Wellington, July 28 NZPA - Falling property values caused Tainui Group Holdings Ltd (TGH) and Waikato Tainui Fisheries (WTF) to report a combined deficit this year.

The owner of The Base retail property at Te Rapa in Hamilton is optimistic about its The Mall development at the site, which it expects will inject $100m into the Waikato economy, and plans for a Novotel Auckland Airport Hotel.

But the managers of the commercial assets of the Waikato-Tainui people see a difficult operating environment for the next few years.

The dividend paid to the tribe in 2009 is $10m, down from $10.5m in 2008.

The two organisations had $497 million worth of assets in the financial 2009 year, down from $536m last year.

They collectively reported a $26.7m loss in 2009 after taking into account a $40m fall in property values and $1.3m fall in value of fisheries. This was a turn around from a $52.4m profit last year, which was a sixth successive profit. The profit last year included one-off gains.

The operating profit after tax of $14.7m was down from $18.5m last year. This was largely due to a reduction in sales of residential sections, and higher interest costs.

"As for the balance sheet, we do not see much prospect of a market-driven uplift in asset values for at least the next two years, which means the combined net surplus will either be low, or potentially remain in deficit next year," said chairman John Spencer.

TGH said it has sold all of its managed funds. Asian equities were sold during the year and New Zealand and Australian equities were sold soon after balance date.

A $50m debt facility with BNZ was negotiated during the year. BNZ and Westpac are now the core funders. Total facilities are $150m.

"Borrowing at balance date are the same as last year, at 15 percent of total assets," Mr Spencer said.

The operating cash flow for 2009 was $15.8m compared to $14.5m in 2008.

"The write-down in asset values shows we were not immune from the global recession," Mr Spencer said.

Progress was made on The Base, TGH's flagship investment.

Construction was started on the new mall at site.

On completion, the fully enclosed 26,000sq/m mall will take the total gross floor area of The Base to 73,000sq/m, with 2100 car parks.

Last week TGH, Auckland International Airport Ltd and Accor also announced plans to build a four star hotel at the airport to be open in time for the 2011 Rugby World Cup.