Johannesburg - A business rescue manager has been appointed
for seven of the eight property syndications managed by the last big property
syndication manager, PICvest.
PICvest was previously known as PIC.
It appears to be a desperate attempt by the directors of the
property syndications to prevent liquidation.
A circular with this news was sent by the syndication
company's board of directors to the financial advisers that marketed shares in
the syndications.
About R4.5bn is currently invested in the syndications
administered by PICvest.
Hans Klopper of Independent Trustees, which also trades as
Corporate Recovery Advisors, has been asked to act as business rescue manager.
The new Companies Act provides for this type of business
rescue, giving companies in difficulty the opportunity to put their businesses
in order without liquidators breathing down their necks.
An application for liquidation has already been lodged
against one of the syndication companies and the proposed business rescue is
clearly simply a plan to ward off similar applications against the other
companies.
It is clear that investors - who have already had to see the
income promised them by the syndications virtually halved - have started to
worry whether they will ever see their money again. One investor has already
followed the liquidation route.
How successful the business rescue plan will be is yet to be
seen. The fate of the investors lies not in the hands of the companies’
management, but with controversial property developer Nic Georgiou.
The PICvest syndications operated in collaboration with
Georgiou, who operates what is probably the largest private property company in
the country.
The syndications' properties were all bought from Georgiou
and not only did he promise investors a guaranteed return (usually 10% to 12%),
but also that he would buy the property back after five years at a guaranteed
price.
But earlier this year he informed investors that he was
voiding the agreement and that they would receive a return of only 6.5%. This
was closer to real market conditions.
The reason given was that the South African Reserve Bank had
indicated that his business model, like that of Sharemax, contravened the Banks
Act. It was alleged that the transaction could not proceed as long as the sword
of Damocles was hanging over the syndications should they be proved illegal.
The proposal was made to investors that the assets of eight
different syndications, as they currently were, were being combined into a
single entity and everyone would own shares in a portfolio theoretically worth
about R5bn.
The new company, Ortotouch Ltd, would buy the properties in all the syndications at the syndicated value. He would also add another R500m worth of unsecured property to the portfolio.
These transactions, however, would have to be approved by the
Securities Regulation Panel and the Competition Commission. It appears that the
approval process has hit a snag because not all players are in agreement.
Meanwhile there is no sign of any action from the Reserve
Bank. It therefore seems that the future of PICvest’s funds is still shrouded
in uncertainty and that Georgiou may still be pulling the strings.
The properties in the last four syndications have still not
been transferred to the investors and there are many versions as to why this
hasn't happened yet.
Georgiou frequently made loans to the first syndication companies - ostensibly to subsidise the returns promised - when the actual rental income
was no longer sufficient.
At this stage it appears that the board of directors continues to hope that some agreement can be reached with Ortotouch which will protect investors’ interests, and that the business rescue scheme is simply an attempt to keep the wolf from the door.
Meanwhile investors have to be satisfied with the reduced
income, as well as no immediate prospects of getting their money back.
None of the PICvest directors responded to telephone
messages.