By Stephen Mayne, shareholder in GPT, Westfield and Babcocks

Michael Maxwell, the Babcock & Brown executive who stitched up GPT in last year’s controversial joint venture deal, has been rewarded with a huge bonus, according to the 2005 annual report which was released this morning.

Maxwell’s overall pay rocketed from $3.77 million in 2004, when he was the sixth highest paid Babcocks executive, to $10.06 million in 2005, second only to fast-talking CEO Phil Green, whose pay packet rose from $10.3 million to a record $12.18 million.

Maxwell’s real estate operation was the first division covered in the annual report and the GPT deal got plenty of positive mentions, suggesting it was a major factor in the board’s decision to give Maxwell a hefty $8.63 million short term bonus.

The five highlights in the annual report explaining the surge in property net revenue from $79.4 million to $297.17 million included two revolving around GPT which were as follows:

  • Revenue from real estate transactions involving the GPT joint venture
  • Income from ownership and partial sale of portfolios of residential property in Germany prior to the establishment of the GPT joint venture

The 16,736 rundown German workers cottages, similar in appearance to Melbourne housing commission flats, were always the most controversial aspect of the deal and Babcocks managed a $48.2 million profit flogging these into the joint venture, which is 50-50 in voting but 90-10 in favour of GPT when it comes to putting up the capital.

Having listened to all the arguments at last week’s GPT AGM, I reckon the company would have been far better off simply ditching Lend Lease and internalising management. There was no need to simultaneously do the imbalanced joint venture with Babcocks and even less justification for selling those two shopping centres to Westfield at book value, just to secure its 6.5% voting stake in favour of the inter-linked proposals.

The ASX remains in disgrace for allowing Westfield to vote on the deal and the actions of the entire GPT board are still open to debate. GPT chairman Peter Joseph last week claimed the company “could right the book on independence”, which is right at one level because they did ultimately ditch the manager that appointed them.

However, two of the current GPT directors, Ian Martin and Elisabeth Nosworthy, also sit on the Babcocks board and Joseph himself has enjoyed a GPT pay rise from $120,000 to $300,000. Faced with the sack or almost tripling his pay, Joseph had a strong incentive to be the brave independent.

Then you have Joseph’s history with Frank Lowy. When Lowy’s Westfield Capital Corporation took a defensive 20% stake in the once-great engineering giant ANI shortly before the 1987 crash, Joseph and David Gonski joined the board as his representatives.

Given the miraculous way Westfield wriggled out of some of its exposure in 1988, you would have to ask whether Joseph was indeed independent, because last year’s GPT deal was the second time in history that Lowy has come out smiling after doing a deal with Joseph.

The massive $621 million paid by GPT in March for a half share in Melbourne’s Highpoint shopping centre confirmed the generosity of the book value deal with Westfield and now we have Michael Maxwell’s huge Babcocks bonus as further confirmation that GPT unitholders got the worst of all these dealings.