ANZO agreement to buy Bowen Campus

NZX and Media announcement – 18 April 2012

ANZO agreement to buy Bowen Campus

AMP NZ Office Limited (ANZO) (NZX: ANO) announced today that it has entered into a conditional agreement to buy Bowen Campus in the heart of Wellington’s government precinct.

Confirming the agreement, Scott Pritchard, ANZO’s Chief Executive, said the purchase of the campus, which is made up of the Bowen State and Charles Fergusson buildings, was an important step for the company in continuing to invest in future office space requirements in the Wellington CBD.

“We see Bowen Campus as a real opportunity. It is in a highly significant part of central Wellington, and offers an attractive range of options for meeting continuing demand for quality office space in what is an established location,” he said.

ANZO will pay Capital Properties (Wellington) Limited, a member of the AMP Capital Property Portfolio, $50.4 million for the campus.

While the process is well advanced, the agreement is conditional on ANZO board approval by 24 April and approval from the Overseas Investment Office. The company is approximately 28% overseas owned and 72% owned by more than 7,500 New Zealand shareholders.

Situated next to the Beehive and Parliament Buildings and encompassing approximately one hectare of land, the property has 30,000 square metres of net lettable space and an existing resource consent for a total of 60,000 square metres of office space, providing for potential future redevelopment.

The 10-storey Bowen State Building and the 15-storey Charles Fergusson Tower were built between the early 1960s and mid-1970s. The property is 92% occupied predominantly by the Ministry of Social Development whose lease runs through to 2015.

Mr Pritchard said the acquisition would provide an opportunity to invest in a strategic asset while maintaining an acceptable level of risk, with three years secure cash flow, time to consider future options and a relatively low land and building buy-in rate of $1,400 per square metre (Gross Floor Area).

While the campus buildings were structurally sound they would need substantial reinvestment to modernise them on expiry of the current leases, he said The company has assessed the feasibility of a range of options for potential refurbishment or redevelopment based on investment at the end of the current lease terms.

Mr Pritchard noted that in 2011 ANZO sold its Wellington Chews Lane property, and that reinvestment of those proceeds in this core location is expected to generate stronger returns for shareholders. Other nearby Wellington buildings it owns include No. 1 and 3 The Terrace and Pastoral House, which it substantially refurbished in 2006 and 2005 respectively.

Mr Pritchard said that the acquisition will be immediately accretive to earnings, but would have minimal impact on 2012 earnings with an expected settlement date of late May.

The purchase price, which is supported by an independent valuation, reflects an initial yield of 10.7% , a valuation cap rate of 9.9% and represents a 10-year internal rate of return on an “as is” basis of 10.3%.

Following the acquisition ANZO’s weighting to Wellington will increase by 2% to 52%, while ANZO’s occupancy and Weighted Average Lease Term (WALT) will remain unchanged.

The purchase will be funded through bank debt, with ANZO’s facilities being amended through a new $125 million tranche expiring in July 2017 and a reduction in the July 2013 expiry of $50 million. Overall the existing $400 million facility will increase to $475 million.

The acquisition will result in ANZO’s gearing increasing from 22% at 31 December 2011 to 25%.

AMP NZ Office Limited (ANZO) proposed acquisition of Bowen Campus, investment summary:
• Purchase price of $50.4 million, reflecting an initial yield of 10.7%
• Secures a unique and strategic 1 hectare site located next to the Beehive and Parliament Buildings
• The property has 30,000 square metres of net lettable space and existing resource consent for a total of 60,000 square metres of office space
• Land and building buy-in rate of $1,400 square metres (Gross Floor Area)
• Strong covenant, leased to Ministry of Social Development for three years

About ANZO
ANZO is New Zealand’s only specialist listed investor in premium office buildings. Listed on the New Zealand Exchange, ANZO is owned by more than 7, 500 investors, has a property portfolio worth $1.25 billion and provides office space to over 200 businesses. ANZO currently owns 14 office buildings. In Auckland it owns the PricewaterhouseCoopers Tower, ANZ Centre, SAP Tower, AMP Centre and Zurich House. In Wellington ANZO owns the State Insurance Tower, Vodafone on the Quay, 171 Featherston Street, 125 The Terrace, No. 1 and 3 The Terrace, Pastoral House, Mayfair House, AXA Centre and Deloitte House.

To find out more visit: www.anzo.co.nz

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