This article is from the Australian Property Journal archive
BABCOCK & Brown Communities Group will get to run its own show after agreeing to buy the management rights from investment bank Babcock & Brown.
BBC will buy rights from Babcock & Brown’s corporate & structured finance division will gradually be wound down.
Babcock & Brown’s chief executive Michael Larkin said this transaction is consistent with investment bank’s desire to move quickly and decisively to ensure that the interests of investors in its managed funds are not adversely impacted by the restructuring.
“Today’s agreement with BBC is in line with Babcock & Brown’s commitment to narrow the focus of its activities including its funds management activities, to areas where we have an established leading franchise and proven track record and is consistent with the strategic review being undertaken by Babcock & Brown in relation to its listed managed funds,” he added.
Babcock & Brown intends to dispose of its holding of 64.8 million in BBC securities representing 10% of the securities on issue.
BBC has agreed to pay Babcock & Brown $17.5 million as consideration for internalising the management agreements.
Meanwhile, BBC has reported an after tax profit of $41.1 million for the 12 months ending June 30 2008. Revenue was $263.6 million, including $70.9 million in revaluation gains.
NAV was $0.94 per security and NTA of $0.57 per security as at June 30.
BBC’s managing director John Martin said the core retirement living business achieved EBITDA of $111.7 million which included revaluation uplifts of $61.5 million.
“The positive revaluations were largely driven by strong underlying price growth and uplift in underlying economic exposure through upward revision of resident contract terms.
The retirement business also generated $33.1 million in cash driven by 425 resales in the year (with a further 145 resales achieved in the Prime Trust managed portfolio).
Martin said the development business has been impacted more severely by the difficult residential property market.
“As our incoming residents are experiencing longer lead times in selling their own home, we are experiencing a significant widening between the period of a contracted sale and settlement.
“This has cash flow implications for the business as capital is recycled slower and holding cost associated with inventory increases,” he added.
Notwithstanding the challenging real estate market conditions BBC sold 280 new units, 250 of which settled in the period. Development margins in excess of 18% across the portfolio were achieved.
Martin said the outcomes of the strategic review conducted by ABN AMRO will have significant implications for the business going forward.
He said the short term priorities of BBC are to focus on performance of underlying assets; maximising earnings from existing businesses; and capital management to reduce debt.
BBC announced an interim distribution of 2.1 cents.
BBC shares closed 8.5 cents higher at 43 cents.
Australian Property Journal