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The peculiar case of the Picvest billions: Part 5

Disposal of properties contradicts intent of business rescue plan.

A Moneyweb follow-the-money investigation into the sale of the 79 properties syndicated via the Highveld Syndication (HS) companies revealed that virtually all of these properties were sold to third parties before and shortly after the HS companies were put into business rescue.

A previous article analysed the sale of 21 properties before the HS companies were put into business rescue in 2011. Moneyweb can now reveal, based on the analysis of the title deeds of the properties, that the disposal of properties to third parties in fact accelerated after the commencement of the business rescue process in December 2011.

Read: The curious case of the Picvest billions: Part 1 (Background)

Read: The curious case of the Picvest billions: Part 2 (Background)

Read: The curious case of the Picvest billions: Part 3 (Overvaluation of properties)

Read: The curious case of the Picvest billions: Part 4 (Property transactions prior to business rescue)

The investigation found that at least 50 properties originally syndicated as part of the HS schemes were sold shortly after the commencement of the business rescue process. Virtually all the properties were sold in 2013, although five – collectively valued at R328 million in the business rescue plan (BRP) – were sold within six months of the HS companies going into business rescue at the end of 2011. (The first property was sold back to property magnate and patron of the scheme Nic Georgiou within a few weeks; he then immediately sold it to a third party for a profit – see below.)

The sale of these properties is in stark contradiction to the provisions in the BRP, penned by business rescue practitioner Hans Klopper. Klopper was also a director of Orthotouch.

BRP and Section 155 Scheme of Arrangement

To put the sale transactions in context, the original intent of the BRP needs to be revisited.

The premise of the BRP was to transfer all the historic HS properties, as well as a few others, to one company named Orthotouch.

An experienced team of property professionals would then manage the properties to generate the required income to repay investors.

The directors of Orthotouch at the time were Georgiou, Panagiotis Kleovoulou, Klopper and Connie Myburgh. Myburgh is also chairman of the Nova Property Group, the rescue vehicle of the failed Sharemax investment scheme.

The BRP gave the board the authority to sell “non-performing” properties and use the proceeds to maintain, upgrade and improve certain other “primary” centres to “maximise” investment returns for investors.

This is contained in paragraph 2.3 of the Orthotouch business plan, which forms part of the BRP and reads:

2.3  The objective of Orthotouch is to maximize the investment return of shareholders and all stakeholders in Orthotouch by selling off the non-performing properties and utilizing the proceeds to redevelop primary shopping centres, such as Southdale in Johannesburg South, Piazza in Randburg, Forum in Sasolburg, Saveways In Witbank and Lyttelton Manor in Centurion. In addition Orthotouch will retain certain retail and commercial properties such as those in Charles Crescent in Sandton, Cell C in Sandton and Ethos in Parktown.

However, despite this provision in the BRP, the primary properties and other retail and commercial properties described in the paragraph were sold shortly after the adoption of the BRP. Three of these properties were sold within six months, with the first (Southdale Shopping Centre) sold back to Georgiou’s company Zephan less than a month after the BRP was adopted.

These primary properties were:

 

Property Name

 

BRP Valuation

Date sold

Price

Third party

1

Southdale

HS17

R164 192 090

2012/01/23

R208 000 000

Zephan/Serica Investments

2

Cell C

HS22

R127 923 588

2012/02/29

R125 007 652

Annuity Properties

3

Ethos

HS22

R59 168 700

2012/05/24

R46 000 000

Annuity Properties

4

12 and 13 Charles Crescent

HS22

R19 896 800

2012/08/01

R23 000 000

Alchemy Properties

5

Lyttelton Centre

HS18

R0

2012/08/06

R64 000 000

Rapfund Investments

6

The Piazza

HS16

R105 000 000

2013/01/30

R148 000 000

 Moxicorp Investments

7

Checkers Sasolburg

HS15

R0

2013/04/23

R87 145 665

Luvon Investments, Ivory Pewter 90

8

1 Charles Crescent

HS22

R107 044 630

2013/10/29

R110 805 516

Accelerate

9

9 Charles Crescent

HS22

R30 324 040

2013/10/29

R17 099 946

Accelerate

10

10 Charles Crescent

HS22

R19 547 978

2013/10/29

R20 844 885

Accelerate

11

Saveways

 

R464 159 510

2015/11/05

R700 000 000

Benfield Inv

12

Forum Sasolburg

No information

No response from Klopper or Georgiou 

Moneyweb sent questions to Georgiou and Klopper (in his capacities as both business rescue practitioner and director of Orthotouch) on November 9, 2018, relating to the selloff of the properties. Neither responded to the questions.

The Section 155 Scheme of Arrangement (SoA), which was implemented three years after the failure of the BRP, offered an explanation. The SoA stated that the properties were not transferred as Orthotouch wasn’t able to acquire funding from financial institutions. This was due to the actions of so-called “detractors”, which “sought to bring about the failure and demise of the HS Companies”.

These detractors were never named, but were accused of influencing financial institutions against providing funding to the group.

The SoA did, however, highlight that Georgiou went to great lengths to acquire funding from various financial institutions, a process that would have taken several months. The SoA does not, on the other hand, explain why the majority of the identified “primary properties” were sold within a few months.

A few of these sales transactions deserve further analysis.

Southdale

The Southdale Shopping Centre was the flagship property in the HS 17 syndication and was syndicated to investors for R205.5 million. At the time, it was the largest single property ever syndicated by any HS syndication.

The BRP also cited the centre as one of the “primary” shopping centres destined to receive additional investment to increase its revenue potential, but this never materialised.

The property was sold less than a month after the implementation of the BRP.

It was sold via a back-to-back transaction from Orthotouch to Georgiou’s company Zephan, which then on-sold it to Serica Investments. The transaction resulted in a profit of R26 million for HS 17, but a significant loss of R57 million for Orthotouch. Zephan, in turn, earned a profit of R33 million from the transaction. The details appear in the table below:

Southdale

Valuations

Date

Valuation

HS 17 Syndication value

2007

R205 560 000

Value as per BRP

Dec 2011

R164 192 090

Sale transactions

   

Company

Year

Price

Zelphy 2095

2004

R53 700 000

Bosman & Visser

2006

R139 000 000

Highveld Syndication 17

2008

R205 560 000

Orthotouch

2012

R232 200 000

Zephan

2012

R175 000 000

Serica Investments

2012

R208 000 000

The Piazza/Randview

It was not only the Southdale centre that was sold back to Zephan. The Randview Shopping Centre was originally syndicated as part of HS 16 and valued in the BRP for R105 million. The source of the valuations that feature in the BRP was never disclosed. Yet the property was sold in a back-to-back transaction to Orthotouch (R160.9 million) and then immediately to Zephan for R105 million. The transaction did not stop there. Zephan then sold it to Moxicorp straight after for R148 million. Georgiou is currently the only director of Moxicorp.

The Piazza/Randview

Valuations

Date

Valuation

Value as per BRP

Dec 2011

R105 000 000

Sale transactions

 

 

Company

Year

Price

Zelphy 2095

2008

R96 456 198

HS 16

2010

R103 000 000

Orthotouch

2013

R160 928 914

Zephan

2013

R105 000 000

Moxicorp (Georgiou is a director)

2013

R148 000 000

Ethos

Another interesting transaction was the sale of Ethos. The property was syndicated to investors for R115 million in 2007, but was never transferred to HS 22. Zephan, who procured the property in 2006 for R45.9 million, sold it to Annuity for R46 million in 2012 at nearly R14 million less than the BRP valuation.

Ethos

Valuations

Date

Valuation

HS 22 Syndication value

2007

R115 502 957

Value as per BRP

Dec 2011

R59 168 700

Sale transactions

 

 

Company

Year

Price

Zelphy 2095/Zephan

2006

R45 940 000

Annuity

2012

R46 000 000

Accelerate

Moneyweb’s investigation found that a total of 27 of the 50 properties were sold to Accelerate in October 2013. Part 6 of this investigation will focus on these sales transactions.

 

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Accelerate is a house of cards built on bad faith.

Ryk, thank you for the facts detailed and which cannot be disputed. Hans Klopper, the so-called BRP, was always against the investors and that fact can no longer be disputed. Which begs the question: Why was Hans Klopper and his dealings on behalf of Georgou never investigated??

HANS KLOPPER’S dealings were always questioned by Investor’s and his day of reckoning is around the corner too!
He closed his Business INDEPENDANT ADVISORY / CORPRECOVER towards the end of 2017 / or early 2018 (I can’t be sure of exact date) and joined BDO. All evidence of the BUSINESS RESCUE of the HIGHVELD SYNDICATION COMPANIES was on the CORPRECOVER website but Financial Statements were only available up to FINANCIAL YEAR END Feb 2012. Nothing has been disclosed to Investors since.

MR KLOPPER, YOU CAN RUN BUT YOU CANNOT HIDE BEHIND BDO!

As said before the Georgio empire is built on investors money which was unshamefully looted by a merry go round system planned by ruthless role players!!! Zephan via Ortotouch via Accelerate enriching themselves by believing they are right If the law system do not see the arrogance of these deeds then it will be a sad moment for investors but……. the wheel is turning Boasting with Fourways Mall under the Accelerate umbrella was initiated by Fourways Precinct which was paid by Pic investors and listed in their prospectus!!

That will be the day when all hope will be lost for our Court System. Nearing the end for the Certificate to be issued for the Class Action – that will open the gate for full blown investigations into Georgou, Hans Klopper, etc. and especially Accelerated. Share price of Accelarated insightful.

@Logic, Brilliantly put!!! They have indeed unashamedly boasted with Fourways Mall. The day of reckoning is around the corner even though they have managed to get this far…

I wonder if our current Minister of Finance Mr Tito Mboweni was aware of all the wheelings and dealings when he was a Non-Executive Director of Accelerate up untill he became Minister????

I observed the auction and did my numbers on the prices achieved. All very Gupta-esque

Oh BTW – Ryk and Moneyweb, seriously first class work. The only real voice of these poor investors

Picvest is definitely one of the most “sophisticated” Ponzi schemes I have ever come across. Even Steinhoff collapsed under its burden of fraud, but Picvest is still standing. The fact that it took German, and not South African prosecutors to take down Steinhoff, reveals the essence of the problem. Zero skills, zero accountability, zero management, zero results but huge pay and privileges. This is the local criminal justice system.

THANK YOU RYK! THANK YOU SO MUCH FOR BRILLIANT INVESTIGATIONS AND PUTTING IT ALL DOWN IN BLACK & WHITE!! It’s no doubt been a mammoth task!!!

“Moneyweb’s investigation found that a total of 27 of the 50 properties were sold to Accelerate in October 2013. Part 6 of this investigation will focus on these sales transactions.”

I am no Financial Guru (although I have learned an enormous amount since the decline of Pickvest in 2011 and then what became Orthotouch) and I thought it VERY STRANGE / COINCIDENTAL at the time that ACCELERATE listed on the JSE with ± R4 BILLION in 2013!

Hans Klopper understands better than most how remote the possibility of successful prosecution is. This was his response to an investor who raised the prospect some years ago:

“Insofar as you have made reference to possible criminal prosecution we believe that this is fact the most unlikely of outcomes that will benefit the investors. Having said this, it has been brought to my attention that there has not been a successful criminal prosecution for a commercial crime in Gauteng during the last two years. It would, likewise, become a costly exercise and I am not sure how this will in any event benefit investors.”

@Julius, yes Hans Klopper is counting on law of averages, as do all involved with this debacle! They are also unashamedly fighting the investors in court with investor’s own monies. Very cleverly planned and orchestrated. The trouble with counting/betting on odds and evens is that one day the tables turn…
They are all playing for time (As are the Sharemax/Nova crowd et al) … but time might eventually run out for them?
It’s extremely sad that time has already run out for many investors who were not able to live out their last days on this earth enjoying their hard earned money.
Julius, I commend you too for great journalism done in this arena (various Property Syndications) ~ I recall reading your articles as far back as 2011!

Thanks for the kind words Vivienne.

Great investigative journalism – thank you.
Now we need to do the same for African Bank, Tongaat and Steinhoff!
And whilst you’re at it – what about a look at Tencent share sales by those connected – makes for an interesting read…particularly if you’re a paranoid SA investor!

Julius Sorry to say but if competent,relentless investigation is done with facts thrown on the table then NOBODY will be above the law. Investors have lost so much (Nic Georgio has been in default with 12 mths interest payments) that they have no trust in any promises from the Georgio enterprise and therefore liquidation will bring the answers to the jackpot question WHERE IS THE MONEY THAT ZEPHAN RECEIVED????Murphy’s law if you cannot pay the promised interest according to the BRP PLAN THEN YOU ARE IN DEFAULT and same with the Scheme of Arrangement therefore you are insolvent and control must be taken over the Companies so we can determine WHERE THE FUNDS WENT TO!!!!!! At least then the culprits will be EXPOSED by criminal charges Hans Klopper should have taken action when the BRP plan was initially in default but instead he hastingly dood properties with Nic Georgio as soon as the BRP plan was implemented. WHY SO SOON???

Thank you very much Ryk for the excellent work and keeping the investors informed.

The concerning question is what now for the investors? The last interest payment was received in November 2018 (for September 2018) and it has dried up since. Why?

What does the balance sheet of Orthotouch look like? It seems highly unlikely that they will the be able to pay out all investors in 2024.

In the recent communication from Orthotouch (29 April 2019) investors were offered shares in Accelerate Property Fund at a mere 20% of the value of the Orthotouch investment. Is it not maybe better to count one’s losses and accept this swap, although there is no guarantee that the Accelerate shares will be worth much in a while.

In the mean time the looters are roaming free with all the money they stole from the investors and no legal action is being taken against them. It also seems that the group of investors that are trying to launch a class action in not really making progress.
Should this matter not be reported to the Public Protector to investigate? It will not improve the financial situation of the investors, but will at least have a chance that the matter will be criminally investigated.
Please let us have your views on this and also if there is someone with legal knowledge who is willing to assist in this it will be appreciated.

@Estate Executor, with all due respect, you seem very behind with all the ins and out of this financial slaughter debacle.

Monthly interest from Orthotouch started drying up as early as June 2018 for a lot of investors and then it was eventually rolled out to everyone.
Nic Georgiou says he can’t pay investors because of the cost of litigation cases against him.
There are many reasons why the interest payments have dried up and I can assure you the above reason is not one of them. Keeping up with the shenanigans over the last 8 years has made my head spin!!
there are 2 buildings left in Orthotouch, the payouts will most certainly not take place in 2024 as per the SoA AND .. they have not disclosed Financial Statements since 2012.

The Recent Share Offer is a JOKE!! The 20% Offer actually works out to 10% when you take the fact that they have doubled the value of Accelerate shares to R7.50 and if you sold at today’s price, it is worth half of that!!!
ALSO, the moment you sign for those shares you sign away any rights to claim your original Capital Investment.
Please go to the http://www.hsaction.co.za website to get more info on a HSAG Class Action against Nic Georgiou, Orthoutouch, Hans Klopper and other role players. Read the Newsletters on the website (you will be kept busy reading for a month of Sundays! So much has happened.) The Legal route is the only way. The other unfortunate fact is that most claims will legally prescribe by the end of this year. If one does not have any form of legal protection before then, you can kiss your investment goodbye.
There is also a facebook page you can join ~ https://m.facebook.com/hsaction/

The HSAG (Highveld Syndication Action Group) headed by Theron & Partners is literally on the verge of registering a Class (this has taken some time as with all legal procedures) but this route costs investors a fraction of what it would cost to litigate as an individual. Criminal litigation is also a very costly route. Nic Georgiou and others want time and money to run out for investors. We have to keep fighting with all our might and it’s absolutely sicking that they are fighting investors with investors own money. Can you imagine how much interest Nic Georgiou/Orthoutouch makes from the monthly interest payments that have been withheld from 18 300 investors for a year??? It’s a very cleverly orchestrated numbers game.

People that have been sitting on the fence waiting to see if the Class Action is going to be registered and have at the same time been considering taking a (ridiculous) offer from Nic Georgiou / Orthotouch are playing a dangerous game… time is running out, prescription of claims etc etc. The legal route is slow however, it’s the only way to ensure justice is served.

@Estate Executor, you said: “Is it not maybe better to count one’s losses and accept this swap, although there is no guarantee that the Accelerate shares will be worth much in a while.” If you are willing to cut your losses, you should consider the cost of that loss against the cost of joining the HSAG? I speak for my family – it is certainly not worth it to give up 90% of an investment to a well orchestrated ‘corporate capture’ scheme. I’m sure Nic Georgiou / Orthoutoch and others will be very happy that some investors choose to “cut their losses”. They can continue to live in luxury and carry out their schemes. 🙂

In the end it is up to each individual to choose the route that will best suit them.
Call me an idealist, but I will continue to fight for justice until the bitter end!!!

@RYK I CANNOT WAIT for you next Chapter 6, regarding ACCELERATE! It is going to reveal much I am sure!

Ryk hopefully in the next edition exposure will be given to how and at what price did Accelerate obtain the properties that investors paid for that they utilized for the listing of Accelerate Oh and how did Michael Georgio pay for his shares?? Obtain the proof please

Logic, good point. I for one cannot wait to see the ‘explanation’ of Michael Georgio of Accelerated and for that matter the then chairman, Tito Mboweni. Come to think of it Pic was investigated and cleared during his term at the Reserve Bank – 8/8/1999-8/11/2009.

Thank you for the investigation. What now about the thousands of pensioners that have invested and the estates that can not be wound up.
Should Kloppers, Georgia and previous directors of PIC not be jailed?

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