DNZ property seeks RM325 million to reduce debt

DNZ Property Seeks NZ$130 Million to Reduce Debt (Update1)

©2009 Bloomberg News

(Adds debt reduction target in third paragraph.)

By Tracy Withers

Nov. 19 (Bloomberg) -- DNZ Property Fund Ltd., a New Zealand commercial real estate investor, will seek NZ$130 million ($97 million) from a share sale to reduce debt and buy out a management contract.

DNZ will aim to raise NZ$30 million from existing shareholders and the balance from new institutional and retail investors, it said in offer documents released today. Goldman Sachs JBWere (NZ) Ltd. is fully underwriting the offer of about 159 million shares at 82 cents apiece.

Auckland-based DNZ, which owns about NZ$730 million of property, said debt is projected to fall to about 35 percent of property value by March 31 from 47 percent a year earlier. The company has negotiated a three-year loan facility and has about NZ$108 million available for future investment and development of existing projects, it said.

“It is important to reduce our gearing to levels more appropriate in the current market and that would ensure support from institutional investors,” Chairman Tim Storey said.

DNZ is currently managed by a separate company DNZ Management Ltd., co-owned by Paul Duffey and Alastair Hassell. DNZ will pay NZ$43 million to terminate the contract, and to transfer the management operations into DNZ.

The two men will re-invest about half the NZ$43 million in DNZ shares and retain a management role for at least 18 months. Duffey is chief executive officer of DNZ.

Internalizing the management is “highly desirable,” DNZ director Simon Botherway said today on a conference call.

Some other publicly traded real estate companies have external managers who are interested in asset growth rather than dividend distributions, and investor experience with some of these companies “has been less than satisfactory,” said Botherway, a former fund manager at Brook Asset Management.

WELLINGTON: DNZ Property Fund Ltd, a New Zealand commercial real estate investor, will seek NZ$130 million (RM325 million) from a share sale to reduce debt and buy out a management contract.

DNZ will aim to raise NZ$30 million from existing shareholders and the balance from new institutional and retail investors, it said in offer documents released today. Goldman Sachs JBWere (NZ) Ltd. is fully underwriting the offer of about 159 million shares at 82 cents apiece.

Auckland-based DNZ, which owns about NZ$730 million of property, said debt is projected to fall to about 35% of property value by March 31 from 47% a year earlier. The company has negotiated a three-year loan facility and has about NZ$108 million available for future investment and development of existing projects, it said.

“It is important to reduce our gearing to levels more appropriate in the current market and that would ensure support from institutional investors,” Chairman Tim Storey said.

DNZ is currently managed by a separate company DNZ Management Ltd., co-owned by Paul Duffey and Alastair Hassell. DNZ will pay NZ$43 million to terminate the contract, and to transfer the management operations into DNZ.

The two men will re-invest about half the NZ$43 million in DNZ shares and retain a management role for at least 18 months. Duffey is chief executive officer of DNZ.

Internalizing the management is “highly desirable,” DNZ director Simon Botherway said today on a conference call.

Some other publicly traded real estate companies have external managers who are interested in asset growth rather than dividend distributions, and investor experience with some of these companies “has been less than satisfactory,” said Botherway, a former fund manager at Brook Asset Management. -- Bloomberg