PIC valuator fights back
Julius Cobbett, Money Web
Estranged valuator gives reasons for withdrawing R1.3bn opinion.
Former PIC valuator Carl Nel has hit back with his side of the story regarding his alienation from the property syndication company. For readers unfamiliar with the story, Realestateweb recently reported that Nel had withdrawn his permission for PIC to use his valuation certificate for its Highveld 21 syndication.
Nel says he fell out with PIC after he heard unsettling rumours and asked the company for information which would put his mind at ease. The Highveld 21 syndication apparently owns 11 properties, which were valued by Nel at R1.3bn. The prospectus includes the opinion of another valuator, Joe Knipe, who arrived at the same valuation. However, Knipe confirmed to Moneyweb that he supports Nel, and that he has also withdrawn his permission for PIC to use his valuation.
This leaves financial advisers selling Highveld 21 in something of a quandary, as there is currently no independent valuation for its assets.
When Realestateweb first reported the news of his fallout with PIC, Nel chose to remain silent. However, after PIC Rikus Myburgh issued an explanation which Nel claims contains inaccuracies, he felt obliged to tell his side.
Here is Myburgh's version: "Mr Nel did indeed have certain queries with regards to the valuation for re-registration of the prospectus after which we supplied him with all the relevant information, in writing. This included a letter from the auditors of Zelpy stating that Zelpy's asset value had indeed increased with approximately 20% since his first valuation. Thereafter, Mr Nel indicated that he no longer wanted to be involved with PIC's valuations and claimed a large amount from PIC to terminate his contract. In spite of the fact that he did not have a legal contract with PIC, we agreed to pay him a specific amount. He declared his dissatisfaction with our offer and threatened to do everything in his power to harm the corporate image of PIC. Legal proceedings against Mr Nel are already initiated."
Nel responds in a three-page letter addressed to investors, financial advisers and PIC. The letter documents the circumstances which led to Nel's dispute with PIC. It contains several annexures, which he uses to support his argument. Click here to read Nel's letter (in Afrikaans) and here to download the annexures.
The letter details how Nel requested the following information from PIC:
Proof of ownership of properties in syndications 18 to 20 as well as any outstanding mortgages over those buildings. These are syndications already completed by PIC and therefore the buildings ought to be owned by the investors and there should be no mortgages. However, Nel was concerned because he had heard information to the effect that transfer of the buildings to investors was not complete.
According to Nel, PIC attorney Eugene Kruger was not able to confirm that all buildings were in investors' names, citing trouble with the deeds office. Nel said that he did not have enough information at his disposal to value syndications 21 and 22 on an income-based method.
"After numerous requests to make this information available to me were not met, Myburgh instructed me to value the syndications using a head lease. I agreed on condition that the auditors of PIC should verify these figures as real income for the properties involved before I can use it to determine the value of the head lease."
The head lease referred to by Myburgh is an agreement concluded by PIC with Bloemfontein-based property mogul Nic Georgiou, his company Zelpy and his trust, the N Georgiou Trust. Put simply, Georgiou sells buildings to PIC investors with an agreement to pay rent at a pre-determined rate for five years. Georgiou also provides a "guarantee" to repurchase the buildings at the original selling price at the end of the five-year rental period.
Nel says that his requests for further information on Georgiou's assets were met with a letter from Zelpy's auditors Mazars Moores Rowland. Partners Wayne Beelders and Cedric Peterson wrote letters to Nel which showed that Zelpy had experienced significant increases in its equity. However, Nel says that these letters, which he attached as annexures, do not contain sufficient information on which to base a proper valuation.
The head lease agreement states that Georgiou's company Zelpy will rent the buildings from PIC investors at R166m a year for a period of five years. It is this income which forms the basis of Nel's valuation.
Since inception, the Georgiou "guarantees" have bothered some financial advisers. They argue that it is impossible to assess the strength of the guarantees, because the Georgiou finances are not open to public scrutiny.
Nel says one of the conditions for PIC's use of his valuation certificate was that it should be published together with the Georgiou head lease and buyback guarantee. He says this would help brokers and advisers to determine whether the risks are acceptable prior to making in investment decision.
"Not attaching these documents in the prospectus is a misrepresentation and already enough reason to withdraw as the valuator of these two syndications," says Nel.
Source: Money Web, Julius Cobbett: julius@moneyweb.co.za
