Tight Radius for trapped investors
Goings-on at Radius Properties offer an object lesson for investors about the pitfalls of buying into an investment they can't trade.
Investors trapped in the illiquid rest-home property investment oversubscribed to an offer for their shares last year in a bid to get some of their money out even though the price offered was at a big discount to the value of the assets backing their shares.
They were offered the chance to sell 19.99 per cent of their shares at 42 cents per share to Montagu Investment Holdings, controlled by directors of Ascot Capital Management, which had wrested control of the company in 2010 from a previous manager.
It was an offer that raised eyebrows as a valuation report shows the unaudited net tangible assets backing each Radius share to be worth 77 cents at the end of September.
They are now being offered a chance to sell more Radius Properties shares, again at a discount, By January 18, the holders of another 15.84 per cent of shares had accepted.
That second offer, which appears to have traction, will raise eyebrows for an additional reason: Radius has received an offer to buy five properties and the interest held by Radius in two property syndicates for $23.76 million, a sum that represents 59 cents a share.
The trouble is, the sale could go ahead only if there is a special resolution, and Montagu will not vote for the sale of the properties for what it believes is a 16 per cent discount to their true value.
That would make it very unlikely the sale would be approved until it goes unconditional on the shares it has been offered.
Once it controls more than 25 per cent of the shares in Radius, Montagu could block any special resolution put to the vote.
The original offer was designed to provide some liquidity to investors who want to sell their shares, as the company is not listed on any stock exchange, and was too small to be listed economically, said the directors, who had no plans to sell down any of Radius's holdings to free up cash to return to shareholders.
Montagu is ultimately owned by Radius directors Sandy Maier, who was the statutory manager of South Canterbury Finance, and David Glenn, as well as business associate Craig Priscott.
The company trying to buy the assets is Radius Residential Care Limited, the tenant of Radius Properties properties. One of its directors is Charles Anthony Hannon, a former director of Radius Properties before an investor vote brought in Glenn and Maier on a mandate to turn around the struggling company and restore the payment of dividends to shareholders.
Many investors bought into Radius as clients of financial planner Vestar, which vanished after the collapse of investment firms it backed, but there was no ready market for those shares.
- © Fairfax NZ News