The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The majority shareholder of a BISX-listed company yesterday said it was “seriously concerned” that the value of its multi-million dollar investment is being steadily eroded, following a $2.607 million net loss for the year to end-September 2012.

And, exacerbating the situation, is the fact that the 51 per cent stake in Premier Commercial Real Estate Investment Corporation represents one of the best recovery sources for hundreds of investors in a collapsed $471 million fund structure.

Clifford Culmer, the senior BDO Mann Judd accountant and partner, who is joint liquidator for the Bahamas-domiciled Olympus Univest investment fund, and its Mosaic Composite counterparty, said a buyer for the majority equity stake had yet to be found.

In a series of e-mailed replies to Tribune Business questions, Mr Culmer said there had been “limited” interest in Mosaic Composite’s stake.

He added that its “lack of marketability” meant the liquidators could not avoid sharing in Premier Real Estate’s losses, as the BISX-listed real estate investment trust (REIT) comes under increasing pressure to find buyers and new tenants for its three-strong property portfolio

“No buyer has been found for the Premier stake yet, and interest has been limited,” Mr Culmer told Tribune Business.

“The joint official liquidators are considering various options for realising the cash value of this shareholding, and are confident that they will be able to do so within a reasonable amount of time.”

He added that “in terms of realisable value, the Premier shareholding represents a very substantial portion of anticipated recoveries of Mosaic assets”.

To-date, Mr Culmer and his co-liquidator, Raymond Massi, have recovered just $10.652 million of the funds invested in Mosaic Composite.

Some $1.991 million, or almost 20 per cent, of this has come from Premier Real Estate dividends paid on the 51 per cent stake, at a time when the real estate investment trust (REIT) was doing well.

Yet Premier Real Estate appears to have fallen on hard times, its financials for the year to end-September 2012 showing losses had increased more than 30-fold to $2.607 million, up from $69,228 the year before.

This was sparked by a $3.06 million negative revaluation of its property portfolio’s worth, and the future of two of its three holdings is shrouded in uncertainty.

Caribbean Bottling Company (Bahamas), the tenant for those properties, has moved to its own headquarters in Nassau and is in the process of doing the same in Freeport.

As a result, Premier Real Estate is faced with having to find either buyers or new tenants for both, and purpose-built buildings in an anemic economy are likely to prove difficult to move.

“We are seriously concerned that the Premier stake is diminishing in value, but given the lack of marketability of the investment, the measures available to the joint official liquidators to avoid these losses are limited,” Mr Culmer told Tribune Business.

“The major property is the First Commercial Centre in Freeport, so value is still there. The Caribbean Bottling property in Nassau is currently on the market to be sold, and is over three acres of land, so hopefully this can be leased or sold shortly.”

Premier Real Estate’s net equity, or net assets available to shareholders, dropped by 19.4 per cent year-over-year to $10.841 million at end-September 2012, down from $13.448 million the previous year.

It was created as a mutual fund to invest in, and hold, real estate investments in 2003 by former Grand Bahama Port Authority and Freeport Concrete chairman, Hannes Babak. He was a former major shareholder in the First Commercial Centre.

But even that property, Premier Real Estate’s flagship, is having to contend with tenant departures. Moss and Associates, the law firm of PLP and former National Insurance Board (NIB) chairman, Gregory Moss, moved out last year.

The Olympus Univest/Mosaic Composite collapse has left around 1,900 small retail investors, many of them Canadian, out of pocket with no explanation as to where most of the money went.

Among Premier’s founding directors, although he is no longer on the board, was Stephen Hancock, president and chief executive of Cardinal International, the ex-Bahamian fund administrator for Olympus Univest, Mosaic and a number of other entities in the investment structure.

The Olympus Univest/Mosaic Composite co-liquidators’ previous reports detailed how Norshield, the investment manager, placed retail investor monies into its Olympus Funds, which then invested them into the asset manager’s wholly-owned subsidiary, Barbados-based Olympus Bank.

The bank co-mingled retail investor funds with capital received from institutional investors, such as pension funds and financial institutions, placing all monies into Bahamas-based Olympus Univest. The latter used these funds to make “substantial investments” in Mosaic, a ‘fund of funds’ structure, which invested in “both hedged and non-hedged assets”.

Mr Massi said that based on Mosaic’s last audited financial statements, as at September 30, 2003, the value of its hedged assets totalled $387 million. These asset values, though, had been inflated.