Waltus still trying to refinance KPMG

Syndicated property promoter Waltus is still trying to refinance the mortgage on its ill-fated investment in Auckland’s KPMG Centre.

Friday, February 1st 2002, 2:52AM

by Jenny Ruth

The existing mortgages provided by Commonwealth Bank of Australia were due for repayment on 29 May last year but the loans were extended to 29 November last year and then to March this year.

Waltus finance manager Hamish Plimmer says his company is in the middle of negotiating with Commonwealth Bank and another party. "Until everything’s finalised, I’m not prepared to discuss anything, but we’re very confident it will be refinanced," Plimmer says.

He refused to say whether Waltus’ attempt late last year to raise $8 through a four-year contributory mortgage offer was successful. The plan had been that the contributory mortgage would rank behind a $16.9 million loan advanced by an unnamed trading bank.

The KPMG Centre is owned by Waltus Prime Properties. Its accounts to the end of March last year showed it owed the Commonwealth Bank of Australia $26.4 million in two facilities, one of $21.4 million and the other $5 million.

In December last year, Waltus wrote to Waltus Prime Properties investors telling them their company "has been unable to confirm a satisfactory first mortgage facility beyond March 2002. We are continuing discussions with financial institutions to confirm arrangements for that facility beyond that date. Given the uncertainty, distribution payments will remain suspended at this stage."

When last year’s accounts were issued, the directors warned that if the mortgages couldn’t be refinanced, assets might have to be sold "other than for the amounts at which they are currently recorded in the statement of financial position."

The KPMG Centre is the syndicate’s sole property. Plimmer insists it won’t have to be sold.

The contributory mortgage investment statement contained details of a valuation of the KPMG Centre at 21 September of $42 million by CB Richard Ellis. The valuer noted that while the building was fully leased, the major tenant, KPMG’s lease expires in mid-2005 and that its current rental was "significantly above market."
Together with the evidence of the building’s track record of constantly falling value, that suggests the valuation will slip even further. The loss of value also suggests why the Commonwealth Bank has been so reluctant to renew its loans for any length of time.

When Waltus Prime Properties bought the building in 1998, it paid $51.62 million for the building.

For the investors in the syndicate it has been a disastrous experience. Each $5,000 investment they made in 1998 had dwindled to just $1,874.05 by 31 March this year and has obviously declined further since then. Back in March, Waltus Investments sold 892 Prime Properties units to another Waltus company, Waltus Property Development, for just $1,490 per unit.

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