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Waltus tries to rescue KPMG Centre investment

Yet again, Waltus Investments is trying to rescue its disastrous investment in Auckland's KPMG Centre.

Tuesday, October 30th 2001, 4:48PM

by Jenny Ruth

The existing $26.4 million in loans by Commonwealth Bank of Australia to its owner, the Waltus Prime Properties syndicate, were due for repayment on 29 May this year but were extended to 29 November.

Prime Properties' latest accounts make it clear that if these loans can't be refinanced, the building will have to be sold.

Now Waltus is trying to raise $8 million from mums and dads from a four-year contributory mortgage offer, although the investment statement doesn't mention the fix Prime Properties is in. The statement does say the funds are to refinance the KPMG centre and that Prime Properties is also seeking $16.9 million "to be advanced by a trading bank."

The unnamed trading bank will get first mortgage security and the contributory mortgage investors will have the "right to be paid behind that of the trading bank."

Ranking behind the contributory mortgage holders is another "second mortgage" of $8.5 million "held by Perpetual Trust as trustee for certain bondholders," who are in fact the original investors in Prime Properties. Each $5,000 of their original investment was worth only $1,874.05 at 31 March this year and has obviously continued to decline.

The KPMG Centre was valued at $42.273 million at 31 March. That was down from $47.525 million a year earlier. When Prime Properties bought the building in 1998, it paid $51.62 million for the building.

The contributory mortgage investment statement doesn't mention this continuing loss of value, but it does contain details of a still lower valuation at 21 September of $42 million by CB Richard Ellis.

The valuer notes that while the building is fully leased, the major tenant, KPMG's lease expires in mid-2005 and that its current rental is "significantly above market." That suggests the valuation will slip even further and also suggests why the Commonwealth Bank has been so reluctant to renew its loan.

Back in June 1998, Waltus director Shayne Hodge told GoodReturns he was proud that Waltus secured the KPMG Centre ahead of the institutions.

Back then, Hodge said "competitive jealousy" was behind criticism that Waltus in paying $50 million for the building was paying $10 million too much. He claimed three other parties had wanted to buy the building, two offering the same price Waltus paid and one who offered $750,000 more.

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China Construction Bank Special - - - -
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Co-operative Bank - Standard 8.40 7.74 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
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