Devaluations hurt commercial landlord

Rob Lang said the unrealised loss would have no impact on the profit available for distribution to investors. Picture / Greg Bowker

The country's largest listed commercial landlord has suffered a bottom-line loss, hit hard by property devaluations.

Rob Lang, chief executive officer of AMP NZ Office Trust's manager, said the half-year result carried with it devaluations of $63.1 million.

That was the main factor which turned the trust's $70.3 million half-year operating profit into a $27.7 million net after-tax loss for the half-year to December 31, 2009.

Yet the trust made more money, up from its $65.2 million operating revenue in the 2008 half-year.

Lang said the trust had to comply with International Financial Reporting Standards which required the business to take into account non-cash adjustments in reporting net profit.

The unrealised loss does not affect the profit available for distribution to investors, Lang stressed, and the trust held the same view as virtually all other New Zealand listed property entities: that distributable profit was the most relevant indicator of profit.

The trust, managed by AMP Haumai Management, owns 15 properties valued at $1.3 billion.

A big capital-raising move resulting in more units being issued and netting $201 million in May last year has, however, hurt investors. Unitholders will suffer a distribution drop from 3.6 cents a unit to 3 cents a unit for the half-year.

"The cash distributions on a cents-per-unit basis decline because there are more units on issue in comparison to the previous years. We did a pro-rata issue which gave investors the right to buy more units. As a result, there are more units on issue to divide the total cash available for distribution which as you can see has gone up," Lang said yesterday.

About 10 per cent of the trust's portfolio is vacant, a position mainly sparked by refurbishing Auckland's 21 Queen St but only securing existing PricewaterhouseCoopers Tower tenant CB Richard Ellis.

All the rest of the spruced-up tower is empty.

The building's prime ground floor retail space is fully leased to Dick Smith.

Lang said rents across the portfolio were up nearly 8 per cent which generated the $70.3 million operating revenue. The latest rental revenue figure included some payments in settlement of rent reviews begun during the previous financial year and reflected growth in market rentals in past years.

The trust will soon announce a big shakeup in how it is run. Craig Stobo, chairman of the trust's manager, said governance and management fee structure changes were being examined. An update would be given later this month, he said.

Lang said the trust was on track for a full-year gross distribution of 7.058 cents per unit for 2010, a 2 per cent increase.

The trust does not provide annual profit forecasts.

Investors are due to get their second-quarter distributions around February 25.