becton article in todays australian

Maurice Dunlevy | October 08, 2009

Becton Property Group to continue assets fire sale

Article from: The Australian

MELBOURNE'S Becton Property Group will continue to sell assets unless it can find new investors to recapitalise its $1.7 billion funds management business.

In a blunt assessment of the Becton funds portfolio, chief executive Matthew Chun said a repeat of last year's $220 million of sales was unlikely despite more than $61 million of sales so far this financial year.

"Until we can recapitalise the funds, the funds will need to continue to sell assets," he said.

The decree follows an equally blunt warning from auditor PricewaterhouseCoopers, which in this year's Becton annual report warned of "significant uncertainty" about the group's continuation as a going concern.

That was because of a June 30 deficiency of assets to liabilities of almost $117.8m and only $16.4m of cash, or cash equivalents on hand.

Since then Becton has been buoyed by a refinancing deal that frees it from financial covenant testing on a $150m working capital facility for the next two years.

The important concession is in addition to about $226m of debt refinancing.

According to Mr Chun, Becton's current corporate debt of about $320m was almost at a sustainable level, allowing the group to concentrate on major social housing projects in Sydney and Melbourne as well as its successful retirement business, which is now a joint venture with the Oman Investment Fund, a sovereign wealth operation.

The Melbourne housing project is at inner-suburban Kensington, where Becton is integrating public and private housing on a 7ha site. The Kensington and Sydney Bonnyrigg housing developments, as well as new retirement projects in Queensland and Victoria, were Becton's new focus, but the recapitalisation of its 17 unlisted funds -- which collectively had $1.7bn of assets and $950m of debt -- remained a priority, Mr Chun said.

The major institutions had recapitalised the big REITs, Mr Chun said, but Becton's small investors simply did not have the firepower to take advantage of deep discounts.

"They understand the product, but don't have the cash to participate."

Finding an alternative to small investors was a work in progress, but offshore investors, or even mergers, were possible.

Approaches by vulture funds had not been considered seriously, Mr Chun said.

"The reality is vulture funds are sophisticated investors looking for a bargain, so it may not be a perfect solution given the sort of discount they require."

Mr Chun said Becton had watched with interest as property billionaire John Gandel earlier this year pumped $82m into listed Charter Hall as part of a $118m equity raising.

"Someone who likes and understands the platform, and understands property cycles is suited to these types of investments," he said.

The scarcity of investment dollars was recently driven home for Becton when it attempted a $23m capital raising for the Becton Industrial Fund.

Three months later it was left with only $6m, which was not as much as he would have liked, but in the circumstances he was happy to receive, Mr Chun said.

Only four of Becton's 17 funds had to sell assets or recapitalise, but the portfolio needed to be actively managed to stabilise the capital position of funds. One good sign was that the $61m of sales settled so far this financial year had only been at a 3 per cent discount to book value. As revealed last week by The Australian, Becton has has found a circa $28m buyer for its new East Melbourne headquarters building. It also has 446 Collins Street under due diligence for more than $20m. A CBD office building at 45 William Street is for sale at an asking price less than $30m.

All three properties are held in the Becton Office Fund.