Published: 2 June 2005
General Property Trust’s management won support today for its proposal to take management inhouse and embark on a change of investment direction which will see the trust team up with investment banker Babcock & Brown for about 15% of its portfolio.
78% of all issued units were voted at the meeting in Sydney to decide GPT’s fate. All resolutions were passed by their required majorities.
But the key resolution, taking management inhouse, wasn’t decisive â€“ the vote went 55.9% for it, 44.1% against.
The first change is for GPT Management Ltd – an arm of Lend Lease Corp Ltd, which has been the trust’s manager â€“ to be replaced by Australian Diversified Funds Management Ltd, which will then be renamed GPT RE Ltd.
The next change is for GPT to move to a stapled security structure.
Lend Lease tried unsuccessfully to take GPT over last year and that bid was followed by another unsuccessful one from Stockland Property Group. GPT’s management then proposed its combination of internalising management, teaming up with Babcock & Brown to invest internationally â€“ about 15% of its portfolio initially, starting with a package of European residential portfolios â€“ and selling interests in 3 of its main shopping malls to Westfield Group.
Lend Lease still tried to get in the way of the GPT management’s moves, belatedly coming up with its own proposal to allow GPT management to shift from Lend Lease to inhouse at GPT â€“ a bid designed to prevent the Babcock & Brown venture and the sale to Westfield.
The split got nasty early in May, when Lend Lease accused GPT management of trying to steal its staff. GPT management announced that staff voluntarily shifted to their camp, and that they’d filled all the executive roles they needed to proceed with inhouse management.
After today’s vote, Lend Lease said it would support “a smooth & expedient transition of some of its staff & resources”.GPT agreed to pay Lend Lease $A16.5 million for co-operation, services & assets in the transfer of responsibility.
Each new stapled security will consist of one share & one unit. Unitholders in the GPT split trust (split growth & income units) have 28 days to call a meeting to consider the winding up of that trust. If they don’t force a meeting, the winding up will just proceed. In the meantime they can convert to GPT ordinary units; once the winding up starts they’ll lose their redemption rights.
GPT chairman Peter Joseph told the Sydney meeting internalisation alone â€“ the Lend Lease solution â€“ “represents inferior value to GPT unitholders and will make GPT unstable in the future. It will also deprive unitholders of most of the $A880 million value uplift for GPT & the 16.5% increase in distributions delivered by the package of proposals.
“To offer unitholders the option of â€˜internalisation alone’ would risk opening the door to a falling unit price & continued instability. We believe it would leave GPT vulnerable to another undervalued hostile takeover bid. These consequences would, in turn, demotivate our management, make it difficult to keep the best staff and impossible to attract new people of the calibre we need. Independence alone would be a recipe for instability, which itself undermines independence. We need to stay out of this â€˜swamp of uncertainty.'”
Mr Joseph acknowledged the sale of mall interests to Westfield was contentious. Then he put it in the context of how the rest of the property industry, including Lend Lease, was trying to fit GPT up: “We know that late last year and early this year, Lend Lease, Westfield, Stockland & other major participants in the Australian listed property trust sector were variously discussing between themselves the future of GPT.”
He said the deal with Westfield stopped Westfield â€“ and others â€“ putting together alternatives that would have been less beneficial to GPT unitholders.
The European venture is an $A1 billion investment, 90% of the money for it coming from GPT. In Australia, it will still own a diversified portfolio valued at $A8.2 billion .Its retail portfolio will be cut from $A4.7 billion to $A4 billion, but it will still be the 2nd biggest retail portfolio in Australia.
Mr Joseph said GPT wouldn’t be standing still in Australia â€“ it had identified $A1 billion of development opportunities.
He suggested GPT’s units would trade in a range of $A3.61-3.81 after the vote, above the $A3.61 close on Wednesday. Ironically, what got the price up there was the takeover speculation that had proved so disruptive â€“ a year ago, before the Lend Lease bid, GPT units were trading at just over $A3. In the absence of the management’s proposals succeeding or another bid being made, the price would fall again.
11 May 2005: Lend Lease tells GPT unitholders to vote no
10 May 2005: GPT split from Lend Lease gets nasty
22 March 2005: GPT’s European investment venture outlined
4 March 2005: Stockland still under 1% of GPT as bid closes
Websites: GPT internalisation proposal