Published 10 May 2006
Trans Tasman Properties Ltd became a much smaller company in January with the creation of its London-listed Hong Kong offshoot, Asian Growth Properties Ltd, and it had a much smaller (and quieter) annual meeting yesterday to match.
“”It will be mainly focused on New Zealand, it will be watching Australia for opportunities, but the main ability to fund & execute developments is most likely to come from New Zealand,” executive chairman Don Fletcher said.
“We believe there is a niche in the New Zealand market for a company of our size (just over $100 million in assets) to make money from property development in New Zealand & Australia.
“What we have been finding is that, from our work at the Airpark in Auckland, the Viaduct, certainly in Christchurch & Queenstown, that there is an opportunity for us to take positions in land development, with specialised knowledge of the Resource Management Act and specialist construction expertise.
“There seems to be quite a gap in the market between small & private developers and the largescale developers. One of the issues is that most of the value seems to be coming from land rezoning at the moment, and due to relatively soft leasing the construction side is difficult.
“We believe at around this size, at a target internal rate of return averaging over a period at around 15%, we can achieve a viable & profitable business in New Zealand & Australia.”
Trans Tasman remains just over 50% owned by SEA Holdings Ltd of Hong Kong, and Mr Fletcher said SEA managing director Jesse Lu supported the New Zealand company in its new shape & direction – now as a developer instead of as a passive investor.
Head office back to Auckland, Sydney office retained
Trans Tasman moved its head office to Singapore on 1 January 2005, to be closer to the bulk of its activity. On 1 May the head office moved back to Auckland. The company also retains its office in Sydney, where Mr Fletcher lives.
To a question, Mr Fletcher said Trans Tasman would reflect in its annual reports the changes in value of developments, which would no longer be reflected in the accounts on the shift to international financial reporting standards.
“Under IFRS we will still treat our development assets more or less as current assets. They will not be revalued, they will be taken to book at cost. But it is this board’s intention, in the notes in the annual report, to give some guidance to the value of those developments as they proceed, which is not reflected in the net asset value of the company until the development is sold.”
On dividends, Mr Fletcher said it was recognised that dividend cashflow was an important element of share pricing in New Zealand. But, he said, “we haven’t stated a firm dividend policy.”
He intimated Trans Tasman would pay dividends some years and not in others – steering clear of the set percentage policy of a number of listed property entities – and warned: “But you have to be careful that you don’t create a dividend for the benefit of the shareholders and to the detriment of the company. There’s a few people in trouble on that now.”
Asked by ING (NZ) Ltd investment manager Craig Tyson what Trans Tasman would do to get more institutions interested in the company – because they would ultimately drive the share price – Mr Fletcher confessed the company hadn’t been strong on communicating.
“We haven’t really been active with roadshows. We will this year.” But first, he said, Trans Tasman needed to prove its performance from development, “get some runs on the board.”
As downsizing companies go, Trans Tasman had a busy year in 2005:
It sold EDS House, Wellington
It settled the sale of Qantas House & the Finance Centre, Auckland
It sold the Air New Zealand head office development at Viaduct Harbour
It bought a 125ha development property at Woodend, Christchurch, next to Infinity Ltd’s Pegasus Bay town development, which has been launched with more than $120 million in sales
It sold the remaining 2 Airpark 1 sites on the approach to Auckland Airport at Mangere
It bought a further development site at 120 Halsey St, Viaduct Harbour
It conditionally bought a 27.2ha development site in Belfast, Christchurch
Off-market & non pro-rata, it bought back 14.3 million shares at 40c/share, and
It sold a further 10% of the strata units at 65 York St, Sydney.
This year, Trans Tasman has:
completed the sale of 97.5% of the group’s investment in Asian Growth Properties
sold the Viaduct 1 & Viaduct 2 development properties to Manson Developments Ltd for $28.5 million, and
bought a fourth contiguous development site in Packenham St, Viaduct Harbour.
“The group has now accumulated a 16,904m² future development site in this prime Auckland location. Auckland City Council is currently progressing a zoning plan change for the Western Reclamation which will ultimately determine the type & scale of development permitted on this site. Trans Tasman is a major stakeholder in this area.”
Sale of the 2 large Viaduct properties for more than their tax values meant the company would use the rest of its New Zealand tax losses.
Other developments Excavation for the 520-space carpark between Man & Shotover Sts, Queenstown, in conjunction with a local Queenstown investor, was nearing completion and construction has started. The basement carpark development is targeted to be completed late this year, providing a 4000m² building platform. Mr Fletcher said the group was assessing the merits of a mixed-use development on this platform.At Clearwater in Christchurch, Trans Tasman owns a 34% controlling interest in the Clearwater residential & commercial development. Construction & earthworks have started for a further 41 residential sections and the 2-stage development is expected to be completed in early 2007. Sections were recently released to the market, and planning & the consent process continue in relation to Clearwater’s excess commercial & residential lands.The 27.2ha on Johns Rd, Belfast, bought last July for $9.52 million, adjoins the group’s existing 6.4ha Johns Rd site and is near the Clearwater investment. “The purchase is conditional upon rezoning of the land within 2 years and provides the group with a significant land-bank opportunity in this area. Planning for a comprehensive mixed-used development on the land is currently underway and the initial consent hearings are scheduled for September. No development is expected to commence on the land this year.”At Grasmere, Canterbury, Trans Tasman owns 10 large-format residential sites ranging from 5500-9500m² and a residential chalet at Grasmere high country estate, about 90 minutes’ drive out of Christchurch. The sites were acquired as part of the Finance Centre settlement in April 2005 and are being marketed for sale.
Trans Tasman owns a 55% interest in the 125ha Woodend development block. Resource consent has been granted for a subdivision comprising 28 4ha blocks. The group is finalising development plans & consents, and physical development of the land isn’t expected to start until 2007.Watching & waiting in AustraliaMr Fletcher said Trans Tasman made no more investments in Australia during the year but continued to maintain an office in Sydney and continually monitored the market for further opportunities. “The board maintains the view that the Australian property markets remain at or near a cyclical high,” Mr Fletcher said.Direct debt below $10 millionAt the end of 2005, Trans Tasman got its consolidated borrowings down from $195 million to $133 million. After disposing of Asian Growth, that debt has been cut to $37 million, of which $21 million is non-recourse & relates to debt facilities associated with Clearwater & the Queenstown carpark development. Once the Viaduct 1 & 2 sales are settled, scheduled for this month, Trans Tasman will have direct borrowings of less than $10 million and cash reserves of about $20 million available for investment.
Arbitration
One sour note for the company is the decision of 11 shareholders, holding just under 1 million shares, to seek arbitration over the buyout price advised by Trans Tasman in relation to the Asian Growth divestment package.
Howarth Porter Wigglesworth Ltd partner Peter Hayes has been appointed arbitrator and the arbitration process has started. Mr Fletcher said: “Your board strongly believes, as previously stated, that the buyout price should be market price prior to the announcement of the transaction. In any event the arbitration outcome will have an immaterial financial effect on the company.”
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Attribution: Annual meeting, story written by Bob Dey for this website.
