SPI investors face tough choice

Investors in one of SPI Capital’s property syndicates will have a difficult decision to make after a lender called in the mortgage on its property.

Tuesday, October 9th 2012, 7:50AM

by Niko Kloeten

SPI has sent a letter to investors in its 656 Syndicate, advising them that “significant decisions” need to be made about the future of the syndicate, with the options to be discussed at an upcoming meeting.

The syndicate owns a commercial property at 656 Great South Road in the Auckland suburb of Penrose, with tenants including the National Bank and Griffins.

“As you are aware from previous correspondence we have been negotiating for some time with a large national chain for a long term lease to this property,” SPI said in its letter to investors.

“To date we have not been able to reach agreement due to the large consideration for rent incentives required and the ability of the syndicate to meet these costs along with the overall impact on the syndicate cashflow.”

Meanwhile, the mortgagor Guardian Trust has withdrawn from the lending market and has called in its loan with a demand notice to the manager.

According to SPI the two options are to re-finance the current debt, which “may be difficult in the current market”, or to sell the asset.

Due to a “potential conflict” for the manager, SPI has appointed chartered accountancy firm Taurus Group, which is managing the wind-up of SPI’s Gloucester syndicate, to chair the meeting.

Auditors Christmas Gouwland & Co emphasised the Guardian Trust loan, which was on a monthly rolling facility, in the syndicate’s financial statements for the year ended March 31.

“If the syndicate is unable to continue in operational existence for the foreseeable future, adjustments may have to be made to reflect the situation that assets may need to be realised other than at the amounts at which they are currently recorded in the balance sheet,” the auditors said.

They also emphasised a $2.2 million loan owed to the syndicate by a related party called SPI Assets.

The syndicate has 59 units with a unit contribution of $100,000. Its value per unit as at March 31 was $127,165, down 12% from the previous year.

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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