Beware of dodgy dealers

2010-10-09 00:00

JOHANNESBURG — PIC Syndications has more than a few similarities to Sharemax, which has been in the news recently for the wrong reasons.

We have written thousands of critical words on PIC Syndications and its investment offerings.

In April, we noted that there was no independent valuation for the properties housed in Highveld 21, a syndication that PIC claims is worth R1,3 billion. This worry was compounded by evidence that suggested that certain properties had been sold to investors at inflated values.

For example, two properties in the Highveld 21 stable, Highveld Centurion and Glen Gables, used to belong to Sharemax investors.

A Sharemax prospectus discloses that its investors sold Glen Gables for R59 million. Yet PIC sold the same property to its investors at R200,7 m — an increase of 240%. Similarly, Sharemax investors sold Highveld Centurion for R40 m. PIC is syndicating it at R142 m, more than three times the price.

Today, half a year after our original report, there is still no independent valuation for the Highveld 21 properties, or for the smaller Highveld 22 syndication.

PIC managing director Ben van der Linde says: “Two independent valuators have been appointed to valuate the property portfolio of Highveld 21 and 22. Their valuations should indicate the actual income generated by the portfolios as the valuations will be based on open-market values. I do not have a time frame as to their completion.”

We also noted that it is virtually impossible to verify the strength of the income and capital “guarantees” that apply to PIC’s products. These guarantees are backed by apparent property mogul Nic Georgiou and his company and family trust.

If PIC’s marketing material is anything to go by, some financial advisers are unfazed by these issues. A newsletter dated August 18, 2010, claims that the available shares in Highveld 21 and 22 “are running out”.

These financial advisers would do well to consider a ruling by Financial Advisory and Intermediary Services (FAIS) Ombud Noluntu Bam, which was delivered in June.

Bam ruled against financial adviser Nigel Seegers who had sold a property syndication to his client.

Bam wrote: “Any financial services provider who intends to recommend an investment in a property syndication to a client must first obtain all the available information about the promoters before the financial product can be presented to a client. The [adviser] is expected to first satisfy himself or herself that the investment is sound.”

Financial adviser and regular Moneyweb commentator Magnus Heystek says that an investment adviser can only do a proper due diligence on PIC Syndications if they have access to audited financial statements for Georgiou, his company Zelpy, and his trust, the N. Georgiou Trust.

Heystek says that without these documents, financial advisers cannot recommend PIC’s products with any degree of certainty, and they are opening themselves to an adverse ruling from the FAIS ombud if these products fail or perform poorly.

If any financial advisers have had sight of these documents, and have satisfied themselves of Georgiou’s financial muscle, we welcome them to contact us. Realestateweb’s own requests for this information have fallen on deaf ears. PIC has issued a document to its financial advisers in which it acknowledges Bam’s ruling. The documents states: “PIC would like to provide you, as independent financial adviser, with a certificate of proof that you have done the necessary due diligence on the products of PIC Syndications.”

Realestateweb asked Van der Linde whether this letter means that certain financial advisers have had sight of Georgiou’s financial statements. Van der Linde responded that as Zelpy [Georgiou’s company] is a private company, its financial statements are not available to public scrutiny.

• Write to Julius Cobbett: julius@money web.co.za

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