Banks hit Multiplex investor payments

The ASB Bank Centre in Auckland.

Banks banned a $701 million property fund from paying investors and its manager.

Leon Boyatzis, Multiplex New Zealand Property Fund manager based in Sydney, said ANZ and CBA had renewed a $419 million funding line two months ago but imposed conditions.

He praised the banks for extending loans which gave the fund time to reduce its gearing but said the new facility came at a cost to the business and its investors.

The banks imposed conditions that the fund did not pay either its manager or 1977 investors.

Boyatzis said management fees were A$9 million ($11.5 million) in the year to June 30 last year but cannot be now paid to Brookfield Multiplex until gearings are reduced. Quarterly investor distributions, which were A$20.7 million for the full year to June 30, 2008, are barred too.

"Banks have imposed a requirement that we don't pay distributions until they give us permission. They have prevented us paying ourselves management fees. We're effectively doing the work for free.

"We've renegotiated our debt, which took a lengthy period of time. It's challenging because the margins are high and our repayment programme is challenging but we have asset sales in place at the moment. We can't release specifics but it will be part of our non-core portfolio."

The $701 million portfolio of New Zealand property could be sliced back to about $650 million after revaluations were completed but details won't be available until the half-year report is released today. Boyatzis said most of the fund's investors were Australians but 200 were New Zealand-based.

Leases are about to terminate in the portfolio's two most valuable Auckland properties: Telecom House near Karangahape Rd and the ASB Bank Centre in Albert St.

"They are two major lease expires which we are addressing. We are in negotiations with Telecom. And I can't hide the facts about the ASB Bank because the facts have been in the press. The lease expires in June 2013 and while that's a few years away, it has an impact on valuations. If they were to go, it would have an impact on the fund," he said.

Refurbishment of space in the ASB building was likely.

As for the fund's 65 per cent debt-to-equity ratio, Boyatzis said that was not unusual.

"This is an Australian-based fund and from 2004 when it was set up, the loan-to-value ratios in Australia were circa 65 per cent and that's where banks had been lending. At that time, the property cycle was at a different point," he said.

In December, the two banks extended loan facilities if the managers cut the loan-to-value ratio to 55 per cent by December and 50 per cent by next June.

Most listed property vehicles in New Zealand have loan-to-value ratios of around 35 per cent and DNZ Property Fund's ratio at above 40 per cent is considered high. Boyatzis said the fund would sell properties but could not say what was on the market.

The fund owns Auckland's $51 million Telecom House on the eastern side of Hereford St and the southern side of Hopetoun St near Karangahape Rd. But the telco is soon shifting to purpose-built premises in Victoria St.

The fund was launched with many supermarkets but it has sold most including Foodtown Pukekohe for $8 million, Countdown Porirua for $12.2 million, Woolworths New Plymouth for $8 million, Foodtown Hamilton for $4.2 million and the Hornby Distribution Centre in Christchurch for $17 million, less than its previous valuation of $18.9 million.

WHAT'S AT STAKE

Fund's most valuable stock:
ASB Bank Centre, Ak $138m
Gen-i Tower, Ak $84m
Telecom House, Ak $51.5m
180 Molesworth St, Wngt $42.7m
EDS House, Wngt $31m
AIA House, Takapuna $28m
143 Willis St, Wngt $16m