Investors shake up $191m trust

Sir Selwyn Cushing at the meeting in Ellerslie yesterday. Photo / Steven McNicholl

Unitholders in the $191.2 million listed National Property Trust voted overwhelmingly in favour of major restructuring yesterday.

About 120 investors, including representatives of major institutions, supported big changes which internalise management of the real-estate business and will see it converted from a unit trust into a company.

David Cushing of the wealthy Hawkes Bay family and H&G Ltd made an impassioned plea at the annual meeting in Auckland for investors to support moves he made months ago with his father Sir Selwyn for a shake-up of the business.

"This is in all unitholders' interests," he told the meeting in Ellerslie.

"How many times in New Zealand have we seen managers do deals great for managers and hopeless for investors? This will get rid of that conflict."

He predicted the unit price would rise and investors would have more confidence.

Better corporate governance was the major driver behind the proposal, he said.

"We will decide who sits on that board table. At the moment, we have a token one independent director. We will control the board table and we deserve A1 management.

"We need to get the market price of National's units closer to the net tangible asset backing of 72c. We need to be creative and show initiative. Managers don't need to do that."

Brian Kreft and Kerry Hitchcock, directors of National's manager, spoke in favour of changes.

Craig Brown of ING (NZ) also backed the shake-up, saying $2.5 million to buy the management was just 1.3 per cent of assets under management so represented great value.

Shane Solly, Mint Asset Management's head of equities, said before the meeting he backed the changes.

"It's been a long process getting National to the point where it is arguably best of breed in terms of corporate structure for a listed New Zealand property security," he said.

"We believe the changes are a good outcome for investors.

"National's business is well positioned to grow from here and Mint looks forward to supporting that growth. One key outstanding issue is the structure of the board and Mint will get involved in that process. Also the costs associated with the corporate restructure will need to be monitored.

"National's core management team have done a good job recently in controlling costs and focusing on returns to investors so I expect they will work hard on minimising costs."

After the meeting, Andrew Walker, a director of National's manager, said the board backed the outcome.

"It was passed with 99 per cent in favour. What that demonstrates is that there's almost maximum support for the resolution and we are quite pleased," he said.

St Laurence (in receivership) owns the management and gets the $2.5 million. It also has a 17 per cent stake in National, controlling units that will be sold to the trust for 51c each, equating to a further $16.2 million and then those units will be cancelled.

Investors had a number of questions for the board, including why the management contract was being sold so cheaply when others such as DNZ's were going for $35 million.

David Cushing said after the meeting that had investors not voted in favour of the deal, his family business would have moved to call an extraordinary general meeting and seek 75 per cent support for a resolution to terminate the management contract.

This had been a real prospect until the board supported the proposal and took it to the annual meeting and was one of the reasons for the low price paid to the manager.

Kreft, a Christchurch investment banker, was reappointed a director after a contested election in which Tauranga management consultant David Simpson lost.

Jim Sherwin, chairman of National's manager, said further details of the restructuring would be discussed at an investor meeting on November 25.

Kevin Podmore, the St Laurence boss who stepped down as chairman of National's manager in April, said nothing at the meeting. He is still a director.

The trust owns properties in Auckland, Napier, Hastings, Wellington and Christchurch.