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SYDNEY-General Property Trust's self-management proposal won outover an alternative proposal put forth by Lend Lease, which hasmanaged the trust's $9 billion of shopping center and office assetssince 1999. A vote for either proposal was to result in GPT beingself-managed, but by approving GPT's own plan unitholders signedoff on a pair of controversial transactions that GPT claims arenecessary to effect the transition and that Lend Lease claims arebad for unitholders in the long run. Back in February, GPT proposedself-management as part of a plan to counter a takeover attempt byStockland Group. Under the proposal, now approved, GPT will sellinterests in three GPT retail centers to Westfield--includingSydney's Penrith Plaza, the third-most productive shopping centerin Australia--and use the proceeds to fund a joint venture withBabcock & Brown Ltd., Australia's second biggest publiclytraded investment bank. In addition, the plan will give unitholdersa 16.5% increase in distributions in 2006.Lend Lease officialsultimately spoke in favor of GPT managing itself--a change thatwill cost it an estimated $65 million in fees annually and more indevelopment revenue--but spoke out against GPT's plan, saying inpublic statements that it had "numerous flaws," a position that wasbacked by independent third-party analysis. Lend Lease said thoseflaws include the sale of GPT's prime retail assets to Westfield (a6.5% unitholder in GPT) at "a discount to true value" and theBabcock & Brown JV, which Lend Lease believes will take GPTinto new markets with "a disproportionate level of risk and lesserrewards." "The inseparable package of deals that GPT management hastied into its proposal is, in our view, not in GPT unit holders'interests," Lend Lease's Group CEO Greg Clarke was quoted assaying. GPT independent chairman Peter Joseph maintained that GPT'sproposal offers unitholders higher growth and value than the LendLease alternative. As an alternative, Lend Lease said publicly thatif unitholders reject the GPT proposal it would support aninternalization that didn't include those transactions by providingits management services at cost--with no incentive or performancefees--until the internalization is effected. That offer is nolonger on the table, but Lend Lease and GPT have reached agreementon key aspects of the transition. Key elements of the transitionagreement include:

  • Employment offers by an internalized GPT to Lend Lease Retailemployees who predominantly work on assets 100% owned by GPT.
  • Continuity of access and use of Lend Lease IT systems and IPfor asset management, funds management and other operations untilGPT has established independent systems.
  • Termination of the Property Management Agreements and transferof the Property Management businesses associated with assets 100%owned by GPT.
  • Lend Lease will not exercise its pre-emptive rights on theRouse Hill and Twin Waters joint ventures with GPT, and GPT willmake a further investment to move from 49% to 50% ownership ofthese projects.
  • GPT will make a payment to Lend Lease of $16.5 million(excluding the increased investment in the Rouse Hill and TwinWaters joint ventures) for the interim use of its IT systems and IPfor asset management and funds management.

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