Dynamic Wealth property investors given tough choice
Embattled Pretoria-based financial services company Dynamic Wealth, which is subject to a Financial Services Board (FSB) court application for curatorship, is giving investors in an unlisted property investment company, Specialist Income Ltd, the choice of cashing in assets at a loss or sticking it out until property markets come right.
The company itself, which started off life as a Dynamic Wealth-sponsored investment club, is also subject to the FSB’s curatorship application.
Specialist Income has run into trouble because of the property market collapse and consequent tightening by banks on loans to property developers, says Christiaan Jordaan, Dynamic Wealth’s head of compliance and risk.
Also subject to the application are Dynamic Wealth management, Dynamic Wealth Stockbrokers and the Bridging Factory.
Dynamic also has a problem with an investment club money market portfolio, which has been caught up in the collapse of Corporate Money Managers (CMM), which masqueraded as a unit trust money market fund but which, in fact, pooled investors’ money to invest in property developments.
Dynamic was the biggest loser in the R230-million potential loss, but others, such as Momentum, were also caught short.
The investor clubs are one of the main reasons for the FSB curatorship application. The FSB claims that the clubs are pooled investments that contravene the Collective Investment Schemes Control Act (Cisca).
The money market investor club members and the Income Specialist shareholders are mostly pensioners who invested in the Dynamic products for a monthly income, but they have received little or no income for at least 12 months. They have also not had access to their capital.
Specialist Income shareholders are to be asked to vote on special resolutions at the AGM of the company on June 24, which will determine the fate of the company and their investments.
The shareholders are being asked to vote either for a resolution that will allow for some assets to be realised and used to develop undeveloped property over the next four or five years, or for an alternative resolution to sell all assets, at a loss, and distribute the proceeds to the shareholders.
The directors, most of whom are elected by shareholders, are also seeking the right to set valuations of the company’s assets at their discretion, that would not exceed the firesale value, to pay back capital to investors, who are suffering from financial hardship.
Jordaan says that by choosing to keep Specialist Income going, investors should make sound profits when banks loosen up on credit, allowing developments to go ahead, and when property demand and prices improve.
Jordaan says that the AGM must be held in terms of the Companies Act, despite the FSB’s curatorship application.
Gerry Anderson, the FSB deputy executive in charge of market conduct, says as Specialist Income Ltd is now a private company and the matter is sub judice, the FSB will not be intervening in the scheduled annual meeting.