Friday 14th November 2003
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The offer to syndicate investors is effectively an exchange of securities and an acknowledgment that the single or dual property ownership structure of syndicates set up in the 1990s has been less successful than envisaged with some outperforming while others under-performed. Other syndicating companies like Urbus recently offered a different solution of merging a large number of syndicates so the ones with poorer performing properties were lifted by higher yielding syndicates whose returns were averaged down initially. The Urbus merger was promoted on the attraction of forming a larger group with improved borrowing capacity to trade properties and greater portfolio flexibility in terms of when leases of various properties expire.
But in the case of St Laurence Group, its Property & Finance subsidiary is offering to buy syndicate company investors' parcels of shares and mortgage bonds in exchange for convertible property notes, with the purchase price equating to 10% premium over the net asset backing per parcel for each syndicate as at 31 March 2003.
The separate offer to the public is for 25 million convertible notes (with over subscriptions of up to 18 million notes) priced at $1 per note and paying 9% per annum. They will convert into St Laurence Property & Finance shares on December 1, 2008.
St Laurence manager John Mallon said the offer was the result of an extensive consultative process with investors, investment advisers and brokers, which concluded that while some investors are happy to sit on their investment others would take the incentivised opportunity to exchange their securities. This may mean that St Laurence Property & Finance could end up with 5% of one trust or 80% of another.
There are 13 syndicates involved and only two of them Mt Wellington Industrial Fund and Capital Office Fund are subject to the takeovers code that requires a majority of investors to agree, potentially opening the possibility of litigation as occurred with the Urbus syndicates
Mallon said the offer provides investors with choice they can either remain as a syndicate investor or they can accept the offer and transfer their investment to a larger and fast-growing company with a diverse range of investment activities.
St Laurence Property & Finance directors are "considering" listing the notes on the New Zealand Exchange to provide investors with increased liquidity.
The downside for some investors is that "to ensure its interests are aligned with those of the convertible property note investors, St Laurence will cap its gross annual dividend to 9% of total shareholders funds as at September 30, and will only receive payment of the dividend after all interest payments on the property notes. The balance of St Laurence Property & Finance net profits after tax and the dividend will be retained by the company and accessed by the noteholders on conversion of the notes to shares.
PriceWaterhouseCoopers will provide an appraisal report for every syndicate.
Managing director Kevin Podmore said the offer to syndicate investors gave them a chance to exit from their current investments.
"We believe happy investors equal long-term investors, and that belief is the driving force behind this offer. We want to do right by our current investors and welcome new investors into the company."
St Laurence describes itself as a niche investment and finance company specialising in property bond issues, fixed interest debenture stock and syndicated property investments.
Founded by Kevin Podmore nine years ago, it manages over $550 million of assets for about 12,000 investors.
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