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Waltus' swap scheme aims to perk up restless shareholders

By Chris Hutching

Friday 7th July 2000

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Waltus directors have come up with a proposal to reduce risk and maintain dividends for investors in 29 property syndicates.

Waltus managing director Shayne Hodge said a decision last year to suspend payments on some syndicates had been unpopular with investors who wanted more certainty.

Waltus suspended payments on some property syndicates because leases were expiring and it was prudent to set aside some rental income for renegotiating them in a soft market. Waltus wants investors to face up to the reality of a flat and uncertain market where leases are shorter and tenants may demand rental inducements.

"So by bringing more of them together, with everyone coming in on a fair value basis, we can ensure that earnings are more sustainable. There are other efficiencies too but the prime driver was to reduce risk and maintain payments," Mr Hodge said.

Waltus directors have been hawking the idea around financial intermediaries in recent weeks but the idea is not unexpected. Property magnate Sir Robert Jones recently claimed he had promoted the idea to the Waltus board many months ago.

An application is due to be considered by the High Court so the proposal can be put to investors for a vote in about three weeks. A key influence on investors will be a report by Deloitte Corporate Finance determining whether the new offer is fair and what returns are forecast. Investors in syndicates with longer leases will receive a bigger entitlement than investors owning short-leased properties.

The scheme will invite the investors in 29 syndicates representing 46 properties, who own a mix of shares and mortgage bonds, to exchange them for shares and convertible notes in equal portions in one enlarged company, Waltus Property Investments, with assets of $237 million. The offer applies to syndicates set up before 1996 in recognition a flat market has given tenants the upper hand while property owners were forced to negotiate shorter leases and offer inducements to tenants.

The syndicates in the merger represent about half of the Waltus portfolio in New Zealand, valued at $473 million, which earned $42 million in rental income in the year to March.

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