GPT GROUP — Regulatory Filings 2004

Nov 10, 2004

Lend Lease Corporation

ABN 32 000 226 228

30 Hickson Road

Millers Point NSW 2000

11 November 2004

The Manager Companies Section Australian Stock Exchange Limited

Pages: Seven (7) pages

Dear Sir

The Manager Companies Section New Zealand Stock Exchange Limited

Telephone $(612) 9236 6111$

Australia

Limited

Level 4 30 The Bond

Facsimile
(612) 9252 2192

www.fendlease.com

STOCK EXCHANGE ANNOUNCEMENT

LEND LEASE WELCOMES CONFIRMATION OF GPT INDEPENDENT DIRECTORS' RECOMMENDATION

Attached for information is a media release in relation to the proposed Lend Lease Corporation Limited merger with General Property Trust.

Yours faithfully LEND LEASE CORPORATION LIMITED

SJ SHARPE Company Secretary

Lend Lease Corporation Limited

ABN 32 000 226 228

Lougi 4 30 The Bond 30 Hickson Road Millers Point NSW 2000 Australia

11 November 2004

MEDIA RELEASE

LEND LEASE WELCOMES CONFIRMATION OF GPT INDEPENDENT DIRECTORS' RECOMMENDATION

Lend Lease welcomes confirmation by the GPT Independent Directors yesterday that they consider that the last minute Stockland proposal is not superior to Lend Lease's recommended merger with GPT.

The GPT Independent Directors concluded that the Stockland proposal is not superior to the recommended Lend Lease merger on the basis of both financial and non-financial considerations and reaffirmed their unanimous recommendation that GPT unitholders vote in favour of the Lend Lease merger.

The announcement of a conditional takeover proposal by Stockland – in respect of which Stockland admits it has not prepared necessary documentation – in the week prior to the GPT unitholder vote appears, in Lend Lease's view, solely designed to create confusion and frustrate unitholder support for the recommended Lend Lease merger next Wednesday.

Over 5 months have passed since the original announcement of Lend Lease's merger proposal. The GPT Independent Directors went through a long, open and transparent process to evaluate the Lend Lease merger proposal, during which time they made it clear they would evaluate alternative proposals if any were made. Stockland had ample opportunity during this period to put forward a proposal to GPT.

Unitholders who do not vote to support the recommended Lend Lease merger next week would be voting for an uncertain conditional proposal that has been judged by the GPT Independent Directors and their Independent Expert not to be superior to the recommended Lend Lease merger. The only beneficiary of such an outcome, in Lend Lease's view, would be Stockland.

To summarise the reasons why the recommended Lend Lease merger has been evaluated as superior:

$\ddot{\phantom{1}}$ Demonstrably better value with Lend Lease Recommended Merger

Grant Samuel indicated yesterday it had increased its valuation of the Lend Lease scheme to \$3.72 per unit. Grant Samuel based its revised valuation on the one month volume weighted average price for GPT to 5 November 2004, commenting that it believes that the market price in this period provides strong prima facie evidence of the market's expectation of the price at which securities in the merged Lend Lease/GPT group would trade.

On a similar basis, Grant Samuel valued the Stockland conditional proposal at \$3.57 per unit, having regard to trading in Stockland following its announcement on Monday 8 November 2004.

In Lend Lease's view, the real value of the Stockland proposal is even less than this. On 5 November 2004, the day prior to its announcement, Stockland's security price reached an all time high. Lend Lease believes it is important to consider the value of Stockland's proposal with reference to trading over a longer time frame. On all reasonable comparisons, Stockland's all scrip conditional proposal for GPT is well below Grant Samuel's assessed valued for GPT at \$3.72 under the recommended merger with Lend Lease.

The below table applies the same approach as in the Grant Samuel report in regards to dealing with the component of the Stockland distribution that GPT unitholders would not be entitled to.

	Value of	Ex-	Implied
	Stockland	Distribution	Value of GPT
	Security	Adjustment (1)	$Unit^{(2)}$
3 month VWAP	5.71	5.58	3.42
1 month VWAP	5.83	5.70	3.50
1 week VWAP	5.98	5.85	3.59

$(1)$ Stockland security adjusted for distributions on the same basis as Grant Samuel's 10 November 2004 report

$\langle 2 \rangle$ Implied value adjusted for distributions on the same basis as Grant Samuel's 10 November 2004 report

$\blacktriangleright$ Higher expected returns and upside potential from Lend Lease

Grant Samuel notes that due to the higher expected DPU growth rate under the recommended Lend Lease merger, total expected returns under the Lend Lease merger are 14% compared to 10.6% under the Stockland offer.

In addition. Stockland's last minute offer was launched at a time when its securities were trading at a 2005F yield of 6.4%. At a value of \$3.72 per GPT unit, the implied Lend Lease/GPT 2005F yield is around 7.0%. The Lend Lease/GPT initial proforma DPU is 9% (2.2 cents per unit) higher than Stockland/GPT and the Lend Lease/GPT target DPU growth rate is 7%, compared to around 4% from Stockland. Lend Lease believes its proposal offers the greatest potential for stapled security price appreciation from yield rerate.

$\geq$ Lend Lease offers balanced earnings mix to deliver higher growth

Lend Lease/GPT will produce around 70% of net income from investment assets and the balance from higher growth corporate activities. A merged Stockland/GPT would derive around 90% of its distributable income from property investment assets. This means:

Lower overall growth with Stockland; and

Higher risk with Stockland, as Stockland has indicated it would be seeking unspecified future acquisitions to boost its active corporate income exposure. This would require Stockland to increase gearing or issue additional equity. Most importantly. GPT investors being invited to take Stockland scrip do not have a clear picture of the future risk profile of that investment, including the prices Stockland would be forced to pay to achieve its objectives.

⋟ Lend Lease offers greater diversification of corporate earnings and hence lower risk

Lend Lease offers significant diversification of corporate earnings across development activities, funds management and project management and construction, from Australia. Asia, the UK and USA.

Stockland's corporate earnings are virtually all from Australian residential development, a sector which is widely acknowledged to have slowed in the last 12 months. Accordingly, Stockland's corporate activities have risk concentrated in one sector and country.

$\blacktriangleright$ Lend Lease offers an established international platform to fuel growth

Lend Lease offers greater and more sustainable long term growth, as well as better diversification and lower risk, through its quality international business franchise. International earnings account for 25% of the merged Lend Lease/GPT's group earnings. Lend Lease hedges its foreign earnings to ensure no material earnings risk and has the advantage of access to lower cost off-shore debt. Stockland, by contrast, offers GPT investors exposure to 3 shopping centres in New Zealand.

$\ddot{\phantom{1}}$ No integration risk with Lend Lease

Lend Lease has continually managed GPT since it was established 33 years ago, and all employees involved in the management of GPT are Lend Lease employees. Under Lend Lease management, GPT has built a high quality asset portfolio and delivered regional shopping centre redevelopments and development of large commercial assets. There is no integration risk with Lend Lease, particularly with respect to GPT's important regional shopping centre development pipeline.

Stockland's retail and commercial properties are, on average, significantly smaller in scale and poorer quality than GPT's – evidenced by their higher average cap rates in independent valuations. As a result Stockland's property management and development skills are different to Lend Lease's.

In a press release vesterday, Stockland made a number of inaccurate assertions in an attempt to bolster its proposal. The attachment to this release addresses such inaccuracies.

Lend Lease welcomes the confirmation by the GPT Independent Directors that the unitholder vote will proceed next Wednesday, 17 November 2004, and is confident it will be supported by unitholders. Following unitholder approval, the new stapled units will begin trading on 7 December. The Stockland proposal by contrast is subject to substantial uncertainties, including:

• the possibility of significant delays beyond its indicative first possible closing date in $\blacktriangleright$ January 2005 - which could be extended significantly for any reason:
• $\geq$ a highly uncertain value to GPT investors. For example, if Stockland acquires less than 80% of GPT, GPT unitholders will not get capital gains tax rollover relief. Furthermore, if rollover relief is applicable it will only apply to the unit component of Stockland stapled securities and the share component will still be subject to immediate capital gains tax. Under the recommended Lend Lease merger, GPT unitholders get full roll-over relief on the stapled securities they receive.

Lend Lease urges GPT unitholders to submit their proxies in favour of the recommended Lend Lease merger as soon as possible.

ENDS

For further information please call:

Roger Burrows Lend Lease Corporation Tel: 02 9237 5856

Grant Samuel Report

Stockland states that Grant Samuel's report "appears to value Stockland's offer in the range of \$3.57-\$3.66". This statement is incorrect. The Grant Samuel report says: "At yesterday's closing price of \$5.96, the value of the Stockland offer is \$3.57 per GPT unit, well below the value of the Lend Lease proposal at around \$3.72. Even at a Stockland price of \$6.10, the value of the Stockland offer at \$3.66 is below \$3.72". The report then includes an illustrative table of the value of the Stockland offer based on a range of different prices.

Lend Lease notes that when Grant Samuel considered the Lend Lease/GPT merger (and other similar mergers like Westfield) it considered market prices for periods of 1 week, 1 month and 3 months up to the announcement. On this basis and using the 7 cents distribution adjustment that Grant Samuel made in its 10 November report, the value of a GPT unit under the Stockland offer would be \$3.43-\$3.59.

Earnings Mix Based on EBIT

Stockland asserts that Lend Lease/GPT will have a corporate EBIT of 46%, including 20% from Construction. These figures are not supported by any reasonable analysis of the Explanatory Memorandum (which Stockland took 3 weeks to review before launching its offer). The Explanatory Memorandum includes an earnings mix based on NPAT which is summarised below together with an earnings mix based on EBIT derived from information in the Explanatory Memorandum and previously released annual reports:

	NPAT	BBIT
Investment Assets Funds Management	71% 3%	) $70\%^{(1)}$
Development Project Management and Construction	11% 15%	15% 15%

$(1)$ Split 58% in GPT and 12% in Lend Lease

Moreover, Lend Lease believes an earnings mix based on net profit is a much more relevant measure for LPT investors given the focus on earnings, distributions and EPU and DPU growth. Given companies are required to pay interest on their debt and tax on their income before distributing the remaining income, net income distributable to security holders is the appropriate measure to consider the earnings mix. On this basis, Stockland/GPT would have corporate development earnings of only around 12% before any unspecified future acquisitions.

Corporate Pavout Ratio

Stockland asserts that Lend Lease/GPT has a 128% corporate payout ratio. This assumes that all changes in group earnings as a result of the merger occur in Lend Lease and none in GPT, which is inaccurate. Furthermore, most of the adjustments that Stockland relies on in its incorrect calculation do not actually flow through the company's accounts, so the actual company payout ratio will be below the group payout ratio of 109%.

The 2005 forecast Lend Lease/GPT group payout ratio after adjusting for these items of 109% is similar to Westfield's.

In any event. Lend Lease notes that the group payout ratio is the relevant measure where Stockland's ratio is 99% and Lend Lease's ratio is 100%, before adjusting for three items which Stockland does not have in its business:

• $\geq$ Alignment of accounting policies as part of the merger, which predominantly relates to the pre merger period in the full year 2005 pro forma forecasts, and therefore will be negligible in the actual post merger results:
• $\blacktriangleright$ Distributions on GPT unstapled units held by Lend Lease – Lend Lease is making an adjustment to ensure the full amount of GPT distributions received by it are passed through to stapled security holders, as would be the case if the unstapled units were not in existence;
• $\ddot{\phantom{1}}$ Arms-length development and construction margins earned by Lend Lease on work conducted by Lend Lease for GPT. Lend Lease/GPT will pay these normal margins to its stapled security holders as they own one of the market leading construction/development businesses which is conducting that work on the development assets, rather than have these services conducted externally and pay these margins to an external party. This approach is entirely consistent with that of other stapled LPTs that have an internal construction/development capability like Westfield.