Two of the main criticisms have been that syndicates have poor liquidity, and often investors wanting out have to sell at heavily discounted prices because there are no buyers.
Likewise, there have been concerns that many of the syndicates are poorly diversified, and they own buildings in provincial centres that have weak commercial property markets.
This feature was illustrated last year when Waltus was forced to cut interest payments to investors in some syndicates as it had trouble finding new tenants for buildings in the provinces. Often the company had to spend not inconsiderable sums of money refurbishing premises to attract tenants.
Earlier this year Waltus launched an incentive scheme for leasing agents to get tenants for vacant buildings in Hamilton, Auckland and Palmerston North. In Hamilton it had more than 8100m2, with a net rent of $930,000 vacant or about to be vacant, and another 11,720m2 of space available in five buildings in Auckland.
Waltus director Shayne Hodge says in a letter to investors that the merger is being undertaken to provide "better sustainability of income, growth prospects, liquidity and diversification of risk".
He says the syndicates involved in the merger proposal are those that were formed between November 1989 and December 1996. These are generally syndicates that own just one building in the provinces.
Hodge says Waltus has decided to do the merger by way of a court approved scheme of arrangement.
Advisers spoken to by Good Returns have mixed views on the proposed merger.
Generally those that have clients in the affected funds are keen on the idea, while those who don't, or only have minimal exposure, are lukewarm.
One of the main concerns is that investors holding the better are being asked to combine their investment with someone else's poorer investment. As a result of this their return is likely to be diluted.
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