Waltus wraps up merger

By ANNE GIBSON

Wellington property company Waltus succeeded yesterday in gaining investors' approval for its proposal to roll all but two of 29 syndicates into one $227 million company.

It held a series of sometimes fiery but mainly tedious meetings of all syndicates at the WestpacTrust Stadium in a strange arrangement whereby staff members and investors trooped from one meeting room to another for eight hours.

Such were the numbers expected for the meetings that two rooms were used.

But most of the meetings were attended by only a handful of people, mainly Waltus staff and advisers.

Only two of the 29 syndicates - Ascot and Colonel - voted against the merger. Most votes were cast by proxy in accordance with postal instructions, with 76 per cent of all investors voting, and of those, 86 per cent approving the scheme.

The High Court now has to approve the merger. Waltus director John Hodge said that barring any objections, this would be completed in two weeks.

At every meeting, the chairman of the independent syndicated companies' board, Warwick Hawes, tried to quash any investor dissent. He said there was not time to have a meaningful discussion and that adequate information had already been presented.

But National Radio financial commentator and investment adviser Murray Weatherston was vociferous, attending almost every meeting and objecting to having discussion blocked, as well as raising a series of questions.

He quizzed directors mainly about the disadvantages of the syndicates that had performed well subsidising those that had not.

One syndicate has returned investors 16 per cent annually.

He sought answers to how Waltus would deal with dissenting minorities who opposed the merger.

He further raised questions about the loss of tax write-offs as a result of the merger proposal.

Mr Weatherston had advised some of his clients - through his company Financial Focus - to invest in Waltus some years ago. He is also a Waltus investor himself.

He criticised the prospect of the new structure and said shares in the merged company would invariably trade at a discount to net asset backing, because other property company shares were generally discounted.

He questioned prospects for re-tenanting buildings whose leases had only a short time before they expired.

Outside the meeting, Waltus financial controller Hamish Plimmer asked Mr Weatherston: "What's your motive for being here? Why is it such a big issue for you?"

Mr Weatherston refused to reply.

Waltus director Shayne Hodge also urged "someone to hand a calculator to the gentleman at the back," criticising Mr Weatherston's financial calculations.

For the entire merger to go ahead, Waltus needed approval from 75 per cent of investors and 90 per cent of the value of the syndicates.

Waltus will now convert investors' holdings into two vehicles: half into ordinary shares in the unlisted Waltus Property Investments, and the other half into mandatory convertible notes.

Another investor who raised questions in a meeting was Wellington journalist David Barber, an investor in Carmont, which owns a $3.6 million building in Carmont Place, Mt Wellington.

He cited a letter from another investor saying that Carmont had continued to perform well and was due to wind up in about a year. Shareholders would then receive capital gains of the last 10 years.

But Mr Plimmer said the lease on the Mt Wellington building was due to expire in the next three to four years. "You are seeing a declining value of the property, so the new structure is taking on the risk of re-tenanting Carmont. We are alleviating that risk for investors."

Mr Barber remained unconvinced. "I am disturbed by this development. I shall be voting against it."

The Waltus directors outlined a grim future for the syndicates if they remained separate vehicles. They cited a Deloitte report which said the merger was fair. Mr Hodge and Mr Plimmer in particular stressed that many leases relied on a small number of tenants, many were due to expire soon and mortgages on the properties had to be refinanced.

The merger would diversify risk and provide sustainable income, they said. The new company would have assets of $227 million.

The only investor to speak in favour of the proposal was Bill Sheat, of Waltus lawyers Gibson Sheat in Lower Hutt. He spoke as an investor in Regalia, which owns a building in Taupo tenanted by Woolworths and is worth $6.5 million.