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Hind Hotels

Hind director looks afresh at NZ

Singapore Government-controlled DBS Realty has been struggling for a month to mop up just over 1% of the shares in Hind Hotels so it can complete a takeover begun early last year.
Meanwhile one of Hind’s former controlling shareholders, Niwas Jhunjhnuwala (right), is looking again at New Zealand property. He has taken control of the investment portfolio he and his brothers began acquiring in the early 90s, which he estimates is worth about $S100 million ($NZ122 million) although takeover documents show its value dipped well below that during Asia’s economic upheaval.
The New Zealand assets had been keeping the tired Singapore hotel company afloat, although the last company documents before the directors bought the portfolio show their value to the group fell from $S90 million to $S79 million in the year to December 1998.
Those assets are headed by Central Office Park, at the Ellerslie-Penrose interchange on Auckland’s Southern Motorway, which fell from a value of $S43 million in 1997 to $S36.6 million.
Hind bought the office park in 1992 for $NZ38 million from a bank syndicate which took it over from the statutory managers of Aurora Group. Hind later bought the Wiri woolstore and Masport industrial estate in Mt Wellington and, two years ago, paid $NZ8.5 million for the Meadowland shopping centre in Howick.
Niwas Jhunjhnuwala said, during an interview in Singapore in January, he wants to spread his investments and fields hundreds of proposals. An example: the brothers took off for Romania two years ago to check one of these. “We went to buy a port, but it didn’t stack up,” he said.
Those other opportunities now have to match the feel he has for New Zealand. “Now I have a good feel of the market, hopefully I will further expand and may go public.”
Mr Jhunjhnuwala says a float of the New Zealand portfolio is probably “some time away.” It might also depend on a new generation having that feel, because Niwas and brother Lal, who was Hind chairman, are in their 70s.
Their start in New Zealand was entirely debt-funded, ironically so because they bought from banks selling up New Zealand companies, which by then were being charged very heavy penalty interest rates. (Central Park developer Aurora was controlled by Equiticorp and fell in that group’s collapse.)
“In 1992 the equity ratio was nil, 30% was a bank letter of credit from Singapore. I’m building an equity base, roughly 40% equity,” Mr Jhunjhnuwala says.
He says Hind bought “at the right time” but may now sell some of its assets to buy better. That “something better” has some basic requirements to meet: “We go for good long-term tenants. It should not hurt my pocket. My expenditure should come out of rent.”
The asset category does not seem important. Whatever scheme is shown to be viable, “we are ready,” he says.
“I can ready inside [a proposal] now, good or not good. The main thing is feeling you can retain that growth. That’s why we go for blue-chip, long-term tenants, who are getting more and more rare. It’s not a landlord’s market, it’s a tenant’s market now.”
The Jhunjhnuwalas own their industrial premises in Hong Kong and Niwas has an office in Bombay, but the brothers steered clear of Indonesia, the Phillipines, Malaysia and Thailand during their growth surge. “I don’t take currency risk and I borrow long-term. I pay extra but I can sleep peacefully.”
The Jhunjhnuwala brothers have moved cautiously, despite the size of the New Zealand portfolio, ensuring rent more than pays the mortgage. Between them they have numerous business interests around the world – among them, watchmaking in Hong Kong and an experimental farm in Burma which exports black beans and green peas to India. Another branch of the family has been in construction in India for 50 years and now manages 46 hotels there.

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National Property Trust boosts net half-year earnings 70%

Due diligence being done on new project

The National Property Trust increased its after-tax surplus by 69.7% to $3.2 million on revenue up 68% to $8.94 million in the November half.

Before tax, the operating surplus rose 95% to $3.18 million. Property sales, 1 with a gain & the other at less than book value, brought $101,000 of revaluation. The trust’s regular revaluations are done at the end of the financial year.

Basic earnings/share rose from 1.94c a year earlier to 3.04c, net tangible assets increased from 91.5c to 96.5c/unit (but down on the May 2003 nta of 98.2c) and debt funding :gross value rose from 38.7% to 41.5%. The dividend payouts are being maintained at 9c/unit (2.25c/unit quarterly) during a period of major construction & expansion for the trust, which now has $222 million of gross assets (up $16.5 million on a year earlier, down $6.4 million from May 2003) & $95 million of equity.

Executive chairman Paul Dallimore said completion of the Newmarket Property Trust acquisition had come in at a $1.147 million discount (the difference between the assets’ value & cost), but 1 Newmarket asset which National initially wanted to sell – the AA Centre on Albert St in Auckland – now looked like a better-quality proposition.

“Initially we didn’t want it, tried to sell it & couldn’t,” Mr Dallimore said. But, now almost fully leased, it’s turned into a good investment, with year-end revaluation still to come. “The leases are for an average term of six years at current market rentals, and the building is expected to achieve a significant valuation gain as a result. Fully leased, it’s showing around an 11½% return,” Mr Dallimore said.

The Rialto Centre in Newmarket is almost fully occupied. The major new tenancies are Lifestyle Sports, a sports retail store, and Eurostyle, catering for men’s fashions, which replace the Ultimo tenancy.

The Eastgate Shopping Centre in Christchurch opened at Easter 2003 and its 29,000m² is now 99% leased. “The rental flows are continuing to build and by the end of this financial year the centre is on target to achieve forecast rental income. There have been significant increases in centre turnover & foot traffic compared to the previous period. Subsequent to interim balance date, the centre had a very successful Christmas trading period, achieving 100%-plus increase in foot traffic and a 46% increase in turnover compared with the same period last year.”

Mr Dallimore said National was doing due diligence on a new North Island retail property, with an outcome expected in about 4 weeks. Aside from that, the trust would consolidate over the next 6 months, with the income stream from its developments flowing through in the new financial year.

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Tainui

Fraud on Tainui alleged
Two men who allegedly tried to collect $12 million from the Tainui Maori Trust Board by inserting themselves in the middle of a Hamilton property deal were committed to trial on Monday in the Auckland District Court.
Had their deal gone through, Tainui would have paid $24 million for five leasehold buildings which had just been bought by another party for $11.8 million, according to the Serious Fraud Office’s summary of its case.
Name suppression was continued when the two men came before justices of the peace on Monday, but SFO lawyer Gus Andree Wiltens said he would appeal the suppression order. The men are on bail, due back in court on March 23. No trial date has been set.
Four of the five buildings are on Tainui land. The SFO contends the two men, one inside the Tainui organisation and one outside, worked on their deal during the first half of 1998 and got approval in May 1998 from the trust board’s finance committee for Tainui to buy the buildings, but not from the full board. Even so, they managed to get a $500,000 deposit cheque out of a Tainui company, for which the outsider got same-day clearance.

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Pacific Retail stands out

Sales up 11.7%, returns even better

When some do well in a tough market, you have to pay attention. Pacific Retail Group Ltd lifted sales 11.7% in the September half, a feat in itself, but all the consequent results were even further ahead.

Total operating revenue was a few dollars under $200 million, up 12%, the operating surplus before unusuals and tax was up 19.4% to $6.1 million and up 115% (no decimal point missing) after unusuals were taken out (none this time, $2.3 million last time).

The bottom line was up 27.2% to $2.4 million, giving basic earnings per share of 4.76c, up 13.6% from last year’s 4.19c.

PRG runs retailers Noel Leeming, Bond & Bond and Computer City, and Pacific Retail Finance. Company chairman Maurice Kidd said consistent decision-making, reduced overheads, better margins and carefully controlled interest-free credit activity all contributed to the better results.

And he said long-term improvements should result from late next year because of better stock management, distribution and logistics initiatives.

Appliance market buoyant

PRG’s new chief executive, Peter Halkett, said PRG’s specialty, the appliance market, was quite buoyant, contrary to recent reports about the state of the retail market.

“In particular we have achieved good revenue growth in newer categories such as computers, large-screen televisions and communications products.”

Mr Halkett said the group had four growth programmes to follow: opening new stores and extending existing ones, expanding the Living & Giving business from its present six stores, and continuing the efficiency drive.

Despite the strong result, the company will not pay a half-year dividend.

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Securities Commission rules out statutory manager for Hartner

Directors file debt compromise schemes

The Securities Commission said today it would not recommend the affairs of Hartner Construction Ltd be turned over to a statutory manager, in place of the receiver and liquidator already appointed.

“The commission does not consider that the law about the appointment of statutory managers applies to Hartner Construction,” commission chief executive John Farrell said.

The commission met in Auckland last Thursday, 31 May, to hear submissions from individuals and organisations recommending Hartner be placed in statutory management, and also met Hartner’s receiver, liquidator, and representatives of the Companies Office and Serious Fraud Office.

“Representatives from the office of the Official Assignee and the Registrar of Companies have informed us that there are a number of matters in respect of Hartner Construction which they intend to investigate. These matters relate to concerns expressed by those making submissions to the commission.”

Meanwhile Hartner directors Wayne and Gaile Hartner have filed debt compromise schemes with the High Court, under part XV of the Insolvency Act.

Creditors have been called to a single meeting on both proposals at the Institute of Chartered Accountants in Ohinerau St, Remuera, at 11am next Wednesday, 13 June. Jeff Meltzer is provisional trustee for both schemes.

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Work starts Monday on new PWC Tower

AMP tower gets green light

AMP NZ Office Trust confirmed tonight it will proceed with its Auckland waterfront tower after signing up accountants PricewaterhouseCoopers and law firm Buddle Findlay as anchor tenants.

It also has ANZ Bank as a tenant to give 54% leasing commitment.
The office trust’s executive manager, Anthony Beverley, said arrangements with Fletcher Construction were being finalised and work would start on Monday.

The $171 million tower will have 31 levels. The two-level retail podium will have frontages on Albert and Quay Sts and the office floors will be on levels 7 to 29. The standard office floor will have a net lettable area of 1352m², far bigger than any other New Zealand highrise. Floorplates in Kiwi Development Trust’s Royal SunAlliance Centre are around 1200m².

PricewaterhouseCoopers has taken naming rights, after relinquishing those rights on its present premises up Albert St in what is now the ANZ Centre.

The tower will have an estimated completion value of $171 million, increasing the trust’s portfolio by 35% to $656 million. Estimated total development cost is $147.4 million.

Mr Beverley said AMP would use corporate debt to finance the development, capitalising all costs for the first two years so it will not detract from the trust’s distributions to investors over that period.

The office trust has a 50% debt cap, but was down to a debt to gross assets ratio of only 1%. This will increase the ratio to 26%, still conservative. The trust says its interest cover ratio should remain steady around 3.5 times earnings before interest, tax, depreciation and amortisation.

Mr Beverley said the building, to be called the PricewaterhouseCoopers Tower, would have a triangular floorplate to maintain harbour views for other buildings (particularly the trust’s own property immediately behind it, Quay Tower, home to Air New Zealand) and would use only 33% of the site.

Completion is scheduled for May 2002.

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PFI gets Airport Oaks design/build

9.33% initial yield on Healthcare Logistics project

Listed industrial property investor Property For Industry Ltd will design/build a $6.5 million 7033m² office/warehouse complex at Airport Oaks for Healthcare Logistics Ltd.

The pharmaceutical supply chain specialist has signed a 10-year lease for the building at 58 Richard Pearse Drive, with 3-yearly rent reviews to CPI and a 6-year right of renewal.

PFI general manager Peter Alexander said the 1.7645ha site would allow for another 3100m² of development.

The Healthcare Logistics project would give PFI an initial yield of 9.33% on project cost.

Mr Alexander said contractor Watts & Hughes Construction Ltd should have the complex completed by the end of this year.

Healthcare Logistics general manager Mr Michael Broome said the project was a major part of the continued development of the company’s business.

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Spotlight goes on prosecutors’ competence in close of Reeves Moses trial

Judge will give decision on remaining four charges Thursday afternoon

For a while this afternoon, the question of whether contributory mortgage company directors Roger Moses and Gary Stevens committed any securities law breaches was forgotten in the courtroom where they’ve been on trial since last Tuesday.

Instead, it was the office of the official assignee and the Crown Law Office whose performances were under the spotlight.

After starting out last week facing 35 charges each under sections 58 & 59 of the Securities Act and the act’s contributory mortgage regulations, the two former owners of Reeves Moses Hudig Mortgage Brokers Ltd were down to four charges each.

Their lawyers, Raynor Asher QC for Mr Moses and Chris Morris for Mr Stevens, succeeded on Monday and Tuesday in seeking a ruling from Judge John Hole that their clients had no case to answer on the section 59 and regulations charges.

One charge for each loan letter left for decision

Under section 58, they still faced one charge each relating to each of four development mortgages in 1999. Knocked back even further, these charges related to statements in introductory letters to mortgage contributors which prosecutor Brian Dickey said they should have known were untrue. The alleged untruthfulness concerned statements that interest for the investors had been set aside for the full term of the mortgage, and that work would start only after a valuer’s completion certificate was completed.

At the end of the afternoon, Judge Hole adjourned the hearing for a decision at 2.15pm on Thursday. Between times, however, he and Mr Asher managed to knock an awful lot of credibility out of the prosecution argument.

Prosecutor emphasises absolute liability

Mr Dickey said that under section 58 there was an absolute liability on directors to verify the truth of documents. The only out was an affirmative defence that they believed the documents to be true. “The statement is in the affirmative and places the obligation on the director.”

Mr Dickey said the introductory letters for two mortgages, for Pauanui Lake Resort Ltd and 32 St Stephens Avenue Ltd, contained unauthorised alterations. On the Pauanui letter, Mr Dickey said: “If they had ever seen that letter they would have known it was untrue.”

On both of these letters, “if the defendants say they did not see the letter and know its contents, they could not believe it was true. St Stephens and Pauanui [letters] on their face were obviously untrue.”

On the notion that a director should believe employees will be honest in their work, Mr Dickey said: “I don’t accept that it is sufficient to trust an employee. Checks will never be perfect or foolproof, but some pretty simple checks would have exposed Mr Van Nieuwkoop [Reeves Moses’ mortgage manager, Peter Van Nieuwkoop, who will face similar charges in a separate trial].”

Credibility knockout

And then came the blow from Judge Hole that might knock any credibility out of the Crown case: “What happened to the ‘best evidence’ rule?” the judge asked Mr Dickey.

The prosecution presented the court with a wad of introductory letters from ICSL, variously described as a subsidiary of Sovereign Assurance (which was Reeves Moses’ parent company in 1999), a contributory and trustee of contributories’ interests.

Mr Asher had raised doubts over the office master copies of documents during the trial and, at the close, Judge Hole revived the point: “We’ve got a whole lot of virtual circumstantial evidence in these introductory letters, but wouldn’t the best evidence be from at least one contributory to each mortgage saying ‘I have a letter, here it is’?”

After Mr Dickey told the judge “I don’t accept that is the only way the court can be provided with proof,” Judge Hole widened his questioning. “There is no evidence from someone either sending out the letters or receiving them.”

Dear Salutations…

Mr Asher, in his response to the prosecution’s closing submissions, naturally seized on the judge’s opening, pointing to the word “Copy” imprinted in large capital letters on the front of each introductory letter used by the prosecution in evidence.

“These documents all have ‘Copy’ on them. ‘Copy’ is not consistent with these being sent to ICSL as a contributory. As a contributory it would be getting originals, which contributories would expect.

“The first of them is computer-generated and reads, ‘Dear Salutations…’

“You don’t send documents like this to contributories, it’s the last thing you’d want to do.”

Comparison inevitable

Mr Dickey said there was no evidence the documents got to ICSL any way other than as missives to a contributory but the comparison — from the sideline, at least — was clear. Mr Dickey had accused directors Moses and Stevens of not keeping close enough tabs on the work of their employees, who couldn’t be trusted implicitly, and here were Crown Law and the official assignee providing documents which were plainly short of an evidential standard — what the prosecution had presented couldn’t be trusted.

On directors’ liability, Mr Asher said the Crown’s interpretation “would be tantamount to saying every director in a nominee company would have to read every letter that goes out to contributories, and to satisfy the Crown’s test it seems likely they would also have to be involved in the sending of them to make sure there was no change.”

Instead, Mr Asher said, “the real untruth is that Mr Van Nieuwkoop did not intend to do that which the introductory letters said would be done. This is the fundamental misconception behind the [Dickey] submission.”

Judge Hole adjourned the trial until 2.15pm Thursday for “at least a bald answer” on the charges. “I won’t necessarily have reasons at that point, in fact I doubt it.”

Background

Irregularities in the Reeves Moses mortgage portfolio were spotted by new mortgage manager Ken Taylor, who joined the firm in August 1999 and took over after Mr Nieuwkoop departed in November 1999.

When Mr Taylor had calculations done in early 2000 on the four projects the charges relate to, the total loss or risk potential on them was $3.64 million, or just over $4 million if a loan from one mortgage to another property apparently not secured by any documents was taken into account.

Reeves Moses was sold by Sovereign to Brisbane firm Harts, which has renamed it Harts Contributory Mortgages Ltd.

Previous stories:

Trial over Reeves Moses mortgage fiasco opens

Judge finds no case to answer on securities regulations charges

Prosecutor loses another round in case against Reeves Moses directors

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Continuing house price rises expected

ASB economist says supply of new homes not matching demand

The ASB Bank’s quarterly housing confidence survey showed 54% of respondents (63% in Auckland) thought house prices would rise despite the gradual rise in interest rates over the June quarter, compared to 40% in the March survey.

The bank’s chief economist, Anthony Byett, attributed this to 3 things: a continued rise in personal income, ongoing high net immigration flows and a continued undersupply of houses.

Mr Byett said rising interest rates & house prices had quelled demand, but the volume of new housing was still below the level of demand.

In addition, house price rises overseas (20% in a year in England) make New Zealand comparatively cheap.

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Inflation hits 4%

Q4 rise 1.2%, housing up 0.9%

Inflation hit an annual rate of 4% in the December quarter, the first time it’s been up there since the second quarter of 1995, when interest rate changes were included in the consumer price index. Interest movements have been excluded from the CPI since the June 1999 quarter.

Statistics NZ’s CPI totals show a worsening picture through 2000 — annual rates of 1.5% and 2% in the first two quarters, rising to 3% in September and 4% in December.

In quarter-on-quarter terms, the first half saw 0.7% rises, followed by 1.4% in September and a comparatively better 1.2% in December.

The annual rate of food price inflation hit 3.6% in the December quarter after three quarterly falls, one steady quarter and a 1.8% rise in September.

The finger can be pointed immediately at oil prices for the overall CPI rise, but not in the December quarter. Petrol prices rose 13.1% in the September quarter, contributing to a 3.3% transportation group increase. But petrol prices actually fell 0.1% in the December quarter, with the transportation group rise 1.8%.

In the year 2000, the petrol price rose 23.1%.

Statistics NZ said the most significant price increase in the December quarter was international air travel, up 5.6%. These airfares have risen in four of the last five December quarters.

After airfares, the next most significant December quarter rise was for the purchase and construction of new homes, up 0.9%. The household operation group rose 1.3%, its biggest rise since the third quarter of 1998, driven by a 4.5% increase in the price of furniture and 2.5% increase in the price of home appliances and equipment.

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