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Dorchester Property Trust trading above budget

The Dorchester Property Trust is trading better than expected, thanks to above-budget performances from its Goldridge resort in Queenstown and its Parkview on Hagley hotel in Christchurch which was only slightly damaged by the earthquakes.

Friday, April 1st 2011, 12:56PM

by Jenny Ruth

Dorchester says it now expects the trust will report about a $450,000 profit before depreciation and tax through to March 31, up from the $385,000 forecast in last June's prospectus.

Units in the trust were one of four securities issued to Dorchester Pacific's debenture holders in exchange for the 50 cents in the dollar they were still owed as part of a rescue deal , the alternative to which was for Dorchester Pacific to go into receivership.

The trust will pay about 4.25 cents per unit, or $1.4 million less legal costs, from the previously announced sale of the trust's Frankton Arms apartments in Queenstown on April 15. The sale for $2.3 million, compared with the $2.2 million value at which it was transferred to the trust, involved an upfront payment on March 16 with the remaining $900,000 to be paid on March 1 next year.

Dorchester is asking investors to approve an amendment to the trust's deed to allow it to negotiate deferred payment terms with potential buyers of the three remaining properties.

"It is apparent that, in the current market, deferred payment terms are likely to be necessary to realise the best sale price," Dorchester Pacific chief executive and a director of the trust Paul Byrnes says in a letter to unitholders.

The trust deed is silent on the issue. Any deferred payment would be secured by a mortgage with interest payable, he says.

He is also inviting nominations for a director to represent unitholders on the trust's manager's board. Arend Lanser, a business consultant with business degrees from Massey and Victoria universities who has had no previous relationships with the board's other directors, is standing for election at the August 16 annual meeting.

"Without wishing to preempt the election outcome ..., we believe that, in the interests of good governance, there is merit in Mr Lanser attending board meetings of the manager until the annual meeting," Byrnes says. Lanser has accepted that invitation.

The trust's units, which have net asset backing of $1, last traded at 40 cents on the Unlisted market. Byrnes renewed warnings against unitholders accepting "low ball" offers for their units. "With the three remaining properties in the Dorchester Property Trust trading positively, we urge unitholders not to succumb to unrealistically low offers."

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