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Questions over Mike Pero valuation

NZF chief executive Mark Thornton explains large difference between the recent valuation of the Mike Pero Mortgages business and what is recorded at in the company’s books.

Tuesday, November 27th 2012, 6:44AM 4 Comments

by Philip Macalister

NZF currently lists its half stake in the Mike Pero Mortgages business at $7.5 million however a valuation of the stake, released on Friday has it sitting at $2.76 million.

The $4.74 million difference has surprised NZF directors.

The most recent review, completed by Simmons Corporate Finance, was done after NZF agreed to sell its half share in the business, plus a half share in Mike Pero Real Estate, to its joint venture partner Liberty Financial.

Thornton says, in a statement to the NZX, that its valuation of the business is based on annual impairment testing carried out as part of its annual audit and an external valuation commissioned by the NZF board in October 2011.

That valuation had a range between $6.12 million and $7.59 million.

“The directors of NZF Group are surprised at discrepancy between the outcome of the valuation and the carrying value, which they believed to be reasonable. They acknowledge that they may need to reconsider the carrying value of this investment.”

Thornton blames two factors for the difference.

The first is that the NZF valuation was done on a discounted cash flow basis, while the latest one was based on capitalisation of earnings.

The second reason is that the joint NZF/Liberty board are deadlocked at the moment and the valuer was not allowed access to company information including projections.

“The relationship with Liberty has been strained for some time with active High Court proceedings between the parties and deadlock on certain matters at a board level on Mike Pero Mortgages,” Thornton says.

“The performance of Mike Pero Mortgages is inextricably linked to the performance of the property market in New Zealand. The current valuation does not place much weight on the strong recovery in the property market that is now underway and is forecast to continue for some time to come.”

Whether the sale proceeds at this valuation now rests with NZF Group shareholders.

Thornton says a detailed notice of meeting will be circulated in the next couple of weeks.

He also says that there is uncertainty about the future of the group and its survival, or otherwise, relies on three factors.

One is resolution of the Mike Pero Mortgages sale.

The second relates to proceedings brought against the company by NZF Money (in receivership) and the associated freezing orders which have placed cashflow constraints on NZF Group. A trial date has been set down for February 2013.

The third is a plan to convert capital notes into shares.

“This early conversion should correct NZF Group’s balance sheet (including if the Mike Pero Mortgages  sale proceeds at the current valuation) as its liabilities should then, no longer, exceed its assets.”

“The board considers that it is only appropriate to proceed with (conversion) once the first two issues above are resolved.

“The future of NZF Group and its financial position will ultimately be dictated by the outcome of the(se) three matters,” he said.

« Mike Pero Mortgages value revealedRates held, but growing chance of a cut »

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Comments from our readers

On 27 November 2012 at 11:20 am Amused said:
Mike Pero mortgages are a franchise business and the franchise model no longer stacks up compared to the aggregator model of Allied Kiwi etc. You would have to be either incredibly naive or not have done your homework to even consider buying a mortgage broking franchise nowadays.

On 28 November 2012 at 11:43 am Not Amused said:
Well "Amused" - I wonder if you stopped any passer by in the street and asked them who Allied Kiwi are - then ask if they've head of Mike Pero. The difference would be day and night. My guess is you are with Allied Kiwi and no doubt envy the reputation of the likes of Mike Pero etc. PS haven't you guys just experienced a recession and would expect some market variations ? - go figure....
On 28 November 2012 at 4:22 pm Amused said:
@ Not Amused - Mortgage brokers who STILL have franchise agreements e.g. Mike Pero don't seem to get it that customers come to see a mortgage broker for his or her abilities NOT the brand name above their office door. The franchise model in mortgage broking is DEAD. Sorry if you missed that particular revelation, it happened about 5 years ago!! If you are any good as a mortgage broker YOU are the brand.

Envy been part of Mike Pero paying 20-35% of my income to a franchisor??? Hahahaha now I really have heard everything.
On 29 November 2012 at 9:10 am Alistair said:
I Just Love the juxtaposition of the ANZ ad for making your business appear more in this sort of article! ooops

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.79 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 6.79 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.84 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.39 7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 ▼8.09 ▼7.59 ▼7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 ▼9.09 ▼8.59 ▼8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.29 7.32 6.65

Last updated: 28 March 2024 9:42am

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