Nova Selling Off Assets

We have become aware of the impending sale of five properties in the Nova Property Group (up for Auction through Auction Inc on 30 May) – all in the former Sharemax stable and all linked to debentures held by Nova Debenture Creditors (DCs)

It did not surprise us that there had been no announcement by Nova to the DCs of their intentions and we connected with Ryk van Niekerk of Moneyweb in the matter

Ryk has posted on this event (https://www.moneyweb.co.za/in-depth/investigations/nova-plans-to-sell-another-five-properties/) and included excerpts from comments that we provided

Here is the full text of our comments:

Speaking for the Nova Debenture Creditors Action Group (www.ndcag.co.za), Chair Roger Johnson has stated that the group is gravely concerned that the intended disposal of yet more of the assets of Nova Property Group, the very assets that are the core of the company and that represent, ultimately, the original investor’s (now Debenture Creditors – DCs) value in same, will lead to yet further reduction of the asset base and estrangement of sale proceeds which money should be applied to redemption of the Debentures

This did not occur with the Rivonia Square property which was sold in 2012. In November 2016, the Nova board announced that the monthly interest payments to relevant DCs would cease. In their announcement, they made no mention of their intentions as regards the capital amount – the sale proceeds – which had, up to that time, been ring-fenced for eventual use to repay DCs. That capital has since disappeared.

During 2017/18, four properties were sold (Checkers, Virginia for 36.4 million and Benoni Hyper, Silver Water Crossing and properties related to Brookfield Investment for a total of 284.5 million) without any pre- or post-sale communication with the DCs except for a March 2017 communiqué to the effect that debenture holders in the Silverwater Crossing and Magalieskruin properties had been repaid.

Why are some sales proceeds applied to debenture repayment and others not?

NDCAG suspects that, as with Rivonia Square, the other funds received from a number of these sales have been diverted into the company’s working capital and have been applied to who knows what undeclared purposes and expenditure. Perhaps it is this money that is keeping the company afloat and funding the allegedly excessive remuneration of the directors?

So, with the intended sale via auction at the end of May, what is the likely outcome if sale does eventuate? Will there be a further repayment or will these funds also “disappear”?

NDCAG notes also that the board stopped communicating with the DCs by way of quarterly communiqués some years ago. They published a communiqué with information on some of the commercial properties including, co-incidentally, the properties now up for auction, in their web site in February but, contrary to past practice, did not inform the DCs of same by way of the usual SMS message distribution. NDCAG is not surprised about this “omission” as it has been clear to us and DCs for a long time that communication is not high on Nova’s priority list

When approached during 2018 for recognition of NDCAG as a representative forum of DCs, the board (deliberately?) failed to respond to the request whilst at the same time, declining to provide the Group with contact details of the DCs, requested under the Promotion of Access to Information Act. This only serves to demonstrate further that the board has no interest in communication except on their own terms and has no interest in dealing with the DCs as a collective

NDCAG welcomes any communication that the board might issue in response to these comments