There were more mea culpas than in a George Pell High Mass and more ‘sorrys’ than a Kevin Rudd speech: yesterday’s AGM of tarnished blue chip property group, GPT, was, by all reports, one of the saddest affairs for a while.
Looking at it another way, after billions in losses, a near-death experience being tarnished by the linked to the failed financial engineers at Babcock & Brown, and after asking security holders for over $3 billion in cash in the space of 8 months, GPT’s newish looking board says it has now returned to the fold of being a boring, safe, mostly Australian property investor.
It left the straight and narrow back in 2005, fired by adventure and the desire to escape the attempted takeover by former sponsor Lend Lease. Rival Westfield played a while and snatched a retailing gem or two, but the clincher was the joint venture in European property with Babcock, and the equally exciting move into the US property sector.
Both pushed the unit price higher, but left it exposed to the credit crunch when the easy money days ran out both cost GPT its “safe haven” status with many investors, left both the board and management exposed.
Outgoing chairman Peter Joseph said sorry and apologised countless times in the four hour meeting in Sydney yesterday, but he also defended the Babcock joint venture, saying it was supported by investors and analysts at the time. It was, but there were still critics who saw in Babcock & Brown a badly flawed attempt to be a mini Macquarie Bank, but without the required smarts or skills. Both the European and US ventures were a house of cards built on quicksand of easy and cheap money, and both cost GPT dearly for that.
Incoming deputy chairman, Rob Ferguson appeared in a surprise move.
He lasted a reported 2-and-a-half-hours of the 4-hour meeting. Perhaps he had seen and heard all he wanted, but he should have stayed the distance because he will be required to do so next year. He might need the training as he will be taking over from Ken Moss who succeeded Mr Joseph yesterday, despite being a long-time board member through the B&B days.
Mr Moss’s term on the board is up in 2010, Mr Ferguson was appointed as Deputy Chair yesterday and you don’t have to be Einstein to work out business people of his stature and ambition don’t accept deputy roles. He’s already chairman of litigation funder, IMF Australia (is that sustainable now he’s set to become a chair a company already facing some class actions from IMF rivals, like Slater and Gordon?).
Mr Ferguson was headhunted by Mr Joseph through the best ‘old mates’ network in Australia: the group of fund managers, executives and more who worked and rank Bankers Trust in Australia: from Ferguson, to Joseph, to Chris Corrigan, to Laurence Freedman, Mike Crivelli and more, they were the most talented group of financial sector executives and have had successes post BT.
Mr Ferguson is now at GPT and will have to take it back to being grey, boring, but a blue chip property player with high quality assets, and not a hint of adventurism about it.
First off he and new CEO, Michael Cameron, will have to sort out the relationship with the ambitious Mr Quinn at Stockland. Already that has soured. Stockland now has a 13% stake in GPT held through a series of financial derivatives. Stockland is raising a lot of money itself: well over $1.2 billion, which has caused speculation that Stockland will have a nibble at GPT once the Babcock and Brown joint venture is finally put to death
But Stockland has its own tar baby in its UK property play: forecasts are for further falls in rents, further rises in capitalisation rates and further losses in UK property in the coming year. It’s already hurt Lend Lease and Valad, and forced Stockland to cut its UK investment values and renounce any further ambitions.
Stockland will have to borrow money to takeover GPT which is already worth more than $2.18 billion (against the $3 billion of cash injected in the past 8 months).
Mr Ferguson knows all about corporate plays: he helped run quite a few in years gone by with some of the best in the business.