Property doldrums force Waltus' hand

By GEOFF SENESCALL

The country's largest property syndicator, Waltus Investments, is seeking a major restructuring of its $643 million portfolio as it attempts to combat a difficult market.

Waltus has confirmed it will file an application with the High Court this week in a bid to create one property grouping with assets of $237 million by pooling 29 of its 44 syndicates.

To do this, the company will also need 75 per cent approval from investors in each of the syndicates involved.

Set up in 1985, Waltus manages commercial, industrial and retail properties in New Zealand and Australia, which have been syndicated to more than 12,500 retail investors.

As at March 2000, its 44 syndicates comprised 69 properties. The capital value of its New Zealand properties was $473 million and its Australia properties $A131 million.

But a soft property market, coupled with falling capital values and shortening lease profiles, have created problems for Waltus, as well as other property companies.

Last year it was forced to suspend interest payments to many of its syndicates, which created unease among investors.

The new proposal would reduce income risk, according to Waltus director Shayne Hodge. Investors would benefit from being part of a larger, more resilient group, he said.

"The larger group enhances our ability to actively manage the portfolio and create cost efficiencies.

"Because of its size, it will have better sustainability of income, growth prospects, liquidity and diversification of risk - all of which makes the group a more attractive proposition than the individual syndicates.

"The small syndicates we're proposing should merge have been successful for many years now, but market conditions have changed and we believe it's vital to evolve the investment structure to meet the new challenges.

"We're looking at a flat property market in New Zealand and the need for incentives to attract new tenants, particularly in provincial cities."

Mr Hodge declined to give further details. But information obtained by the Business Herald suggests the 29 syndicates to be pooled are all smaller-value, single-property, single-tenanted syndicates, most of which have leases with less than five years to run.

The other 15 in the Waltus portfolio were set up after 1997 in a different economic setting and are characterised by larger-value, multi-tenanted funds with different risk profiles.

Waltus is understood to be proposing that syndicate investors swap their existing securities for an equal mix of ordinary shares and mandatory convertible notes.

It has employed Deloitte Corporate Finance to provide an independent report to appraise the values of the different syndicates in an attempt to make the merger fair to all investors.

If all vote in favour, the new group will be the largest property syndicate in the country.