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Corporatisation harder than thought, says ANZO

Tuesday 25th May 2010

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Efforts to turn AMP New Zealand Office Trust (ANZO) from a listed trust to a listed company are proving harder than expected, and the company requires an extra two months to get a proposal ready for shareholders.

Instead of a June shareholders' meeting to consider the changes, which respond to shareholder feedback, a meeting will be called in August, the company said in a statement to the NZX, accompanying its latest six monthly property portfolio revaluation.

The news on the valuation front was a further fall in the total unrealised value of ANZO's A-grade Auckland and Wellington central business district properties of 3.4% as at last December, for a 12-month drop of 7.6% for the 2009 calendar year to a total value of $1.27 billion.

ANZO is New Zealand's largest listed investor in prime commercial office property, with 15 office buildings in its portfolio.

"The nature of the changes required to create the new vehicle proposition for unitholders to vote on have been and continue to be significant," the company said.

"This is the first time that this exercise has been undertaken in the New Zealand market, and requires extensive coordination with a number of regulatory bodies, including the Takeovers Panel, the Securities Commission, NZX, the Overseas Investment Office, and overseas regulators," the company said in a statement to the NZX.

With respect to proposed amendments to ANZO's fee structure, which is to kick in from July 1 and was to have been settled at the June shareholders' meeting, there would now be a "wash-up" to reflect changes agreed at the August meeting.

ANZO chief executive Robert Lang said the commercial property capitalisation rates appeared to be "stabilising", with the weighted average market capitalisation adopted by the valuers rising to 8.14%, up only slightly from 8.08% in the previous six months.

Although tax changes announced in the Budget were expected to knock returns in the 2010/11 financial year by 7%-to-9%, this had been "widely anticipated by the investment community."

Less clear is the impact of the changes on property values, although the cuts to corporate and savings vehicle tax rates were expected to encourage investment.

The revaluation does not affect distributions, which are on track to increase by 2% on a gross basis for the financial year to June 30, ANZO said.

The trust's gearing ratio is expected to sit at 23% at year end, one of the lowest in the Australasian listed property sectors, and units carry net tangible assets of 86 cents on an NZ IFRS basis, or 91 cents when the fact that tax on unrealised gains counted under IFRS does not generate tax payable in New Zealand.

While there was an "accelerating return of leasing activity and investors" a full market recovery was likely to be slow and reliant on investor condience and macro-economic conditions.

ANZO units were unchanged on the NZX today at 71 cents.



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