Urbus plans run into opposition

Waltus wants to roll a further nine syndicates and their 16 properties into Urbus Properties at a total nominal cost of $157 million. Investors are being asked to swap their investments in the individual syndicates for convertible notes in Urbus. The enlarged company would then have about $390 million in assets.

Urbus was formed in 2000 from the merger of 27 Waltus syndicates. Moyle led a group of dissenters who failed in their bid to stop the merger.

Moyle’s objections to the current proposal are essentially the same: that investors in the syndicates deliberately chose to invest in particular properties, not in a property portfolio.

He also objects to investors being asked to swap investments secured by registered mortgages over particular properties for "totally unsecured convertible notes (ie junk bonds)" in Urbus.

This time around, Moyle is particularly incensed that Waltus is including the Albany Power Centre in the merger proposal.

Back in 2000, Moyle had feared the Albany syndicate would eventually be included in Urbus and wrote to its investors telling them so.

On November 12, 2000, Waltus wrote to Albany investors refuting Moyle’s concerns.

"Albany Power Centre is not and was never intended to be involved in the merger," the Waltus letter said.

"The implication in Mr Moyle’s letter to you is that your company will be a prime target to be taken over by the new merged company," it said. "This statement is clearly incorrect and, we think, deliberately designed to create doubt and confusion where quite clearly none exists."

Moyle has again written to Albany investors and investors in the other syndicates involved in the merger proposal.

He says that contrary to Waltus’ claims that Urbus has performed well. "We all know just what a debacle that has turned out to be in terms of the horrendous losses of capital value that investors are suffering," Moyle says in his letter.

Urbus units, issued at $1 each, based on independent valuations of each property, are currently trading at 84 cents, their highest level this year. They traded as low as 65 cents in May.

While Waltus is promising all investors in the affected syndicates will receive a higher and more stable income after being folded into Urbus, Moyle says these claims are "highly questionable."

Urbus could cancel interest payments if it is in danger of breaching banking covenants. "With $171 million in bank debt, any slight increase in bank interest rates could result in you being deprived of your total income should all of your funds have become invested only in Urbus," he says.

Under the proposal, the Albany property will be sold to Urbus for $53 million and investors will receive cash and convertible notes with a face value totalling $7,959 for every $5,000 originally invested.

Moyle says there is "the very real prospect" the Albany property’s value could exceed $60 million in the foreseeable future because of the rapid growth and development in the area. A merger will force Albany investors to share this gain with all Urbus investors, he says.

The merger proposal has been endorsed by PricewaterhouseCoopers as being fair to the Urbus investors and by Grant Samuel as being fair to the individual syndicate investors.