Should one worry about the billions that seem to have gone walkabout?
- DOWNLOAD THIS INTERVIEWALEC HOGG: The people who invested in a company called Picvest might wish that they’ve lost only 1% [like the Shoprite and AngloGold Ashanti share prices]. It's been a saga of concern and our Julius Cobbett, investigations journalist atMoneyweb, has been taking a very close watch on what's going on at Picvest. Jules, it's a running saga, billions of rands involved, most of it pensioners or retirees’ money. Give us the story so far.
JULIUS COBBETT: Alec, it’s a long story, it goes back a while. The properties were supposed to be sold to investors in the syndication form – so you lump a few properties into a company and the investors buy it. Picvest was different because it was supposedly guaranteed by a gentleman by the name of Nic Georgiou.
The recent development is that Georgiou has walked away from his guarantees and now investors are left with a lot less income than they used to get.
The recent development is that Georgiou has walked away from his guarantees and now investors are left with a lot less income than they used to get.
ALEC HOGG: So what were they expecting to get, or what were they sold on?
JULIUS COBBETT: Well, it depends on the syndication, but I think in the most recent one they were getting as much as 12%, and that’s now been reduced to 6%.
ALEC HOGG: So those guarantees weren't worth the paper they were written on. You met this week with the new managing director at Picvest.
JULIUS COBBETT: Well, he’s been there since March 2008. His name if Rikus Myburgh. He took over from Durand Botha who is, as you know, the brother of Willie Botha from Sharemax.
ALEC HOGG: So it runs in the family. What did he have to say to you, Mr Rikus?
JULIUS COBBETT: Well, there are two major issues. The first one, the drop in income – that was you could say guaranteed by a lease agreement which Georgiou had to lease the buildings from the investors. I questioned him about that, because he’s now blaming the Reserve Bank, saying that it is now responsible for Georgiou reneging on his lease.
ALEC HOGG: Can that be possible? Why would the Reserve Bank be involved to that degree? Surely the Reserve Bank is only there to protect us?
JULIUS COBBETT: Exactly. And what Rikus told me was that the lease agreement is also dependent on a buy-back agreement, and that the Reserve Bank says that the buy-back agreement is a contravention of the Banks Act because it's a type of a guarantee. So what Rikus is now telling us is that you can't have the lease agreement without the buy-back agreement, and vice versa. And that's why Georgiou walked away from the lease agreement.
ALEC HOGG: Sound like a bit of … here, Jules?
JULIUS COBBETT: Ja, it does, and if you look in the prospectus there’s nothing in the lease agreement that says the one is dependent on the other. So we will wait for him to show me the exact wording where it says the one is dependent on the other.
ALEC HOGG: But you remain sceptical?
JULIUS COBBETT: I do. And then the other big problem with the scheme is that there’s R3.5bn worth of syndications sold to investors and the properties haven't yet been transferred into their names.
ALEC HOGG: Jeepers. So they put the R3.5bn, presumably, again through high-pressure salesmen who were well rewarded or well remunerated through high commissions?
JULIUS COBBETT: Ja, that’s right. The brokers received I think about 6%. But some of these syndications were sold as far back as 2007, and they still haven't been transferred into investors’ names.
And the one thing Mr Myburgh can't tell me is whether the properties themselves are unencumbered – they don’t have any debt. He can't tell me that for sure, and the rumours we've been hearing from lawyers who phoned us and other parties, they say they are indebted, they have bonds.
And the one thing Mr Myburgh can't tell me is whether the properties themselves are unencumbered – they don’t have any debt. He can't tell me that for sure, and the rumours we've been hearing from lawyers who phoned us and other parties, they say they are indebted, they have bonds.
ALEC HOGG: It sounds a bit like the Sharemax story, which really did end in tears.
JULIUS COBBETT: Ja. Well, it's different from Sharemax in that Sharemax was a developer. Here it's cut and dried – the prospector says: “Give us the money, we give you the buildings.” The investors have given them the money, but they haven't got the buildings.
ALEC HOGG: Julius Cobbett will be chasing that story, staying on top of it. Jules, just before you go, what about the investors’ R3.5bn that has been put in there? Do they have any recourse at this point? Should they be worried?
JULIUS COBBETT: Well, I think there is reason to be worried if they can't say that the buildings are without debt. Why haven't they been transferred yet? So I think there is reason to worry about that and hopefully some clarity can be given in time.
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