New Zealand news 16/09/1999

Director of syndicated property group Waltus Investments, Shayne Hodge, has hit back angrily at recent criticism of its performance.

Hodge says reports claiming many of the company's property syndicates were in trouble were untrue and have caused undue concern for investors.

"We've suspended interest payments on three out of our 62 syndicates. That's not many, 58 would be many. Many implies at least half. We made this information available to investors over three months ago and some in the media have only caught onto it now," Hodge says.

"Some of these funds have been going for seven years and returned over 11 per cent."

He says interest payments were suspended on the three funds as a prudent measure during sensitive lease renegotiations.

However, the Securities Commission is investigating the way many property syndicates advertise expected rates of return and is warning investors to look closely before buying in.

Investment adviser, Murray Weatherston, agrees investors should be cautious with property syndicates and consider each on a case by case basis.

"The question is: should the syndicates' investment statements address the issue of income sustainability," Weatherston says.

He says other potential problems such as decline in the capital value of properties and liquidity pressure may have to be discussed in syndicate investment statements.

Hodge says Waltus do advise clients of these changes quoting an expected rate of return based on full occupancy, normally in the 9-11 per cent range, and then making adjustments for each of its 62 syndicates according to projected leasing levels.

He says the current economic environment is placing pressure on all commercial properties with a recently released performance index for the entire New Zealand commercial property market showing everything except retail premises experienced negative growth over the past year.

"It's a flat market at the moment and most commercial leases expire in the next two to four years. Most commercial tenants look to renegotiate leases anything from six to 18 months before the lease is up," Hodge says.

"And they negotiate on today's conditions despite the fact that even the most pessimistic observer would say the economy will be better in 2001."

Consequently, Hodge says Waltus must be conservative in its projections of future returns for the property syndicates.

The Society of Independent Financial Advisers (SIFA) may benefit from advisers unhappy with the direction of New Zealand's new professional body according to SIFA chairman, Evan Still.

Still says several advisers dissatisfied with the recently formed Financial Planners and Investment Advisers Association (FPIA) have recently enquired about SIFA membership.

"Also, the majority of SIFA members are also FPIA members and most of them have indicated they won't be renewing their FPIA membership," Still says.

He says while SIFA is not in competition with the FPIA and does not aim to be a controlling body, the current situation has created an opportunity to increase SIFA membership.

Still reckons up to 200 financial advisers may be eligible to join SIFA under new membership conditions that have slightly relaxed the definition of independence.

Advisers using master trusts whose providers demand a set proportion of the business are now able to join SIFA.

"But SIFA still demands its members offer clients a broad range of risk and investment products," Still says.

He says he hopes SIFA can lift its membership from its current level of about 50 up to 90 by April next year.

"SIFA membership has dropped by natural attrition over the past few years. We need some new blood to inject new ideas," Still says.

The New Zealand stockmarket is set for a bumper crop of new listings this year with three large companies set to float.

Tower Corporation has scheduled its listing for September 28 and is expected to have a market capitalisation of around NZ$1 billion putting it in the top 10 on the New Zealand Stock Exchange (NZSE).

Calan Healthcare Properties Trust has also listed this month and will be included on the NZSE top 40. Calan owns a diversified portfolio of healthcare properties on both sides of the Tasman which it leases out to healthcare providers.

WestpacTrust has also announced plans to raise $800 million with a public share offer later in the year.

New Zealanders currently own only two per cent of Australian Westpac shares while the New Zealand operation contributes about 17 per cent of the Westpac group profit.

A recent superannuation conference highlighted the need for a more complete approach to New Zealand's retirement savings issues, according to chairman of the Association of Superannuation Funds of New Zealand (ASFONZ), Michael Chamberlain.

Several speakers at the conference, Chamberlain says, introduced new ideas and concepts to the superannuation debate.

"A lot of people talk about the demographic problem of an aging population and its effect on superannuation payments but they're not looking at the whole story.

Some speakers pointed out, for instance, the reducing cost of youth and the impact on housing and financial markets," Chamberlain says.

"Unfortunately, many people have entrenched viewpoints but they should think beyond tax incentives and compulsion."

Chamberlain also questions the efficacy of politicians in coming to terms with the issues.

"The reality is the politicians aren't that good and they won't be coming up with any ideas."

Tax rules setting out the deductibility of financial planning fees are being reviewed by the Inland Revenue Department (IRD).

Following a number of court cases that brought into question the current ruling, the IRD is seeking feedback on an interpretation statement which attempts to clarify the situation.

In the statement, the IRD claim the 1996 binding ruling "...has been useful in respect of the deductibility of expenditure incurred in deriving gross income, but that it has also been inadequate to cover the many factual variations that can arise."

The IRD proposes to extend the fee categories for financial planners from three (establishment, implementation and monitoring services) to seven.

"The new categories are based on the process of obtaining an initial financial plan, the subsequent monitoring of that plan, and any following adjustments or alterations to the plan," IRD says.

Other issues the IRD wish to investigate include: the question of deductibility when a taxpayer is considered passive, speculative or a business investor; the different treatment where the investment is treated as a financial arrangement under the accruals rules; and other recent changes to the accruals rules.

The existing ruling will remain in place until the end of the financial year.