Gidgegannup

In July 2007, certain subsidiaries of Port Bouvard Limited entered into three separate put and call option agreements in respect of englobo land in Gidgegannup (Option Agreements). The first Option Agreement was exercised in September 2007 pursuant to which a subsidiary of the Company acquired the first tranche of rural residential land in Gidgegannup. The 2 remaining Option Agreements, if exercised, require a subsidiary of the Company to pay $30 million in August 2010 and a further amount of between $15 million and $24 million in August 2011, respectively to acquire the remaining Gidgegannup townsite lots. The total remaining payments under the Option Agreements are therefore in the range of $45 million to $54 million.

The Board has now determined that the exercise price of the options is significantly above the current market value of the remaining townsite lots which were the subject of the Option Agreements. This deterioration had previously resulted in a write-down of the value of the original Gidgegannup land acquired from its cost of $36 million to $4.85 million as at 31 December 2009.

Accordingly, Port Bouvard Limited and certain subsidiaries have entered into a cancellation agreement with the vendor of the Gidgegannup land (Riseley Investments) whereby the Option Agreements are cancelled and the relevant subsidiary’s rights and obligations under the Option Agreements are released (Gidgegannup Cancellation Agreement). Under the terms of the Gidgegannup Cancellation Agreement, the Gidgegannup land acquired will be transferred back to Riseley Investments and a fee will be paid consisting of:

  • $2 million, payable on the satisfaction or waiver of all conditions of the Gidgegannup Cancellation Agreement which are set out below (expected to be on or before 12 July 2010);
  • $3 million, payable upon the earlier of 15 January 2011 or the receipt of the refund of stamp duty previously paid to the Office of State Revenue in 2007; and
  • a deferred payment of $4.9 million, payable on 2 January 2014.

The Gidgegannup Cancellation Agreement is conditional upon:

  • shareholder approval being obtained in respect of the FKP Placement and Institutional Placement at the General Meeting; and
  • the successful completion of the key aspects of the Capital Raising (other than the allotment of shares) by 12 July 2010.

The Gidgegannup Option Agreements and their attached funding obligations have proven to be an insurmountable impediment to securing new capital for the Company during the last 9 months. The Gidgegannup Cancellation Agreement has removed this impediment and enabled the Company to secure FKP as a cornerstone investor and implement its capital management strategy. The Gidgegannup Cancellation Agreement significantly de-risks the Company going forward and will allow the Company to focus on its flagship asset, Point Grey. Further details of the Gidgegannup Cancellation Agreement will be disclosed in the notice materials for the General Meeting, to be dispatched to shareholders and available on this website shortly.