Office investor makes $193 million loss

The largest prime commercial real estate investor has pushed up its distributable profit but made a bottom-line loss.

AMP NZ Office Trust made $59.2 million distributable profit, 13.4 per cent higher than in 2008. But after devaluations were taken into account, the trust recorded a net after-tax loss of $192.8 million for the year to June 2009. The trust has property assets valued at $1.4 billion, down 14.1 per cent.

Rob Lang, chief executive of the trust's manager, highlighted International Financial Reporting Standards which he said required the trust to take into account non-cash items like the portfolio devaluation.

The trust's refurbished building at 21 Queen St has been a focus for analysts lately because only the ground floor is tenanted. Lang said the trust was in advanced negotiations with many tenants. Lang has not commented on market speculation that property consultancy and agency CB Richard Ellis would leave the trust's PricewaterhouseCoopers tower nearby on Quay St and move into the revamped block.

But one investment manager said if this lease was concluded, it would not really count because CBRE was already a trust tenant. The trust reported an unrealised development loss of $34.4 million on 21 Queen St.

The trust's portfolio is 97.2 per cent leased and five properties are fully occupied. It completed 70 rent reviews in the past year and Lang said the market was improving.

"Eighteen months into the recession we have had only three small tenant defaults, one of which has already been replaced on better terms with no loss incurred. This represents a very small proportion of the trust's 220 tenants and reinforces the benefits of a high-quality tenant roll," Lang said.

He forecast the 2010 year to be one where business confidence would return but said valuations would continue to come under pressure.

The trust, which leases a large amount of office space to government departments and owns 15 office buildings, is trading around 81 cents a unit.

The trust's buildings include the ANZ Centre on Albert St, 151 Queen St and Wellington's State Insurance Tower and Vodafone on the Quay block.