Lack of control criticised

Press, 5 August 1981, Page 24

Lack of control criticised

PA Wellington Strong criticism for the Government’s lack of policy of controlling interest rates has come from the chairman of Grosvenor Properties, Ltd, (Mr H. Radford) in the annual report. “The recent high interest rates are a direct result of inflation,” he said. “It is a matter of great regret and concern that the Government had done nothing to examine and analyse the causes or to

take any steps whatever to curb or control its agonising growth.” The continuing high interest rate on debentures and mortgages, some 16 to 17 per cent, remained well ahead of the rate of returns from investment properties, around nine to 11 per cent, he said. “This virtually eliminates the funding of new investments from borrowings, without accepting a signifi-

cant annual loss on such newinvestments for probably two rental reviews, a period of six years, before the rental income equates the interest outgoing.” A further period would follow before past losses are recouped. However, an increased profit this year was assured, with 14 rental reviews due, giving a higher income, as well as continuing rises in property values. The asset backing per share had risen from an initial subscription of 25 cents to $1.04, a 419 per cent increase in eight, years of operations. Grosvenor hopes to pay most of its 16 per cent total dividend (unchanged) from the tax-exempt source of the share premium account, rather than from profits.

As previously reported, after-tax profit, including the revaluation of properties of $806,555, was $981,838. Rentals earned $1,068,158, with operating and administrative expenses being $840,945 and trading and investment profit being $177,691. The conditions of the issue of 1,250,000 ordinary shares of 100 c (paid to 25c a share) to the Fletcher Trust and Investment Company, Ltd, in part consideration for the purchase of properties, limits dividends on those shares in the March 31, 1981, year to 1.5 c a share.