24/02/2011 - 00:00

Aspen players strap in for wild ride

24/02/2011 - 00:00

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WITH the date now set for a boardroom showdown, the battle for control of residential property developer Aspen Group is heating up.

Aspen players strap in for wild ride

WITH the date now set for a boardroom showdown, the battle for control of residential property developer Aspen Group is heating up.

Early this week, the three directors facing the axe – Gavin Hawkins, Reg Gillard and Terry Budge – fired back at accusations that the developer had lost its way since co-founder Angelo Del Borello was dumped from the board in June last year.

Shareholders will vote on the men’s future with the developer at a meeting on March 24, requisitioned by major shareholder Entrust Funds Management and Mr Del Borello, who is seeking reinstatement as managing director.

Mr Del Borello holds 3.3 per cent of Aspen’s shares, and interests associated with Entrust hold just over 4.5 per cent, giving the group a collective stake of more than 7.8 per cent.

The challengers are also seeking to appoint Entrust managing director David Franklyn and Richard Colless to the board as the current directors’ replacements.

Former Mallesons Stephen Jaques Sydney executive Frank Zipfinger, who was elected to the Aspen board on January 31, is also in the firing line.

Entrust has proposed a resolution to remove any director appointed to Aspen after January 27 and before the meeting on March 24.

Of the current board, only long-serving director Seng Fai Chan appears to be safe.

Mr Chan forced a retraction of a statement to the market last month that the board was unanimous in its decision to remove Mr Del Borello as Aspen managing director.

Entrust and Mr Del Borello’s main concern was that Aspen was trading at a 33 per cent discount to its intrinsic value.

“This action is not about seeking control, it is about restoring value,” Mr Franklyn said.

Messrs Gillard, Hawkins and Budge acknowledged Aspen was trading at a discount, but said that was symptomatic of the Australian real estate investment trust sector.

The directors rebutted the claims of underperformance, pointing to Aspen’s share price having outperformed both the ASX200 Real Estate Investment Trust and ASX300 REIT indices during the past seven months.

The directors said the group was forecast to deliver a strong increase in financial year 2011 pre-tax earnings.

“The business is very much on the right path to generate security-holder value over the next 12 months and beyond,” a statement from Messrs Gillard, Hawkins and Budge said.

“Far from Aspen having lost its way, the group now has a clear corporate strategy, a well-defined senior executive reporting structure, and a cohesive and disciplined management team.

“The team is demonstrating that it can achieve earnings growth and execute on key transactions.”

Last week, Aspen trumpeted the acquisition of a $183 million office development in Adelaide and an extension to its debt facilities with National Australia Bank until 2014 as evidence that its revised strategy had been successful since Mr Del Borello’s departure.

Under the agreement, Aspen will buy the Adelaide land from the Aspen Development Fund No.1, which had previously been unable to secure a pre-sale of the building.

Aspen Group is the fund manager and major shareholder of ADF. But Mr Franklyn said Messrs Gillard, Hawkins and Budge’s response did nothing to address the concerns of Entrust and Mr Del Borello with the direction of the group.

“There is nothing from these three directors on why Aspen trades at the biggest discount to NTA of any company in the ASX300 AREIT index with and Australian only focus – which is the sharp end of our argument.

“What we’ve seen today are three directors excusing the lack of strategy and performance by saying things are not as bad as they might be and finding comfort in the lack of performance of others,” he said.

“That’s not a measure that is acceptable to Entrust and nor should it be to any investor in Aspen.’’

Entrust said it would outline its vision and strategy for developing the company into a leading Australian funds management business shortly.

 

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