Losses mount for property developers

Write downs and impairments have hammered a number of the state’s biggest-name listed property players.

THE brutal property market has taken its toll on several major Western Australian property developers, with three listed players highlighting impairments or write-offs amounting to more than $200 million.

The bad news – including big statutory losses from Aspen Group and Port Bouvard, and slim net profit from Peet – came towards the end of profit-reporting season and reflects the constrained residential property market, which has limped along for the past two years.

Smaller player Axiom Properties, which plans to move its headquarters to South Australia where most of its major activity is now taking place, also pitched in with a $6.8 million loss for the year ending June 30.

In contrast, Cedar Woods revealed a net profit of $34.2 million, up 22 per cent from the previous corresponding period.

Peet, once the biggest of these players, remains the most robust of those making significant write-downs. Despite the $14.9 million in inventory write-downs it remained profitable, with the net result 76 per cent down on the previous year, while operating profit was $20.3 million, less than half that of 2010-11.

On paper, the worst of the performers was embattled developer and funds manager Aspen. Its managing director and founder, Gavin Hawkins, quit the company ahead of the results, which showed a net loss of $99 million, following a $17.4 million statutory profit in the 2010-11 financial year. The company has launched a strategic review.

The loss included impairments of $133.6 million, in relation to write-downs in the value of a number of the company’s property investment funds.

Arguably, however, the most drastic of the news among the major property developers was at Port Bouvard, which has struggled for years on the back of a major apartment development in its home turf of Mandurah, a region that never really recovered after the first hit of the GFC in late 2008.

Port Bouvard has been given a lifeline by its bank, St George, but sales at the Oceanique complex on the coast south of the Dawesville Cut have remained sluggish, with just 10 apartments sold in the financial year for around $16.6 million, compared to 25 units for $61.5 million in the previous year.

The company said 31 apartments were unsold.

Port Bouvard’s other major asset, the Point Grey development on the eastern banks of the Peel Inlet, is a long-term play it had hoped to get to market soon.

Port Bouvard has received state government approval for a marina associated with the development, perhaps the trickiest part of the plan in terms of regulatory steps. It is now awaiting federal approval, something that has proved troublesome to numerous developments in WA.

Nevertheless, there are plenty who see the long-term value of the relatively isolated development site known to have attracted several potential buyers.

It is understood that a rival property player, private group Satterley, teamed up with corporate finance player Euroz to make an offer for Point Grey at the start of the year. Insiders claim the joint venture received little attention from Port Bouvard’s management.

A sticking point is clearly going to be price. Port Bouvard paid an astonishing $93 million for the site when it bought it from the Plunkett family at the height of the property boom. 

Last week, the company said it had a valuation of $60 million from an appraisal conducted in April by a third party, believed to be St George.

However, industry sources question that valuation and highlight that both the consumer and wholesale markets have deteriorated further since that time.

In the background, there is current liability of more than $43 million, reflecting the fact that Port Bouvard’s bank facility is due to expire at December 31, adding to pressure to find a buyer or an alternative solution.

Some months ago, Port Bouvard lost its chairman Lee Verios and then CEO John Wroth in quick succession. Darryl Guihot, a former CFO of Port Bouvard’s cornerstone shareholder FKP, stepped in to run the company on an interim basis.

After spending about six weeks doing his own review, he has appointed Azure Capital as an adviser as it completes what it calls a ‘bottom-up review’ of the Point Grey project and then moves to finalise its capital management strategy.

Mr Guihot told WA Business News there was plenty to be positive about in the Port Bouvard story after a tough year.

He said Point Grey was just one hurdle away from getting through the difficult approvals process, Oceanique had not been further written down in the June quarter, and the board had confidence that the company was not insolvent.

“By putting the accounts out the other day it is implicit that the directors believe it is a going concern,” Mr Guihot said.

Azure director Adrian Arundell, who has international property experience from past transactions involving Lend Lease during a 17-year career with KPMG, is leading that limited mandate.