We are not supposed to believe in miracles, especially in business.
But struggling property giant, GPT Group is doing its best to make us see something many in the market thought they’d never see: life after a near death experience at the hands of the board and former management.
After raising well over $3 billion in the past eight months, GPT now sees a future for itself as an old fashioned investor.
Pity then that some of the people who now won’t talk about the adventures of the group as a financial engineer, remain on the board, led by the incoming chairman, Ken Moss.
He takes over from Peter Joseph who stood down at the end of the AGM yesterday.
His comment, "With the wisdom of hindsight, it is now clear that the Babcock and Brown Joint Venture has become the wrong deal for these times" summed up GPT’s last three or four years: lots of hindsight, not much foresight.
There was a mea culpa and an apology:
"In taking responsibility, as you are aware, Nic Lyons (The former CEO) who was highly respected by his peers and colleagues discontinued as CEO and Managing Director in October last year after many years of unstinting commitment to GPT.
"Elizabeth Nosworthy left last year and Malcolm Latham and I have not sought re-election and will retire at the conclusion of the meeting.
"As a Board, we have cherished your loyalty and your trust, and we have always tried to respond in kind. On behalf of the board, I would like to emphasize how genuinely sorry we are that we have not been able to achieve a better outcome for all of our investors."
Four of the directors who were on the board at the 2008 AGM have gone and yesterday Mr Joseph announced that former BT Australia CEO, Rob Ferguson had been appointed deputy chairman.
While some have gone from the board, Mr Moss and some other long term board members sat and put their hands up for the Babcock and Brown adventure in Europe and for a terribly expensive plunge into the US, while giving up the image the group has as a conservative, stable blue chip property investor.
Now, led by new CEO Michael Cameron and Mr Moss, GPT says it’s going back to its roots as a solid, conservative, blue chip property investor.
Mr Moss’s term is up next year. take a punt on Mr Ferguson being the new chairman.
Pity about the billions lost in all those adventures and the financial pain and suffering many smaller investors have had to endure to get to where the company now believes there is something in being old fashioned about property.
GPT’s AGM in Sydney was told yesterday by Mr Cameron that the company is maintaining its guidance for calendar 2009 earnings and distribution.
GPT in April downgraded its guidance for calendar 2009 operating income to a range of $320 million to $325 million, from a forecast of $347 million in February.
"In this environment, our 2009 forecast remains unchanged from our last update," Mr Cameron said yesterday.
GPT has also forecast a full year distribution per stapled security of 4.5c per security, based on realised operating income of $367 million.
In calendar 2008, it generated operating income of $468.8 million, down from $605.1 million in 2007, after a revaluation of its investment portfolio resulted in a non-cash charge of $2.15 billion.
Its 2008 reported net loss was $3.25 billion, compared to a profit of $1.18 billion in the previous year.
"Globally, real estate values remain under pressure as occupier demand weakens and liquidity continues to be scarce and expensive, particularly for larger transactions," Mr Cameron said.
"Australia is broadly following this trend, however, occupier demand, whilst weakening, remains generally stronger on a relative basis across the key real estate sub-sectors."
Mr Cameron was optimistic about the retail segment of GPT’s property business, saying retail sales had been surprisingly buoyant in the first quarter of calendar 2009.
Sales were up due to lower interest rates, lower fuel prices and federal government stimulus packages.
Some of the gains had been mitigated by lower margins for retailers, Mr Cameron added.
"We continue to expect sales growth to moderate in the second half of 2009 particularly if unemployment continues to rise," he said.
"GPT’s portfolio is well placed to continue to generate income growth given the quality of the assets and the high levels of occupancy."
Mr Cameron said demand for office space had weakened across all major markets and was likely to continue to weaken, resulting in lower rental levels and an increase in incentives.
"We expect this trend to continue over the short term, although the significant constraints on supply are very likely to result in a relatively rapid decline in vacancy, and a return to rental growth once the economy improves," he said.
"Despite these challenging market conditions, GPT’s office portfolio is currently in good shape given we’re virtually fully leased, with long weighted average lease terms providing secure and stable income returns.
"However, while we continue to have exposure to the US and Europe, we can expect further pressure on values and income on those assets," he said.
Mr Cameron also said GPT was no longer being viewed as a forced seller of assets.
"As a result of strengthening the balance sheet, we now have more bargaining power with the banks, we are no longer seen as a fo
