The stock exchange listing of Urbus Properties was a low-key event.
This is not surprising as the company has a controversial history and this was a compliant listing of existing shares rather than an issue of new shares to the public.
Directors are hoping that investors will forget the company's past,
as there is no coverage of its history in the main body of the listing profile.
Urbus has its origins in the Lower Hutt-based Waltus Group, which is controlled by the Hodge family.
In the late 1980s Waltus began purchasing properties and selling them to the public in the form of property syndicates. These were usually single property, one-tenant syndicates.
One of the main characteristics of these new issues was the fat fee structure. Waltus received an upfront corporate management fee equal to 3 per cent on the gross value of the properties and brokers (mainly financial planners) were paid 4 per cent on the funds invested. There were also additional preliminary expenses, the Waltus annual property management fee and ongoing payments to financial planners.
Many of the early syndicates had little or no borrowings but Waltus became more aggressive and geared its later syndicates. This was to the advantage of Waltus as its 3 per cent up-front fee was based on the gross value of the assets.
The outcome was inevitable. The combination of highly geared, single-tenanted, one-property companies in a low-inflation environment is a recipe for disaster. Many of the Waltus syndicates struggled, distributions to shareholders were slashed or suspended and property values dropped.
In mid-2000, investors agreed to fold 27 Waltus syndicates into a new company, Urbus Properties. The new company had 44 properties, valued in excess of $230 million, and was quoted on the unlisted market.
Late last year, a further nine Waltus syndicates, owning 16 properties, were purchased for $157 million.
Urbus now owns 56 properties, with a total value of $395 million, and 7800 share and convertible note-holders. The company's property portfolio is 40 per cent retail, 32 per cent industrial and 28 per cent office. The listed company owns the properties but a separate company, called Urbus Management, is the manager. Urbus Management, which is owned by the Hodge family and employs all of the listed company's personnel, receives several fees. These are:
* Annual corporate management fee (0.5 per cent of total assets).
* Purchase fee (1 per cent of an acquisition price).
* Divestment fee (0.5 per cent of a sale price).
* Property management fee (5 per cent of the gross rental on multi-tenanted retail properties and 2.5 per cent on all other properties).
The management company also receives fees for negotiating and signing new leases, rent increases and refurbishments.
The Urbus corporate structure is less than satisfactory because none of the listed company's directors, with the exception of John Hodge and Shayne Hodge, is on the management company board and this structure has not demonstrated that it can create value for outside investors.
Also, Waltus and Urbus have consistently failed to achieve profit forecasts, after property revaluations, although the dividend projection of 9c a share has been met and directors believe it can be sustained.
At yesterday's closing price of 90c Urbus is selling at a 3.2 per cent discount to its fully diluted net tangible asset backing of 93c a share and has a dividend yield of 10 per cent.
The company has a long road to travel before it shakes off its troubled past and gains widespread investor support.
Tranz Rail
The battle for control of Tranz Rail is at a fascinating stage, with investors analysing statements with the same assiduity as United States intelligence agencies pore over the latest Saddam Hussein tapes.
On Thursday, Toll Holdings made an announcement, under the heading "Toll confirms 90 per cent requirement for Tranz Rail", that "Toll Holdings today confirmed that it has no intention of varying its 90 per cent minimum acceptances condition in its takeover bid for Tranz Rail".
The important words in this statement were "has no intention". The absence of any reference to the 95c offer price in the heading or opening statement is also relevant.
Later on, managing director Paul Little is quoted as saying Toll's offer document would be dispatched to shareholders in the middle of next week and that there would be no change to the price or minimum acceptance level. That was interpreted as meaning that there would be no change to the terms in the offer document but it did not exclude the possibility of changes at a later date.
The two important conditions are 90 per cent acceptance and the 95c-a-share offer price. It is clear that Toll will not obtain 90 per cent at 95c because several shareholders who own more than 10 per cent among them will not accept at that price.
Thus Toll will have either to raise its offer or drop its minimum acceptance to 50.1 per cent (Toll has to purchase only 50.1 per cent to trigger its exclusive deal with the Crown).
Toll will still have difficulty obtaining 50.1 per cent at 95c and will probably have to raise its offer to $1.05, maybe $1.10, to be sure of getting to this level.
To obtain 90 per cent Toll will probably have to raise its offer to at least $1.20, if not more.
The Australian company argues that Tranz Rail's share price was trading for less than 40c three months ago but the Crown's decision to buy back the track infrastructure has substantially improved the company's future prospects and risk profile.
Grant Samuel's revised independent appraisal report is now awaited with keen interest.
Affco
Why can't Affco's major shareholders reach some agreement instead of wasting shareholders' time and money?
In April last year, Affco shareholders were asked to approve the purchase of Hugh Green's 10.5 per cent shareholding by Talley's at 38c a share. The approval was required under the Takeovers Code because the purchase would take Talley's shareholding from 19.4 per cent to 29.9 per cent.
The motion was defeated when Peter Spencer, a major shareholder, voted against it.
In September, Affco had a one-for-one renounceable rights issue at 10c a share, which was underwritten by Talley's and Spencer (this also required a shareholder meeting and independent report). Dairy Meats assigned its rights to Talley's and Spencer and as a result Talley's now holds 26.4 per cent, Spencer 20.8 per cent, Green 11.6 per cent and Dairy Meats 4.7 per cent.
Spencer, Andrew Talley, Michael Talley, Green and Dairy Meats representatives have Affco board seats.
Next Wednesday, Affco shareholders are being asked to approve the purchase of the Green and Dairy Meats shareholdings by Talley's at 25c a share. The purchase will take Talley's stake from 26.4 per cent to 42.6 per cent.
The problem is that Spencer has indicated to Affco that he does not want Talley's to go above 40 per cent and will vote in favour of only one of the transactions but has not indicated which one.
Next week's meeting seems like another pointless exercise for Affco shareholders as Deloitte Touche Tohmatsu, the independent advisers, and the board have made no firm recommendations and Spencer will not disclose how he will vote.
As Affco's performance has improved under its current shareholding structure, and shareholders should not give away their premium for control, they are probably best advised to vote against the resolutions.
* Disclosure of interest: Brian Gaynor is a Tranz Rail shareholder.
* Email Brian Gaynor
The stock exchange listing of Urbus Properties was a low-key event.
This is not surprising as the company has a controversial history and this was a compliant listing of existing shares rather than an issue of new shares to the public.
Directors are hoping that investors will forget the company's past,
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