Property trust launches $35m rescue plan

Trust founder Paul Dallimore.

Listed office and shopping centre landlord National Property Trust has devalued its portfolio by $17.5 million, revealed a breach of its trust deed and launched a $35 million rescue plan to remedy problems.

The big value writedowns hit National's shopping centres in Christchurch, Auckland and Tauranga, blowing the limits of the trust's borrowing ratio.

The trust is banned from borrowing more than 45 per cent of the gross value of its assets, yet after the valuation falls, its outstanding loans amounted to 47 per cent of the value, leaving the trust having borrowed $4.8 million over its limit.

But Paul Dallimore, trust founder, former executive chairman, second-largest unit-holder after St Laurence and an owner of the trust's former manager, questioned the value drops and the need for any rescue plan.

"We're pure property people and they're finance people - they look at it differently," he said of moves by the trust's new manager, St Laurence.

"It's an opportunity for them to start from a lower base and show improvements.

"This is just one way for them to increase the trust's performance."

Valuations could fluctuate up to 5 per cent and the writedown was merely taking a more pessimistic stance, he said.

In May, the trust launches a convertible preference offer to existing National unit-holders to raise the $35 million necessary to get the trust's finances right - $5 million to rectify the breach and $25 million to repay capital notes due in November next year and the rest for working capital. But Dallimore said he had not decided whether to buy into the offer because no terms had been announced.

"They probably see it as a positive move, but it's not a move we would have made," he said of the offer.

Kevin Podmore, managing director of St Laurence, which bought National's management late last year, yesterday criticised the trust's former manager for being too optimistic and described the series of revelations about the trust as "a nasty surprise".

In return, Dallimore asked what was wrong with being optimistic.

Last month, National sought an updated valuation of its portfolio by the same independent valuers who assessed the portfolio last May.

The new valuation updates by Jones Lang LaSalle and Fright Aubrey showed that National's commercial and industrial properties have improved slightly.

But retail portfolio values dropped, with the result an overall unrealised drop in assessed value across the entire portfolio of $17.5 million, comprising an $8.5 million property value drop and writing off $9 million capital expenditure on the malls which did not result in any value gains.

Lower than expected rents from casual leasings and turnover rent were cited as reasons for the falls.

But Podmore emphasised yesterday he had mounted other property rescue missions and cited Auckland's Victoria Park Market and the Hartner Carpark in Viaduct Harbour as examples.

Going down

Value drops in National's retail portfolio:

Eastgate Shopping Centre, Christchurch: $81 million to $73.5 million.

Rialto Centre, Newmarket: $42.8 million to $41.8 million.

Goddards Centre, Tauranga: $18.1 million to $13.2 million.