DNZ chairman issues plea for patience

DNZ Property Fund chairman Tim Storey (right) with chief executive Paul Duffy. Photo / Brett Phibbs

DNZ Property Fund chairman Tim Storey has apologised to thousands of shareholders and sought their patience.

This month, DNZ shelved its $130 million capital-raising and December 17 NZX float after major shareholder opposition.

Storey has defended parts of the the original deal and said sorry for the board's actions in a letter sent this week.

"On behalf of the board, I would firstly like to apologise for any concern and worry that may have occurred over the last weeks regarding your investment in DNZ.

"The board asks you to be patient while we consider the steps forward. We have not engaged with shareholders as well as we perhaps could have, but our aim is to remedy that now. We want you to understand the risks and potential outcomes of the options that we have already carefully considered as we do need to make decisions on the future of the company sooner rather than later. We will be back in touch with you soon," Storey said.

A table showed the pros and cons of the deal, saying how much-improved the business would be after the NZX float, internalising the management contract and floating on NZX. That part of the letter threatened to suspend quarterly dividends but also defended the $43 million payment to chief executive Paul Duffy and ex-chairman Alastair Hasell.

"We appreciate why the buyout of the management contract and bringing the management function into the business has also been an area of concern for shareholders. Bringing this in-house will actually have the effect of significant cost savings for the company and bring in a revenue stream from the management.

"While a sum is being paid now for the contract, the ongoing cost savings are such that it is a positive for the company. Retaining the existing external management contract does not assist in bringing in new or institutional investors to DNZ. They see such contracts as a major cost and a negative for investment as the manager's incentives are not necessarily aligned with the goals of shareholders. Under an external management model, your company would continue to incur significant annual management fees.

"The contract we have in place is a legacy of the old regime with features that are no longer appropriate in the current market. But these contracts also carry significant value as they provide steady income over a long period of time to the management company. Unless DNZ compensates the management company for the early termination of this contract, it will remain in place for a lengthy period," Storey said.

He explained how the share consolidation would not destroy value, saying investors' stakes were unaffected by reducing the number of shares on offer.

Derek Young, chief executive of MMG Advisory Partners, whose clients are DNZ investors, also sent out a letter this week saying he was still pushing for a board shake-up.

He wants shareholders to have more say in DNZ and called for the release of PricewaterhouseCoopers and Northington Partner's reports. Only part of these are in the prospectus and DNZ has refused both the Herald and Young full copies.

Young wants a full shareholder meeting to be held next month.