Money Managers rolls manager

Investors in Foodstore Properties have voted against the sale of one of their two properties following intervention by Money Managers.

Foodstore Properties, a syndicated property investment originally promoted by FMG, invests in Foodtown supermarket buildings in the North Island.

The syndicate's manager, Investment Services, had wanted investors to approve the sale of the Te Atatu Foodtown supermarket for $3.6 million, 25.2% more than the company paid for it in 1995.

But Investment Services also wanted investors to approve it using the proceeds to buy another unspecified property.

Money Managers' key objection was that Investment Services were asking for "a blank cheque" in regards to the replacement property and that it wasn't giving investors the alternative of a capital return.

The sale and purchase required 75% of those voting to be in favour. In the event, nearly 70% of the about 600 investors voted with only 52% in favour and the remaining 48% against.

Before Money Managers wrote to investors two weeks before the voting deadline, voting had been running 98% in favour, says Investment Services.

Money Managers marketing director Alasdair Scott says nearly half the Foodstore Properties investors are his firm's clients and that they went into this investment on the understanding that when any of the properties were sold, the proceeds would be returned to investors.

This is exactly what happened in 1998 when the Blockhouse Bay supermarket was sold.

Scott says in general it has been a good investment with investors receiving both the rental streams and capital gains. He also regards the price for the proposed Te Atatu sale was reasonable.

Investment Services boss Michael Millar, who is also a Foodstore director, agrees the original intention had been to return proceeds of sales to investors.

But the feedback he's been receiving from investors, particularly in today's relatively low interest rate environment, has been that they are primarily interested in the continuity of a good income stream.

Foodstore Properties is currently producing about 11% a year with about 10% paid out to investors, but the Te Atatu supermarket's lease has only five years to run. There's the potential that the rent will be lower after that and that significant refurbishment costs will also be required.

Millar says replacing the property with one providing a comparable income won't be easy and that Investment Services had been trying to get the best possible negotiating position.

His letter to investors about the outcome of the vote notes a Money Managers' advertisement offering 7.89% on a minimum investment of $12,000.

"Clearly, unless highly risky in nature, investments paying 10% or better are in short supply."

The letter says the impact of Money Managers' intervention has been "to destabilise investor confidence" and it is critical of the advisory firm.

Nevertheless, Millar acknowledges Money Managers' view won strong support.

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