St Laurence investor returns face National Property Trust hit

By Gareth Vaughan A group of National Property Trust unitholders, striving to sack the trust’s St Laurence controlled manager, could put a spoke in the wheel of the finance company’s receivers aiming to realize value for 9,000 investors owed NZ$245 million. David Cushing, son of former Brierley Investments and Air New Zealand chairman Sir Selwyn, says he has the backing of the required 10% of National Property Trust unitholders needed to call a special meeting and he wants the trust’s manager and St Laurence subsidiary, the National Property Trust Limited, fired. With an insolvent St Laurence put into receivership by its trustee Perpetual Trust late last month, Cushing argues the entire St Laurence vehicle is now tainted and maintains it’s against the spirit of the trust’s deed for National Property Trust’s manager to be controlled by St Laurence’s receivers, Deloitte’s Barry Jordan and David Vance. Furthermore he says the trust has been among the worst performing listed property trusts for a prolonged period. Fees paid to the manager – NZ$2.4 million in the year to March 2009 plus NZ$1.77 million worth of units – and corporate governance are materially out of line with best practice, and its units, valued at 48 cents each on Wednesday, trade at a large discount to their 70c per unit net asset value. “I’ve talked to dozens of unitholders and everybody’s unhappy,” Cushing told interest.co.nz. “A happy unitholder in the National Property Trust is as rare as hen’s teeth, let me tell you.” The National Property Trust, whose portfolio includes the AA Centre on Auckland’s Albert Street, the Heinz Wattie’s warehouse in Hastings and Christchurch’s Eastgate Shopping Centre, posted a net loss of NZ$9.08 million in the half-year to September 2009 versus NZ$9.30 million in same period of 2008. Distributable profit was NZ$4.85 million, up 1.5%. The property portfolio valuation at March 31 this year stood at NZ$191 million, down 3% since September. Cushing said his ultimate aim was to get rid of the manager, his firm H&G Limited had no interest in taking over the management contract, which is valued at between NZ$6 million and NZ$10 million by First NZ Capital analyst Jason Lindsay, and he wasn’t necessarily out to liquidate the trust. If the manager was removed, trustee New Zealand Guardian Trust would appoint temporary management. “Obviously one potential outcome is to have the management internalized (meaning) it’s done in-house,” Cushing said. “The only outcome I would like to see is the manager dismissed. We just want to have a good result for unitholders.” Cushing noted that St Laurence’s receivers had their interests to protect while he and his supporters were batting on behalf of the National Property Trust’s unitholders. “They (Deloitte) are batting on one team, we’re batting on the other,” Cushing said. Jordan, via a spokesman, said the receivers agreed with the trust's manager that it was business as usual at this point. However, the range of estimates for the realisable value of the National Property Trust's management contract was probably greater given there was now a degree of uncertainty around the valuation. The first receiver's report is due in late June and was likely to be drafted before any National Property Trust unitholders meeting was held. Lindsay notes the receiver will be looking to realise value with the National Property Trust management contract, St Laurence's 15.96% stake in the trust and potentially an 8.8% stake in the trust held by Irongate Property Limited, which is managed by St Laurence Funds Management Limited, on the block. All up, Lindsay reckons these assets, with the management contract at the NZ$8 million midpoint of his valuation range, could fetch about NZ$31 million for St Laurence debenture holders. Meanwhile Andrew Walker, a National Property Trust Ltd director, said the Cushing comments were “wholly unhelpful to preserving value” for unitholders. Furthermore  the manager considered some of the comments regarding the trust’s performance misleading although Walker declined to specify which ones. “We would question whether this is a significant group of unitholders at all in terms of number and this is really being driven by one camp who has demonstrated this type of destabilizing behaviour in the past,” Walker added. However, he didn't question that Cushing had the required 10% support for a meeting. Bryan Connor, general manager for corporate trusts at Guardian Trust, said the manager was obliged to call a meeting and the trustee would work with the manager to organise a meeting as soon as "expedient." To succeed in removing the manager, Cushing will require 75% backing from voting unitholders. He noted St Laurence interests holding just under 25%, could attempt to block the manager's removal. But Cushing said his legal advise was that if a strong majority of unitholders not related to the manager voted to dismiss it, then the next step would be asking the courts to dismiss the manager in the best interests of unitholders and he would expect the trustee to take this step. On this Connor said the trustee was obliged to act for all unitholders and to make sure the manager adhered to the trust deed. *The trust has a NZ$110 million cash advance loan from the BNZ which is due to expire on November 30, 2012. This was first published this morning in our Daily Banking and Finance newsletter, which is for our paying subscribers. Find out more here.