AMP Office Trust profits up 13pc, but values fall $248m

AMP Office Trust's refurbished building at 21 Queen St, Auckland.

AMP NZ Office Trust has reported a 13.4 per cent rise in its full year distributable profit to $59.2 million.

But when factors such as a $248.3m fall in the value of investment properties were included, the trust made a net loss of $192.8m for the year to the end of June.

ANZO said total assets at balance date were $1.4 billion, down 14.1 per cent from the previous year following portfolio revaluations. Total liabilities fell by 30 per cent, largely as a result of a rights issue.

Chief executive Robert Lang said rental revenue for the year was up 10.9 per cent on the previous year to $133.4m, largely as a result of rent reviews, which delivered an average increase of 25.7 per cent over previous contract rents.

Although rental growth in the wider market had slowed, AMP NZ Office Trust (ANZO)'s rent reviews were catching up with growth that happened in the previous two or three years.

The 2009 rentals could potentially have been higher but rent reviews were taking longer to settle in the current economic climate and a number had been carried over to the new 2010 financial year, Mr Lang said.

The momentum would continue into the current financial year, with rent reviews covering 124,550sq m, or almost 50 per cent of the portfolio area, due to take place.

ANZO's portfolio occupancy at balance date was 97.2 per cent, down from 98.7 per cent a year ago, with five properties 100 per cent occupied.

ANZO unit-holders are to receive a final gross distribution for the 2009 year of 1.364c per unit (cpu). It is aiming for a full year gross distribution of 7.058cpu for the current 2010 financial year.

Along with the unrealised $248.3m fall in the value of investment properties, ANZO also reported an unrealised development loss of $34.4m on the 21 Queen Street project in Auckland. A $19.7m unrealised interest rate swap loss was also reported.

Lang said ANZO was in advanced negotiations with multiple potential tenants for the office space in the 21 Queen St project, while ground-floor retailer Dick Smith Electronics was now open. The project was on track for completion at the beginning of October.

A three-year extension of half of ANZO's bank debt facility had been followed by a $201m renounceable rights issue, completed in June, allowing the balance of bank debt to be retired, Lang said.

The combination had secured ANZO's funding on commercially-acceptable terms and had delivered a balance sheet with good headroom between ANZO's actual gearing and gearing covenants and interest cover ratios.

Net tangible assets (NTA) per unit at balance date under international accounting rules were 97c per unit, compared with $1.47 a year earlier.

ANZO said its adjusted NTA, after reversing deferred tax on revaluation gains - which ANZO was not required to pay under New Zealand tax law - was $1.02 per unit, compared to $1.63 at June 30 2008.

The comparisons partly reflected the 309.6m new units issued in ANZO's capital-raising, as well as the reduction in portfolio value.

Tenant confidence was improving, albeit from a low base, said Lang.

"Eighteen months into the recession, we have had only three small tenant defaults, one of which has already been replaced on better terms with no loss incurred.

"This represents a very small proportion of ANZO's 220 tenants and reinforces the benefits of a high-quality tenant roll."

ANZO units closed at 81c yesterday.

- NZPA