NZX Property benchmarks over one-, three- and five-year periods.

With portfolio occupancy at 98.6 percent and a weighted average lease term of 4.85 years, ANZO’s focus is on maintaining high portfolio occupancy and completing rent reviews. More than 125,500 sqm or 50 percent of ANZO’s portfolio is subject to upward rent reviews in the current year, with under-renting confirmed at 12.2 percent.

Collectively, these factors provide the security and stability behind future earnings and distribution growth.
Mr Lang said ANZO’s rentals for the three months to 30 September 2008 were 13.3 percent higher than the previous corresponding period, at $32.75 million.

Operating profit before current tax was up 7.2 percent to $14.91 million. Operating profit after current tax (ANZO’s distributable profit 1) was $13.41 million – lower than the previous corresponding period because ANZO did not pay tax in the first quarter of the 2008 year, having sufficient tax losses to offset its taxable income.

Earnings per unit for the three months (based on operating profit before current taxation), were 7.4 percent higher at 2.17 cents per unit. Earnings per unit based on operating profit after current taxation were 1.95 cents (2.02 cents in the previous corresponding period and not directly comparable due to the difference in taxation).

The record date for the first-quarter distribution is 6 November 2008 and payment will be made on 13 November.

ANZO’s bank gearing (bank debt to total assets) at balance date was 26.3 percent, well below its self-imposed ceiling of 40 percent. At balance date, 84.7 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.

Key portfolio events for the quarter included new lease commitments of nine to ten years by longstanding tenant Buddle Findlay to 3,150 sqm over three floors of the State Insurance Tower in Wellington. ANZO will progressively refurbish the space, and is also upgrading the building’s foyer and lifts.

Meanwhile, retailer JB Hi-Fi will open its first Wellington store in the State Insurance Tower’s subterranean retail space, where it has leased a total of 1,080 sqm for six years.

Mr Lang said despite challenging times for investment markets, ANZO had welcomed a considerable number of new unit-holders during recent months.

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.

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Footnote:
1. In common with virtually all of New Zealand’s listed property entities, ANZO continues to hold the view that distributable profit is the most relevant indicator of profit. Under NZ IFRS, net profit after tax (NPAT) now includes a number of non-cash adjustments – some of which will never crystallise – such as deferred tax on depreciation clawback, other non cash adjustments include the fair value of interest rate swaps and tax losses utilised, as well as unrealised revaluation gains/losses on investment properties. These do not affect the profit available for distribution to investors.

It should also be noted that the presentation of this result and the accompanying comparative figures is consistent with ANZO’s past practice.