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They slap em up quick but Central Equity still sells plenty of apartments in Melbourne and profits remain solid despite the excessive pay packets of their executive directors and the lack of any independent directors.

The Central Equity AGM was held in the sales office for its new Southbank development called The Summit which is already 80 per cent sold. You had to walk through an old W-class tram to get into the meeting and I needn’t have spent $500 buying shares two weeks back because they didn’t even check if you were on the register.

Eddie was at pains to point out that the company has performed well over the past four years with net profit tripling from $10 million to $30 million.

This is true but the share price has remained relatively stagnant around the $2 mark as everyone waits for the fairytale to end thanks to the GST, an end to the Kennett planning free for all and the industrial thuggery of Victoria’s building unions.

But when Eddie talked about cost pressures it wasn’t just the 36-hour week he was referring to. What about the $1.5 million whack the three directors each took in fees for the year – a rise of more than 20 per cent.

This tidy sum of $4.5 million amounts to 15 per cent of net profit which is very high. Alas, Eddie conveniently had a benchmarking study prepared by his friends at Arthur Anderson, who double as the company’s totally independent auditors, which showed the boys were underpaid compared with their peer group companies.

Hmmm, sounds a bit rubbery to Crikey.

Eddie also defended the lack of independent directors saying that “the jury is still out” on the question of whether non-executive directors add value.

This may be the case in the colorful and tough development game where you’ve got to cut a few corners to get what you want, but us minority shareholders would derive a degree of comfort from having someone looking after our interests.

Let’s give the boys plenty of notice on this one but if there are no independent directors on the board by this time next year we’ll find an external candidate to stand at the 2001 AGM.

Given that the boys own 26 million of the 82 million shares on issue, they should be able to see off any challenge but the point will be well made.

The boys remain bullish on the outlook with a hefty $330 million of unconditional contracts due to come in over the next couple of years. Sales are tracking ahead of last year so they should crack the $200 million revenue line again this year.

Eddie was coy about the size of any political donations and said they had adopted well to the new government which was keen to see inner city development continue.

And if you’re worried that the impending housing crash is going to hurt Central Equity, remember that 70 per cent of Australian households have no infants and that 80 per cent of housing stock is designed for families with young children.

This is the market niche that the yuppy flat-builders are targeting and the very same niche that has seen a $1000 investment in Central Equity back in 1987 blossom to be worth $60,000 today, provided you reinvested all the dividends.

While they’ve only built 5000 flats in Melbourne compared with about 70,000 for slap ’em up Harry Trigubuffoon in Sydney, the boys are twice the size of their nearest rival Mirvac and look to be tracking quite well.

Dennis Bourke popped over for a chat after the meeting and said I’d treated them relatively kindly. Directors should know that Crikey is always civil. The ranting and raving is left to lunatics like Jack Tilburn.

I fessed up to owning a Becton apartment in East Melbourne and we chatted briefly about the courageous and magnificent legal battle the residents in our stage had with Max Beck’s boys this year. This was a win for the battler that Crikey is most proud of but the settlement contains tough confidentiality clauses so we can’t talk about it.

Dennis appeared pleased that Becton is now down to a meagre 10-floor proposal for the Esplanade Hotel site in St Kilda. Max sure did underestimate the level of opposition from the St Kilda Nimbys.

Dennis also said Central Equity was staying out of Docklands because there is simply not enough infrastructure development in there yet. It is interesting that Lend Lease and Mirvac are now looking at deepening their invovlement in Docklands. Be careful boys, be very careful.

Peter Fray

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