26/05/2011 - 00:00

Aspen signals institutional shift

26/05/2011 - 00:00


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AUSTRALIA’S listed property sector was savaged by the global financial crisis but Perth-based Aspen Group has battled more than punitive market conditions in the past year.

Aspen signals institutional shift

AUSTRALIA’S listed property sector was savaged by the global financial crisis but Perth-based Aspen Group has battled more than punitive market conditions in the past year.

An attempt by Aspen’s biggest shareholder, Entrust Funds Management, to replace the board, including its managing director and co-founder Gavin Hawkins, led to a sustained attack on Aspen’s management team.

Headed by dumped former managing director and co-founder Angelo Del Borrello, the bid focused on Aspen’s corporate governance and its investment in a major development for the Australian Taxation Office in Adelaide.

It was ultimately unsuccessful but it is not a victory Mr Hawkins is keen to dissect in public.

Mr Hawkins and Mr Del Borrello founded Aspen in 2001 and worked side-by-side for a decade, harnessing the strong economic conditions to drive its expansion.

Mr Hawkins said the disagreement between the two founders was not personal and he didn’t have any regrets.

“The main thing is, for the staff and our executive team that we are through it and we can get on with business,” Mr Hawkins told WA Business News.

He denied the board challenge did any lasting damage to the business, characterising it as an “unwanted distraction”.

“I tend to take some positives out of that process and clearly, through that process, we gained significant investor support,” Mr Hawkins said.

Aspen is a very different looking business from the peak of the last mining boom and pre-GFC, when it employed 92 staff.

The slimmed-down operation has 68 employees and overheads have fallen by 20 per cent.

In light of the challenges of the past year, Mr Hawkins said it was crucial the business focused on developing and retaining its executive team and staff to ensure the operation was prepared for the next upswing.

“We have a very stable executive team that is very focused and motivated to deliver some results,” he said.

The most recent executive appointment was that of chief financial officer Simon Martin, who joined the team in July last year.

The mix of institutional and retail investors has also shifted from 70 per cent institutional investors, 30 per cent retail investors in 2007 to a 50:50 split.

But Mr Hawkins said a number of high-profile institutional investors had signaled their interest in returning to the register.

He said it had been a significant focus for him to get those institutional investors interested in the stock again.

“What I have been trying to do is improve the quality of the commercial book. We had a weighted average lease expiry (WALE) of 2.4 years, which is low. We have now acquired the ATO development (in Adelaide), that increases our WALE to 6.7 years,” Mr Hawkins said.

“And that then starts getting institutions back interested in the stock”

He said debt management had been another major issue in the past six months.

The group’s average debt maturity was very short, sitting at less than one year at the end of 2010.

Since that time Aspen has refinanced $400 million worth of facilities, representing more than 50 per cent of its debt.

He said this process illustrated the banks’ support for Aspen’s strategy and it had increased the average debt maturity across the group and its funds to 2.3 years.

“That, combined with the increased WALE, takes away any element of risk associated with Aspen Group,” Mr Hawkins said.

Aspen has about $100 million of refinancing to bed down in the next 12 months and Mr Hawkins said he was confident this would be


He said there were development opportunities in the Aspen Parks portfolio, including projects in Karratha and Coral Bay, as well as within Aspen Living.

“We have 4,500 lots in that business in the five syndicates and we want to grow that strongly over the next two to three years looking at opportunities where there may be players that are struggling to get finance,” Mr Hawkins said.

Despite this confident appraisal, the stock continues to trade at a big discount to its intrinsic value, which was one of the key concerns raised by Entrust and Angelo Del Borrello to support its board bid.

And until Aspen can close that gap, the cost of equity may restrict its growth strategy and any major acquisitions.

“Our cost of equity, like many in our sector, is pretty expensive; we are looking to correct that by getting the value back in our stock price,” Mr Hawkins said.

Aspen’s half-year result in February, revealed a 40 per cent slump in net profit after tax to $7.7 million.

However, Mr Hawkins said the operating earnings, which increased by 17.5 per cent to $15.6 million was a more accurate reflection of the group’s performance.

“The real value is what the assets generate in terms of cash, what is your rental income, what fees are you deriving from your funds management business,” he said.

“That is the real value of your




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