This article is from the Australian Property Journal archive
AGED care investor Prime Trust is considering an earlier retirement and potentially selling up, the surprising news comes just 18 months after PTN was floated on the Australian Securities Exchange.
PTN’s chairman Michael Wooldridge yesterday delivered a change of tone for the company, which just a few months ago aggressively took on Lend Lease in an attempt to takeover Babcock & Brown Communities Group.
Yesterday PTN reaffirmed its earlier guidance, delivering a loss of $91.2 million for the six months to
December 31 2008. The result relates to a $44.8 million write down in the property portfolio and $36 million for bad loans made to external developers. Wooldridge said those loans are unlikely to be fully recovered.
Unlike Valad Property Group, PTN has not named the developers it has lent to.
Prime Trust’s net asset value per unit at December 2008 is $0.76 per unit and its gearing is
48.5%.
During the period, Wooldridge said the management reassessed its entire strategy with the specific objective of seeking to maximise unit holder value.
The board considered a number of strategic options including continuing operations; a total or partial sale of assets; a re-capitalisation of the trust by an equity raising; and a merger with other entities.
It was concluded that a break-up of the trust and sale of all assets is likely to lead to a significant discount on net asset values in the current market, especially for the core Retirement Village assets (value of circa $625m) – so that strategy is not recommended at this stage.
Wooldridge said the villages will continue to operate.
PTN is also looking at a re-capitalisation by way of an equity raising if a cornerstone investor is prepared to pay in excess of the current market price and provided existing unit holders have the ability to participate on the same terms.
And finally Wooldridge said the trust is exploring the sale leased retirement and aged care facilities (value of $100 million), as well as other non-core assets ($60 million), and lower its exposure on some loans made to external developers by selling down loans (up to $10 million), all to reduce current debt.
PTN currently has interest bearing debt of $423.5 million but as a result of the write downs in property valuations, the trust has a number of non-compliance matters, relating to Loan to Valuation Ratios and Interest Rate Cover ratios. The loans affected by these issues amounts to $212 million.
On operational level, PTN settled the rollover of 74 existing units during the period. This compares to 105 in the previous six months. The trust noted the usual relatively quick time to settlement has slowed considerably, reflecting the slowdown in the time retirees need to sell their own properties to finance their retirement unit.
Looking ahead, Wooldridge said the board is not able to provide guidance on when future distributions might occur because the trust will first need to pay down bank debt.
“The current environment is extremely challenging… we have already… ceased all new development expenditure at existing sites; limited any expenditure on future refurbishments of existing accommodation units to only those supported by a confirmed re-sale; significantly reduced staffing and operational costs,” he concluded.
PTN shares fell 16% or 1.6 cents to close at 8.4 cents yesterday.
Propertyreview.com.au
