ANZO announces outcome of full-year portfolio revaluationMay 25, 2010 AMP NZ Office Trust (ANZO), New Zealand’s largest listed investor in prime commercial office property, has announced the unaudited outcome of its full-year portfolio revaluation. Chief executive Robert Lang said the unaudited valuation as at ANZO’s financial year-end on 30 June 2010 showed a decrease of $45.73 million (1,2) or 3.43 percent over the six months since the interim revaluation as at 31 December 2009. Over the full year, the valuation decline has been 7.60 percent. ANZO’s total portfolio value (3) is now $1.27 billion. Mr Lang said ANZO’s revaluation performance was in line with expectations, and what has been experienced by other New Zealand listed property entities. “This revaluation appears to confirm that capitalisation rates are stabilising. The weighted average market capitalisation rate adopted by the valuers across ANZO’s portfolio for this revaluation was 8.14 percent, up only slightly from 8.08 percent six months previously." He added that capitalisation rates have now eased to levels similar to those recorded in 2002, which – according to CB Richard Ellis research – was the year that they began to firm in the current property cycle. “The main drivers for the valuation decline have been lower effective market rents, extended periods for re-leasing vacant space, and weaker rental growth expectations reflecting increased supply and subdued business confidence.” The revaluation will be reflected in ANZO’s full-year financial result to 30 June 2010, due to be announced in August 2010. Mr Lang reiterated that the unrealised valuation decline does not affect distributions to unit-holders, which ANZO has confirmed are on track to increase by 2 percent on a gross basis for the full financial year. ANZO retains a strong balance sheet with a gearing ratio, following the revaluation, that continues to be one of the lowest in the Australian and New Zealand listed property sectors. This is forecast to be approximately 23.0 percent as at 30 June 2010, compared with the loan covenant ratio of 40 percent. The prospective interest cover ratio for the 2010 financial year is a healthy 3.7 times, compared with a covenant of 2 times. ANZO’s revised net tangible assets (NTA) per unit as at 30 June 2010 under NZ IFRS will be approximately $0.86 per unit. The adjusted NZ IFRS NTA (after reversing deferred tax on revaluation gains, which ANZO is not required to pay under current New Zealand tax law) is expected to be approximately $0.91 per unit. Mr Lang said that while he expected that the worst of the valuation declines were now behind ANZO, the road to a full market recovery is likely to be slow and contingent on improving investor confidence, property market and macro economic conditions. He added that the accelerating return of leasing activity and investors to the market was an encouraging sign. However, this must be tempered against the risk of market rents continuing to soften, particularly in the Auckland market. The property tax changes announced in last week’s Budget are not expected to impact ANZO’s after tax distributable profit until the 2012 financial year commencing 1 July 2011. The impact is expected to reduce the distributable profit in that year by approximately 7-9 percent and has been widely anticipated by the investment community. In addition, it is unclear if the tax changes announced will have a flow-on effect on commercial property values. On a positive note, the decline in the corporate tax rate is beneficial to ANZO tenants, while the reduction in PIE tax rates is expected to encourage further savings and investments - again, likely to be advantageous for property and ANZO. ANZO is managed by AMP Haumi Management Limited. About ANZO Footnotes:
Valuations carried out by Colliers International and CB Richard Ellis. * Ground lessors’ interest. Valued on DCF basis to reflect 48-year remaining fixed (highly over-rented) cash flow About ANZO
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