Investors eye $800m float of revamped property group

The biggest NZX float this year is due to be announced next week.

Fund managers and professional investors are studying DNZ Property Group's prospectus document, to be issued before its float on the NZX next month.

The heavily geared DNZ, with $746 million of property, will have an internalised management contract and is proposing to pay interests associated with chief executive Paul Duffy and ex-chairman Alastair Hasell $43 million for that.

A listing with an initial market capitalisation close to $800 million is expected.

DNZ, which has debt issues and wants to reduce its gearing to under 40 per cent, would become the ninth listed property trust or company in the list headed by Kiwi Income Property Trust, Goodman Property Trust and AMP NZ Office Trust.

Prospective investors say DNZ would be the first listed property business with an internalised management structure cementing the interests of shareholders with management.

Simon Botherway of the Securities Commission has joined DNZ's board. It is chaired by lawyer Tim Storey, who took over from Hasell a few weeks ago.

Goldman Sachs JBWere is preparing the initial public offering and DNZ will have a gearing ratio around 35 per cent.

The float is expected to be announced next week, but those handed copies of the prospectus have signed confidentiality agreements, banning them from issuing any statement or commenting on the deal.

"I don't want to go to jail just yet," said one fund manager yesterday as he examined the numbers.

He expressed delight about the float, saying DNZ would be substantially restructured and changed, removing many of its historic problems. The business is an amalgamated series of syndicates owning a diverse range of properties.

DNZ's portfolio did have many B and C grade buildings but it had enough value to provide excellent returns, he said.

DNZ could change the face of the listed property sector, forcing alignment of management and investors in other vehicles, another investor said.

He is considering buying into the float, mainly because of the management structure being proposed and partly because Botherway is now on the board.

He said DNZ's debt did not come up for renewal before 2012 and the float would draw a huge amount of interest.

DNZ

* $746 million property fund.
* An amalgamated series of syndicates owning a diverse range of properties.
* Formerly known as Dominion Funds.
* Plans to float on the NZX next month.
* Chaired by lawyer Tim Storey.
* Securities Commission's Simon Botherway has joined the board.