Todd name survives at Shortland

Retiring chairman John Todd consented to wine being poured for shareholders after the annual meet-ing, not just the usual cup of tea. At the meeting, he explained that he was retiring on reaching the age of 72 but could have continued being re-elected annually.

But he will remain closely involved with the listed property company, as chairman of Todd Corporation and through the 38 per cent of Shortland held by various Todd interests.

His seat on the board will be taken by his son, Mike, a 48-year-old businessman who is involved in Todd Corp matters but whose career as a marketer and property investor has taken him away from the family firm.

The Shortland annual meeting this year brought together some diverse elements of the Wellington property scene. The new chairman is lawyer Denis Thom, who in the 80s was on the board of Robt Jones Investments (now part of Trans Tasman Properties). And Sir Bob Jones was along as well, as a shareholder owning about 4 per cent of the conservatively geared company.

The Todds took control of what was Mainzeal Properties in December 1989, with John Todd becoming chairman of a property investment company created by a developer and with a precarious post-crash future.

A key to the new control was risk aversion. Shortland did some shopping, raising its stake in a couple of Australian ventures which have proved profitable, and is now looking at expanding by buying industrial properties.

John Todd could have been talking about his family's interests when he told Shortland shareholders, with an eye to the future focus of the company, "We are a New Zealand company, we have our roots in New Zealand." The Todd empire began with John Todd's grandparents and the motor business, expanding into areas such as oil exploration off the Taranaki coast and nowadays widely into the energy sector.

The eldest family member of his generation, John Todd is chairman of the Todd Corporation and Todd Foundation and represents the interests of about 130 direct descendants of his grandparents, who have investments placed through a range of trusts and estates.

Becoming chairman of a listed company, he thought, he would continue to represent those family interests. "I changed focus entirely because I realised I was not just representing Todd interests. When I put my Shortland Properties hat on I feel quite different.

"At Shortland, we see opportunities for growth in the Australian market probably a little bit stronger than in New Zealand. That's not to downgrade or denigrate New Zealand - we will continue to be a New Zealand company and will continue to concentrate on New Zealand.

"We will look at Australia for growth activities. We will look at it as being a useful extension of our total investments."

As for the share price, he said the board believed it was doing the right things. "We are not over-extended in borrowing, our portfolio is an excellent one, we do have leases which have to be renegotiated and [properties] released, but that is not a problem which is unmanageable and should not push the price down. There has been some selling by an overseas investor, but that is now behind us.

"We're making sure our properties are well managed and continue to look for high-class tenants."

Managing director Mark Peterson said the company was trying to buy properties on yields between 9 and 10 per cent, giving a risk premium of 4 to 4.5 per cent over debt.

But when a property was bought, the share price discount to asset backing - 34 per cent at 57c against backing of 88c - meant the purchase was immediately devalued.

This prompted Wellington investment manager Frank Pearson to ask whether the Shortland board had considered buying back the company's shares, which would put a premium on them through greater scarcity and, presumably, increase their price.

John Todd says that had been considered, but the directors felt it would not be in the long-term interests of the company, especially as stock liquidity was already thin and paying money back to institutional shareholders and major holders such as the Todd interests would not do much for the market.

Short-term, a buyback looked sound, but for the company's long-term growth it made more sense to keep the money in the company.

John Todd, in his answers, expressed the long view that had been a mark of Todd family investments, most of which are major long-term capital ventures.

Since 1989, the company had moved slowly, being in conservative hands. So a quick payback not been a major consideration. John Todd said the company would also not need to go to shareholders again for expansion funds for probably five years.

He said: "The objective [of the company] is to invest in high-quality property. The objective, policy, has changed, by expanding into industrial properties producing good returns for shareholders and long-term growth for shareholders in property as an equity investment."

Incoming chairman Denis Thom said that since Todd interests bought control, the company had grown substantially through increases in capital and with some extra debt, but always with a risk-averse policy. Total assets rose from $127 million to $365 million, total revenue from $7.8 million to $30.9 million, and net lettable area in its buildings from 21,741 sq m to 102,474sq m.

New director Mike Todd sits on the boards of various family companies, but spent his first seven years in business in advertising and marketing, continued the marketing emphasis while he worked for Todd Motors, and since 1986 has been a residential property developer and investor.

As joint managing director of G.E. Stock Investments - George Stock was his grandfather on the other side of the family tree - Mike Todd said his commercial property experience was limited to that company's ownership of two floors in Central House, Brandon St in Wellington.
The building was on city council leasehold, but was recently converted to freehold.

Todd and a cousin took charge of Stock Investments at the end of 1987. "There wasn't much left of it. We picked up the bundle of investments and made them work."
Stock Investments also owns a family farm in Hawkes Bay, which Mike Todd said had been "turned back into an operating unit. We view ourselves as investors".

Since leaving Todd Motors, Mike Todd said he had got into various venture investments. "Some have worked and some haven't. I've been in two restaurant partnerships. The first worked very successfully and the second was a disaster. "I then bought the domestic rent role of Nathan's Real Estate, 150 properties. One thing I learned out of that is that, as an agent in the middle, you can't win because you are never good enough for your landlord or your tenants."

Mike Todd turned that venture into a residential property investment partnership and said that by always choosing location very carefully, "the yields I've been getting out of my rental properties surprise real estate agents. One started at 21.3 per cent on the purchase price and the overall gross rent return is between 12 and 15 per cent.

"As interest rates have tumbled we've been able to hold rents - Wellington rental property has held up. We very quickly threw away the idea of investing in Auckland - the prices were too high and the rentals too low." Mike Todd believes he will bring "a level of practical experience, pragmatism" to Shortland.

"I'm not a high-flying financier, more a marketer and administrator. I don't see myself coming to the board as a representative of Todd but as a representative of the wider shareholder."