Viaduct property deal's value queried

Singapore's Government Investment Corporation has bought a 49 per cent stake in Auckland's Viaduct Quarter.

Professional investors wonder what Goodman Property Trust gets out of Singaporean buy-in.

Professional investors have questioned the value to Goodman Property Trust of Singapore's Government Investment Corporation's acquisition of a 49 per cent stake in Auckland's Viaduct Quarter.

Shane Solly, Auckland-based director, portfolio manager and research analyst with institutional investor Harbour Asset Management, and Matt Goodson, Salt Funds Management managing director, raised issues about the value of the deal for investors in the NZX-listed trust.

"It's a little disappointing that there is no increase in earnings, dividends or net asset backing for Goodman unit holders as a result of the proposed GIC transaction," Solly said.

The deal is being seen in the market as favouring Goodman Group, which could get a disposal fee of many millions and continues to manage the trust, but bad for investors because there is no increase in the value of their portfolio from the sale, nor does it recognise spiralling Auckland property prices in the past few months because prices being paid were set many months ago.

Goodson said the trust's managers, ASX-listed Goodman Group, could gain far more than the New Zealand investors in the trust.

"It's clearly a good deal for Goodman Group. Whether it's a good deal for the trust is less clear."

He also questioned the price paid.

"It's disappointing to only get a slightly dated book value in what is a very hot property market where investors are willing to look through the risks of land leasehold.

"It appears likely investors will get less than NTA [net tangible asset value] because there is very likely that a disposal fee is payable," he said. "Clearly, it's a win-win for Goodman Group but not so positive - or material - for Goodman Property Trust."

GIC, a global investment firm with over US$100 billion of assets under management, is buying 49 per cent of the Viaduct Quarter, which comprises Air New Zealand House, the new Fonterra development now being built by Fletcher Construction and the Viaduct Corporate Centre, containing the Vodafone, KMPG and Microsoft/HP buildings.

As part of the deal Goodman Property Trust is selling 49 per cent of its stake in Air New Zealand House and the site where the new Fonterra development is rising, while private investor Newcrest is selling its 49 per cent of the Viaduct Corporate Centre.

The deal involving assets valued at $313 million is pending Overseas Investment Office approval and certain approvals from the freehold land owner of the Air NZ and Fonterra buildings.

John Dakin, trust chief executive, said he was always interested in investors' views but reiterated the positive aspects of the deal.

"The introduction of a like-minded partner gives the trust the capacity to expand its investment in the Viaduct Quarter without the requirement for any significant new funding," Dakin said.

"This sets a really clear strategy for our investments in this part of town - this is something our investors have been looking for clarity on.

"On a year to date basis we have realised almost $100 million of sales that we are looking to reinvest into our development programme where we are experiencing strong demand across the portfolio," he said.

The deal was negotiated at March 31 book values but values were above those of last March, so the trust had captured market upside.