Port Bouvard has emerged from its financial strife and is now strongly positioned to commence work at its landmark project, Point Grey. Dan Wilkie reports.
AFTER a challenging year in which the company was considered by many to be in deep financial strife, residential developer Port Bouvard says its new capital management strategy has taken the firm one step closer to its goal of no longer being reliant on the banks.
The last 12 months for Port Bouvard has seen share values plummet by 46 per cent after an eight-month trading halt, an annual loss of $26 million, and the cancellation of an agreement to develop land at Gidgegannup, after the company refinanced its debt facility with St George in November 2009.
Port Bouvard blamed its $26 million financial year loss on accounting impairments and other losses at Gidgegannup, where the land cost Port Bouvard $36 million to acquire in 2007, but was valued at $4.85 million in December 2009.
In an ASX announcement released in May, Port Bouvard said the Gidgegannup project had proved to be “an insurmountable impediment” to securing new capital over the previous nine months.
Port Bouvard chief executive John Wroth said jettisoning the Gidgegannup project and launching the refinancing process, which began in March 2009, had allowed the firm to embark on its new capital management strategy, designed to restore credibility to its stock after the eight-month trading halt on the Australian Securities Exchange.
“We’ve had to look at where we’ve come from as far as core competencies, abilities and achievements are and how best we can leverage from them into the future,” Mr Wroth said.
“Yes, the decision in regards to Gidgegannup was necessary in order to make the fresh start. When delivering these transformational activities there has been continuity as far as our management and our values are concerned.”
Part of the strategy was a $60.2 million capital raising, completed in June, which included a $22.75 million cornerstone investment by Queensland-based FKP Property Group, which will hold 29.47 per cent of Port Bouvard.
“FKP have not previously had a presence in Western Australia, despite having their foot on the ground in nearly every other state, they are one of Australia’s larger developers, and I believe they’ve been looking for some time to invest in the West,” Mr Wroth said.
“I believe the Company is a perfect fit for them to enter the WA residential property market through an existing platform that has regarded management on the ground, as well as strong relationships with local and state governments within the Peel Region, on the most valuable undeveloped site in WA, and a platform that has already proved itself, which has been highlighted with the recent Masterplanned Community UDIA award.”
Also part the capital management strategy, Mr Wroth said, was a non-core asset disposal strategy.
“Essentially these non-core sites were some of the smaller sites that we acquired pre-GFC in order to benefit the shorter to medium term turnover,” Mr Wroth said.
“These sites have been through varying stages of planning approvals before being sold, like Melros and Dawesville, as well as the final stage of Port Bouvard, Eastport stage 5, which we developed into 47 canal lots and 37 island lots which we sold in four weeks.”
Mr Wroth said the successful capital raising and Port Bouvard’s agreement with PKF had the firm poised to commence its landmark 175-hectare Point Grey masterplanned community near Mandurah.
“An important aspect of the capital raising was $32.2 million we have set aside purely for the commencement of Point Grey,” Mr Wroth told WA Business News.
“When we went to the market we wanted to make sure the shareholders and the incoming institutions had every confidence that we would be able to commence our flagship development, Point Grey, without having to go back to the market, or be reliant on banks to fund. This robust financial position is truly unique and uncommon amongst our industry peers.
“The other key part of our transformational activity, through the capital raising process, is the quite significant change to our shareholder base, so that now the share register is made up of an increased number of institutional players.
“The greatly improved gearing position, attractive discount to NTA and medium term prospective profitability and eventual yielding stock has been the investor’s main attractions.
Mr Wroth said the $32 million set aside for Point Grey would go towards construction costs for the entry road, sewerage, water, power and civil works for the first 170 lots of the 3,080 lot development.
“What we have done is effectively de-risked Point Grey,” he said.
“I think we are on track to match or better our industry peers when you consider our ability to now start Point Grey and unlock a 13-year development lot pipeline of 3,080 lots.
“That opportunity is further highlighted by the presence of FKP now coming on board, and a range of new institutional investors who are further satisfied that FKP have completed an enormous amount of due diligence which should give an investment in the Company some confidence.
“Out of that first stage we expect $35-40 million in sales revenue, of which we’ll only use $7 million to turn around stage two, so the project is fully funded from day one, and will then unlock $1 billion in sales revenue over the next 13 years.
“It’s not only reducing the reliance on the banks, but its protecting the Company against a downturn in the market where the capital markets are constrained.”
According to Mr Wroth, the Point Grey development has passed through 80 per cent of the planning approvals process with the Shire of Murray, and estimated a development plan would be approved by October, paving the way for construction and pre-sales to commence mid-2011, and land titles available by the end of 2011.
“We’ve been working on it for about three years, the approvals take that long for Point Grey, you can appreciate its quite a unique site with the coastline and the proposed marina,” he said.
Mr Wroth said Port Bouvard would also focus on completing existing settlements for its boutique $127-million luxury apartment complex, Oceanique, and relaunching its stage two sales campaign for the project’s remaining 26 apartments.