The value of listed office property investor AMP NZ Office Trust's portfolio fell 4.3 percent or $60.2 million to $1.33 billion in the past six months.
The revaluation, for December 31 compared to June 30, will be reflected in the trust's interim financial result to the end of December.
Chief executive Robert Lang said the decline in portfolio was unrealised and did not affect distributions to unit-holders, which were on track to increase by 2 percent on a gross basis for the full financial year.
The revaluation was in line with expectations and the trust's balance sheet remained in strong shape to withstand valuation headwinds lingering in the wake of the global financial crisis,' Mr Lang said.
The trust's gearing ratio would still be one of the lowest in the Australian and New Zealand listed property sectors. It was forecast to be about 21.8 percent as at the end of December, compared with the loan covenant ratio of 40 percent.
The prospective interest cover ratio for the 2010 financial year was a healthy 3.7 times, compared with a covenant of 2 times.
The trust's net tangible assets (NTA) per unit as at December 31 was forecast to decrease to about 92c per unit, down from 97cpu at June 30. Adjusted NTA, after reversing deferred tax on revaluation gains, was expected to be about 96cpu, down from $1.02.
The main drivers of the valuation decline were lower effective market rents, extended periods for re-leasing vacant space, and weaker rental growth expectations, Mr Lang said.
He cautioned about a continued shortage of evidence, in terms of new leases and sales, to support valuations.
In the financial year so far 48 rent reviews, covering 57,360sq m, had been settled, reflecting an average increase of 24.6 percent over previous contract rentals.
Portfolio occupancy remained consistent with the 90 percent reported in the trust's first-quarter financial result.
Excluding the recently-completed 21 Queen St, portfolio occupancy was 94.9 percent. The first tenant for the new building had been confirmed and negotiations were under way with other prospective tenants.
A distinct uplift in leasing inquiries had been seen in recent months as tenants looked to capitalise on favourable market terms, Mr Lang said.
"There is a clear sense that tenants are looking to capture cheap rents and incentives while they last. While vacancy rates have increased in line with expectations, recent significant leasings in the Auckland market have improved the near-term supply risks."
While he expected the worst of the valuation declines were now behind the trust, the road to a full market recovery was likely to be bumpy, Mr Lang said.
