AMP NZ Office, which sold its Chews Lane building in Wellington last year, plans to spend $50.4 million on two buildings near the capital city's Beehive and Parliament.
The commercial property investor has agreed to buy Wellington's 10-storey Bowen State and 15-storey Charles Fergusson buildings from Capital Properties (Wellington), a member of the AMP Capital Property Portfolio, the company said in a statement.
The price reflects an initial yield of 10.7 per cent with a valuation cap rate of 9.9 per cent, and represents a 10-year internal rate of return on an 'as is' basis of 10.3 per cent.
"We see Bowen Campus as a real opportunity," chief executive Scott Pritchard said. "It is in a highly significant part of central Wellington, and offers an attractive range of options for meeting continuing demand for quality office space in what is an established location."
The property is 92 per cent occupied, mainly by the Ministry of Social Development, whose lease expires in 2015.
The acquisition boosts ANZO's portfolio weighting to Wellington to 52 per cent, as the government clamps down on spending by aggregating administrative and support service functions. That includes targeted annual savings of some $32 million by rationalising its office space.
ANZO will fund the purchase with bank debt, boosting its bank facility to $475 million from $400 million. The deal will lift the company's gearing to 25 per cent from 22 per cent as at Dec. 31.
The deal will immediately add to earnings, but will have a minimal impact on the 2012 financial year due to a settlement date in late May.
ANZO said the buildings were structurally sound but will need "substantial reinvestment" to modernise them once the existing leases expire.
The shares rose 0.5 per cent to 93.5 cents, and have gained 13 per cent this year.