Property investor National Property Trust (NPT) says using debt to buy out the manager of its portfolio is not detrimental to investors.
The trust is proposing to pay St Laurence, which is in receivership, $18.8 million to terminate the management contract, and buy the 32 million units St Laurence holds in the property company.
A report by Northington Partners says the offer is fair, and effectively lets unit-holders increase their stakes at a cheap price, while the trust will save more than half a million dollars a year by running the portfolio itself.
The proposed deal will be debt-funded, lifting debt levels to about 32% of the current value of property assets.
One of the trust's directors says it's a low-risk deal for unit-holders, despite the flat property market, as the assets are being repurchased at a significant discount.
Meanwhile, another independent report by Grant Samuel, which analysed the performance of St Laurence since it was appointed manager in 2006, concludes the trust's financial position has materially improved since St Laurence took over.
NPT investors will vote on the proposal at the trust's annnual meeting in Auckland on 30 July.