ANZO announces interim result

February 10, 2011

AMP NZ Office Limited (ANZO) has announced its financial result for the six months to 31 December 2010, with an after tax distributable profit of $31.0 million.

Highlights for the six months include:

• After tax distributable profit of $31.0 million or 3.11 cents per share in line with expectations.
• Net profit after tax of $28.4 million, after non-cash deferred tax changes and interest rate swap gains.
• Strong balance sheet maintained, with liabilities to asset values (gearing) at 23 percent.
• Thirty-five leases completed, including thirteen new customers, securing $8.6 million of rental income.
• Leasing success has increased occupancy to 92.0 percent from 90.4 percent at 30 June 2010, with the weighted average lease term maintained at 4.6 years.
• Improved corporate governance through ANZO’s conversion from a unit trust into a company with a new board of directors, including a majority of directors independent of the manager.
• A new management fee structure with a reduced base fee and a performance fee aligned with investors’ returns.
• The appointment of Scott Pritchard as Chief Executive Officer and George Crawford as Chief Financial Officer.

Result overview
ANZO’s rental income was $68.5 million, 2.6 percent lower than the previous interim period, primarily due to the sale of five retail units in Wellington’s Chews Lane precinct in May last year, as well as the expiry of IAG’s lease at 151 Queen Street in late 2009.

While debt levels have remained stable, interest expense has increased, reflecting that the interest costs associated with the 21 Queen Street development have no longer been capitalised following practical completion in September 2009.

Lower administrative expenses are the result of the revised management fee structure, and include a one-off fee rebate of $0.7 million relating to the 2010 financial year.

A recent amendment to the accounting standard IAS 12: Income Taxes allows ANZO to restate its deferred tax liability to reflect the actual tax payable if its investment property assets were to be sold. This has resulted in the reversal of the deferred tax liability booked by ANZO as at 30 June 2010 relating to the Government’s removal of depreciation on building structures, as well as the reversal of deferred tax liabilities booked on revaluation gains and leasing costs/incentives amounting to $165 million in total.

ANZO’s net tangible assets per share have therefore increased from $0.77 per share to $0.93 per share and no longer require adjustment.

Portfolio performance
Increasing leasing activity has resulted in 35 new leases being secured during the interim period (including thirteen new customers) and a further eight existing customers extending their leases. These transactions have secured $8.6 million in annualised rentals and 21,300 sqm of net lettable area.

Major leasing highlights include:

• Four new leases in 21 Queen Street including three new customers.
• Eight new leases in 151 Queen Street including four new customers.
• ANZO has also retained two major customers at 125 The Terrace in Wellington, lifting the building’s WALT from 2.4 to 4.4 years.

The new customers welcomed to the ANZO portfolio over the six months included insurance broker Willis, software solutions provider SAP, Serious Fraud Office, Goodman, Swire Shipping and Crown Fibre Holdings.

Scott Pritchard commented: “It is pleasing to see improving leasing enquiry, and our focus is on converting that enquiry to new leases, improving portfolio occupancy and stabilising rental levels.  While increasing occupancy through attracting new customers remains a priority, we are also particularly focused on enhancing existing customer relationships and de-risking future expiries through pro-active management.”

Earnings and distributions
Full-year distributable earnings after tax are expected to range between 5.9 and 6.1 cents per share, consistent with the 2010 financial year.

ANZO shareholders will receive a second-quarter dividend of 1.474 cents per share plus imputation credits of 0.2437 cents per share – consistent with the first-quarter dividend. Offshore investors will receive an additional supplementary dividend of 0.1003 cents per share to offset non resident withholding tax. The record date is 10 March 2011 and payment will be made on 24 March 2011.

About ANZO
ANZO is New Zealand’s largest listed investor in prime and A-grade commercial office property. Listed on the New Zealand Exchange, ANZO currently owns 15 New Zealand office buildings – Auckland’s PricewaterhouseCoopers Tower, ANZ Centre, 151 Queen Street, 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 (Chews Lane).