Published 26 November 2005
A much smaller Trans Tasman Properties Ltd will get a new chief executive in the New Year, when the 75% of it that’s invested in Hong Kong is turned into a new company listed in London, Asian Growth Properties Ltd.
Don Fletcher will remain as chairman of Trans Tasman as major shareholder SEA Holdings Ltd retains its majority stake (at least 50.1%). Trans Tasman will start the recruitment process for a new chief executive in early 2006. Rod Hodge will continue as an executive director.
Mr Fletcher’s main role will be as chief executive of the new company, which has all its assets in Hong Kong now but intends to extend its business into China and is looking at other Asian markets.
Trans Tasman will offer its shareholders one share in Asian Growth for every 2 they hold in the current company, under 2 scenarios – a full offer for up to 100% of their shares, or a partial offer for up to 65%.
Trans Tasman will send shareholders the offer details on its Asian Growth proposal on Monday, 28 November. The documents are all on the Trans Tasman website. The offer will open on 28 November and close on Friday 16 December.
The company will hold a special meeting to approve its reconstruction proposal on Thursday 15 December at 10am, at the Alexandra Park Function Centre.
Trading in Asian Growth shares will open on the London Stock Exchange’s AIM (alternative investment) market on Monday 16 January.
And that event carries a warning in the prospectus for small shareholders, who are told that if they want to trade small parcels on the London Stock Exchange’s AIM (alternative investment market), they are likely to find the cost disproportionately expensive.
Meanwhile Trans Tasman’s major shareholder, SEA Holdings Ltd of Hong Kong, gave notice on Friday that it had increased its stake from 64.64% to 66.26% in 8 onmarket transactions over the 10 days to 24 November. That holding ensures that the resolution approving the partial Asian Growth offer will succeed. The full offer requires a special resolution, for which SEA can’t guarantee the outcome.Reasons for split
Trans Tasman said in its notice of meeting the present company structure wouldn’t enable it to fund investment opportunities of the size & scale available to it: “The separation of the Asian assets presents an opportunity for better management of development capital requirements. Meeting ongoing development capital requirements and accessing funding for the pursuit of investment opportunities in Asian property markets presents challenges to the Trans Tasman Group as:
there is limited appetite in the New Zealand market for Hong Kong development – which will make efficiently priced capital-raising in New Zealand challenging
Trans Tasman has investigated overseas capital funding and has been advised that a portfolio which also includes Australasian investments would be less attractive in the London market than a stand-alone Asian property portfolio
raising debt to fund future development of the Trans Tasman Group’s current investments and pursue further investment opportunities could change the group’s debt:asset profile to a level which is unattractive.”
The documents also mentioned a longstanding bone of contention – the hefty discount on Trans Tasman’s shares, still at 28% on a much improved share price of 48c, compared to asset backing of 66.8c: “The 2 clearly identifiable investment vehicles should trade at a reduced share price discount to net asset value than the existing discount on Trans Tasman shares, delivering benefits to all shareholders.”
That will be so for Asian Growth, but the Trans Tasman remnant will still be a mixed bag – depending on how keen shareholders are to invest in the Asian company, Trans Tasman could still hold up to 61% of it in the first year. If Trans Tasman retains 35% of Asian Growth, Trans Tasman will have $207 million of net assets split roughly evenly between Australasia & Asia.
The values of the 2 parts of Trans Tasman have dropped slightly from the original net $410 million estimate, to a net $303.1 million for the Asian assets, $101.1 million for the Australia & New Zealand assets, so still a 75:25 split.
The existing Trans Tasman’s net asset value at 30 September was 69.63c/share. Asian Growth’s asset value was $HK7.4694/share ($NZ1.3926/share), allowing a precise pro rata swap of one Asian Growth share for every 2 Trans Tasman shares.
Under the full offer, Trans Tasman shareholders will be able to convert up to 75% of their shares to Asian Growth. Under the partial offer, they’ll be able to convert 48.75% (the 75% multiplied by the 65% partial offer limit).
The pro forma 30 September balance sheet shows the Australasian Trans Tasman would be a small business with low gearing – $101 million equity, $9.1 million of borrowings, $7 million of other bills, $75.2 million of New Zealand development properties, $22.5 million of Australian development properties.
Asian Growth would have $282.8 million of Hong Kong development properties, $118.1 million of cash in the bank, $99 million of borrowings & other liabilities.
Under all scenarios, Trans Tasman will retain its Australasian assets:
31,098m² of Viaduct Harbour land, split over 3 development sites, valued at $40.94 million
an investment in a Queenstown parking development, $8.4 million (55% interest in a development valued at $18 million on completion)
a 34.1% interest in the Clearwater residential & commercial development in Christchurch, $6.7 million
Christchurch land bank comprising 163ha at Woodend ($2.7 million), Grassmere Estate ($7.7 million) & Belfast ($4.2 million)
other property valued at $4.7 million
a strata interest in a retail & office building at 65 York St, Sydney, valued at $22.5 million
equity investments in e-commerce businesses the PSB Group, GSB SupplyCorp Ltd & SupplyNet Ltd.
Viaduct holdings
Trans Tasman’s leasehold landholdings in the Viaduct Harbour precinct are in 3 separate blocks, 2 of them zoned for office, retail & parking, the other one currently zoned marine activity:
Viaduct 1 comprises 3665m² bound by Beaumont, Gaunt & Daldy Sts, immediately north of the partially completed Air New Zealand building (which Trans Tasman began then sold). Trans Tasman is investigating development options for this site, which is likely to include a 9000m² lowrise office & retail development, complementary in design to the Air New Zealand building, with 80 basement parking spaces. Subject to market demand & finalisation of the project feasibility, development on this site could start in late 2006
Viaduct 2 comprises 16,847m² bound by Fanshawe, Halsey, Gaunt & Daldy Sts. This site is between the Air New Zealand development & the recently completed Vodafone head office and represents one of the larger parcels of undeveloped land in the area. Trans Tasman is working with Auckland City Council to secure resource consent to facilitate development of 50,000m² of office & retail space and up to 800 parking spaces. Development on this land is contingent upon Trans Tasman having obtained substantial leasing precommitment, and satisfying itself that further development of the land is economically viable
Viaduct 3 consists of 3 separate properties totalling 10,600m² bound by Packenham, Halsey & Madden Sts. This site’s extensive frontage to Halsey St allows a range of development possibilities. The buildings are tenanted, with leases running through to 2010. This landmark site has a combined 130m frontage to Halsey St with an unobstructed outlook back to Auckland’s cbd. The lessor’s interest in this land is held by Ports of Auckland Ltd, which is promoting the rezoning of the entire northern Viaduct area. Trans Tasman is working closely with Ports of Auckland to ensure the group obtains an optimal outcome should the zoning change proceed.
The group’s $NZ11 million & $A30 million tax losses should be preserved. The New Zealand tax losses could be reduced by $2.7 million if Trans Tasman loses a court case brought by Inland Revenue over an asset bought in 1996 and since sold.
The Australasian group’s $9.1 million of borrowings represents only 8% of total assets. The borrowings are represented by a 4-year interest-only debt facility provided by The Hongkong & Shanghai Banking Corp Ltd and secured over the 3 Viaduct sites and Kitchener St parking building. The facility can be drawn to $23.4 million and expires on 31 March 2009. A further $7 million has been drawn since 30 September.
Among variables which depend on how many shareholders take up the Asian Growth offer, the head office set up in Singapore at the start of this year is likely to be closed if the Trans Tasman remnant ceases to have any investments in Asia, but might remain open if Trans Tasman retains a shareholding in Asian Growth.
Asian Growth will start out more focused than that, with a new board (apart from Mr Fletcher & SEA’s Jesse Lu):
David Matthewson, chairman of Sportech plc, non-executive chairman of Geared Opportunities Income Trust plc, non-executive director of merchant bankers Noble & Co Ltd, Edinburgh UK Tracker Trust plc, Martin Currie High Income Trust plc, Murray VCT plc & various private companies
Richard Prickett, former chairman of Brancote Holdings plc, former chairman and now non-executive director of Patagonia Gold plc, non-executive director of the Capital Pub Co plc
David Runciman, a Hong Kong resident since 1977 who will be an executive director, fellow of the Royal Institution of Chartered Surveyors, CBRE’s former Asia-Pacific chairman who has spent much of his working career in Asia dealing with all aspects of residential & commercial real estate markets, now chief executive of his own investment company, Scottish & Oriental Estates
Larry Lim Kee Yong, finance director & executive director, who joined Trans Tasman this year, was a senior finance manager of Singapore-listed Keppel Telecommunications & Transportation Ltd for the previous 9 years.
Website: Trans Tasman Properties
Earlier stories:
12 November 2005: 25 November record date to set Trans Tasman reconstruction rolling
5 November 2005: SEA will keep majority in both Trans Tasman companies
23 October 2005: Trans Tasman sets course for Asian split
29 September 2005: Trans Tasman proposes splitting Asian assets into new company
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