Lend Lease Offers Up Alternative for a Self-Managed GPT

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SYDNEY-Lend Lease on Wednesday offered up an alternative plan for General Property Trust’s proposed conversion to a self-managed entity, an issue that unit holders will vote on next month. The alternative proposal is an attempt by Lend Lease–which manages the trust–to one-up GPT’s plan.

Back in February, GPT proposed the internalization of its management as part of a plan to counter a takeover attempt by Stockland Group. Under the proposal, GPT would sell interests in three GPT retail centers to Westfield for A$842.4 million and use the proceeds for international property investments and developments. Much of that would be through a joint venture with Babcock & Brown Ltd., Australia’s second-biggest publicly traded investment bank.

Lend Lease officials are in favor of GPT managing itself, but they have said in recent public statements that there are “numerous flaws” in the package of transactions related to GPT’s proposal for self-management. According to the statements–made on Wednesday– those problems include the sale of GPT’s prime retail assets to Westfield (a 6.5% unit holder in GPT) at “a discount to true value” and the Babcock & Brown JV, which would take GPT into new markets with “a disproportionate level of risk and lesser rewards.”

“The inseparable package of deals that GPT management has tied into its proposal is, in our view, not in GPT unit holders’ interests,” Lend Lease’s Group CEO Greg Clarke was quoted as saying. Not surprisingly, GPT independent chairman Peter Joseph maintained that GPT’s proposal offers unit holders higher growth and value than the Lend Lease alternative.

Lend Lease has managed some $9 billion of GPT’s shopping center and office assets since 1959. Deutsche Bank estimates that Lend Lease could lose $65 million a year in fees and exponentially more in development revenue if GPT’s management is internalized.

Neither of the parties involved could be reached Tuesday or Wednesday for comment. On Tuesday, through prepared statements, both Lend Lease and GPT announced that negotiations between the two companies with regard to the internalization proposal had failed, but they disagreed on the why and the how of it.

In its Tuesday statement, GPT says negotiations broke down after Lend Lease “demanded” that GPT refrain from soliciting to employees then proceeded to make its own employment offers to key personnel involved with GPT. In addition, on May 6, the same day Lend Lease informed GPT of its actions, GPT claims Lend Lease also gave it three days to split GPT’s retail team or negotiations would be called off. Lend Lease would then take steps to remove GPT head Nic Lyons and the rest of the senior management team and insert Ross Taylor, another Lend Lease executive director, into this role.

“The full board of GPT Management Ltd., as responsible entity of GPT, has unanimously rejected this attempt to interfere with its management structure, and Nic Lyons remains in charge of GPT’s affairs reporting to the GPTML board,” the GPT statement said.

GPT then held its own presentation for employees over the weekend of May 7. As a result of that event, GPT said in its Tuesday statement that 23 key Lend Lease employees assigned to GPT–spanning retail development, property management and leasing, and four key portfolio managers–have indicated formally that, if the internalization proposal succeeds, they will join GPT.