Dominion Funds plans second merger

By Christine Nikiel

Friday 8th August 2003

Auckland-based property manager Dominion Funds is planning its second major merger in nine months this time a group of 30 properties.

The 4500 investors involved, all clients of financial adviser Money Managers, must approve the merger of 34 properties valued at $166 million in late August.

The merger was "the next logical step" on from the first merger of eight property funds in November last year, Dominion Funds chief executive Paul Duffy said.

Mr Duffy, who has headed Dominion for two-and-a-half years, said the merger was "all part of the plan to create efficiencies and continuity of income for investors."

There were no plans to list the new entities, Mr Duffy said, but Dominion was "keeping its options open."

The plan was to give investors continuation of earnings, greater diversification, more liquidity and to create a platform for further growth, he said.

The new company, to be called Dominion Foundation Property Fund, will see investors in 17 unit trusts and 13 note companies issues shares and debentures in the new company, based on the net tangible asset (NTA) and forecast cashflows of each property.

Mr Duffy said the restructuring was in the best interests of investors.

Reducing the exposure to any one tenant would reduct the risk to future distributions, Mr Duffy said.

Dominion's goal was to achieve a portfolio mix of 40% industrial, 40% office and 20% retail but it wanted to remain flexible enough to re-weight if need be, Mr Duffy said. The spread stands now at 45% office, 18% retail and 37% industrial.

About 60% of the properties hold single tenants but no more than 15% of the leases expire in one year. The average remaining lease term is 5.2 years.

The properties include buildings in Auckland, Manukau, Rotorua, Napier, Tauranga, Wellington, Christchurch and Dunedin and range in value from $14.2 million (9 Springs Rd in East Tamaki, leased to New Zealand Wines & Spirits) to $1.7 million for 14 Tyers Rd in Ngauranga, Wellington, leased to New Zealand Milk Corporation.

The yields range from between 7.64% and 11.83% with an average of 10.8%. Less than 5% of the buildings were overrented, Mr Duffy said.

An independent report by PricewaterhouseCoopers said the restructure was "fair and reasonable to investors."

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