This article is from the Australian Property Journal archive
MELBOURNE-based Becton Property Group’s dalliance with funds management ended dramatically yesterday and the group is going back to basics.
Yesterday, Becton jettisoned its $1.05 billion funds management business to 360 Capital Group, a company founded by former James Fielding director Tony Pitt.
The sale closes the chapter in Becton’s expansion into funds management. In November 2007, the group made a big splash by paying $63.4 million for Lachlan Property Group which was founded by former Macquarie Bank executive Ray Allen and Philip Baker and had $2 billion of total funds under management.
The news spurred Becton’s share price which rose 5 cents that day to close $4.85.
Yesterday’s Becton shares closed at 4 cents.
Recently the business lost control of two flagship funds, the Becton Office Fund No 2 and Becton Diversified Direct Property Fund to ASX-listed OFG, which indicated it was interested in taking over the management of the remaining 14 funds.
In FY10, funds management contributed EBIT of $4.6 million which represents a lion share of the group’s EBIT of $10.3 million and Becton earned $10.7 million in management fees.
The 14 funds own 48 properties in Australia and one in New Zealand, comprising 19 offices, five shopping centres and 24 industrial properties.
Becton CEO Matthew Chun said since December last year Becton has explored various options for the recapitalisation of the managed funds, including the potential merger of funds, listing and recapitalisations.
“However, none of the options would have achieved the dual objectives of resolving the capital management challenges facing the funds and the protection of investor value.
“Throughout this time, both debt and equity markets have remained constrained and the competition for available capital has been strong, with lenders reluctant to lend to the property sector and investors adopting a conservative approach to investment in unlisted property. As a result, Becton has continued to refinance and selectively sell assets to repay debt,” Chun said.
He added that the sale of Becton Investment Management Limited is the culmination of a comprehensive process involving discussions with more than 25 parties over the past 18 months. The sale involves the transfer of the entire Becton Funds Management platform together with a number of employees.
Chun said the sale of the business to 360 Capital will achieve a separation and will allow the group to focus on a smaller number of core projects in the development & construction and retirement living businesses.
The sale will reduce the group’s debt exposure by $650.6 million.
As part of the agreement, 360 Capital will make an upfront initial cash payment plus an agreed revenue share agreement over the next three years. 360 Capital will also have a call option to purchase Becton’s 58.9% stake in the Becton Diversified Property Fund. BDPF has major co-investment stakes in most of the funds managed by BIML.
The sale is subject to a number of conditions precedent, including the approval of fund lenders.
360 Capital was founded by Tony Pitt, a former executive director of James Fielding Funds Management, which later became Mirvac Funds Management.
Pitt is also a director of Pentagon Property Group, Olea Australis Limited and ASX-listed Trafalgar Corporate Group.
Meanwhile Pitt announced that Oleas Australia has commenced discussions with 360 Capital Group and Pentagon Property Group about a potential merger to create an ASX listed property investment and funds management group, similar to JFFM which was sold to Mirvac in 2005 for $478 million.
“If a merger between OLE and 360 Capital takes place, OLE shareholders will benefit from ownership in the management of the fifth largest unlisted property funds management platform in Australia.
“It will also provide further opportunity to capitalise on the anticipated consolidation of the listed and unlisted property trust sector,” he added.
Pitt said the group will undertake a review of each of the individual funds to determine their future.
“As these funds are unlisted and illiquid, some unitholders may want to exit their investment. We will be reviewing liquidity opportunities for unitholders wishing to exit,” he concluded.
Australian Property Journal
