Property trust RCU has signed a term sheet with Saban for the sale of its three remaining assets of any value. If approved, RCU will return about $US0.60 to unitholders and wind itself up.
That’s a lot less than we were expecting when we first invested in this property trust but value dissipates every day RCU exists.
In February unitholders contributed $20m via a capital raising. After transaction costs, only $17m went into the coffers. Less than $4m was used to extend the lease on the RSA asset (since sold). On 23 July the Trust said it had US$13.9m cash. On 16 August it corrected that and said it has US$10.3m. In its latest announcement, RCU estimates it will have US$7.4m by January. Remembering that it now owns two unencumbered, income-producing assets, it’s fair to suggest the trend is not your friend.
Which is why we’ve agreed to vote in favour of the sale to Saban in the absence of a better offer. It’s not full value. It’s not even fair value. But it’s more than we’re going to get under the status quo.
There is plenty of water to flow under the bridge yet. The balanced nature of the register (Woolley 33% versus other majors combined 35%) is a red rag to a hedge fund bull. But hopefully, by January, we’ll be able to spend our time on more productive investments.
*Note: We haven't been able to say much on RCU for the past few months for reasons that should now be obvious. That's likely to be the case for the next few months too so, if you're an RCU unitholder, you're on your own from here.
52 thoughts on “Biting the Bullet on RCU”
2m shares yesterday and another 5m today which is about 7% of total shares on issue. Will be interesting to see who’s been buying and who’s been selling…
If Yaselleraph is tied up with Woolley that would make sense, but what’s Acorn’s motivation for selling? If Acorn had disposed of their entire holding I could understand them being prepared to sell while leaving a few cents per unit on the table, but Acorn still has a 10% holding. I can’t imagine they would sell down a third if they thought their remaining units were at risk. Guess we’ll find out soon enough…
Could be bad news developing – the 7m shares have gone to Yaselleraph Trust, an existing unitholder which now has 10.9%, and seems to be part of LJCB Inv Group where Woolley was formerly CEO. If he’s talked them into seeing things his way, the Saban proposal is unlikely to get up – esp since the sellers of those shares must have come from one or more of the existing major holders who were reported to be voting in favour. Guess we’ll have to wait till Friday to know for sure, but it doesn’t look good………
I will certainly be voting against this proposal.
Most people investing in this vehicle took a long term view on the US commercial property market which is at a low point in the cycle.
The Board do need to reduce the Trust expenses but the discount to NAV that they have accepted is completely unreasonable.
The management haven’t done a great job but in fairness they have stabilisd the business which now has pretty low leverage and will at some point produce positive cash flow if the management fees can be controlled.
You are right wonder why they would do that but it appears to be exactly what has happened.
A comment on the post by John M on his voting intention for the proposal to in-effect wind up RCU.
I do not dispute the points that John M makes, namely that the discount to NAV negotiated is unreasonable, nor the idea that investing in RCU required a long term view for a recovery & re-rating in US commercial property values. However, that investment thesis would necessarily have been predicated on having a management team together with appropriate board oversight that could foster the vehicle to that eventuality, so too a supportive investor base that is patient for that eventuality. Unfortunately, none of these requirements were or are in place (current board excepted perhaps) & realistically investors have a gun to their collective heads….take the offer or more of the same.
The fact is you have a vehicle still bleeding cash at a prodigous rate. You have been put on notice that further capital will be called for, but far worse-the largest shareholder is trying to attain control at the expense of the balance of the register.
It’s public knowledge of the close historical advisor/managerial links that Greg Woolley has with the Liberman family & Yaselleraph. Make what you will of that of their voting intentions for the Saban proposal but it doesn’t take too much imagination. Further, Greg Woolley has publicised his intent to change management & flagged the need for further capital raisings. Equitable on favourable terms for anyone but Woolley & Co. it would not be. Considering his history, in particular with RCU, you could certainly stay for the ride but it will be entirely on his terms, not yours. Do you trust Greg Woolley to look after your interests ?
The ‘gun to the head’ scenario is unpleasant & unfortunate but I’ll vouch you may in time view it as a ‘get out of jail free card’ rather than the ‘death by a thousand cuts’ alternative that you espouse by not voting for the proposal.
In effect you’re hoping in time for cream on the cake. Fair enough. However the reality based on what’s in the public domain at this time is ( by virtue of the recent change in the register ) that you may just find out what it’s like to live on the crumbs that Woolley will throw you. Pardon the pun, but I hope that gives you & others food for thought.
You may as well reach into your pocket & hand Woolley & Co. your wallet. I think the consequences of your proposed voting intent will have the same end effect.
Your complacency has me flabergasted. The irony is that with the way the register stands Woolley has probably in effect stitched up control anyway (more of the register was available last week & it wasn’t taken up)
John M, on a philosophical note as it stands today on the information available … on your voting intention & its reasoning, with respect I couldn’t disagree with you more.
I suppose it makes (some) sense if Acorn are potentially working with Woolley and Co in relation to securing an alternative/improved bid. But that’s still a pretty big risk considering Woolley’s prior actions.
Any chance IIF and Regal club together to greenmail Lieberman for his votes – say $200,000 to vote in favour!
Im wondering whether Lieberman already owned those 7m shares through Acorn – and forced a sale to get the direct vote.
Anyone at meeting?
We were there. The meeting has been adjourned while negotiations continue. Presumably Greg wants more money and Saban doesn’t want to pay it.
I assume we’ll get an announcement this afternoon or Monday.
Any update on this situation?
I’m all for an increased offer if it comes through, but I’m rather nervous about having the resolution split into three….
I would have thought that an increase is unlikely and the resolution to pay out proceeds might not get up
Agreed on both counts, but a cash box now of US$60m has got to better than the existing assets which will cost another US$18m to keep for 2 more years – that is unless you are the fund manager at Acorn who thinks 40c later is better than 56c now.
Woolley has effective control, so might as well vote in favour of everything and see if he is willing to take the cash on offer now.
Great work Steve. You could probably devote a whole chapter to this saga in your future value investing themed memoirs! Shareholders owe you a debt of gratitude. Best rgds, Mark
Excellent, i will be double checking my redemption form has been received! Well done Steve and the Board of RCU. Thanks for taking action for the best interests of shareholders!
the judge has ruled, as i see it, that the claim by Woolley must be taken out of RCU funds, but i thought that the claim was against the RE, and as such unit holders are not liable for claims made against the RE. in any case it looks like funds will need be withheld for these claims and taken out of our payout. the question is , how much?
Be interested in views on where to from here following the vote yesterday.
Assets being sold down but company not getting wound up.
If RCU is becoming a cash box with uncertain strategy it could stay illiquid and discounted indefinitely
Judging from the recent voting it would seem that Mr Woolley is effectively in control of RCU which is now a cashbox. There is no discount to property assets anymore – cash is King!
All those TII members who either invested directly or via the Value fund, would now appear to be minority unitholders in a cashbox with no indication as to where the future lies.
Not sure where to from here. Perhaps a capital raising? Perhaps a change of responsible entity? Perhaps new management? Maybe all three…
Perhaps Mr. Woolley will just announce something totally unfavourable to the minority shareholders. The share price will crash when some of us try to sell to ‘nobody’.
Mr. Woolley’s six month restriction to buy more share is ending soon. He can buy the cash box at a greater discount. Any legal recourse?
Woolley’s plan is now out – he wants RCU to become a private equity investor. It will not make distributions, and may require further equity – not a very appealing prospect. He also wants to replace the reponsible entity with hios own people. If we want out, he recommends we sell shares on market……
Well that didn’t take long.
ASX announcement today – calling for a meeting to replace the RE.
No real surprise there
Steve what are we to do?
thanks, i would like to contact Woolley / Frost but cant find any contact info – can anyone help here?
i would have thought that considering the majority of holders elected to take the cash we should be given that option before he continues on his merry way investing and capital raising.
Woolley’s contact appears to be through his lawyers, Henry Davis York in Sydney – in particular, James Lonie on 02 9947 6581 or [email protected]
We are about to be sent his latest material concerning the change of RE, and the company’s new direction.
The update from RCU regarding the amended NOM to separate the RE change and voting of the new investment strategy is interesting.
While the recent vote shows Woolley/Frost have effective control making the change of RE highly likely, does anyone know if he would then be prohibited from voting on the new investment strategy given his conflict of interest/association with the RE that would be proposing the change??
I don’t think Steve is going to comment:
“….if you’re an RCU unitholder, you’re on your own from here”
So we are now left holding a listed soon to be cash box with a vague and uninspiring plan and a significant shareholder with a history of not giving a rat’s ass about “shareholder value”. It’s the proverbial rock and a hard place.
actually the majority of unit holders (read Woolley associates) voted not to distribute the cash sorry
give him my love if you find him
Hi Everyone, hopefully you have already seen today’s ASX announcement from RCU. We are working hard to get redemption requests processed on behalf of us and any other investor who prefers cash to the proposed new investment strategy. You will be kept up do date via RCU’s ASX announcements.
thanks Steve, i see that IIF has 10% of RCU, so is one of the 20% who are seeking redemptions. i am also a significant holder – would you like us to support your efforts in some way? i gather there will be a showdown in the court over this proposal.
since there is no way a payout can be done before March 11, is it possible to delay the vote for new RE?
Thanks Steve. If there is any justice in the Australian system then you will prevail. Best wishes
I’d love to redeem my 300,000 shares. I don’t see Mr. Greg Woolley as theWarren Buffett type, who turned a failing textile maker to an investment powerhouse in Berkshire Hathaway. The opportunity cost has already been too great each day it drags on.
Thanks again, Steve.
this is going to come down to the wire.
Are we going to get an injunction from Frost et al next trying to stop the RE offering/ processing the redemption? If it is approved and sent out can it be” recalled” or dishonoured if/ when the RE changes?
Your earlier comment on the redemption form and hearing update has disappeared.
Is this your compliance team in action?
p.s. thanks for your activism
Redemption request faxed and sent express mail today; tempted to deliver by hand but no time
Justice White has ruled ReCap can make the distribution.
Thanks Mark, it has been a lot of hassle but I’m glad we ended up with a decent outcome for everyone – the alternative was not going to be pretty.
Yes, a thousand thanks to Steve and IIF for getting this one over the line.
my take is that Woolley was not able to get the AFSL licence and realised the situation was not a goer so best to bail. it seems he did not think the process thru in the first place.
Well done Steve, and thanks again.