Civil service cuts set to hit AMP NZ Office

The Serious Fraud Office and a cafe are among those to sign leases at 21 Queen St. Photo / Supplied

Government plans to slice civil servant numbers will affect AMP NZ Office which leases 27 per cent of its portfolio to the state.

Scott Pritchard, chief executive, said the changes might put a lid on some rental increases in the Wellington market where occupancy levels were high. But it may not spark more vacancies in AMP's portfolio.

"There will be some effect. Our buildings are largely full in Wellington and have been for some time. The effect it will have is on the buildings they vacate but they tend to retrench into our buildings because they are located nearer the Beehive."

With offices valued at $1.2 billion, AMP yesterday announced an interim profit of $28.4 million, reversing the previous corresponding period's loss of $29.1 million.

Pritchard said the company struck four new leases in its high-spec renovated block at Auckland's 21 Queen St. New tenants are the Serious Fraud Office, insurer Willis, AMP Capital and a cafe. The trust is now a company with a new board of directors, the majority independent of the manager.

Buffy Gill of Goldman Sachs said the result was in line with expectations, after adjusting for the one-off rebated management fee of $700,000 for the 2010 year.

"While the company has included this adjustment in its distributable profit figure of $31 million, after removing this, the underlying figure was only 2 per cent ahead of our forecast.

"Net rentals were down 4 per cent year-on-year, driven by the sale of the Chews Lane retail units in May 2010, as well as the expiry of IAG's lease at 151 Queen St in September 2009. We estimate quarter-on-quarter revenues were, however, flat."

Of the key expiries due in 2011, Russell McVeagh, Aon and Minter Ellison have renewed their leases for periods of three, 13 and 15 years respectively. It appears the other significant expiry, Marsh/Mercers, is yet to be dealt with, said Gills.

"Occupancy increased from 90.2 per cent in September to 92 per cent," she said.

Jeremy Simpson of Forsyth Barr said the company had a sound balance sheet with low gearing. "The major difference to our $29.4 million forecast was lower operating costs in the period than forecast."

Revenue was down primarily due to an asset sale and increased interest costs, Simpson said.

The company was trading at 78c yesterday.