Dominion to roll its eight property funds into one

By ANNE GIBSON

Auckland-headquartered Dominion Funds, which manages about $400 million worth of real estate, wants to amalgamate eight funds to form a new entity.

Chief executive Paul Duffy yesterday announced a proposal to roll $128 million worth of New Zealand real estate into one fund, which he said would safeguard the interests of 3000 investors.

Leases expire in the next five years on many of the 15 commercial, industrial and retail properties now structured in the eight companies, so Duffy said it was prudent to amalgamate the properties into a new structure, Dominion Income Property Fund.

He expected to continue the process on other Dominion properties next year, but was hoping to avoid a protracted battle like that endured by fellow property syndicator Waltus Investments, which faced a shareholder rebellion in 2000.

Wellington-based Waltus sought to amalgamate 29 property syndicates into a new entity since renamed Urbis Properties, upsetting investors who complained about management fees and a loss of tax writeoffs.

But Duffy said investors would be better off with the new Dominion vehicle, which would produce more than $13 million annual rent from 60 tenants.

Dominion is the property management investment vehicle of Doug Somers-Edgar's Money Managers empire, which caters for about 35,000 investors.

The unlisted Dominion Funds is one of the largest property investment vehicles. It has 8000 investors, 66 properties and 158 tenants spread throughout the country.

The 3000 investors affected by the latest deal will vote on the offer at Ellerslie at eight special investors' meetings scheduled for November 7 between 9am to 4pm.

The amalgamation proposal has been to the High Court at Auckland, which made initial orders on October 3, including rulings that there be no quorum requirement at the special meetings, and on how the offer will be presented to investors, who can vote and how those who oppose the plan can exercise their rights.

The amalgamation is subject to a final court hearing and receipt of court orders by November 21, with a view to the union taking place on December 31.

For the deal to go ahead, it must be approved by investors holding 75 per cent of the shares in each of the eight companies.

The mainly elderly investors receive monthly distributions from the eight funds and Duffy said they would not be disadvantaged by the amalgamation, although the way they treated tax on their returns could alter.

The eight funds to be merged are:

* Auckland Rise Property Fund, owning an office block at 80 Greys Ave in Auckland and a 14 per cent share of the ASB Bank's multi-purpose centre at 33 Corinthian Dr, Albany.

* Cherry Properties, owing the Armourguard building in Ngauranga Gorge, Wellington, a Glen Innes industrial property and a Big Fresh supermarket in Hamilton.

* Rangitoto Property Fund, owning the ACNielsen building at Takapuna and a 15 per cent share of the ASB centre at Albany.

* Real Steel Properties, owning the Ministry of External Relations building in Lower Hutt and Precision Engineering's building in Hamilton.

* Red Diamond Properties, which owns the Pilkington Glass building in Wellington and the Farmers building in Gloucester St, Christchurch.

* Showcase Properties, owning 650 Great South Rd at Greenlane in Auckland and a 12 per cent share of the ASB centre at Albany.

* Trusthouse Properties, which owns the Public Trust building on Lambton Quay in Wellington, The Warehouse on MacLaggan St in Dunedin and a 21 per cent share of the ASB centre at Albany.

* Two Towers Properties, owning two Wellington office blocks and an 18 per cent share of the ASB centre at Albany.

The eight investment vehicles were established between October 1998 and May 1999, but since Duffy was employed by Dominion last year, he has undertaken a detailed analysis of its structure.

He has quit some real estate and stepped into development with a new apartment block at Viaduct Harbour behind The Point, which he developed while working at the now defunct Fletcher Property.

Duffy said the amalgamation would cost $950,000 to complete, funded from working capital and savings from the eight entities.

The new structure would provide a more diversified property portfolio, which would result in sustainable distributions and reduced risk.

It would also enhance the liquidity of shares and debentures, allow cost savings and enhance bank arrangements.

A memorandum is being sent to investors with a PricewaterhouseCoopers assessment of the deal as "fair and reasonable".

Dominion Funds