One of the biggest challenges in the current property market results from being unable to exit property investments because of the shortage of motivated cash purchasers. In a downward moving market a cash purchaser will default to doing nothing on the basis that the potential target acquisitions are likely to be cheaper tomorrow than they are today. Procrastination is rewarded on a daily basis! Even in the best of times, signing an agreement to buy property takes a degree of commercial courage and speculation. Against this background, it is easy to see why the volume of property transactions has reduced so dramatically in recent times.

The flow on effect is that banks lose faith in the ability of borrowers to quit their property investments. The client/bank relationship is then under considerable pressure as they both look for ways out of the current situation without having to resort to a mortgagee sale. The light at the end of the tunnel may well be an oncoming train.

A viable alternative in these circumstances is the trading of one property asset for another and the "refreshing" of the bank debt. In other words, a swap of property assets at an agreed value.

This may be particularly useful where value can be added by the new owner. Different investors in the property market have different skill sets that may suit a particular property or transaction and unlock otherwise unrealised value in the property asset. For example, an owner of an empty commercial building may be able to swap that asset for some residential apartments for which it is easier to find tenants. The vendor of the apartments may well be more experienced in finding tenants for commercial premises and accordingly happy to enter into the transactions. Both parties are able to provide a positive outcome and a good story for their bankers. There is a lot to be said for resetting the clock on bank debt and arranging terms that are better suited to the current market and less likely to lead to defaults.

A property on the register can be of any property interest including:

• leasehold and freehold estates,
• stratum estates (such as unit titles, apartments),
• industrial and commercial properties,
• shares of property trusts, and
• joint venture interests may also be saleable through this method.

In fact, any property-related interests where we can work towards customising a mutually beneficial deal between clients can be listed on the register.

Professional fees arising out of listings on the register will take into account the value of the transaction and our involvement in maintaining the register, marketing the properties, brokering services and other services required to facilitate the transaction. As an example, a trade of a $2 million vacant industrial building for a residential property of the same value will cost each party to the transaction $20,000 plus conveyancing fees, which are charged at our usual rate. A fixed fee of $5,000 will be charged for getting the trade deal under contract. The fixed fee does not apply if the deal is not signed, but is payable if the contract does not go unconditional. Otherwise, we charge by reference to the time of our professional staff - rates will be provided upon request.

Fees quoted in the above example are indicative only and exclude GST.

Before entering into any contract, independent advice should be sought by at least one of the parties to the agreement.

Contact John Heimsath or any of the team at Knight Coldicutt should you wish to register an interest. At that point we can provide you with more details about the fee structure in the event that a trade or exchange of property interest is effected through the KC Property Trade and Exchange Register. Or you can email us with the details of your property interest and we will be in touch.

p +64 9 306 1102 | m 021 707 734 | e john@kclaw.co.nz