This article is from the Australian Property Journal archive
A DISGRUNTLED group of investors want Castlereagh Capital to takeover the distressed Premium Income Fund by booting out Jenny Hutson’s Wellington Capital. Meanwhile Trilogy, which famous ousted City Pacific in 2009, has taken control of six Austgrowth property schemes.
The PIF Action Group, which represents 27% of investors, have voiced their concerns about the continued poor financial performance of the fund and believes it will be improved by dumping Jenny Hutson’s Wellington Capital.
The investors group said Wellington has not acted ‘positively for the benefit of all members’ and has failed to deliver on promised milestones including a three cent capital distribution to members by 24 December 2008, which was not paid. Wellington also promised quarterly distributions by March 2009, which have never be paid or commenced.
PIF Action Group vice president Charles Hodges said Wellington has also failed to help members pursue claims for up to $400 million (over 50 cents per unit) against the fund’s former auditors, responsible entity and some of its directors, where Wellington commenced proceedings against the class action members to strike out the claim against it and its wholly owned subsidiary Wellington Investment.
Hutson took over control of PIF in May 2008 from failed property group Octaviar, formerly MFS, despite concerns of a conflict of interest due to the close relationship between Hutson and Octaviar’s executive Chris Scott, who was reportedly running Octaviar and was part owner of Wellington Capital.
Hodges also questions Wellington raising $11.3 million from unknown third party investors without unitholder approval and is doing so at a 70% discount to the value of the fund.
“There are many more examples of the failure of Wellington to act positively for the benefit of all members. The issuance of units at a discount of more than 74% without our consent, and in breach of the Constitution and the Corporations Act – astounds us. Wellington is clearly no longer acting in our best interests,” Hodges said.
Castlereagh chairman Ian Ferrier AO said his team would focus on reducing the substantial 74% discount to net tangible assets of the fund and developing viable turnaround strategies for its assets.
“Many of the investors in the fund are retirees, for whom a timely and value-maximising strategy is crucial. Castlereagh is ideally positioned to deliver this strategy.
“Our senior executives have significant experience in managing both distressed and performing property and mortgage funds. The board of directors and senior executives hold senior roles in both listed and unlisted funds where assets under management exceed $17 billion. We also have considerable expertise in managing large-scale litigation similar to the current class action, to which many unitholders are a party,” he added.
Ferrier said Castlereagh has the expertise of director Tony Pope, who led the reconstruction and workout of Estate Mortgage Trust, which collapsed in the early 1990’s.
“Estate Mortgage had similar problems to the Premium Income Fund. Tony was able to stabilise and then turnaround the trust, which became Meridian Property Trust and continues to operate today. The successful reconstruction secured value of $300 million for investors in that trust,” he continued.
Meanwhile CYRE Trilogy has won control of six schemes managed by Austgrowth Property Syndicates after unitholders’ meeting last Friday.
Trilogy Group chairman Rodger Bacon said CYRE Trilogy enjoyed very strong support from the active members of Austgrowth schemes.
“However, as is usual in these situations, there is a significant number of inactive members and because they do not vote, it is effectively a vote for the incumbent manager.
“Given the very high threshold required – 50% of all units on issue – it is always very difficult, because of the inactive members, to exceed this threshold. For example in 66% of the schemes in which a vote was taken, a majority voted in our favour which is a measure of the strong support received,” he added.
Despite the unusual voting situation, CYRE principal Peter Arnold said it was still gratifying to bring about management change in these six schemes.
“Throughout the process we have only stood for the best interests of unitholders.
“This particular venture was not about acquiring large management mandates, but of meeting the wishes of the unitholders who approached us to become the manager of their assets and to conduct the meeting process that could bring this to fruition,” Arnold concluded.
Australian Property Journal
