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ING deal paves the way for expanded, more liquid trust

Chris Hutching

Friday 14th November 2003

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A deal that involves the restructuring of properties managed by ING (formerly Armstrong Jones) is aimed at building up its listed property vehicle, the ING Property Trust (formerly Paramount Property Trust).

ING Property Trust will buy 71 commercial, industrial and retail properties in Auckland, Wellington and Christchurch worth $282 million from vendors MFL Mutual Fund and SIL Mutual Fund, two superannuation funds managed by ING with $900 million under management on behalf of 48,000 investors.

The move comes at a buoyant time for property valuations and ING says it will benefit investors in the superannuation funds by providing $100 million in cash as well as giving them a stake in the listed trust through an issue of ING Property Trust units at $1 each as part of the purchase consideration.

The deal will also expand the management fees of ING and its management partner Symphony Group, which promoted the ING Property Trust (then Paramount) listing on the New Zealand Stock Exchange with just two properties initially.

Placing the properties in the listed trust will allow the manager to borrow more money than ING could under the terms of the restrictive constitutions of the two superannuation funds (the current average gearing ratio of listed trusts is about 35%).

ING Property Trust's progress has surprised some analysts. Soon after listing it ran into difficulties with defaulting tenants in one of its properties but it surpassed prospectus forecasts in its inaugural year. Exactly how the relationship between Symphony and ING developed remains unclear but in August ING (NZ) bought from Symphony a half share of Paramount Property Trust Management (the manager of the trust), and renamed it ING Property Trust Management. The move gave Symphony some cash and a continued income stream from management fees.

ING's general manager property, Andy Evans, became managing director of Paramount Property Trust Management and has taken over responsibility its administration of its properties through an assignment of the property management contract to ING.

Evans is overseeing the restructuring and said yesterday the deal was consummated after ING was satisfied about the independence and calibre of the board of the management company.

With a sound portfolio under its belt the ING Property Trust will look to dispose of some smaller properties.

Its two initial properties acquired from Symphony had a value of $57.4 and in June added the $7.9 million Liggins Institute Building in Grafton. Then it bought the $21.2 million ANZ House at the Domain Centre, a Symphony development due for completion next April.

The new deal is subject to unit holder approval and the approval of the Overseas Investment Commission. Evans was expected to provide further details today.

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