KEY POINTS:
As a hot and nervous January draws to a close, clouds hang over a number of corporate entities in Australia. Debt splurges are being blamed as the call goes out among their corporates to reel in their global businesses.
New Zealand is one of the first areas of the world where the big funds are looking at selling assets as a furious race for cash heats up.
One of the biggest worries is the future of Australia's Centro Properties Group, a fund holding four large suburban malls in New Zealand and last year said to be on a hot acquisition trail. Now, Centro's destiny has changed drastically after Australia's second largest shopping centre owner said it wanted to hear from potential buyers for its assets to help refinance A$1.3 billion ($1.5 billion) of debt by February 15.
Centro has suburban shopping malls at Kelston and Howick in Auckland, its largest centre in Porirua and another suburban centre at Barrington in Christchurch.
The future of Queensland-headquartered MFS Group is also up on the air after it was hit by high debt levels and saw $1.1 billion or 70 per cent of its value vanish.
MFS owns Stella Group whose New Zealand businesses are Gullivers Travel Group, which owns 74 franchised Holiday Shoppe travel agencies and 97 United Travel stores; Peppers hotels in Rotorua, Martinborough, Christchurch and Queenstown; five Breakfree serviced apartment resorts in Queenstown; and the High View apartment complex also in Queenstown.
It also has a 19.9 per cent stake in NZX-listed stapled security MFS Living and Leisure and a 38.5 per cent stake in MFS New Zealand.
MFS Living and Leisure last year failed to gain control of New Zealand's largest listed tourism entity, Tourism Holdings, but it was on a big expansion drive here, hungry for more assets.
MFS New Zealand has been embroiled in problems over MFS-owned financial advisory company Vestar which had large amounts of client money invested in failed finance companies Bridgecorp, Capital + Merchant and Nathans Finance. MFS New Zealand has promised to put together a proposal for Vestar investors.
MFS New Zealand also owns finance company MFS Pacific Finance while parent company MFS also owns finance company MFS Boston both of which lend money to the property industry in New Zealand and Australia.
Problems emerged this week for another large Australian business with an influential presence here. Concern surrounds Allco Finance Group after it was revealed it was having problems refinancing A$1.1 billion in loans scheduled to expire this year, although the company rejected questions about its long-term survival. Allco's shares have dropped more than 70 per cent in the past year.
Last March, ASX-listed Allco Hit - a finance company managed by Allco Finance Group - bought Strategic Finance, an influential funder behind many large New Zealand property deals. Kerry Finnigan, Strategic's chief executive, said the businesses were separate and he had no qualms.
"We're quite isolated from Allco in all respects. We don't provide any guarantees to them and they don't to us, so what happens at their level needs to be addressed by their directors and chief executive," Finnigan said.
Strategic's loan book now stood above the $493.4 million announced last March, he said, predicting a healthy result to be issued in the next few weeks.
Last year, Strategic had $192 million loaned to provincial areas, $187 million in Auckland, $88 million overseas including Fiji, $19 million in Wellington and $8.8 million in Christchurch.
Rob Lang, head of AMP NZ Office Trust which has $1.4 billion invested in prime commercial properties, said he was watching the changes closely and expected some fallout.
"All types of assets are coming under price pressure, be it real estate, equities or bonds. Investors are reassessing pricing risk and some asset classes will fall in value," he said. But any widespread bailout of the sector was unnecessary. Many investors had now decided on a broad sell-off of their exposure to property trusts in Australia and New Zealand so unit and share prices of real estate vehicles here had fallen, he said.
Some sell-off might be appropriate to reflect increases in borrowing costs but there was no reason to lose faith in the sector, he said, describing the bailing as "a little overdone".
Two Australian businesses have also just sold their interests in AMP property vehicles.
On Wednesday, control of New Zealand's largest listed commercial property fund - AMP NZ Office Trust - changed after Australian-headquartered construction and investment business Multiplex sold its management rights to Haumi, the Abu Dhabi business. And on Christmas Eve, ASX-listed Stockland sold its $368 million investment in three Auckland malls to the unlisted AMP Property Portfolio, one of the country's largest real estate entities.
Lang warned against concluding that Multiplex had sold out of AMP NZ Office Trust because of the debt crisis or corporate woes in Australia. The deal had more to do with Multiplex ownership changes, he said, following its sale to Toronto's Brookfield Asset Management for $4.7 billion. AMP Capital Investors had the right to buy Multiplex out as part of the original deal struck in January 2004, Lang said.
This week's McEwen Investment Report sounded a warning.
"Property in this country, the US and elsewhere is so deep into a bubble territory that the correction in that asset class could be momentous. Property doesn't crash as easily as shares because it is illiquid and sellers take properties off the market when they don't get their price," the report said.
Westfield's withdrawal of its Glenfield and Pakuranga malls from the market late last year after buyers failed to emerge could well illustrate the report's point.
WHO'S WHO
* Centro Properties Group: ASX listed with funds under management of A$26.6 billion. Owns four New Zealand malls.
* MFS: Top 200 ASX listed investment and funds management company in Australia, New Zealand and Dubai.
* Allco Finance Group: ASX listed company managing A$9.7 billion assets in aviation, shipping, rail, infrastructure, funds and property, including Strategic Finance of New Zealand.
* Multiplex: Left ASX last month after Brookfield Asset Management's takeover, now sold its stake in a large listed New Zealand trust.
* Stockland: Top-50 ASX company with A$13.7 billion assets, just sold its half-share of three large Auckland shopping centres to AMP for $368 million.
* AMP NZ Office Trust: NZX listed entity with 14 properties worth $1.4 billion-plus, manager Multiplex just sold to Haumi.
* AMP Property Portfolio: Unlisted New Zealand-based fund, just bought Stockland out of joint ownership of three Auckland malls.
