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More than 1400 mainly Southern investors face substantial
losses after a decision to wind up a $41.4 million
Dunedin-based investment fund.
Fund Managers Otago Ltd operates the NZMIT PIE fund, worth
$41.4 million. Its $1 units were yesterday valued at 74.5c in
The NZMIT PIE fund has been under pressure all year and had
suspended capital repayments three times since February, with
the exception of one tranche of repayments in May, allocating
50% payment of the request.
As of November 12, and with the assent of its trustees,
Trustee Executors Ltd, Otago Fund Managers cancelled capital
redemption requests by any of the 1429 investors as they
moved to wind up the fund, which could take "some years",
In a letter to investors, obtained by the Otago Daily Times,
chairman John Farry and managing director Peter Hutchison,
outlined how the past six years in the property sector had
been "challenging in the extreme" and the decision had been
made to wind up the $41.4 million fund.
"The current financial climate in general - and the property
sector in particular - continue to languish," Mr Farry said
in the investor statement.
About 80% of three separate funds on offer are investments
made by Otago and Southland people; the NZMIT PIE fund in
question was three years ago valued at $99.8 million, which
has steadily declined 58% to $41.4 million.
Mr Farry was unavailable for comment, but Fund Managers
acting chairman David Ehlers and managing director Mr
Hutchison gave an interview yesterday.
Mr Hutchison said after investors were informed of the
wind-up, there was "no reaction from investors". They were
"not unhappy with the event", "apart from a small number".
"I don't believe there is a major collapse here, like the
finance companies. We will not rush to fire-sale [the]
assets. Selling too quickly would force the values down," Mr
Mr Hutchison said it was best to have an "orderly
realisation" of asset sales and investors could next week
expect to receive "cessation accounts" disclosing unit
values. He said other mortgage trust wind-ups around the
country delivered between 80c-$1 to investors, and "hoped to
better" the present unit value, which stood at 74.5c in the
"It is a loss. Only the future will say where [that loss]
ends up," he said.
He expected the wind-up to take about "two years", with the
first distribution to investors next April, noting that
between now and March next year, $5.5 million was due to be
The pair said the fund was being wound up because liquidity,
or cash in hand, was below the minimum 5% threshold.
"Many of the loans are yet to come to maturity.[With] no
cash, no redemptions," Mr Hutchison said.
Of eight impaired mortgages in the fund, of a total 38, the
pair would not say how much was involved, nor would they
supply details on the overall percentage decline in
valuations, citing confidentiality reasons.
Mr Hutchison said legal action was being taken regarding two
valuations which involved "mistakes", but declined to give
While dealing in first mortgages, with 66% in commercial
properties and 28% residential, some became bad debts, with
present values written down for an "as is where is" mortgagee
sale, Mr Hutchison said.
In "most cases", the properties were "adversely affected
through illegal alterations" under the Building Act, failed
compliance with the Resource Management Act or were vacant,
he said in an online newsletter to investors.
The NZMIT PIE fund reported a $3.66 million surplus for the
financial year to March 2010, but in the 2011 year that
plunged to $401,000. There is no account online for the year
to March 2012.
The main contributors to the 2011 decline were impairments,
which rose from $587,000 to $2.02 million, and loss in
investment realisations, up from $673,000 to $1.33 million.
Asked why the full-year to March 2012 account for the
distressed fund had not been posted as due on September 30,
Mr Hutchison said yesterday the usual auditor had been
purchased by another firm, which started its auditing process
He said the "recasting" of the full-year accounts had to also
take in the more recent cessation accounts, and the
subsequent delay to presenting the annual accounts had been
"okayed" by the Companies Office, he said.
While the site says the "NZMIT PIE Fund is currently closed
for new investments", there is no update on the decision to
liquidate the NZMIT PIE fund.
Mr Hutchison said yesterday unit holders first had to be
advised of the wind-up and details would be posted online.
Unit-holders in the NZMIT PIE fund can contact Simon Hartley,
in confidence, at firstname.lastname@example.org
or phone (03) 479-3527.
Fund Managers Otago Ltd's ailing NZMIT (NZ Mortgage Income
Trust) PIE fund
• Began as NZMIT unit trust in 1994, raising $7 million.
Within seven years, fund totalled more than $50 million
From October 2007, fund became a PIE (portfolio investment
entity). First 90-day capital suspension in February this
year; extended again in May and August with reassurances fund
would not be wound up.
November: investors notified of intention to wind up fund
(effective November 12).
• The NZMIT PIE fund, with an overall size of $41.4 million,
has 1429 investors, funding 38 mortgages at an average size
of $1.04 million, in value totalling $39.7 million, according
to Fund Managers Otago's website.
• On Fund Managers Otago Ltd's website, there are three
investment funds: The NZMIT No 2 Fund, worth $12.3 million,
offering 7% and open for investments; the CMIT PIE Fund,
worth $16.5 million, offering 4% and closed to new
investments; and the NZMIT PIE fund, worth $41.4 million
(unaudited at September), with capital payments cancelled;
also closed to new investments.