While AMP NZ Office Trust's distributable profit grew 18.5% in the six months to December, it said the market remains tough.“During a downturn it is apparent that tenants see the “stay put” option (remaining in their current premises) as
While AMP NZ Office Trust’s distributable profit grew 18.5% in the six months to December, it said the market remains tough.
“During a downturn it is apparent that tenants see the “stay put” option (remaining in their current premises) as a prudent and logical decision,” chief executive Robert Lang said.
“The market environment is undoubtedly a tough one, with tenants taking a cautious approach and vacancy rates and incentives on the rise.”
Increased rent up by 7.8% to $70.32 million following rental reviews was the biggest driver behind the boost to the trust’s profit, together with reduced asset management fees which were down 14.2% because of lower portfolio values and interest costs.
Its net operating profit after tax was up $5.01 million from the previous interim period to $32.10 million.
Its December property revaluations said its portfolio had decreased by $60.2 million, which contributed to the trust recording an unrealized net loss of $27.76 million, a total net decline of $63.12 million.
The trust said that despite the $60.2 million drop in valuation, the rate of decline in valuations has decelerated in the last 12 months.
“A notable feature of the interim revaluation was a relative stabilisation of the capitalisation rates used by valuers. The weighted average market capitalisation rate adopted by the valuers across ANZO’s portfolio remained essentially unchanged at 8.08%,” Mr Lang said.
“The main drivers of the valuation decline were lower effective market rents, extended periods for re-leasing vacant space, and weaker rental growth expectations.”
Its gearing was looking healthy at 21.7% compared to its loan covenant ratio of 40%.
Unitholders will receive gross distributions for the six months to December of 3.52 cents a unit. What that is lower than the same time last year, the trust said it was in line with what it predicted in May 2009.
The trust is currently marketing some of its Chews Lane assets in Wellington’s CBD, and looking to tenant its troublesome asset 21 Queen St.
“While the near-term environment is challenging, the right signals are starting to emerge in terms of macro-economic indicators, credit market conditions and tenant engagement,” Mr Lang said.
“Tenants are well aware that favourable lease terms can be negotiated in times such as these, and this – along with those who see an opportunity to migrate up the quality chain from secondary buildings, or move into the CBD from the fringe – can easily provide a catalyst for increased activity.”
At press time the trust’s shares were trading at 75 cents each.
