Calan apologies

The board of Calan Healthcare Property Trust have apologised for the fund's performance, but are defending the level of management fees.

Tuesday, December 10th 2002, 3:51AM

by Philip Macalister

On the same day Tower apologised to shareholders for its losses this year, the directors of Calan Healthcare Property Trust did the same thing.

Calan managing director Martin Lyttelton told unitholders at the fund's annual meeting in Auckland that the board was sorry for the a series of poor returns and that it had learnt from its errors.

His apologies related to the poor performance of the fund since it was listed on the stock exchange and the fact that the fund was currently trading at a significant discount to net asset backing.

However, Lyttelton and chairman Bruce Davidson spent some time in their lengthy speeches defending the level of fees that the fund has paid the management company and related entities.

Calan, when it was launched as an unlisted unit trust became a bit of a darling amongst the financial planning community.

The fund, which invested in healthcare related properties, was established on the premise that it would provide investors with a strong income stream.

However, management changed tack over the years and has became focussed on growing the assets under management and moving into the higher risk game of property development. Unfortunately for unitholders there have been significant costs in this expansion and not all the fund's capital has been well-employed.

In the six year period from 1997 to 2002 period, the management company received $6.5 million in fees and an additional $15 million for extra costs such as due diligence on new projects.

Davidson said a full review of expenses had been carried out in July after a new board was appointed.

"The board is fully satisfied with the outcome of its investigation and review and the independent directors of the board are unanimous in expressing full confidence in current management," he says.

Another of the big issues for Calan is that $29.9 million of its $210.9 million worth of assets were non-income bearing.

Because this money is not earning income it has the impact of cutting the distribution by 1.41 cents per unit. This is a significant drag as the fund aims to pay out 2c per unit each quarter.

Lyttelton says the trust's focus now was to try and make sure all its capital was well employed earning income for unitholders.

He says the fund will move away from the development end of the property game and work on becoming a passive investor.

Earlier story:

Measuring the pulse on Calan's fees

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