Big shake-up expected at property trust

The AA Centre at 99 Albert St, Auckland central, is valued at $28.9 million. Photo / NZ Herald

Investor activism has set the scene for a radical shake-up of the $191.2 million National Property Trust on Friday.

Institutional investors and the wealthy Cushing family of Hawkes Bay have called for an overhaul of the trust's management, formerly chaired by St Laurence boss Kevin Podmore, who was replaced on April 30.

The St Laurence-owned manager has acquiesced and Andrew Walker, a director of the manager, said this month that unitholders would vote on a proposal to internalise management.

Investor interests will be aligned with the interests of those who run the business.

The trust will become a company, with its shares listed on NZX. A second meeting will be held before November 30 to cement the reforms.

Hastings-based Sir Selwyn Cushing and his son, David, have long been outspoken critics and crusading unitholders in the trust with a diversified portfolio of commercial, retail and industrial properties.

The Cushings, worth an estimated $110 million, have criticised the St Laurence management, lambasting the board at meetings, demanding real estate sales and a wind-up of the entire business and asking last year if the manager was financially viable.

St Laurence bought the management in 2005 from interests associated with Paul Dallimore of Christchurch.

David Cushing said H&G, the family investment business which holds a big stake in the trust, had received widespread backing for changes.

H&G backs the shake-up, David Cushing said, dropping its demands for a special meeting of unitholders to call for the manager's head after the manager confirmed it supported changes demanded by investors.

"Provided the restructuring proposal is implemented on the basis outlined to the market by the manager on June 23, H&G Limited in its capacity as a unitholder will be voting in favour of the proposal," David Cushing told NZX.

The manager has denied St Laurence's downfall has had any effect even though Podmore, chairman of National's manager, has now been replaced by Jim Sherwin.

St Laurence was one of the biggest finance companies to collapse, with 9000 investors owed $250 million by St Laurence Finance.

National is the third of eight NZX-listed entities to undergo radical changes after moves by AMP NZ Office Trust, with more than $1 billion in the sector, and DNZ Property, which owns properties valued at $671 million.

ING (NZ) investment manager Craig Tyson, whose portfolio of listed real estate businesses includes National, supports moves to change the business.

"The proposal being put to unitholders provides investors with the long-awaited opportunity to buy the management contract from the manager and ultimately to corporatise.

"There is no substitute for good management regardless of structure, but most people would agree that the best way to improve the alignment of interests between management and investors is to have an internalised corporate structure where there is no conflict between the manager's desire to grow assets under management, in order to grow their fees, and unitholders' desire to receive a steady and increasing distribution.

"What is being offered also represents good value for money: $2.5 million is about 1.3 per cent of property assets under management which is not a high price to pay for the management contract when recent deals have been much more expensive, including the proposed buyout of the DNZ manager for $32 million, which is closer to 5 per cent of assets under management," Tyson said.

Last month, receivers of St Laurence and six subsidiaries told secured debenture holders they could expect a distribution of between 15c and 22c in the dollar over the next 18 months.

That would be on top of the 10c in the dollar paid out to debenture holders under a moratorium repayment programme prior to St Laurence going into receivership in April.

Receivers Barry Jordan and David Vance of Deloitte said the expected distribution would depend on an orderly sale of remaining management contracts, sale of National Property Trust units and no further adverse movements in the property sector.

National Property units yesterday closed steady at 52c.

* The National Property Trust investor meeting will be held at 2pm on Friday at Ellerslie Event Centre, 100 Ascot Avenue, Greenlane.

The AA Centre at 99 Albert St, Auckland central, is valued at $28.9 million.


NATIONAL PROPERTY TRUST
* Management owned 100 per cent by St Laurence.
* St Laurence bought into National in 2005.
* St Laurence also holds 17 per cent of the trust.
* St Laurence now in receivership.
* National investors to vote for change.

THE DEAL
* National's manager, St Laurence, sells its management rights, systems, people and infrastructure to the trust for $2.5 million.
* St Laurence's 17 per cent stake in National will be sold to the trust, then units cancelled.
* A company replacing the unit trust will be formed.
* That new company will have a new, independent board.
* Application will be made to NZX for shares of that new company to be listed.
* Expects to list on April 1, 2011.

BIG HOLDINGS

National's real estate portfolio includes:

* Eastgate Shopping Centre, Christchurch: $76.3 million.
* AA Centre, 99 Albert St, Auckland: 28.9 million.
* Baldwins Centre/AMP Plaza, Wellington: $28 million.
* Heinz Wattie warehouse, Hastings: $20.5 million.
* Print Place warehouse/factory, Christchurch: $11.7 million.

Source: National annual report, 2010