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City Pacific Limited has just announced an 18 per cent increase in net profit after tax for the 2007 financial year. Investor TV spoke to Phil Sullivan, City Pacific’s managing director. Phil, how did you achieve this result?
PHIL: We had a very strong year in 2007. We’re up 18 per cent on last year; we said we would deliver double-digit growth between 15 and 20 per cent and we’ve hit that right in the middle. We’ve had a strong year with our property division and our lending division. We are looking forward to the coming year, we’ve had an extremely strong first six weeks and we’ve got an enormous amount of prospects in the pipeline.
KATE: The property sector has been under intense scrutiny over the past year – how has this affected City Pacific?
PHIL: City Pacific has been lending in this sector for just over 10 years – we just celebrated our 10th anniversary. During that period we’ve never had a capital loss for any of our investors, we’ve completed in excess of $8 billion worth of projects and lent in excess of $4 billion to our borrowers. I think those numbers illustrate that we have an extremely strong handle on our business.
KATE: What’s your response to the recent takeover speculation about City Pacific?
PHIL: City Pacific doesn’t see itself as a takeover target. We are in fact looking at a number of companies with the purpose of growing our mortgage book. We would expect to make at least one acquisition in the near future and possibly more. We will most definitely move away from the concentration on the retail market for our investor funds and we will move more towards the institutional market.
KATE: Marinas are a fast growth area – what are your plans?
PHIL: City Pacific will introduce a marina fund within the next few months. We currently have a number of operating marinas that are under construction or we have access to. So we would look to have the funds up around 60-90 days and expanding that fund to around 7 marinas in the next 18 months with a value of around a quarter of a billion dollars.
We believe the marina industry is an extremely strong industry and will deliver significant growth in the short and medium term. It is an industry that has delivered enormous growth over the last few years and will continue to do so.
KATE: In June, related company CP1 announced a strategic alliance with Victoria-based developer Grocon – how is this developing?
PHIL: Grocon is a builder of iconic structures; they are extremely well known in Victoria and they have made a conscious decision to move into southeast Queensland. They are about to commence construction on Soul and Vision – on the Gold Coast and Brisbane - and we believe they will add significant capabilities to CP1 with their projects going forward. We have a number of opportunities we are considering and Grocon are the ideal partner to take those projects forward.
KATE: Phil can you give us an update on the $400 million Martha Cove marina community in Victoria?
PHIL: Martha Cove is going extremely well – the final stage is being completed and will be completed in the dry season. It’s a new suburb, people are living there and it's become a community. We are looking forward to the retail component starting shortly, giving the community a heart with the alfresco dining and the restaurants around the marina section.
We’ve concentrated in the past on delivering super lots to developers; from here on we’ll concentrate on building out the finished product and that will increase revenues and the profit margin to CP1 and City Pacific.
KATE: What about the Townsville Ocean Terminal marina project?
PHIL: Townsville is going exceptionally well with all approvals just about in place. We expect to start development during the next calendar year and the interest in the project has been enormous so we are looking forward to getting in there and starting.
KATE: How does Queensland’s booming economy affect City Pacific?
PHIL: Queensland has been a strong base for City Pacific – about 50 per cent of book is currently loaned in Queensland, with just over 40% in Victoria and the balance in New South Wales. We do see New South Wales coming off the floor as far as the residential market is concerned and we’re able to move very, very quickly.
We’re quite happy with having the majority of our book in Queensland at this time. It’s been a very strong market – that’s down to resources boom and the tourism boom. We’re very comfortable in Queensland and particularly southeast Queensland.
KATE: And finally Phil can you tell us what your growth prospects are?
PHIL: The constraint to our growth has always been the availability of funds. We have regular borrowers. We’ve never spent a cent on advertising for borrowers, it’s purely repeat business that we rely on.
We have a very strong shareholder base – both our unitholders in the mortgage trust and our shareholders have shown extreme loyalty over the years and our early shareholders have extremely well. When we listed in 2001 our market capitalisation was in the vicinity of $11 million and we currently are in excess of $600 million. So our original shareholders have done extremely well.
We most certainly can deliver another record year on top of the 18 per cent uplift we’ve had this year. We’re looking forward to the coming year.
KATE: Thanks for your time Phil, I’m Kate Williams for Investor TV.
PHIL: We had a very strong year in 2007. We’re up 18 per cent on last year; we said we would deliver double-digit growth between 15 and 20 per cent and we’ve hit that right in the middle. We’ve had a strong year with our property division and our lending division. We are looking forward to the coming year, we’ve had an extremely strong first six weeks and we’ve got an enormous amount of prospects in the pipeline.
KATE: The property sector has been under intense scrutiny over the past year – how has this affected City Pacific?
PHIL: City Pacific has been lending in this sector for just over 10 years – we just celebrated our 10th anniversary. During that period we’ve never had a capital loss for any of our investors, we’ve completed in excess of $8 billion worth of projects and lent in excess of $4 billion to our borrowers. I think those numbers illustrate that we have an extremely strong handle on our business.
KATE: What’s your response to the recent takeover speculation about City Pacific?
PHIL: City Pacific doesn’t see itself as a takeover target. We are in fact looking at a number of companies with the purpose of growing our mortgage book. We would expect to make at least one acquisition in the near future and possibly more. We will most definitely move away from the concentration on the retail market for our investor funds and we will move more towards the institutional market.
KATE: Marinas are a fast growth area – what are your plans?
PHIL: City Pacific will introduce a marina fund within the next few months. We currently have a number of operating marinas that are under construction or we have access to. So we would look to have the funds up around 60-90 days and expanding that fund to around 7 marinas in the next 18 months with a value of around a quarter of a billion dollars.
We believe the marina industry is an extremely strong industry and will deliver significant growth in the short and medium term. It is an industry that has delivered enormous growth over the last few years and will continue to do so.
KATE: In June, related company CP1 announced a strategic alliance with Victoria-based developer Grocon – how is this developing?
PHIL: Grocon is a builder of iconic structures; they are extremely well known in Victoria and they have made a conscious decision to move into southeast Queensland. They are about to commence construction on Soul and Vision – on the Gold Coast and Brisbane - and we believe they will add significant capabilities to CP1 with their projects going forward. We have a number of opportunities we are considering and Grocon are the ideal partner to take those projects forward.
KATE: Phil can you give us an update on the $400 million Martha Cove marina community in Victoria?
PHIL: Martha Cove is going extremely well – the final stage is being completed and will be completed in the dry season. It’s a new suburb, people are living there and it's become a community. We are looking forward to the retail component starting shortly, giving the community a heart with the alfresco dining and the restaurants around the marina section.
We’ve concentrated in the past on delivering super lots to developers; from here on we’ll concentrate on building out the finished product and that will increase revenues and the profit margin to CP1 and City Pacific.
KATE: What about the Townsville Ocean Terminal marina project?
PHIL: Townsville is going exceptionally well with all approvals just about in place. We expect to start development during the next calendar year and the interest in the project has been enormous so we are looking forward to getting in there and starting.
KATE: How does Queensland’s booming economy affect City Pacific?
PHIL: Queensland has been a strong base for City Pacific – about 50 per cent of book is currently loaned in Queensland, with just over 40% in Victoria and the balance in New South Wales. We do see New South Wales coming off the floor as far as the residential market is concerned and we’re able to move very, very quickly.
We’re quite happy with having the majority of our book in Queensland at this time. It’s been a very strong market – that’s down to resources boom and the tourism boom. We’re very comfortable in Queensland and particularly southeast Queensland.
KATE: And finally Phil can you tell us what your growth prospects are?
PHIL: The constraint to our growth has always been the availability of funds. We have regular borrowers. We’ve never spent a cent on advertising for borrowers, it’s purely repeat business that we rely on.
We have a very strong shareholder base – both our unitholders in the mortgage trust and our shareholders have shown extreme loyalty over the years and our early shareholders have extremely well. When we listed in 2001 our market capitalisation was in the vicinity of $11 million and we currently are in excess of $600 million. So our original shareholders have done extremely well.
We most certainly can deliver another record year on top of the 18 per cent uplift we’ve had this year. We’re looking forward to the coming year.
KATE: Thanks for your time Phil, I’m Kate Williams for Investor TV.
