DNZ Property to pay $35 mill for management contract

Friday 4th June 2010

DNZ Property Fund, the property investor that grew out the relationship between Dominion Funds and Money Managers, will pay $35 million to buy-out its controversial management contract from Paul Duffy and Alastair Hassell.

The purchase includes the management contract Duffy and Hassell have with Diversified NZ Property Fund, and they will have to reinvest $10 million back into DNZ Property Fund. The offer is conditional on the fund adopting the constitution approved by shareholders at last year’s annual meeting, which will be considered by the board this month. The agreement also relies on approval from lenders and investors’ representatives in the Diversified Fund.

“They accept the management contract has to be bought out and the management function internalised and they have indicated their support for the terms the independent directors have negotiated,” said chairman Tim Storey, in a statement. “Internalising the contract and adopting a new constitution means we will no longer have two classes of shareholder, removing a significant impediment to any listing plans.”

Hassell and Duffy offered to sell the contract for $43 million as part of the fund’s unsuccessful bid to list on the NZX.

Shareholder MMG Advisory rallied investors to block the proposal, prompting new director Simon Botherway to step down from the board and forcing a special meeting last month that elected MMG’s David van Schaardenburg to the board.

Storey said Duffy will stay on as chief executive of the fund, which the manager’s knowledge of the business “important for our plans to restore a level of shareholder value that is more reflective of the company’s $700 million property portfolio.

DNZ Property will use debt to fund the $35 million buy-out, and continue its asset sale programme to manage its borrowings. It also plans to raise capital, something it flagged it will put forward at its annual meeting in this month of next month.

Businesswire.co.nz

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