Deal helps bridge Newmarket's yield gap
The Newmarket Property Trust's surprise move that it is to buy 90 per cent of the AA Centre in Downtown Auckland for $19.9 million has been well received by unitholders. ra
Tuesday, March 30th 1999, 12:00AM
The Newmarket Property Trust's surprise move that it is to buy 90 per cent of the AA Centre in Downtown Auckland for $19.9 million has been well received by unitholders. Units in the trust rose 6c to close at 68c on Tuesday on volumes of nearly 900,000.
Newmarket originally intended to merge with the National Property Trust, then buy the AA Centre, however unitholders, on Thursday, rejected the merger plans at a special meeting. Following that meeting the fund's shareprice fell to 55c.
After the merger failed, National helped Newmarket facilitate the transaction, which is to be funded by debt and the placement of 6.6 million new units in a private placement.
Newmarket says the purchase will help boost its yield and bridge the gap between the fund's actual rental income and the 9.5 per cent pre-tax yield guarantee on the fund, which is currently underwritten by 38 per cent shareholder Sovereign.
However, that guarantee (which was to be abolished under the failed merger) is due to expire in June 2000.
Newmarket says the AA Centre purchase was a good deal as the building had been revalued from $21.1 million $25 million because of new leases signed during the due diligence process, which increased the annual rental by $300,000 to almost $2.6 million a year.
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Forsyth Barr director Neil Paviour-Smith. |
National Property Trust chairman Paul Dallimore said the merger failed because Forsyth Barr advised its clients to vote against the proposal. Likewise, Newmarket chairman Jock Irvine says he was led to believe the proposal had "very strong support" from the Dunedin-based brokerage, which was the organising broker for both floats.
However, Forsyth Barr director Neil Paviour-Smith says, "it's a bit unfair we were singled out for all the criticism." He says even if all the firm's Newmarket unitholders voted for the proposal it still wouldn't have been sufficient support.
He says there were a number of significant private investors who opposed the merger as they too could see it was not the best offer.
Paviour-Smith says that Forsyth Barr had taken an open mind on the merger. "We looked at the consequences post-merger and concluded that it was not in the interests of Newmarket unitholders.
He concluded that, on-balance, the deal post-merger was not in the best interests of unitholders.
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