AMP NZ Office Limited (ANZO) (NZX:ANO.NZ - News) announced today that it has entered into a conditional agreement to buy the Westfield Downtown Shopping Centre on Auckland’s waterfront from Westfield Group (ASX:WDC.AX - News) and Westfield Retail Trust (ASX:WRT.AX - News) for $90 million. The purchase will lift annualised earnings by around 3%, and as a result ANZO expects to pay an FY13 dividend of 5.12 cps.
Confirming the purchase, the company’s CEO, Scott Pritchard, said ANZO was very pleased to have secured the opportunity.
"With excellent access to public transport and positioned by Auckland’s waterfront, this property has to be one of New Zealand’s best long term investment opportunities. It has enormous potential for future development as both an attractive public amenity and a great working environment." The site adjoins ANZO’s existing buildings PwC Tower, Zurich House and AMP Centre. It provides the potential to create a more attractive environment through linking buildings and access-ways. Mr Pritchard said the company looked forward to working with Auckland Council to deliver on the transformational projects proposed in the City Centre Master Plan.
"We support Auckland Council’s call in the city centre masterplan for this precinct to showcase Auckland, and we are keen for this site, along with our adjacent buildings, to contribute to that vision"
"This transaction further demonstrates ANZO’s strategy of owning well located central city assets that provide optionality and earnings security. In a similar acquisition in April, ANZO entered into an agreement to acquire the Bowen Campus site near Parliament in Wellington. This latest Auckland purchase gives it strong strategic positions in both cities"
The company also announced today that it will move to a new name, Precinct Properties New Zealand Limited ("Precinct"), on Friday 28 September. The name change reflects its evolution over 15 years to become New Zealand’s only specialist listed owner of premium central city office space.
First opened in 1975, the Downtown Shopping Centre has a land area of approximately 6,500 square metres and existing resource consent for a 71,000 sqm (GFA) mixed-use office and retail development. It was last refurbished in 2005 and is fully let to around 80 retailers over four levels with a total of 14,368 sqm of net lettable space. The purchase price is below independent valuation and reflects an initial yield of 7.6%. The Centre has a weighted average lease term (WALT) of 2.9 years, is 4.3% under rented and is in a high demand growth location.
Mr Pritchard said that the company was attracted to the opportunity to add value to the site through redevelopment in the longer term, while enjoying a strong and secure holding income off the Downtown Shopping Centre in the meantime. The strength of the location means that the holding income should be sustainable, providing a high degree of optionality on the timing of any future development.
The acquisition will be immediately accretive to earnings with ownership for the part year contributing to an increase in full year earnings for the 2013 financial year to around 5.8 cents per share (cps) (before performance fees). Dependent on continued operational performance, ANZO now expects to pay a dividend of around 5.12cps for the 2013 financial year, a slight increase on the 2012 dividend of 1.6%.
The purchase will be funded through bank debt, with ANZO securing a new $107 million tranche expiring in September 2017 and a new $53 million tranche expiring in July 2015. The new facilities replace ANZO’s $100m facility that was due to expire in July 2013, increasing the weighted average term to expiry from 2.9 years to 3.7 years and the total facility amount from $475 million to $535 million.
The acquisition will result in ANZO’s gearing increasing from 27% at 30 June 2012 to 31.5%. The acquisition remains conditional on certain consents to transfer of the title and is expected to settle in November.