Savings to directly reduce debt of Opus 21
Century Funds Management (Century) has announced that it will waive the first year of its management fees if it is successful in being voted in as manager of Opus 21.
Century will use the net savings to immediately reduce debt with Opus 21’s bank lender. Based on 2010 accounts, waiving the fund management fee will immediately reduce the debt by close to $1.3 million.
In a motion requested by a number of major financial planning firms, which represent some 25 per cent of unit holders, Century is currently seeking to replace the beleaguered Opus as manager for the unlisted property trust – Opus 21. Over 90% of the proxies received to date are in favour of removing Opus as the manager of Opus 21.
Opus 21 is an open-ended, unlisted diversified property trust with assets valued at over $242 million. Subject to unitholder approval, Century will convert it to a terminating fund with the aim of providing an exit point in the medium term in an improved property market. Over 400 financial planners Australia-wide have clients invested in Opus 21.
Investors will have the opportunity to vote for Century to take over management of Opus 21 at a special unit holder meeting to be held in Brisbane on 28 February 2011.
“This undertaking further aligns Century’s interest with those of investors in restoring value to this poorly managed fund,” said John McBain, CEO of Century’s parent company, Over Fifty Group. “Unit holders in this fund have seen a long and continuing reduction in the value of their holding, we’re offering an opportunity for change, far greater transparency and better management.”
“This undertaking is in addition to our ongoing commitment to Opus investors to provide financial support for a modest equity raising to be approved by investors as well as the proposed fee reductions – including halving of property sales fees,” Mr McBain said.
In discussions with financial planners and unit holders Century has raised a range of concerns with Opus’s management of the Fund, including:
- Loss of 74% of the value of original investment in Opus 21. Their $1.00 per unit investment is now worth only $0.26 and distributions are a miniscule 0.003% pa of the original investment.
- $17.3 million related party loan from Opus 21 made without unit holder permission to another Opus fund, G1, that was subsequently written down by 90 per cent to $1.7 million
- A highly geared structure – 76.7% as at 30 June 2010; and a significant debt burden across all funds managed by Opus which threatens Opus 21’s ability to refinance outstanding debt on reasonable terms
- An outstanding legal appeal by ASIC against the AAT’s decision to reinstate Opus’s Australian Financial Services Licence (AFSL)
- A number of related party transactions, such as a lease agreement with Tretecnic, a company in liquidation which shared two Opus related directors
- Lack of available information regarding the track record of the newly installed board at Opus
- Excessive exit fees charged by Opus for the sale of properties
“We have been speaking widely with financial planners in recent days, showing the sad but unarguable story that the balance sheet tells and putting our clear plan for improving the fund’s future,” Mr McBain said.
“Our discussions have been an eye-opener for planners, who once the surprise abates, are angered by the truth, having not earlier appreciated the level of mismanagement, and subsequent cost to unit holders.”
