Sale of the Wairarapa state rental portfolio to Trust House in 1999
In March 1999 the Wairarapa state rental portfolio of 541 properties was sold to Trust House
Limited. The properties were located in Masterton, Carterton, Greytown, Featherston,
Martinborough, Ekatahuna, Pahiatua, Woodville, and Dannevirke. At the time of the sale it
was considered unnecessary for the Corporation to provide state housing in Wairarapa, as
there was a relatively low level of unmet housing need. The Corporation continues to own
several Community Group Housing properties in the region.
Trust House was formed in 1998 to operate the business enterprises owned by the
Masterton Licensing Trust. The Masterton Licensing Trust currently has a 75 percent
ownership share in Trust House, while the remainder is owned by the Tararua Foundation,
the Rimutaka Licensing Trust, the Flaxmere Licensing Trust, the Masterton Licensing
Charitable Trust, and Trust House Foundation.
The sale price of $11.5 million was in line with the net book value of $10.2 million and an
independent market valuation by Darroch Limited of $8.7 million to $12.7 million. The
S(9)(2)(a)
The sale agreement included a covenant preventing the sale of more than 10 properties a
year for a 5-year period, excluding sales to tenants. The agreement also recorded Trust
House’s intention to honour existing tenancy agreements, provide rental accommodation for
those in need, provide ownership opportunities to tenants, and honour tenure protection in
place for over-55s and those living in modified properties. In addition, the Corporation
provided Trust House with all relevant information held on the properties being transferred.
In December 1998 both the Corporation and Trust House wrote to the tenants affected by the
sale, and made a commitment that tenants affected by the sale would not experience
reduced services. Following the sale the Corporation performed a monitoring role to ensure
that a high percentage of low income families and priority customers were being housed.
Trust House also employed two Corporation staff, which helped to ensure tenancy
management continuity.
Trust House currently owns 517 rental properties and has an overall asset base of around
$100 million. The Trust provides a 24/7 emergency maintenance service and has spent $7
million on improvements since 2000. It has occupancy rates of around 97-99 percent and
charges lower quartile market rents. Trust House tenants may apply for the Accommodation
Supplement to help them with the cost of their housing. However, the sale to Trust House
occurred prior to the introduction of income-related rents in 2000, and its tenants are not
eligible for an income-related rent.
The key success factor for the stock transfer was that Trust House was an established third
sector organisation with significant commercial and business capability. A review following
the sale identified a number of other success factors, including:
the scale of the transfer, which provided critical mass for a viable business
providing flexibility within the sale agreement for movements in the portfolio during the
sale process
providing for social objectives in the sale agreement, and including clauses that
allowed the Corporation to undertake due diligence
establishing ‘ground rules’, ensuring that key people at each organisation were
involved from the start of the process, and clearly defining roles and responsibilities
business continuity considerations, such as learning the Corporation’s business prior to
the transfer, defining when the Corporation will stop letting maintenance work, and
following through on commitments such as home-buy offers
communicating to staff and tenants in a timely and effective manner, and following up
written communications with visits to at risk tenants
making additional Corporation staff available to provide temporary additional support.
It was also noted that once a transfer is announced the Corporation has a strong political
obligation to proceed, which effectively weakens its bargaining position unless the terms of
the transfer have already been agreed.
