Landmark bids to reduce debt

Press, 13 September 1988, Page 25

Landmark bids to reduce debt

PA Wellington Landmark Corp has raised $75.5 million by selling nearly half its property portfolio over the past five months in a bid to reduce a hefty debt load, according to deputy chairman, Mr David Ross. In a letter to shareholders, Mr Ross said the properties — two in Sydney, four in Auckland and one in Hamilton — had been sold for $l.B million more than their book value at March 31.

Mr Ross’s letter, dated September 8, was an insert to the annual report, which shows the property firm saddled with a $128.2 million debt burden and a proprietorship ratio of just 36 per cent (compared with 64 per cent the year before). The March 31 accounts showed the worst situation with regard to the company’s financial gearing, he said.

The property sales would improve the proprietorship ratio to 55 per cent, with shareholders’ funds of about $66 million and total assets of $ll9 million. Once all the sales were settled, Landmark would have successfully completed plans to restructure its financial and operating position for the difficult economic conditions and market ahead, Mr Ross added. On Mr Ross’s estimate of shareholders’ funds, Landmark shares will have a net asset backing of 48c each — compared to market sales on Friday at 17c.

The company is currently the target of two takeover offers, one of 25c cash from minority shareholder, John Yates, and the other a share swap bid from Hooper

Bailie Industries, an Australian subsidiary of new largest shareholder, Richmond Smart Corporation.

Despite selling the buildings above book value, shareholders’ funds have declined from the $71.85 million at balance date.

In the year ended March 31 interest expenses were $15.03 million, well up on the previous year’s $3.96 million.

In early July Landmark announced a $36.57 million net loss for the year. The main contributors to the loss were the interest bill and a $41.75 million writedown in investments, mostly from the write-off of a 48 per cent stake in collapsed Investment Finance Corporation (in receivership).

Investments in associate companies at balance date were valued at $24.62 million: but one of these, valued at $7.9 million, is the subject of a lengthy tagged report from auditors, Deloitte Haskins and Sells. Deloittes said the un-

named associate’s accounts had been qualified by its own auditors, who were uncertain whether development properties recorded at cost in the accounts and not independently valued could be sold for at least book value in the current market conditions. The associate’s auditors also pointed out the accounts were prepared on a going concern basis, which assumed the company could achieve the sale of sufficient properties on normal commercial terms to meet its obligations. While Deloittes does not name the company, Landmark has 50 per cent shares in two property development firms: Chase-Landmark Investments and Pan Tasman Holdings a joint venture vehicle owning all of Baker Corporation.

Both investments are recorded at cost in Landmark’s books and are not equity-accounted. Apart from its $7.9 million investment in the associate firm, Landmark had also guaranteed $l3 million worth of obligations by the company, Deloittes said. Notes to the accounts show Landmark has guaranteed loans by bankers and financial institutions totalling $14,850 million. In addition it is also the guarantor of $2.3 million relating to an unspecified Wellington property development. - The loss for the year was reduced somewhat by nearly $l5 million worth of unrealised property revaluations:

Given the booming state of the Australian property these probably came from Landmark’s two recently sold Sydney buildings.