Investors would have had to read the prospectus very carefully to spot the over-renting acknowledgement, especially with a valuer's chart forecasting steady rent rises in the Wellington cbd office market through to this year.
One valuer, Iain Gribble of Mahoney Gardner Churton, acknowledged that "the market rental for the main office building [there is also a small cottage on the front of the site] is currently less than the contract rent." The other valuer used for the prospectus, Mike Horsley of Darroch & Co, said the building "should attract keen interest" at the time of head lease expiry and added: "In terms of market rental we forecast growth in the period through to lease expiry."
Lynch said Dominion expected the Terrace building to maintain occupancy, but at lower rents. Two law firms had recently signed new leases, NGC was likely to keep three floors when its lease is up for renewal next year and a decision would be made early next year on Commerce Ministry space, some of which could go to NGC expansion.
Lynch said that, in changed circumstances, Dominion had taken a long-term prudent approach.
"Most of our funds are performing well. For investors in the Terrace fund, by suspending distributions now we can reduce bank debt and in the future return to distribution levels expected by investors."
On the question of whether Dominion bought properties to satisfy a hungry investor market in the 90s, Lynch said: "If the property doesn't value, we don't buy it." And on the possibility of selling properties to get over temporary cashflow problems, he said "a couple" of syndicated buildings might be sold and the proceeds used to clear debt, leaving some for reinvestment, but in general he believed the syndicates' property-holding intentions were not long-term enough, even though he said "we're not looking at selling under 10 years."
Between Dominion and Waltus, investors have placed nearly $1 billion in syndicated property. Dominion's portfolio has a value of $320 million and Waltus's about $640 million, including $A131 million in six Australian syndicates.
This article is from The Bob Dey Property Report, a property news website which can be reached at www.propbd.co.nz. As it is a subscription site, visitors from goodreturns who want to look at the Bob Dey site are offered the use of a temporary username and password (type in GOOD for the username and RETURNS for the password) until Tuesday, 25 July.
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