Ructions as property fund plans to list

Two finance chiefs yesterday tried to force stricter governance on the board of the DNZ Property Fund as it prepares for an NZX listing.

The big property business, with real estate valued at $746 million, hopes to list within a year.

Derek Young, chief executive of financial advisory group Money Managers, and David van Schaardenburg, principal of NZ Funds which owns 40 per cent of Money Managers, spoke out at DNZ's annual meeting in Auckland trying to force changes.

But DNZ's board held its ground over the constitutional wrangle and advised about 100 shareholders not to back the changes.

DNZ, with 61 investment properties, has many shareholders who were or still are Money Managers' clients and they held their annual meeting at the Duxton in Auckland.

Money Managers has previously been closely associated with DNZ when the business was Dominion Funds.

Under chief executive Paul Duffy, the real estate company has changed its name and its structure, axing syndicates and in the last few months trading on the unlisted market

Duffy told the meeting DNZ planned to list on NZX and had a sunset clause which meant it must be completed before September 15 next year.

"I would be confident in saying it would be completed before that date," Duffy told shareholders, adding that last month DNZ retained Goldman Sachs JBWere to advise it.

Young and van Schaardenburg wanted DNZ to change its constitution to prepare for that listing, even though the board had not yet adopted a new constitution.

Young and van Schaardenburg proposed a resolution which said the board would "ensure that the company will act in accord with the intentions of a new constitution around governance, transparency and full disclosure".

The meeting stalled while the two finance bosses negotiated with members of DNZ's board and its legal team.

In the end, an amended resolution was put to the meeting which said "in exercising its management powers, the board will have regard to the intent of the rules of the proposed new constitution".

Tim Storey, a lawyer and DNZ director, told shareholders the board did not back the revised resolution and they should not vote in favour of it. The results of the voting had yet to be declared last night.

Van Schaardenburg sought reassurance from the directors that shareholder approval would be sought before any capital-raising scheme was launched. DNZ chairman Alastair Hasell partly rejected that prospect. "We have no concrete plans in terms of capital raising," Hasell said, although he added it was "obviously an option".

After the meeting, van Schaardenburg said he believed capital raising was planned because DNZ had high gearing.

DNZ has a $500 million debt facility with a syndicate of three banks (ANZ, ASB and BNZ), and has drawn down $360.9 million.

Duffy said DNZ quit almost $100 million of real estate in the last year.

DNZ declared a net after-tax loss in the year to March 31, 2009 of $19.2 million (previously a $17.4 million profit). Included in this year's loss were $53.2 million of property writedowns compared to $12.8 million valuation gains in the previous year.

DNZ FUND

The property firm, previously Dominion Funds, has $746 million of properties including:
* 11-level office block, at 1 Grey St, Wellington: $45.5m
* Stake in Johnsonville Shopping Centre: $38.9m
* Bay Central, Tauranga: $36.5m
* Meridian Energy building, Wellington: $32.3m
* Lumley House, Wellington: $23.8m