AMP NZ Office Trust announces Wellington acquisition and higher investor returnsDecember 11, 2006 New Zealand’s largest listed investor in prime commercial office property, AMP NZ Office Trust (ANZO), has announced the $39.5 million acquisition of Wellington’s AXA Centre, in combination with a private placement of new units, a unit purchase plan and an increase in future investor returns on the back of continued strong portfolio performance and outlook. ANZO executive manager Rob Lang said the AXA Centre was acquired in a keenly-contested international tender process involving nine bidders. “This high level of interest is indicative of the demand for investment-grade assets and should underpin strong valuation growth leading into ANZO’s annual portfolio revaluation in June 2007.” Mr Lang said the A-grade AXA Centre, located on The Terrace, is 100 percent occupied by institutional and quasi-government organisations, increasing ANZO’s exposure to government tenants and to the top-performing Wellington market. Following the acquisition, Wellington properties will make up 48.8 percent of ANZO’s portfolio value, with government sector tenant exposure rising to 24 percent of the portfolio. ANZO estimates the AXA Centre is 19.4 percent under-rented, providing strong rental growth prospects, as well as synergies with ANZO’s existing portfolio. “We’re very confident of achieving substantial savings in operating costs, as we have done with other Wellington acquisitions in recent years,” said Mr Lang. The weighted average lease term of 3.7 years is an advantage, improving ANZO’s ability to quickly capitalise on these opportunities, and Mr Lang said the AXA Centre’s initial twelve month rolling yield of 7.14 percent is expected to rise to 9 percent over the next three years. “Market rents for premium and A-grade office space continue to increase, and ANZO’s portfolio is now approximately 7.1 percent under-rented, positioning ANZO strongly for rental growth across the portfolio,” said Mr Lang. “This is already delivering encouraging results – in the first five months of the current financial year, ANZO has completed 19 rent reviews over 15,700 sqm of net lettable area, recording an average increase in contract rents of 22.5 percent over the three-year review periods. “A further 45 rent reviews over an area of 39,600 sqm are scheduled during the balance of the 2007 financial year [to 30 June 2007], and in the following year, ANZO has 49 rent reviews over 63,300 sqm scheduled.” Mr Lang said ANZO’s continued growth momentum from within the portfolio, and growth expectations arising from the AXA Centre acquisitio,n have allowed a lift in projected investor distributions, for both the current financial year and the future. The projected distribution for the financial year to June 30, 2007 is now 7.76 cents per unit, up from the previously-indicated 7.63 cents per unit, representing a 4 percent increase over the 2006 financial year. This increase is intended to be spread over the third- and fourth-quarter distribution payments. “In addition, our expected minimum year-on-year growth in ANZO’s distributions beyond FY2007 has increased to 2.5 percent from 2.25 percent,” Mr Lang said. “The board continues to monitor ANZO’s performance and a similar upward review of distributions is certainly possible.” Mr Lang noted that the office premises of ANZO’s seven existing Wellington properties are fully occupied and continue to enjoy strong tenant enquiry and demand. Overall, ANZO’s portfolio occupancy stands at 99.3 percent. ANZO has today launched an institutional unit placement of $40 million – the proceeds will be used to fund the acquisition of the AXA Centre. A trading halt has been requested while an institutional book-build takes place. The placement is being managed by First NZ Capital. Following the placement, ANZO’s balance sheet will be in a stronger position from which to grow the portfolio and further enhance unit-holder returns. Gearing (bank debt to total assets) will reduce to 28.6 percent, giving ANZO approximately $195 million of bank debt capacity before reaching its self-imposed 40 percent ceiling. Approximately 85 percent of ANZO’s bank debt is hedged for an average term of five years, substantially reducing its earnings exposure to any future increases in interest rates. The AXA Centre acquisition will increase total assets in ANZO by 3.8 percent to $1.071 billion. Mr Lang said, “In addition to the institutional placement, ANZO intends to implement a unit purchase plan of $5,000 per unit-holder to be offered early in the New Year. The unit purchase plan will allow all of ANZO’s unit-holders to participate in the capital-raising and growth initiatives. More details on the proposed unit purchase plan, pricing terms, including the record date for entitlements, will be announced shortly.” “We continue to see a resilient market for premium and A-grade office accommodation,” Mr Lang said. “The AXA Centre represents an opportunity to further develop ANZO’s principal strategy of investing in premium and A-grade office property.” Further detail on the AXA Centre, along with the effect of the acquisition and placement on ANZO’s portfolio and balance sheet, is provided below. About ANZOANZO is New Zealand’s largest listed investor in premium and A-grade commercial office property. A unit trust listed on the New Zealand Exchange, ANZO currently owns 11 New Zealand office buildings (excluding the AXA Centre) with a total gross value of more than $1 billion – Auckland’s PricewaterhouseCoopers Tower, ANZ Centre, IAG House and Quay Tower; and Wellington’s State Insurance Tower, Vodafone on the Quay (formerly Mobil on the Park), HP Tower, 125 The Terrace, No. 1 and 3 The Terrace, Pastoral House and Mayfair House. Media enquiries: Or: Robert Lang AXA Centre
ANZO’s portfolioFollowing the acquisition:
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