Deserted islands hit GPT Group, with book value reduced

Author: Bridget Carter
Date: 23/04/2009
Publication: The Australian

GPT Group's $200 million islands and lodges portfolio is likely to fetch only half its earlier book value, with one outback lodge in Queensland labelled "unsalable" by analysts.

In the same week GPT appointed its new chief executive Michael Cameron and chairman Ken Moss, sources say the listed property trust is still struggling to offload its flashy island assets, which have been on the market since the middle of last year.

GPT's Voyages Resorts and Hotels portfolio includes 14 properties, with the bulk being north Queensland islands, such as Lizard and Heron.

Voyages also includes the $300 million Ayers Rock Resort and other Northern Territory properties that have been subject to long-running negotiations.

But apart from a lodge in Tasmania, nothing has sold.

Since the middle of last year, the company has shaved $200 million off the value of its tourism portfolio, which also includes the Four Points Hotel in Sydney.

The value of its Voyages portfolio, excluding its Northern Territory assets, has dived from about $200 million in December 2007, when it last provided values for the individual Voyages assets, to about $100 million, according to industry sources.

It is believed Cradle Mountain Lodge in Tasmania sold for up to $20 million, after GPT shunned an earlier offer for $17 million.

Sydney developer Lang Walker has denied reports he was the buyer.

GPT valued the lodge in December 2007 at $22.3 million.

But while Cradle Mountain Lodge sold for close to its asking price, Dunk Island, off Mission Beach in north Queensland, is believed to have attracted interest at only about $25 million.

It was valued at about $51.8 million in December 2007. Voyages describes the property as a rainforest island with a 160- room resort and room rates of $330 to $630 a night.

Much of the writedown has been blamed on the fact that Dunk Island has development land on it and the value of nonincome producing land has fallen sharply.

But industry analysts say Wrotham Park Lodge, 300km west of Cairns, is unlikely to be sold at all.

While the property was valued at $2 million in late 2007, money has since been spent improving the property.

Sources say its price tag is about $5 million.

Deterring factors include the $2300-a-night cost to stay at the 10-room lodge.

Over time it has held an occupancy rate of about 30 per cent, according industry analysts.

Access to the resort is by air at a cost of $570 return from Cairns and flights are only in daylight hours and subject to certain weather conditions.

"It is very hard to run, it is very small and they won't sell it," one source said.

The property is a working station and has 10 luxury quarters as part of a homestead farming property.

Dean Dransfield from Dransfield Hotels and Resorts said the unanswered question was: who was going to buy these GPT assets.

"It is hard to get funding for high-quality mainstream assets," Mr Dransfield said.

Other assets in GPT's Voyages portfolio are Brampton Island, a small 106-room resort in the Whitsundays, with seven beaches and a coral reef amid what is mainly a national park.

Room rates range from $286 to $686 a night.

Sources say the current value is less than $10 million, but GPT valued the asset at $18.4 million as at December 2007.

El Questro Wilderness Park, a resort located in Western Australia's Kimberley region, has six rooms, which cost about $1000 a night.

The market tips the asset will sell for about $10 million, after GPT purchased the property for about $17.4 million and valued it in December 2007 for $18.2 million.

Lizard Island, on the northern Great Barrier Reef, with 24 beaches, has a 40-room resort with rooms priced at about $1000 to $2000 a night.

GPT is expected to realise $10-$15 million for the asset, after paying $25 million.

Bedarra Island has 16 villas and has a room rate at $1000 to $1500 per night.

Industry insiders say the island may attract a buyer due to its luxury appeal, but is unlikely to sell for more than $5-$7 million.

In December 2007, GPT valued the island at $24.8 million.

Silky Oaks Lodge, located in the Daintree National Park in north Queensland, has 50 rooms with a room rate of between $500 to $800 a night.

Industry insiders say the resort will sell for about $5-$10 million, but was valued at about $17.6 million.

Wilson and Heron Islands on the southern edge of the Great Barrier Reef are being sold together.

Wilson is a tiny island that houses a maximum of 12 guests in six permanent tents.

The room rate is $1600 a night, while Heron Island has 109 rooms with a room rate ranging from $300 to $900 per night.

The two are expected to attract interest at $10-$15 million, but the 2007 book value was about $35.6 million.

Some think the islands are worth more and, while they could take some time to sell, the understanding is that they will sell eventually.

GPT Group did not respond to the industry claims about its assets yesterday.