Saturday, December 3, 2011

Property Syndication- R4.6bn Pickvest rescue hinges on property billionaire

Property Syndication
Julius Cobbett
02 December 2011 09:22
R4.6bn Pickvest rescue hinges on property billionaire

Rescue practitioner says the choice is simple: Accept Georgiou’s deal, or liquidate.
Pickvest investors stand to lose an estimated R3.8bn, or 81% of their capital, unless they accept a rescue offer proposed by controversial billionaire Nic Georgiou. This is the message from business rescue practitioner Hans Klopper who filed his plan to save the Pickvest property syndications on Wednesday. The rescue plan can be downloaded here.

It was Georgiou who, through his companies, “guaranteed” the generous returns offered by Pickvest syndications. But these guarantees turned out to be worthless when problems started to emerge at the syndication giant earlier this year.

Klopper was appointed to the eight Pickvest schemes in a bid to prevent their liquidation. His appointment provides the syndications with temporary protection from their creditors. This protection gives Klopper time to decide if the syndications can be saved.

In the 62-page rescue document, Klopper effectively tells investors they can choose Georgiou’s offer, or face the liquidation of their investments. Says Klopper: “It is evident that the prospects of the investors recovering their capital without the [Georgiou] offer being accepted are bleak whereas the recovery prospects, should the offer be accepted, are considerably improved.”

Klopper adds that the Georgiou proposal, known as the Orthotouch offer, is the “only realistic opportunity” for investors to recover their capital.

The Orthotouch offer is nothing new. It was proposed to investors in April. The deal would see Orthotouch, a company controlled by Georgiou, buying all of investors’ buildings, and paying for them after five years. They will also earn an income, starting at 6% in year one, increasing to 7% by year five.

However, Klopper has renegotiated the original transaction with clauses and safeguards that he says are to the benefit of Pickvest investors. He says the deal will be underpinned by property worth more than R4bn, and that investors can appoint two directors to the Orthotouch board. Further, Georgiou’s company, Zephan, will transfer buildings worth approximately R1.5bn into Orthotouch for added security. Orthotouch may not lend any money to or invest in third parties while investors remain unpaid.

Klopper says there has been a “groundswell of optimism” from financial advisers, some of whom were steadfastly opposed to the Orthotouch offer in its original form.

Investors are scheduled to meet on December 14, where they can propose amendments to Klopper’s plan and vote to approve it. The plan amounts to the acceptance of the renegotiated Orthotouch offer.

A key feature of the Orthotouch deal is that it is dependent on its acceptance by investors in all eight property syndications. Those in the Highveld 19-22 might feel they have nothing to lose by voting for Georgiou’s proposal. But those invested in the healthiest syndication, Highveld 18, may be less inclined to invest another five years with Georgiou.

Bleak liquidation scenario

Klopper provides investors with estimates of what they can expect to receive in the event of liquidation. It is no surprise that those invested in the older syndications, Highveld 15-18, are expected to fare considerably better than the others. This is because the older syndications actually own property. The others do not.

In April Moneyweb reported that Highveld 18 is the healthiest of these four syndications, and that 16 was in the most trouble. Klopper arrives at the same conclusion in his business rescue plan.

According to Klopper’s estimates, an investor in Highveld 18 might hope to recover 61% of their capital. An investor in Highveld 16 might get 35c. Klopper’s estimates are based on the orderly sale of assets at market value. He estimates that the return could even be 50 percent lower if the assets are sold at auction prices.

For the investors in the newer syndications, Highveld 19-22, the situation is considerably bleaker. These syndications do not own any property. Their only asset is a claim against a company called Bosman & Visser, which has no assets to speak of. For more on this perilous situation, see this article.

Klopper describes the difficulties of pursuing the claim against Bosman & Visser (B&V) in his rescue plan. He says that at least R10m will be needed to sue B&V. In turn, the liquidators of B&V would need money to sue Georgiou’s company Zephan, which has so far failed to deliver investors’ buildings.

Klopper says that Zephan “will undoubtedly defend such action and institute a counterclaim for damages against B&V.”

If the syndications Highveld 19-22 are liquidated, Klopper expects investors to recover no more than R250m out of a total of R3.5bn invested. He also warns that this recovery could take years. Investors in Highveld 21, the largest, are the worst off, with an expected recovery of only 2% of their capital. The best is Highveld 22 with an expected recovery of 17.6%.


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Author: Julius Cobbett
05 August 2011 12:38
Asset management boss in R1.2bn fight with property billionaire

Investors claim that Nic Georgiou failed to deliver Fourways Mall to them.

JOHANNESBURG - Prieur du Plessis, the founder and executive chairman of Plexus Asset Management, appears in a R1.2bn battle with the Georgiou family. Regular readers will be familiar with apparent billionaire Nic Georgiou’s involvement in troubled syndication scheme Pickvest (formerly PIC Syndications).

Du Plessis is described in court papers as the representative of Signal Capital and Securities, which is the “general partner” of the Plexus Private Property Fund. Signal Capital is suing Georgiou’s Fourways Precinct for R1.2bn.

But Du Plessis downplays his own involvement, and tells Moneyweb that he is “not the representative” of Signal Capital & Securities and also does not serve as a director of this company.

“Plexus Private Property Fund is, as its name implies, a private fund put together by nine private investors, who asked that the fund be administered by Plexus.” Du Plessis notes: “Neither Plexus itself, nor any of the funds we manage, nor any clients outside of the specific investors in this portfolio have, or have ever had, any exposure to this private portfolio. “

The Fourways Precinct is a private company that counts Nic Georgiou’s 40 year-old son, Michael Georgiou, as its sole director.

Volksblad reported that Signal Capital entered into a contract in May 2006 to buy the Fourways Mall and other surrounding properties for R2.9bn. In its court papers, the Fourways Precinct claims that the contract lapsed because suspensive conditions were not met. However, Signal Capital claims that the Fourways Precinct cancelled the contract illegally.

The Plexus fund issued summons against the Fourways Precinct on March 31 2008. But the case has been delayed by side skirmishes. The most recent case known to Moneyweb was a fight over security for costs.

Fourways Precinct wanted Signal Capital to pay R7.3m as security in case the judge orders Signal to pay Fourways’s costs.

Signal said it was not opposed to paying security, but said R7.3m was excessive. In February this year, Free State Judge SPB Hancke ordered Signal to pay security of R3m.

Du Plessis declined to state whether this security had indeed been paid, nor would he comment further on the case. “The matter is being dealt with by the Court and, as such, it would be inappropriate to comment further.”

He would only note that the legal action “relates not to an investment made and not recovered, but to rights to future profits that were denied”.

Nic Georgiou and his immediate family are terribly media shy. They have simply refused to respond to queries from Moneyweb.

Pickvest investors may be interested to learn about the court battle, because the Fourways Precinct is one of the parties to a restructure of eight property syndications with a total value of R4.5bn.

In terms of the restructure agreement, which can be downloaded here, Georgiou will repurchase the buildings he originally meant to sell to investors. Payment would not be made immediately, but after five years.

Nic Georgiou signed the agreement on behalf of Fourways Precinct. No mention was made of the precinct’s legal battle.


Property Syndication............

Statutory managers appointed at Sharemax
Julius Cobbett
16 September 2010

Managers tasked with conducting an "urgent review" of syndications.

JOHANNESBURG - The Registrar of Banks has appointed two statutory managers to Sharemax and all of its syndication companies. The managers were appointed to conduct an "urgent review" of the syndication companies and to seek "positive solutions" for investors.

The Registrar appointed Neels Alant, partner in law firm Hahn & Hahn and Jaco Spies, director of Facct Forensic Consulting, as statutory managers.

The appointments come as Sharemax investors and their financial advisers face tough choices - particularly those invested in the two largest syndications, Zambezi and The Villa.

"Following a meeting with Sharemax directors in Pretoria this afternoon, the statutory managers stated that they will maintain business as usual and seek positive solutions for the investors while evaluating the state of the company and its related syndicated properties," reads a Reserve Bank media release.

The managers said: "Our mandate is essentially orderly management and the protection of the interests of investors. To this end, we are conducting an urgent review of the companies and will inform investors of the next steps as soon as we are in a position to do so."


Sharemax increasingly paranoid
Julius Cobbett
05 December 2007

The mega-size property syndicator’s lawyers are doing good business threatening journalists and financial advisers. Read about its latest threat.

Botha, Willemse & Wilkinson, attorneys for property syndication company Sharemax Investments, are onto a good wicket. They have drafted countless threatening letters to journalists (including this one) at Sharemax's expense.

Apart from that, they have racked up good fee income in the ongoing legal battle between Sharemax and former financial journalist Deon Basson.

The latest Sharemax job to land in the Botha, Willemse & Wilkinson offices involves a threat issued to financial adviser Andre Matthews.

Matthews had the temerity to author an analysis of Zambezi Retail Park, a Sharemax syndication.

The critique can be read by clicking here.It was distributed to various financial advisers and raises concerns about the Zambezi development.

Says Matthews: "It took Sharemax roughly a day to get a lawyer's letter, threatening me with action for defamation, on my desk. There was no defamation, only an analysis of its prospectus." The letter was written by Coenie Willemse, an attorney for Botha Willemse &Wilkinson.

To read Willemse's letter, click here (letter, pages 1,2, 3 and 4 ). To read Mathews's response, click here.

The main concern raised by Matthews is a so-called "cash flow shortfall fund" which will be used to subsidise investors' income. This is a common theme among Sharemax's syndications, which offer investors a minimum annual cash income.

Matthews is worried that the Zambezi Retail Park fund will be sufficient only for a few months before it is depleted.

Willemse does not address this specific concern in his letter to Matthews.

Matthews argues that there is no justification for investing in the Sharemax project. "It is far better for investors to put their funds in a fixed deposit," he notes. "The risks for the tiny bit of upside the investors might get vesus the probable downside are simply way too great."

Moneyweb has previously noted that some respected financial advisers believe that Sharemax and other property syndications have excessive fees and lack transparency.

This is not the first time that Coenie Willemse has threatened financial services professionals. The Sharemax website carries an apology from PSG Konsult Academy CEO Jan (JJ) Serfontein.

In a letter addressed to Willemse, which is published on the Sharemax website, Serfontein apologises for allegedly untruthful statements made by independent contract facilitator Adriaan Schutte during a presentation.

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