Dorchester Property Trust investor seeks change of manager to speed up sales

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Dorchester Property Trust, the hotel investor spun out of the financier and insurer formerly known as Dorchester Pacific [NZX: DPC] five years ago, is holding a special meeting at the end of this month after a unit holder complained that the trust's managers were too slow in selling properties and returning funds to investors.

LET Securities, owned by directors Deepak Gupta and John Southworth, is seeking enough votes at the May 29 meeting to be appointed as the manager of the trust, replacing Dorchester Hotel Property Trust Management, the Wellington-based company said in a statement.

In a letter to unit holders, LET's Southworth says the current trust manager hasn't returned capital to investors quickly enough, with less than 21.5% of assets sold since the trust was established in June 2010 with the aim of selling its assets at the best available price and returning the sale proceeds to unit holders. LET says it owns about 6% of the trust's units, and has support from other investors, giving it a total of about 15% of the units committed to vote for a change of manager.

"Over the past few years many other investment vehicles which have been in much more serious strife than the trust have disposed of all their assets and paid back capital and income to investors," Southworth said, adding that the property market in regions relevant to the trust's properties had experienced a broad uplift in values during the past five years.

Dorchester Hotel Property Trust Management, a subsidiary of the NZX-listed Turners, which was previously called Dorchester Pacific, disputes LET's claims. It says more than $6 million has been returned to investors from property sales of more than $7 million, with remaining assets including the Goldridge Resort in Queenstown, serviced apartments in the Parkview on Hagley in Christchurch and the Quality Emerald Hotel in Gisborne. It rejected suggestions from LET that its management fees were excessive, saying its $250,000 annual fee was reasonable and below market rates. It noted that calling the special meeting instead of addressing the concerns at the annual meeting planned for late August cost investors an extra $50,000-60,000.

The current manager said that until recently there had been little buying interest in the hotel properties held by the trust and its properties had also been hurt by earthquake damage.

"With the recent pickup in the tourism industry and accommodation market and with the current lower interest rates prevailing, the manager believes it is an opportune time to realise properties in the trust," Dorchester Hotel said.

The current manager is putting forward a resolution at the meeting for it to accelerate the timeframe within which the remaining properties are sold to no later than July 31, 2016, with the trust to be wound up by November 30, 2016, when new rules come into effect, meaning the trust manager would need to be licensed by the Financial Markets Authority, incurring additional costs.

It said LET could seek to sell the properties at a discount and still make a significant profit because it had bought units at a lower price than original unit holders who were issued the stock at $1 apiece. The stock last traded at 46c on the Unlisted market, valuing the trust at $12.4 million.

The Public Trust, which holds the assets and moneys for unit holders and acts in their interests, said it has no reason to believe that Dorchester Hotel had not acted in the best interests of unit holders and in accordance with its obligations.

"To date, the manager has taken the view that it should realise the properties at or about carrying value even if this means that the realisation process takes longer than originally anticipated," the Public Trust said. "The acceleration of the timeframe could result in lower prices being achieved for the properties."

The Public Trust said it wasn't able to make its standard assessment on LET because LET intends to develop and formulate its business plan and associated policies and procedures only after the special meeting. Should LET be appointed, it will be obliged to execute a deed accepting the current terms of the Trust Deed and to put a suitable replacement management arrangement in place urgently, steps which could involve additional costs and inefficiencies that could otherwise have been avoided, it said.

(BusinessDesk)