KEY POINTS:
Goodman Property Trust's $275 million share offer announced this week may propel it into the NZX's top 10 and gives a rare chance to buy new shares in a listed property fund, but market watchers have found some fish-hooks in the deal.
Unit holders are to vote later this month to approve the $228.26 million Highbrook business park investment package for which the trust is raising the cash, but they are also being asked to approve what amounts to a rebasing of performance targets for the trust's managers, Goodman NZ Ltd.
According to independent directors Rick Bettle, Tim Miles, Phil Pryke and Keith Smith, the proposed performance fee structure will result in "greater alignment between unit holders and the manager, where the manager is rewarded if the trust outperforms its listed real estate peers", and also provide investors with "greater transparency".
But one local fund manager, who believes the proposed changes have largely been overlooked, sees them as essentially a lowering of the hurdle the managers have to meet.
He points out that over the last year, the targets have been met easily, thanks in small part to the introduction of the Portfolio Investment Entity (PIE) tax regime, which provided a substantial boost to the unit prices of listed property vehicles when announced last year.
"It's going to be five years before they get over that from a performance view so they won't get a performance fee for some time."
Part of the proposal is the alteration of the period over which the trust's performance is measured.
"They've decided they want to strip out a period of time because it's set too a high a hurdle. They want to start again."
Little guys lose out
Meanwhile Forsyth Barr investment adviser Richard Burton believes the structure of the offer of new shares doesn't sufficiently reward Goodman Property Trust's loyal retail shareholders whose future returns will be watered down, and it gives "a whole lot of shares at a deep discount to a privileged few people".
In a two day book-build to institutions and retail brokers the trust raised $229 million, leaving $46 million for retail shareholders and the public. The price of the new shares has been set at $1.43, a 10c discount to its price before the capital raising was announced.
"Many of the existing shareholders have sat there for years and then when the company wants to raise some money they aren't asked.
"The fiduciary duty of the directors is to shareholders, not to these big institutions."
Goodman Property units closed down 7c at $1.46 yesterday.
Still learning
The Securities Commission's Look Learn Invest website launched last week was a worthy but underwhelming effort, bringing a bunch of investment basics together in one place.
However Stock Takes hears the Shareholders Association is also working on something a little more comprehensive. The association's Kevin McCaffrey says a major funding proposal to support its own investor education website is being negotiated at present and more information, including the launch date, will be forthcoming soon.
Pay about to climb
Auckland International Airport directors who have spent months in a confusing tag wrestle with foreign suitors are in line for a pay rise.
Towards the end of formal business at next Tuesday's annual meeting, shareholders will be urged to increase the total fees from $660,000 to $1,150,000. This will follow what is bound to be a fairly lively debate on ownership issues and three new nominees for the board, which admittedly will be getting bigger.
But just as (most of) the board has taken the conservative approach to the Canadians, it has also been fairly cautious in rewarding itself. Probably just as well given consternation many shareholders feel about its performance since it welcomed Dubai without getting all the ducks in a row then spurned the Canadians before anyone had a chance to have a decent look at the deal.
An independent review by John Egan of Egan Associates has found directors deserved a fee rise taking into account skills, performance, experience and the level of responsibility.
But rather than going for the full whack the board has decided "to recommend base fees for the chairman and other directors which are below the level recommended by Mr Egan".
This will still mean the chairman's annual fee will rise from $160,000 to $180,000 and directors' base fees climb from $80,000 to $90,000. Ad hoc committee work fees stay the same at $2500 a day.
Auckland Airport shares were down 1c at $3.04 yesterday. Shares have traded as high as $3.50 since takeover speculation began.
Beneath the surface
The finance company sector remains deceptively placid looking - for now. There's a good chance that when quarterly interest payments fall due at the end of December the strain of falling debenture investment rates will become too much for some firms.
Nevertheless there have been some interesting developments. This week Allan Hubbard's South Canterbury Finance, one of the biggest and most solid firms, said it was bypassing the soft debenture markets, partially at least, to secure funding which it says it will use to pick up lending opportunities left open by some of its less well positioned rivals.
Also this week Allied Nationwide Finance said it was moving to obtain a credit rating from Standard & Poor's ahead of the requirement to do so under the Government's new regulatory regime which will take full effect over the next couple of years.
Meanwhile, Marac, in what Stock Takes understands is an unusual move, is to increase interest rates on some of its existing car loans, as funding issues linked to events on international markets and the local finance company sector erode margins.
Stock Takes understands the increases are relatively small, less than one percentage point and likely to add just a few dollars to monthly repayments.
Nevertheless Marac says it will give borrowers the option of extending the term of their loans by an additional month rather than raising repayments.
But the move is unlikely to catch on among Marac's larger peers.
Daniel Clarkson, treasury general manager at Motor Trade Finance, said his company would not raise rates on existing contracts. "I'm not even sure that we can legally do that."
Taking on SFO
Peter Connolly, one of the four Digi-Tech tax avoidance defendants, was jubilant this week after the Supreme Court ruled that the Court of Appeal had got it wrong in slashing costs awarded to the four after they were acquitted on Serious Fraud Office fraud and money laundering charges.
It's clearly about more than just money for Connolly, who promised legal action against the SFO if the Government doesn't investigate what he says was some dodgy behaviour by the office when it investigated the case.
Connolly says he was told by Attorney-General Michael Cullen that he would look into the issue once the Supreme Court action was completed.
With the SFO due to be wound up within the next year, Stock Takes wonders how much appetite Cullen would have for that.
Price relief
For years, electricity consumers have seen retail tariffs climb steeply as power companies tell them that is the cost of investment in badly needed new generation.
However Contact Energy's ambitious renewable generation plans may see some restraint on price increases for its customers, says Goldman Sachs JBWere analyst Matthew Henry.
While Henry says that over the medium term electricity prices will continue to rise, Contact will be looking to increase its customer base so that it better matches its increased generation capacity.
"We believe this focus will mean Contact is likely to be less aggressive in lifting retail tariffs relative to its competitors or historical precedent."
