troubled gpt may have to pay besens $600m

Troubled GPT may have to pay Besens $600m.
Florence Chong | March 13, 2009
Article from: The Australian

TROUBLED listed property trust GPT may have to pay Melbourne's retailing dynasty, the Besen family, up to $600million.

This is the result of a put option that gives the family the right to offload its half-share in one of Australia's best shopping centres, Melbourne's Highpoint, to the trust.

The family, which is headed by Marc Besen and had a $1.75billion fortune according to last year's BRW Rich 200 List, has until March 30 to exercise the option.

If the put is made, it would push Australia's oldest listed property trust close to breaching its debt covenants yet again, after it narrowly averted a breach last year with a $1.6billion capital raising.

GPT has been beset by troubles. After a lengthy search, the group is still to find a new chairman and chief executive, has yet to make any meaningful asset sales and is entangled in a toxic joint venture with Babcock & Brown.

It is understood the Besen family's 50 per cent stake in the massive centre at Maribyrnong in Melbourne's north has been divided among family members and that each has the right to put their stake, some of which are in 6-8 per cent lots, to GPT.

Mr Besen has four children, including developer and investor Daniel, Naomi Milgrom, who is the executive chair of the Sussan fashion group, Carol Schwartz, property investor and former chair of industry super fund ISPT, and Debbie Dadon, executive director of the Besen Family Foundation.

Ms Milgrom's Sussan group is one of GPT's biggest tenants, ranking in the top 10 based on the gross income of the retail portfolio.

Besen family members could not be reached for comment yesterday.

GPT has $1.75billion in cash and undrawn facilities after the $1.6billion capital raising late last year.

Credit Suisse property analyst David Burgess said that assuming the put option was based on the 2006 acquisition price of $621.2million, it could push GPT's gearing ratio from 33.7 per cent (at December 31) to 37 per cent if exercised. And if the asset were valued at a lower price in today's market, it would affect the $5.3billion valuation of GPT retail portfolio, Mr Burgess said.

A drop in values could push GPT close to its loan-to-value ratio covenant limit of 40 per cent.

To avoid breaching its covenants, GPT may be forced to do a second capital raising, according to analysts.

In reviewing GPT's credit rating for a possible downgrade, Moody's Investors Service regarded the Highpoint transaction as a potential call on GPT's capital.

However, another analyst said the Besens could also be viewed as long-term owners and may not exercise the option.

The stake in the centre is owned by the $2.1billion GPT Wholesale Shopping Centre Fund.

GPT's chief financial officer Kieran Pryke told The Australian that if the option was put, it would be to the wholesale trust.

However, analysts said if the fund refused to take the stake, the put option would revert to GPT.

Mr Pryke said that if the option was put to GPT, it would have until September to settle the transaction.

Highpoint, anchored by Myer, Target and Big W, has total lettable space of 122,000sqm and was 99.7 per cent leased at the end of 2008.

GPT's share price rose 3c to close at 32c a security yesterday -- in line with the A-REIT sector, which rose more than 26 points. It reached a 52-week high in April last year of $2.63.