DNZ Property Fund to raise $35m from shareholders

DNZ Property Fund's chief executive Paul Duffy. Photo / Brett Phibbs

DNZ Property Fund, which abandoned plans last year to list on the New Zealand stock exchange, is planning a $35 million capital raising after agreeing to buy out the management contract from DNZ Management.

On Friday, the board said it would cost $32m to end the existing management contract, plus a $3m management contract held by DNZ Management for the Diversified NZ Property Fund, enabling the fund to manage its $700m property portfolio itself.

DNZ Management - part-owned by Paul Duffy, who is DNZ Property Fund's chief executive - would invest $10m in shares as part of the agreement.

The independent members of the newly restructured board had unanimously decided to internalise the management structure, ending the previous A and B shareholder structure.

DNZ Property Fund chairman Tim Storey said that shareholders would be able to vote on the planned $35 million capital raising at the annual meeting, likely to be in July.

The capital raising, smaller than one proposed last year, would cover part of the buyout and other costs. It would also reduce debt, which is currently in the high 40-per cent level in terms of debt to value ratio, to the early 40-per cent region. The fund's banking covenants allowed debt to reach up to 60 per cent.

The proposal followed meetings with shareholders and shareholder representative groups, who wanted a capital raising accessible to as many shareholders as possible, and which would not significantly dilute the holdings of those who did not take part.

"With those parameters in mind, the board has settled on a $35 million pro rata offer to be made to existing shareholders, followed by a book build for shares not subscribed for by the company's existing 8000 plus shareholder base," said Storey.

Internal management would cut costs by a "conservative" $3m a year, he said.

Many of the shareholders started as clients of property syndicates put together by Money Managers. The syndicates were combined into DNZ Property Fund in 1998.

DNZ had been seeking up to $140m from investors, which would have significantly reduced debt, but pulled the plug late last year.

DNZ Property Fund's shares are traded on private trading platform Unlisted.

- NZPA