Queen Street gets a makeover

St Laurence is proposing a major restructuring of its Queen St syndicate which will result in $3,000 of every $5,000 originally invested in December 1999 returned to shareholders and which will enhance the yield on the remaining investment.

The syndicate has sold two of the five Queen St retail shops it owns for $4.8 million, just below their most recent valuation in August at $4.85 million, and expects net proceeds of $4.725 million.

The sale means that each original $5,000 parcel is now worth $5,233, a capital gain of 4.7%.

If nothing was done to the syndicate’s structure, the sales will result in the yield falling from 9.2% to 7.92%, explains St Laurence managing director Kevin Podmore.

The proposal involves drawing down a $5.1 million three-year interest only term loan from WestpacTrust which, together with the proceeds of the property sales, will allow the return of capital and boost the return on the remaining investment to 8.78%.

Podmore says the shops sold were of lesser quality and had limited upside. The remaining properties are prime shops, but their better quality means the yield will be lower.

"We thought, let’s take advantage of market conditions and try to enhance the portfolio," Podmore says.

While the capital gain on the original investment might be viewed as disappointing, at least it’s still positive, and creditable, given the state of the property market, he says. "One of the criticisms of syndicates has been the high upfront costs. We’ve managed to claw all of that back plus get a bit ahead," he says.

While the proposal will mean lower management fees for St Laurence, Podmore says it should generate goodwill towards his company in future.

A notice of meeting to vote on the proposal will be sent to investors next week, he says.

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