Pay-out at last for City Site preference shareholders
CITY Site Estates, the vehicle of Glasgow property tycoon Louis Goodman, has told long-standing minority investors it is now able to make partial payment of dividends left unpaid for years.
Goodman has written to them explaining that he was under a “legal restraint” from paying out, because despite making bumper profits the company had no distributable reserves. Now, however, despite the property downturn and a crash in profits, distributable reserves are suddenly in surplus.
The group which went private in a controversial deal in 1999, trapping independent shareholders, has been under pressure over its failure to redeem or pay dividends on £15m of preference shares, afterThe Herald first reported on the matter in July 2006.
Last February we reported shareholder concerns ahead of the company’s annual meeting that dividends arrears had reached £7m, with still no sign of the £1 shares, due to be redeemed in September 2003, being bought back.
In its last two annual reports City Site has said that a “deficit on distributable reserves … prohibits the redemption of the preference shares and payment of the arrears of preference dividends”.
Disgruntled shareholders, however, have argued that assets in Goodman’s web of property companies could easily be restructured.
The distributable reserves depend on the profit-and-loss account, which has consistently shown a deficit despite City Site’s bumper pre-tax profits, which totalled £26.2m in 2005 and 2006.
The company’s 2007 annual report published yesterday reveals a crash in pre-tax profits from £11.7m to less than £1m. But it also says in a note to the accounts: “The company no longer has a deficit on distri- butable reserves and therefore it will pay preference shareholders six instalments of preference dividend, equivalent to three years of outstanding arrears.” Some £2.37m would be paid out this month, though a further £5.37m was still outstanding and disclosed as “due after more than one year”.
The accounts show that the key distributable reserves, in deficit to the tune of £1.24m in 2006, are now showing a surplus of £5.56m. The notes explain that the profit-and-loss account benefited from a transfer from the capital reserve of £9.2m following the disposal of an investment property, and a transfer of £2.2m from the revaluation reserve.
City Site responded last night by making available a copy of a letter from Goodman to shareholders explaining the new position.
In the letter, Goodman says: “With the removal of the legal
restraint, the directors can now address the arrears position.”
He says they will “review the position on the remaining arrears and on the redemption of the preference shares” next year.
The Herald, however, has now learned that at least some shareholders were last year made an offer of 100p for their shares – more than twice a previous offer made years earlier.
One shareholder, who did not want to be named, said that following a further report inThe Herald last July he had been contacted by company broker Bell Lawrie and made an offer of 100p, which he had readily accepted as it was worth around £230,000 more to him than the previous offer.
“The original offer was 25p, and the previous offer had been 40p, that is not payment in full which is 100p, but the total amount due with dividends was about 145p. I took the view that a bird in the hand was worth two in the bush. He settled with me, but I don’t knowwho else he settled with.”
The preference shares, issued in 1989 to help City Site buy t wo L o n d o n properties, promised a 5.25% annual dividend, and some 40 independent shareholders were still on the register last year.
City Site was controversially taken private in 1999 by a Goodman family trust despite an expressed willingness by Miller Group to pay more.
Union Estates, the ultimate parent company, reported a £9.1m pre-tax profit for 2006. Goodman, 56, is estimated to be worth £30m.