AMP NZ Office said it had agreed to buy the Westfield Downtown Shopping Centre, despite the potential for uncertainty surrounding the site should the Auckland Council go ahead with plans to build a rail link underneath it.
AMP NZ Office, which is changing its name to Precinct Properties New Zealand, agreed to buy Auckland's Westfield Downtown Shopping Centre from Westfield Group and Westfield Retail Trust for $90 million.
Chief executive Scott Pritchard said AMP Office was supportive of the council's city centre masterplan and said the council could compulsorily acquire the land under the Public Works Act if it deemed it necessary.
"It's a great site for an office tower, but we don't see great demand for a new office tower in the next four or five years anyway, so the potential uncertainty at the moment is not a concern," he said.
He told APNZ the company had taken a long-term view.
"We have not purchased this asset because we think it's going to go well as a shopping centre over the next three years," he said.
Pritchard said the company was more focused on its potential re-development in the next six to 10 years.
Shane Solly, portfolio manager at Mint Asset Management, which has a holding in AMP NZ Office, said the council's potential development to put in rail lines would have a significant impact on what AMP NZ office could do with the site, but that it had paid a fair price.
"They have bought well and, as investors, we are happy with the outcome," Solly said.
The purchase price was below an independent valuation and is at an initial yield of 7.6 per cent.
The property has a weighted average lease term of 2.9 years, the company said, its acquisition would raise annualised earnings by about 3 per cent.
AMP NZ Office has forecast a full-year 2013 dividend of 5.12 cents a share, up 1.6 percent from 2012.
Westfield Downtown is adjacent to AMP Office's PwC Tower, Zurich House and AMP Centre.
The purchase will be funded through bank debt as AMP Office has a new $107m tranche expiring in September 2017 and a $53m tranche expiring in July 2015. The new facilities increase the total amount to $535m from $475m.
The acquisition will lift AMP Office's gearing to 31.5 per cent from 27 per cent at June 30.
Opened in 1975, the centre has a land area of about 6,500 square metres and existing resource consent for a 71,000 square metre mixed-use office and retail development. It was last refurbished in 2005 and is fully let to around 80 retailers over four levels.
AMP Office share last traded at 98c, not far off the top end of their 87c to $1.00 12-month trading range.
