Property fund suspends dividends

Speculation is rife that ASB Bank will leave Multiplex's Albert St tower when its lease ends. Photo / Natalie Slade

Australian investors in a $701 million New Zealand real estate fund are suffering dividend cuts.

Managers of the Multiplex New Zealand Property Fund wrote to investors this month suspending their quarterly dividends and explaining big funding problems.

The fund, managed by Brookfield Multiplex Capital Management, has landmark assets here including Auckland's $138 million ASB Bank Centre in Albert St and the $84 million 19-level Gen-i Tower in Wyndham St.

Leon Boyatzis, the fund's Sydney manager, delivered the blow.

"As a result of the restrictions imposed by the fund's financiers and the need to ensure there is sufficient cash reserves to meet its obligations, it is unlikely distributions will be paid during the 2010 calendar year," he wrote.

The fund's website shows its other Auckland assets are AIA House in Takapuna, the ANZ Business Centre at Albany, the Mangere Distribution Centre, The Plaza on Karangahape Rd, Uniservices House in Symonds St, University House leased to Auckland University in the CBD and Woolworths Grey Lynn in Richmond Rd.

The fund's Wellington's assets are the 14-level office tower at 143 Willis St, 17-level office tower at 180 Molesworth St, Conservation House in Manners St and EDS House. The fund owns The Hub in Whakatane.

In Christchurch, it has the $37 million South City Shopping Centre, Telecom House and in New Plymouth stages one and two of the Valley Mega Centre.

Boyatzis said the aim in the next 12 months was to reduce gearing to comply with debt covenants. The fund is available only to Australians. It was started in September 2004 and established to pay quarterly distributions.

ANZ and CBA have loaned the fund $419 million and Boyatzis said that the banks had extended that debt facility in December but only on the condition that big chunks were repaid fairly fast.

The bankers' patience is coming to an end, but Boyatzis said the fund had done all it could to sell properties. In October, it sold the Wiri Distribution Centre for $19 million.

The key terms of its debt renewal scheme meant big repayments had to be made progressively. The fund must find $350 million to be repaid by August next year, $69 million by October this year and also needs to reduce its loan-to-value ratio covenants gradually to 50 per cent by June next year.

Institutional investors are watching the fund nervously, comparing it to the troubled DNZ Property Fund and saying the future of both real estate vehicles is worrying.

DNZ is also on a campaign to sell properties and slice back debt, although chairman Tim Storey acknowledged now was not the best time to be selling.

Speculation is high that the Multiplex fund's major tenant, ASB, will leave its 20,000sq m Albert St tower when its lease comes up for renewal.

Multiplex said the lease expired in just over three years and the bank has 61 per cent of the tower, whose tenants also include ING.

Brookfield Multiplex has been trying to sell its new property at 80 Queen St, leased to BNZ and Deloitte.

The part of the construction business with headquarters in Auckland has also been hit by the leaky building disaster.