$167m wiped from AMP's office values

The value of the PricewaterhouseCoopers Tower has dropped by $40 million. Photo / Supplied

New Zealand's largest prime office block landlord has had $167 million wiped off the value of its properties, blaming its falling fortunes on the global downturn.

AMP NZ Office Trust's interim nine-month independent revaluation of investment real estate by CB Richard Ellis and Colliers International resulted in a 10.6 per cent devaluation of the properties.

Rob Lang, chief executive of the trust's manager, said the portfolio was now valued at $1.4 billion.

That sparked Credit Suisse research analyst Jason Lindsay to downgrade a valuation on ANZO's units from $1.14 to $1.06, although he added that he thought the dividend of 7.6 cents a unit was sustainable.

The trust was one of the few listed real estate vehicles in New Zealand unlikely to be forced to slash its cash distribution, Lindsay said.

However, he expected it to suspend 2.5 per cent growth in distributions for 2010 unless the redevelopment at 21 Queen St leased up faster than anticipated.

ANZO has almost finished the extensions and refurbishment of this office tower in Auckland's CBD.

Lindsay said the trust had $4.1 million in its dividend distribution reserve that it could use to support dividends if it had trouble with 21 Queen Street.

"Alternatively, if the building leases up in the near future this may be utilised to continue the stated policy of 2.5 per cent growth in gross distributions," he said.

Lindsay noted problems for CBRE and Colliers. "We expect the valuers would have had a particularly difficult job valuing APT's portfolio as there has been no transactional evidence of larger value properties since the GE sale in Auckland and even then this was only $37 million.

"The re-emergence of syndicates has seen good transactional evidence and good support at up to the $20 million level. The sale of the Maritime building in Wellington, partially owned by Valad, will be interesting to observe," he said.

Property would suffer more this year, he predicted. "Following further deterioration in the economy since November when the last lot of CBRE forecasts were published, we are soon to apply the CBRE pessimistic case scenario to our forecasts.

"From 1998-2001 - the last two recessions were in 1997 and 2001 - market rents dropped around 4 per cent (prime office) through to 20 per cent (C-grade office). By adopting the CBRE pessimistic case scenario, we are assuming this recession as it affects commercial property is worse than the previous two recessions but not as severe as the early 1990s property wreck. Note that this was more driven by oversupply, particularly in the office sector, where if we

look at the Auckland office market, we see up to 25 per cent of new supply was added to already high vacancy rates as opposed to now, where CBRE are forecasting less than a 10 per cent addition to supply off a record low base for vacancy."

Lang said the revaluation was unrealised and did not affect distributions to unit-holders. The trust remained New Zealand's third-largest listed property trust.

"At the portfolio level, the outlook is encouraging, with over 10,000sq m leased or renewed in Auckland and Wellington over the past three months, for terms ranging up to 12 years. In addition, more than 18,000sq m of rent reviews have been completed and a new market-leading rent agreed in Wellington," Lang said.