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Picvest's Billion Special Case: Part 1

Picvest's Billion Special Case: Part 1

Synchronization methods for Highveld Syndication belongings are one of the largest investment failures in South Africa. Between 2005 and 2009, 18,700 buyers, most of them elderly, invested R4.6 billion in financial savings in your syndication, and still have little probability of getting a refund. The collapse of the methods left many of those buyers unlikely. A number of buyers and financial advisers have additionally dedicated suicide

In an effort to seek out answers to what went incorrect, Moneyweb did a radical "follow up" research. It targeted on 79 properties that have been initially bought to buyers for R4.6 billion on the idea of unique syndications, analyzing real gross sales events before the creation of syndicates, who owns these options right now

Read: Georgiou claims to be biased. You are a decide

The primary findings will probably be revealed in a number of articles over the subsequent few weeks. Nevertheless, the story of Highveld Syndication (HS) is complicated.

Durand Botha

The historical past of HS corporations dates again to 1998, when PIC Investments (Picvest) markets and syndicates about 120 properties to buyers. The company was based by Durand Botha, brother of Willema Bothan, Sharemax. The primary 14 syndicates (HS 1–14) have been profitable and all buyers have been paid on the idea of the agreements

The entire syndication worth of those syndicates was R2323 million and was bought in 2007 to a serious businessman and Bloemfontein property Magnate Nic Georgiou R892 million. (Georgiou and his Zephani, formerly referred to as Zelphy, and different affiliated entities later bought a big number of attributes to subsequent syndicates.)

In 2007, Botha bought Picvest's Rikus Myburgh to the alleged quantity of R330 million. Later, Myburgh resigned as CEO (in 2011). Picvest markets HS 15-22 syndicates to buyers in 2005–2011. The leaders of the HS corporations have been Ben van der Linde and Morkel Steyn.

Syndication values ​​in accordance with brochures for various syndications are shown in the desk under:

Syndication

Yr

Number of properties

Syndication value

HS 15

September 2005

6

R253 550,000

HS 16

HS 16

HS 16

HS 16

10

R309655

HS 17

February 2006

2

2 R233 220,000

HS 18

October 2006

13

R345 800,000

HS 19

January 2007

13

R602,000,000

HS 20

] December 2007

16

R678 900 000

HS 21

HS 21

HS 21

HS 21

11

R1 332,000,000

HS 22 [19659016]

R888,000,000

79

R4 644 925 000 *

19659050] * T

The Funding Case

Though Contracts and Return Phrases assorted between totally different syndicates, funding instances have been easy and engaging

. the variety of business properties owned by the actual estate syndication. Buyers will then make investments, and their money would then be used to purchase real estate. Non-repaired properties are transferred to corresponding syndicates. Buyers acquired shares and pro rata bank loans from their own HS corporations for their investments, which signifies that they actually turned the property of their house owners.

Advertising Video of HS 21

Rental Revenue for Buyers was attracted by engaging interest rates of as much as 12.5%. The syndication durations have been at the least 5 years, after which the properties have been to be bought and the capital returned to the buyers.

The HS 21 and 22 syndicates have been somewhat totally different and contained special repurchase agreements for which Georgiou, or its affiliated entities, repurchased the buyers' shares after 5 years

The paper yields appeared engaging and "risk-free" – and HS 1 – The success of the 14 syndicates and the engaging 6% reward for brokers was not too troublesome to convince 18,700 principally older individuals to spend money on R4.6 billion.

Unique syndication values ​​have been excessive

. To begin with, the valuations of real property in syndication techniques have been very excessive, which signifies that buyers in all probability paid an excessive amount of for his or her properties. In March 2010, Carl Nel and Joe Knipe, unbiased assessors of the HS Quarter and 22 Syndicates, also canceled the worth of the properties.

The desk under exhibits the extent of the initial syndication assessment. It lists solely three of the properties by which the models bought by Georgiou bought the properties in 2006 and bought them to large income for HS corporations in 2010. Three years later, the properties have been then bought to Speed up, an organization led by Georgiou's son Michael Georgiou. considerably lower values.

Property

Worth was bought to Georgiou in 2006

HS Syndication Evaluation in 2010

Worth bought to Orthotouch in 2013

Worth accelerated in 2013

Glen Gables

Glen Gables

Glen Gables

Glen Gables

R200.7 million

R123.three million

R32.5 million

1 Charles Crescent

R41 million

R206.3 million

R216.four million

R110 8 million

9 Charles Crescent

R19 million

R68.9 million

R61.three million

R17.1 million

These aren’t particular person examples. Moneyweb analyzes the titles of 27 properties bought to Accelerate. Their combined syndication worth was R1.8 billion, about R700 million greater than the R1.1 billion paid for these options. (This is analyzed in additional detail in future articles.)

Non-transfer of properties

At first, everyone went as deliberate, at the least between HS 15 and 18. The properties have been purchased in brochures and transferred to syndication corporations.

Sadly, HS 19-22 wasn't like that. Although buyers paid a collective R3.5 billion syndication value, the properties were not transferred to the corresponding syndication corporations. Nevertheless, buyers are presently receiving at the least curiosity funds.

This non-transfer of properties is likely one of the most crucial occasions leading to the failure of all HS syndicates.

Procurement process

The process by which HS corporations acquire property was complicated. HS corporations acquire the property from Bosman & Visser (B&V). B&V leaders have been Rikus Myburgh and Derik Reichel, accountable CEO and Chief Financial Officer of Picvest. But it’s fascinating that although B&V's company report exhibits that Van der Linde and Steyn have been former leaders of B&W, they each strongly deny all details about their names or their resignation from the company. (Moneyweb examines these arguments in more element in a future article)

Van der Linde claimed earlier that Myburgh was the only proprietor of B&V

B&V acted as a "mediator" for Georgiou's principal firm, Zephan and HS. The corporate buys Zephan properties, repairs them and resells them to HS corporations at a better worth. This construction was used for one property of HS 17 and for all options of HS 18-22.

The dispute between Zephan and B&V

But there was a disagreement between Zephan and B&V in 2009. Zephan argued that the "short-term" B & V's "It was R883, the claim B&V refused at the moment. Nevertheless, Zephan used this dispute to droop the switch of all properties to HS 19 for 22 corporations, despite the fact that the buyers had already paid the complete purchase worth.

It’s also unclear why Eugene Kruger, a switch agent who acquired R3.5 billion from buyers, freed money from his credit score account earlier than the actual estate transfer. The switch of options shouldn’t be solely required by regulation, however can also be defined in the HS brochures. Kruger didn't need to speak to Moneyweb as a result of the case was a sub judice. Nevertheless, he advocates authorized action to release these funds from a credit account.

It by no means noticed the extent of the dispute and its implications for the switch of property to HS techniques. contained in the corridor. Zephan by no means challenged B&V for R883. A good greater mystery is that even if the R883 cost had been made, the remaining R2.6 billion R3.5 billion of the full funding can be ignored.

It is rather curious that this dispute has not been legally investigated

Georgiou's events

Although Georgiou did not reply Moneyweb's questions associated to litigation and non-transfer of property, he claimed that he had submitted a letter. defends the current liquidation towards Zephan that he by no means acquired money instantly from Kruger or HS

He stated that when the funds of buyers have been paid to Kruger, the money was transferred to the HS corporations' third get together fund supervisor. The HS corporations then paid to B&V, which in flip paid Zephan. Georgiou subsequently announced that HS corporations had no claims towards Zephan

Despite several references to varied paperwork, Moneyweb has not discovered any paperwork by which Georgiou warrants that the transfer of properties didn’t end result

Financial problems and enterprise rescue

] The HS truthful led to 2011. The syndicates allegedly encountered monetary difficulties and couldn’t continue to pay interest beneath the unique HS agreements. The South African recession brought on by the 2008 worldwide monetary crisis and the B & V dispute was prosecuted

Throughout this time, the South African Reserve Bank (Sarb) additionally investigated Picvest's alleged violation of the Banking Regulation, and although there were uncertainties, Sarb by no means found abuses.

Georgiou has sought to remedy the state of affairs with a purpose to forestall the proposed reorganization of the proposed syndromes of the Orthotouch proposal. In line with the proposal, all of HS's properties can be transferred to a brand new Orthotouch company owned by Georgiou. The property was to be managed at Orthotouch, and buyers would obtain decreased curiosity funds. It additionally offered for the cancellation of leases and repurchase agreements, of which many buyers set up the initial investment choice.

This proposal was not carried out, and a few months later, HS leaders (Van der Linde and Steyn) set HS to rescue corporations after the investor utilized for the liquidation of HS 19.

Hans Klopper, an skilled corporate lawyer, was appointed as a rescue operator for HS corporations.

Hans Klopper, Director of Orthotouch and Rescue Operator of HS Syndication

Klopper drew up a business plan (BRP), which confirmed that without restructuring, HS corporations can be liquidated and that this might end in worthwhile destruction for buyers. BRP was nearly similar to Georgiou's unique Orthotouch proposal and was adopted in December 2011.

Klopper stated in a current investor communication that corresponded to the Highveld Syndication Motion Group (HSAG) publication that only Georgiou approached him at the time BRP had a solution which would assure continued interest payments to buyers. "In my opinion, the only way to avoid clearing up the HS companies was to renegotiate the terms of the March 2011 contract with Orthotouch and to ensure that the monthly interest payments continue to the investors."

Appointment to the Board of Administrators No Conflict of Interest – Klopper

BRP additionally advised that each one HS options be transferred to Orthotouch, and buyers would get their capital again 5 years after the plan was accepted. Buyers would also obtain lowered curiosity payments throughout this era

Following the adoption of BRP in December 2011, Klopper was appointed to the Board of Orthotouch on 9 January 2012. In a discover to buyers, Klopper said that "this [his appointment to the board] on no account means that the standing of the author and the position of the civil safety practitioner The interests of both parties are the truth is 100% inseparable. ”

Klopper resigned from the Orthotouch Board in October 2018 close to" personal reasons "for his choice.

No research

Klopper shouldn’t be investigating a dispute and failure to transfer actual estate and lack of legal action to recuperate R3.5 billion deserve additional consideration

Article 141 of the Corporations Act offers that if a rescue operator suspects e fraudulent actions or violations of regulation enforcement initiation previous to commencement of enterprise rescue procedures, they need to inform the police and SARS, and take motion to get well such funds.

But in BRP, Klopper doesn’t even formulate an opinion on the truthfulness and veracity of claims in litigation, saying that it might be too costly and that each one litigation might lead to liquidation.

In response to the draft of this text, Klopper stated that this interpretation was "misleading", including that BRP was a negotiated business plan. He also stated that the difficulty of legal proceedings was mentioned with buyers at a meeting at which the BRP was permitted.

Klopper also said that the assembly clearly said that he had very little time to attract up a rescue plan. "It is wrong to suggest that the rescue operator should have spent the time" exploring "the business of various corporations moderately than negotiating a solution to the plight of over 18,000 buyers.

" Klopper needs to make it clear that the potential of a authorized action was examined and delivered to the attention of the persons involved. in its place… when the enterprise rescue plan was reviewed and voted, he stated.

Read the complete announcement

Klopper's message to buyers in February 2012 is a bit totally different. In this communication, he stated that the approval of BRP ensured that the HS corporations handed over all of the claims that they had acquired towards Picvest and Zephan for Orthotouch. "To the extent that buyers might consider that they have claims towards Zephan Properties (Pty) Restricted and / or Bosman & Visser, BRP doesn’t consider there’s any hyperlink between buyers and these corporations, and these corporations can’t subsequently be required. . ”

The draft of this article was sent to Georgio earlier than publishing, however he didn’t reply.

Learn Chapter 2 on Picvest's Billion's Helpful Case.