A lack of appreciation for the benefits of listed property trusts and the hugely popular Contact Energy offering are being blamed for the $200 million Colonial First State Property fund closing heavily under-subscribed.
Colonial was seeking to raise $100 million from the public for its trust that owns 14 buildings throughout New Zealand. However, it only raised $53 million.
As underwriter of the float Colonial will pick up the unwanted units, taking its holding in the trust from 31 per cent to 63 per cent.
Colonial First State Investments chief executive and property trust chairman Bruce Abraham says Colonial will hold onto the extra units, rather than try and sell them once the fund lists on June 3.
He attributes the $47 million shortfall to the patchy track record and lack of understanding about listed property trusts.
"Listed property trusts are not yet fully appreciated by the public," he says.
Colonial's decision to deliberately overlap the offer with the Contact float backfired.
The idea was that investors who got refund cheques from Contact would then consider putting that money into the property trust.
This strategy has been criticised by some in the financial services industry, as the two offers were very different.
However, Abraham defends it saying the problem with the strategy was in its timing rather than its execution.
He says it took longer for the Contact refund cheques to be posted than Colonial expected.
"The strategy was right," he says. "With the benefit of hindsight the (Colonial) offer opened several weeks too early."
Abraham says the trust's thrust now will be to make money for unitholders and educate the public about the benefits of listed property trusts.
He says the trust, with a yield of nearly 11 per cent, is an attractive "quasi-fixed interest" investment.
There was no institutional support for the offer.
A lack of appreciation for the benefits of listed property trusts and the hugely popular Contact Energy offering are being blamed for the $200 million Colonial First State Property fund closing heavily under-subscribed.