ANZO reports $46.0 million nine-month distributable profit

April 21, 2011

AMP NZ Office Limited (ANZO) has announced an after tax distributable profit of $46.0 million for the nine months ended 31 March 2011.

Highlights for the quarter include:

• After tax distributable profit for the quarter of $14.9 million or 1.50 cents per share.
• Third quarter dividend of 1.26 cents per share, reflecting the recently announced revised dividend policy aligned to ANZO’s operating cash flows.
• Retention of major customer ANZ National Bank (ANZ), with a substantial redevelopment of the ANZ Centre in Auckland.
• Strong leasing progress at 21 Queen Street (now known as Zurich House following a naming rights commitment by Zurich General Insurance) where occupancy is now approximately 63 percent.
• Occupancy increased from 90 percent at 30 June 2010 to 94 percent through proactive leasing, with 54 lease transactions covering 56,000sqm.
• Weighted average lease term extended by 1 year to 5.6 years.

Result overview
ANZO generated $102.5 million of income for the nine months to 31 March 2011, a 2.2 percent reduction from the previous corresponding period.

Net financing expense for the nine months increased 5.5 percent to $16.2 million. This reflects the interest costs associated with Zurich House being capitalised in the previous corresponding period.

Administrative expenses of $5.9 million are 17.5 percent lower than the previous nine month period, largely due to lower management fees payable under ANZO’s new management fee structure.

ANZO shareholders’ returns for the quarter significantly outperformed its peer group, with a total return of 7.885 percent compared with the benchmark return under the management contract of 1.335 percent. As a result the manager will be paid a performance fee of $0.95 million.

The net profit after tax of $41.4 million compared with a loss for the previous corresponding period, which included an interim portfolio revaluation, resulting in an unrealised decline in portfolio value. No interim portfolio revaluation has been carried out this year.

ANZO has recently provided earnings guidance for both the current full financial year to 30 June 2011 and the following year. Earnings for the 2011 financial year are expected to be between 5.9 and 6.1 cents per share, while for 2012, full-year earnings are expected to range between 5.1 cents per share and 5.4 cents per share, assuming that the current positive leasing environment is sustained.

As previously announced, this expected reduction in earnings for the 2012 financial year is due to the removal of building depreciation as a tax deduction, the Westpac departure from PricewaterhouseCoopers Tower and increased borrowing costs.

Dividends
ANZO’s revised dividend policy is being phased in over the next three years, and as announced in March, the third and fourth quarter dividends for the 2011 year will be based on the expected 2012 dividend.

ANZO shareholders will therefore receive a third-quarter dividend of 1.26 cents per share  plus imputation credits of 0.197 cents per share. Offshore investors will receive an additional supplementary dividend of 0.0811 cents per share to offset non resident withholding tax. The record date is 12 May 2011 and payment will be made on 26 May 2011.

Portfolio performance
42 new leases and 12 lease renewals have been secured since 30 June 2010, reflecting over 56,000 sqm of net lettable space and $20.3 million of annualised rents. This leasing success has seen portfolio occupancy increase from 90 percent to 94 percent over the nine months, while the weighted average lease term has been extended by 1 year to 5.6 years.

During the quarter Zurich General Insurance, Human Rights Commission and Austar were welcomed into the portfolio.

The key achievement for the quarter was the retention of ANZ at the ANZ Centre in Auckland. ANZ agreed to a new 15-year lease commencing 1 January 2014 and will occupy 17,700sqm in the building, becoming ANZO’s largest customer.

ANZO will undertake a comprehensive redevelopment of the ANZ Centre at an estimated cost of $76 million, repositioning the Centre as one of Auckland’s premier office towers.

ANZO Chief Executive Scott Pritchard said: “We are now seeing increased stability in the Auckland CBD market across all of our assets, while the Wellington portfolio continues to outperform due to its A grade quality and strong customer covenants”.

Future announcements
This will be the last quarter for which ANZO releases a supplementary financial report. ANZO will continue to release annual and half year financial results and to comply with continuous disclosure requirements. In addition, ANZO will provide a quarterly business update to investors, consistent with its commitment to full and transparent investor communication.

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 Zurich House; 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).