General Property Trust was a trail-blazer when Lend Lease established it in 1971, so the dramatic profit downgrade by the now independent GPT Group this morning was a big moment in the continuing global credit and property market shake-out.

It wasn’t in the same league as Centro’s 21-page “we can’t pay out debts” effort on December 17, but the 20-page update from GPT this morning was still a shocker given overall forecast operating earnings for 2008 were slashed from $633 million to $464 million.

This sort of 26.6% earnings shock was meant to have been stamped out by continuous disclosure laws. Talk about hitting the market with a sledge hammer. GPT was an $11 billion-plus giant, second only to Westfield, when its shares peaked at more than $5 last October.

Today, the owner of trophy assets such as Sydney’s Australia Square, MLC Centre, Darling Park, Citigroup Centre and HSBC Centre along with Melbourne Central and Brisbane’s Transit Centre and Riverside Centre has seen its shares tumble to a 15-year low of $1.95. By 11am it had stabilised to be down 38c or 15% at $2.08 as its market capitalisation plunged from $5.41 billion on Friday to $4.57 billion this morning – a loss of $835 billion.

The board, led by chairman Peter Joseph, is now under severe pressure after forging an independent path following the shareholder rejection of Lend Lease’s 2004 takeover bid which independent expert Grant Samuel valued at $3.72 at the time.

The strategy since independence of forming a highly-geared European joint venture with Babcock & Brown and going over the top in buying 50% of Melbourne’s Highpoint shopping centre has hurt GPT.

However, today’s update shows that the core Australian retail, office and industrial empire is travelling well with forecast 2008 operating earnings rising from $502 million to $516 million.

If only GPT has stuck to its knitting rather than moving into things like US retirement homes (forecast down $9 million today) and European funds management (down $41 million).

Australian tourism is clearly hurting from the high dollar and oil price because forecast 2008 hotel earnings were slashed from $57 million to $42 million. GPT’s hotel portfolio includes the Ayers Rock resort, Sydney’s Four Points Sheraton and the big Voyages Lodges business which takes in everything from El Questro to Cradle Mountain plus a string of island resorts such as Bedarra, Brampton, Dunk, Lizard and Heron.

GPT is also paying the price for carrying too much debt. Overall corporate costs for 2008 have been increased by $40 million to $275 million with rising interest rates a major factor. The forecast 2008 distribution has been cut to 20c, after a hefty 7.2c was paid in the first quarter alone. It seems there will be no more borrowing to pay distributions.

Listen to edited highlights from the 2006 GPT AGM when many of these issues were canvassed.