Unitholders in the Newmarket Property Trust torpedoed a plan to merge with the National Property Trust at a special meeting in Auckland on Thursday.
The proposal required the support of 75 per cent of unitholders, however only 56 per cent of them voted in favour of it.
The idea behind the merger was to create a $145 million fund which was a more economic size and had a better geographic spread of properties. Newmarket, which Sovereign has a 38 per cent stake in, owns a retail shopping building in Auckland, while National owns buildings in Wellington, Christchurch, Dunedin, Nelson and Wellington. The merged trust also planned to buy the AA Centre in downtown Auckland.
Following the defeat Newmarket said its future was uncertain, while National said it would now pursue alternative options for future growth.
Newmarket management company chairman Jock Irvine says the vote has deprived the trust of the benefits available from amalgamation.
"Despite the implications for unit holders generally, no one from the opposing group of unit holders emerged at today's meeting to offer an explanation as to why they felt compelled to ignore the detailed analysis of independent, qualified appraisers who found the proposal to be fair."
As earlier reported by Good Returns, a group of unitholders were concerned that a 9.5 per cent pre-tax yield guarantee on the Newmarket fund was to be abolished under the merger.
National chairman Paul Dallimore says the trust will pursue alternative options for future growth: ""We will look to positively step past the setback of this disappointing development, and we can assure our unitholders that our strategic objective of achieving the desired geographical spread in our property portfolio remains."
The defeat also means special dividend payments will be cancelled.
Newmarket had declared a dividend and a return of capital of $0.058 a unit effective April 1, while National was paying a $0.022 a unit dividend on March 31. The payments won't be made and both trusts will revert to previous dividend distribution policies.
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Unitholders in the Newmarket Property Trust torpedoed a plan to merge with the National Property Trust at a special meeting in Auckland on Thursday.