AMP NZ Office's $50.4 million deal to buy a big Wellington commercial property got the thumbs-up from property and investment experts yesterday.

NZX-listed AMP NZ Office is buying buildings and land beside the Beehive from AMP Capital Property Portfolio, run by Stephen Costley.

Costley's portfolio is New Zealand's largest unlisted property fund with 29 commercial office, industrial, retail and development properties worth more than $1.27 billion.

The private fund, which owns Defence House in Wellington and Botany Town Centre in South Auckland, is open only to institutional investors.


Two years ago, it sold West Auckland's LynnMall shopping centre to NZX-listed Kiwi Income Property Trust for $174 million.

Costley said yesterday investors in the fund wanted capital returned and the Wellington sale would reduce debt.

About 90 per cent of his fund is owned by AMP Life, AMP NZ Property Fund and the New Zealand Superannuation Fund.

Costley's fund got the Bowen Campus when it took over Capital Properties, a company it then delisted from NZX. The fund had big plans for that Wellington site, obtaining resource consent to double commercial floorspace from 3ha to 6ha.

Detailed architectural plans from Craig Craig Moller and Herriot + Melhuish were commissioned and development seemed imminent, until AMP NZ Office announced yesterday it had struck a conditional purchase deal.

Costley said yesterday a project worth $180 million to $200 million was planned on the site.

"We are returning some capital to our investors and we used part of the process to retire bank debt as well. We will potentially be looking at more office assets," he said of future sales.

Scott Pritchard, AMP Office's chief executive, said a shrinking civil service did not concern him.


"Wellington has a supply problem - stock is reducing faster than the government contraction because a lot of buildings there are not seismically strong."

Craig Tyson, OnePath equity investment manager, backed AMP NZ Office's purchase.

"This is exactly the type of deal we like to see our listed property companies doing - buying well-located properties, accretively for shareholders, at the bottom of the property cycle, with ample scope to add value through redevelopment and re-leasing. This is a win-win for shareholders and is earnings and value accretive," Tyson said.

Forsyth Barr research director Jeremy Simpson praised the location and expansion potential.

"New premises that close to Parliament will appeal to a number of government departments that have existing leases expiring over the medium term and are looking for well-located appropriate space that will enable them all to be in the same building," Simpson said.

Chris Dibble, associate research director at Jones Lang LaSalle Dibble, said it fulfilled Pritchard's statements that he had his chequebook open.


"It is a very strategic buy from ANO who have in recent months been vocal in the media regarding purchasing assets if there was an appropriate opportunity. The purchase price is the largest-value asset sold in 2012.

"From an overall market perspective, hopefully this will now unlock a strategic Wellington asset for future redevelopment, which has been left in abeyance."

AMP Capital Property Portfolio sold to AMP NZ Office Trust:
* Nearly 1ha of land by the Beehive with two buildings.
* Bowen State building: 34 Bowen St, 10 levels.
* Charles Fergusson Tower: 38 Bowen St, 15 levels with five-level annex.
* Resource consent issued to increase space from 30,000sq m to 60,000sq m.