Central Equity Shares Dumped

Investors demolish $22m of Central Equity's worth.

Investors have dumped Central Equity shares, shaving almost $22 million off the value of the Melbourne residential development company after it warned it was unlikely to make a profit in the next calendar year.

After closing at $2.21 last Friday, the stock opened down 23¢ yesterday. With transactions at six times its daily volume, it plunged to $1.63 before rebounding to close at $1.90, down 31¢. The shares hit a high of $2.45 in July.

The company attributed the expected earnings decline to unsuccessful and delayed planning approvals, increased costs, a stronger Australian dollar, changes to the urban growth boundary and the introduction of a development levy.

Graham Middleton, a director of Synstrat Management and an investor in the company, said a "major contributing factor" to the price fall was the high fees being paid to the company's directors Eddie Kutner, Dennis Wilson and John Bourke.

Mr Middleton said each was paid more than $2 million. For a company the size of Central Equity, he estimated their salary should be about $500,000 each. He also questioned a death and incapacitation allowance that had an estimated $3 million value and would rise annually.

After unsuccessfully raising his concerns with the company, Mr Middleton believes he will have investor numbers to call an extraordinary meeting early next year to discuss executive directors' benefits.

A Central Equity spokesman declined to comment on the directors' pay packages and the share price plunge.

In its profit warning, the company said it was doing a strategic review and was seeking alternative property-related income.

"The only new project which is currently being marketed is Woodland Waters Estate at Mernda and even those sales will not be fully recognised in the 2006 year due to the adoption of the new international financial reporting standards," it said in a statement to the stock exchange.

Central Equity was listed in the mid-1980s and kick-started Melbourne's boom in high-rise living with developments at Southbank in the early 1990s. Aimed at investors, apartments were marketed in Asia and London.

Central Equity upgraded its standard of finish during the height of the boom after a range of criticisms.

Melbourne's apartment market peaked in 2002 and came off sharply when the boom ended in 2003.