New Zealand Rural Property Trust unitholders who were upset about the fund's previous two one year suspensions will be gob-smacked by the latest plans. The trust's manager is now proposing to close the trust for five year years.
Chairman Selwyn Cushing says the proposal will be put to a special meeting of unitholders for ratification next year.
In the meantime unit redemptions have once again been suspended.
Currently the trust is facing significant cashflow restraints. It has been trying to sell up to 10 properties to find the cash to buy back the more than 6.6 million units it currently has on its books for redemption.
These redemptions are due to start on Thursday (November 16) which is the first anniversary of the lifting of the last freeze on unit redemptions.
While it unknown at this stage how much cash the trust has, it would appear the sale process hasn't generated the amount needed. It is known that the trust's Ngarua diary unit had been sold for about $1.6 million and a number of the 12 blocks of the recently subdivided Tarlair property near Hamilton had been sold.
Also outstanding in the trust's books is payment of the manager's fee. The annual report shows that at balance date (June 30) the trust had not paid the $1.54 million management fee for the financial year.
Cushing says the five year freeze is the best means of improving income distributions and capital appreciation.
"At present it's a case of one step forward and one step back because of the need to sell properties to meet redemptions."
He says the trust is using short term funding for long term investments.
"By closing the trust we would be able to release the full value from trust properties and capture full returns from the Ngaruawahia Forest harvest without having new unitholders erode existing unitholders' incremental value."
During the closed period units would still be tradeable on secondary markets.
The trust's manager is also proposing to make a substantial interim capital repayment in 1999 and implement a dividend policy that would allow up to 90 percent of the operating surplus to be distributed each year.
As well, all restricted units would become ordinary units and the management fee structure would be amended "to enhance cash flow per unit".
The trust says it will not actively pursue the sale of any properties until its future structure has been determined and the trust is seeking a binding ruling from the Inland Revenue Department regarding the tax liability of any property it sold.
Cushing says that at the end of five years the unitholders will have the choice of retaining the closed status, winding up the trust or other alternatives.
New Zealand Rural Property Trust unitholders who were upset about the fund's previous two one year suspensions will be gob-smacked by the latest plans. The trust's manager is now proposing to close the trust for five year years.