Dorchester Property unitholders turn down a bid to dump manager

Friday 29th May 2015

Unitholders in the Dorchester Property Trust have rejected a resolution from one of the investors to dump the manager of the hotel investor which was spun out five years ago from the financier and insurer formerly known as Dorchester Pacific and since renamed Turners.

Following a special meeting in Auckland today, the resolution put by LET Securities, owned by directors Deepak Gupta and John Southworth, failed to attract the sufficient number of votes required to have LET replace the current trust manager, Turners’ subsidiary Dorchester Hotel Property Trust Management. LET owns around 6 percent of the trust units which it bought last year.

In a letter to unitholders before the meeting, LET’s Southworth said the existing manager had not returned capital to investors quickly enough, with less than 21.5 percent of assets sold since the trust was set up in June 2010 with the aim of selling assets at the best available price and returning sale proceeds to unit holders. Southworth declined comment on the outcome of today’s vote.

Unitholders passed a second resolution, put forward from the trust manager, that it speed up the sales process so the remaining two properties in the trust are sold no later than the end of July next year and that the trust then be wound up by the end of November 2016. If the trust is wound up by then it will avoid the need for the manager to be licensed by the Financial Markets Authority.

Since LET Securities started agitating over the trust manager’s performance, another property, the Goldridge Resort Queenstown, has been sold for $8 million, around $300,000 to $400,000 below its carrying value.

The purchaser was associated with John Gosney, one of the trust manager’s directors. The director is said to have taken no part in assessing the offer and the trustee, Public Trust, is satisfied the manager adequately disclosed and managed the related party conflict.

Proceeds from the Goldridge sale will be paid to unitholders once the deal settles, with a distribution of around 33 cents per unit likely in early October. So far $6 million has been returned to investors from property sales of more than $7 million while the trust manager has received $1.15 million in fees since 2010.

The remaining two assets up for sale are serviced apartments in the Parkview on Hagley in Christchurch which have a carrying value of $5 million, and the Quality Emerald Hotel in Gisborne, which has a carrying value of $10 million.

Turners chief executive and trust director Paul Byrnes said today’s meeting showed unitholders have a clear preference to realise the remaining assets “sooner rather than later” but not at firesale prices.

“That’s good guidance for both the manager and trustee,” he said.

He rejected criticism the sale process to date has been too slow, saying the trust manager had spent $70,000 on marketing campaigns in the past two years which generated approaches from 53 parties and 10 sale and purchase agreements. The fact those have only resulted in one sale is “not from the lack of trying or lack of experience from management", Byrnes said.

The trust was set up as part of a recapitalisation plan for the former Dorchester Pacific, and owned four hotels estimated to be worth $33 million in 2010.

Some 7,200 Dorchester Pacific debenture holders owed $84 million swapped their debt for the units along with shares in the finance company, three year interest bearing notes, and options to buy more stock as part of a deal to keep the business afloat.

Units in the property trust last traded on the Unlisted platform at 48 cents.

BusinessDesk.co.nz

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