Rockcastle defies calls for neutral investigation
Nepi Rockcastle, one of the group of companies in the Resilient group, is defying calls by some of the country’s largest asset managers for an independent forensic investigation into the stable.
The JSE-listed company, the largest owner of shopping centres in Central and Eastern Europe, said it has set up its own subcommittee to conduct a probe. This falls short of the demands set out by the asset managers, which collectively manage trillions of rand on behalf of millions of investors.
They include the Public Investment Corporation, which looks after R2-trillion on behalf of government workers, as well as household names such as Coronation, Allan Gray, Old Mutual, Stanlib and Prudential.
They are calling for an independent probe into Resilient, Fortress, Green Bay and Nepi Rockcastle, conducted by one of the top four auditing firms to analyse the companies after the emergence of allegations that have left investors nursing billions of rand of losses from the collapse in the share prices.
These include suggestions that there has been insider trading in the companies’ shares and that directors or related parties may have artificially inflated their value.
A selloff in the four companies in 2018 pushed share prices down 40%-60%, wiping off more than R120bn of value.
The Financial Services Conduct Authority said in March that it was investigating possible insider trading in the companies’ stock, as well as the publication of false and misleading financial statements.
Rockcastle on Friday confirmed that it received a letter on August 23 requesting an "independent investigation of all allegations made against the company, its directors and closely associated parties. The company has not yet been able to verify the shareholding of each of the signatories."
The company said it is not aware of any specific allegations related to the business and that it is satisfied with the integrity of its practices.
The board regards the letter "in a serious light" and has "accordingly, established a special board subcommittee to address the matter".
The members of the sub-committee are the newly elected chair of the board, Robert Emslie; the chair of the audit committee, Andre van der Veer; CEO Alex Morar; and CFO Mirela Covasa.
The subcommittee is mandated by the board to contact signatories of the letter who are shareholders, to clarify the specific issues or concerns they may have pertaining to Rockcastle and to determine how such shareholders would like the company to investigate these matters.
It will also seek the views of significant shareholders who are not signatories.
It will determine the scope and costs of any independent investigation and their effects on the company’s shareholders.
Jeff Zidel, a former director of Nepi — prior to its merger with Rockcastle — said that any probe into the Resilient group of companies will take time and that it needs to be done at as low a cost to shareholders as possible.
He said a "top-four auditing firm" would possibly charge high fees for a process that could take "two or three years. I believe that the companies and investors need to find constructive solutions."
Meanwhile, Resilient’s board also released a statement on Friday, saying it was "considering the content of the letter received from institutional investors" and that it will "be engaging with them and with the company’s major shareholders in determining the appropriate course of action".
There are strong links between the four companies. Fortress Income Fund owns 9.94% of Resilient. Resilient used to own a stake in Fortress. The two companies shared offices at Rivonia Village, which is an office and retail building owned by Resilient. Shareholders’ criticisms led to Resilient selling its Fortress stake so as to unwind the crossholding. Fortress also moved to a new office. Des de Beer is a former executive director of Fortress. Resilient’s financial director, Nick Hanekom, was previously financial director at Fortress. Resilient owns 75,140,000 Nepi Rockcastle shares, which, at a price of R142.50, are worth R10.7bn. De Beer is a non-executive director of Nepi Rockcastle.
Resilient owns 2,052,361,996 Greenbay shares, which at a price of R1.45, are worth R2.98bn. Barry Stuhler is an independent non-executive director of Greenbay. He was formerly MD of Capital Property Fund before it merged with Fortress in 2015.