Hard times hit three PIC syndications

Investors in three PIC property syndication companies have had to accept a one-fifth reduction in income. This has been blamed on tougher economic times and soaring expenses in the underlying properties. The affected portfolios are Highveld Syndications 15 to 17. PIC has completed a total of 20 portfolios under the Highveld banner.

The three syndications in question are valued at about R800 and are invested in more than 20 underlying investment properties. Investors were earning an average yield of about 10.5% on capital invested, but this has been reduced to 8.5% with effect from the beginning of this month.

The income drop serves as a reminder of one of the risks of property syndications; income yields are not cast in stone.

Tougher economic times and soaring expenses seem to be the primary reasons for the income knock. PIC director Ben van der Linde tells Realestateweb expenses such as rates and taxes are more than estimated. In other words, the initial yield calculations were too optimistic.

The tough economic climate has also hit tenants and in some cases lower rental rates have been negotiated in an attempt to keep them in business and the building occupied.

The syndications are effectively in the intensive care unit. Van der Linde says PIC is working hard to bring the portfolios back into good health. He says investors can view quarterly progress reports on the company's website.

Syndications 15-17 do not enjoy the rental and buyback guarantees that apply to some other PIC syndications.

The "guarantee" is backed by a company called Zelpy 2095 and its director, Nicolas Georgiou. This guarantee might provide some comfort to investors but some financial advisers, including Brenthurst Wealth's Magnus Heystek, are sceptical. 

The Georgiou family is supposedly very wealthy; it owns several high-value commercial properties in Johannesburg and Bloemfontein. But investors have no way of determining just how good Georgiou's guarantee is. There are no financial statements to peruse, the amount of debt is unknown, and there is no stamp of approval from a well-known bank or credit-rating agency.

Large private property investors are not immune from financial disaster. One only needs to look at the recent troubles at Zunaid Moti's empire for proof.

Zelpy 2095 and the Georgious once attracted the attention of the late Deon Basson in one of his investigative reports on Sharemax.

Basson noted that Zelpy had bought a Roodepoort property called the Flora Centre from listed property giant Growthpoint Properties (JSE:GRT). The property was valued by Growthpoint at R68.5m, yet it was sold to a Sharemax syndication company, Flora Centre Investments, for R92.5m.

Basson wrote: "This series of transactions raises many questions. An experienced group such as Growthpoint wouldn't sell any property at less than a reasonable market value. Nevertheless, the Georgious succeeded in selling the property almost immediately to Flora Centre Investments for a profit of R24m (+35%)."

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Property Fund No it is unlikely that Growthpoint will make a Bu44er up by selling a property for R30 mil less than it is worth only idiots like Old Mutual do that !!!!!! by Property Idiot on November 26 2009, 07:17 Find this comment inappropriate? Report it

Warning bells Dear Mr. Cobbett, Long before the late Basson started writing about PIC and Sharemax another unknown person in 2003 warned that in the future the shareholders in property syndications will suffer the consequences. Certain financial advisors . .more considered their commissions more important than the well being or balanced portfolio of their clients. Certain questions must be asked: Why is PIC and Sharemax so secretive about their their activities? Why do PIC and Sharemax release one sided communications to their brokers only? Why don't PIC and Sharemax allow rating agencies to evaluate their businesses? For so long PIC and Sharemax has been manipulating investors. Unfortunately there is nobody willing to confornt PIC and Sharemax head on so the status quo remains. We can only say BS baffels brains In closing we quote the following: The chicken has come home to roost. Regards Hannes . .less by Hannes on November 26 2009, 07:43 Find this comment inappropriate? Report it

Jou ou doring ! Jy slaat hom so op die kop !!! The chicken has come home to roost !!!!! by Hannes Dreyer se vriend on November 26 2009, 09:16 Find this comment inappropriate? Report it

Transparency It is time to assess the quality of the guarantee. What is the NAV and debt of Zelpy 2095? When were its assets last valued and why was this guarantee provided in the first place-if it has value the Georgious will have been paid for it. Are the . .more Georgious that wealthy-SAM has heard that they bought properties( leveraged) at 8% yield that now trade at 11% to 12% which means that the equity is worth nothing. Why are SA investors so passive with their questions? They get cleaned out and DO nothing!¨ I think its time for Barry S to be released for a long hard sniff around this space!! . .less by SAM on November 26 2009, 09:32 Find this comment inappropriate? Report it

Another property scam? Gee, what a surprise! by Munch on November 26 2009, 10:43 Find this comment inappropriate? Report it

Zelpy and property values What did Zelpy pay for the properties he is now selling back to unsuspecting and naive investors..? Therein lies the true nature of this brewing scandal by Financial Virgin on November 26 2009, 11:23 Find this comment inappropriate? Report it

Whats the problem here... ..the investments is still earning 8,50% return (which is more than likely tax protected) as opposed to 5,5% Call Acc Interest the investor still have Capital Appreciation in real terms (vs capital which falls behind in inflation CPI rate annunally) - . .more lets do the maths before we shoot the gun . .less by Jumping the gun on November 26 2009, 11:51 Find this comment inappropriate? Report it

@Pietie but people do go there and after many years these companies still survive. by gd on November 26 2009, 14:19 Find this comment inappropriate? Report it

What's the big issue? Please show me an investment immune to the economic meltdown. Still better than the average. by AB on November 26 2009, 15:31 Find this comment inappropriate? Report it

Look at the bright side I agree with AB. At least they have a recovery plan in place. by Optimist on November 27 2009, 09:05 Find this comment inappropriate? Report it

Recovery...? What recovery plan.....? These dude's are F%$##.....get out if you can.....of cuorse u can't get out.... Bye -Bye investment..>! by Pear Shaped on November 30 2009, 07:34 Find this comment inappropriate? Report it

FSB interest One wonders why the FSB have turned a blind eye to the many shoddy property syndications. One also wonders what Gerry Anderson (deputy registrar) has benefited from his relationship with Sharemax? by Pensioner on November 30 2009, 14:01 Find this comment inappropriate? Report it

Pear Shaped Idiot Hey dude, sounds like your Pear Shaped head has the mentality of an Avocado. You have no idea what's going on, do you? by John on December 01 2009, 16:19 Find this comment inappropriate? Report it

dark crowd any one who thinks they can trust fat ...... greedy guy like georgiou deserves to be taken for a ride so live and learn a man who gets a thrill from under the table dealings should to in jail not agliotti by report on July 28 2010, 18:53 Find this comment inappropriate? Report it

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