The three P's of success: passion, persistence and patience.

- Doug Bronson
 

Knowing trees, I understand the meaning of patience.  Knowing grass, I can appreciate persistence.

- Hal Borland
 

The portion of the following article that pertains to Flat Rock is highlighted in purple.

Lack of Tower Premium Surprises Some Novices

by Chris Lee, Kapiti

The early failure of Tower Corp's shares to reach their issue price will have surprised many new investors, now used to selling into a share-starved market.  The likes of Capital Properties, AMP, Contact Energy, and Auckland Airport all listed at premiums, because of the need for institutions to meet their portfolio requirements.  In each case the institutions could not be allocated as many shares as they wanted so they bought up large on opening day.

The signal that Tower would not enjoy such a premium came in the prior announcement that every application from preferred buyers (Tower clients ) had been given every share they had sought.  This was a clear signal that the institutions had not been left out and was a virtual guarantee that the demand would be weak on opening day.  Of course weak world markets were a part of this problem as was a very fully priced Westpac issue, which may also list at a discount.  With weak demand, and a large number of eager sellers amongst those given the shares, Tower's first day prices were logical and not a vote of no confidence.

I expect Tower's shares to improve slowly, in neutral market conditions, and eventually to attract a decent premium from the bold organisation that will take over Tower.  When that happens the question may be asked why the takeover bid did not occur on day one, when the price was discounted.  The takeover would have required a 75% shareholders vote, surely easiest to get from mainly novice shareholders when the share price is weak.

Tower is not a gold mine, waiting for the wash up.  It is an average fund manager, average insurer, with some good local managers but some average Australian assets.  It has cleared out some of its deadwood but may be erring in chasing trustee business and like others still has a falsely high idea of the importance of its senior people, and therefore it overspends on staff.

Fund managers and insurers effectively are commodity sellers and as such they do not require rocket scientists to run them.  It follows that the salaries of the senior people need not be set at a level to attract rocket scientists.  In this respect Tower is no worse than many others and is miles better than the likes of the Lotteries Commission and Fletcher Challenge.

While Capital Properties share issue was several times oversubscribed last year, its current price is now well below the issue price.  People who clamoured to buy the shares for a total of $1.00 are now utterly unwilling to pay the 43¢ required for half the share now, and the 57¢ required for the other half next June.  What has changed?  Capital Properties can offer no explanation, expecting to achieve their prospectus forecasts, and believing that the takeover of Shortland Properties will enhance their earnings per share, and presumably, enable them in the future to increase dividends.

So why are people not clamouring to buy Capital Properties shares?  Cynics point to the Alliance threat, with its proposed land taxes, but surely the polls indicate that their required level of gullibility from voters may be out of reach.  Capital Properties will soon be writing to all shareholders over its Shortland takeover and has offered to hold a public seminar in Paraparaumu to discuss these issues with shareholders.  Interested readers and CP investors may contact me for details later this month.

One set of property investors is celebrating.  The chief executive of the St Laurence Group, Kevin Podmore, has gained great satisfaction from announcing the imminent sale of the property in his Broadway Fund.  Investors will have had a 21% gain in just a few years, with the building selling for well above its cost.  How much further evidence is required to illustrate the need for a genuinely independent professional and competent fund manager to manage property syndicates?

A group of Flat Rock Forest investors is refusing to be deterred from the pursuit of those parties who promoted, managed and supervised this astonishingly unsuccessful venture.  The woman heading the fight is clearly single-minded and very focussed on getting clearer explanations than have so far been offered by the directors of the liquidated manager, the management team itself, and the hapless trustee.  The investors seem to be questioning the expertise of the managers and the supervisory skills of the trustee.

My wife is a very small investor in this fund.  If I am allowed to fight on her behalf, I will be quite happy to risk money to seek a judgment in court on the merits of the deal!  It seems to me that the casual write-off does nothing to establish the rights and wrongs of this sort of deal.

If a court found that the directors and managers were competent and the trustees fulfilled their responsibilities to the requirements of the law, at least then investors would know when these people pop up with new ventures in future.  Recently a Wellington broker, who now sensibly maintains a low public profile, opined to me that Flat Rock was "petty cash" compared with some other disasters he experienced in the 1980s.  That opinion might be seen as arrogant and even ignorant by those people who believe they are entitled to see that the rules are observed, however "petty" the number of millions lost.

If all the parties in Flat Rock Forest are shown to be above reproach, then all investors will accept personal responsibility for the multi-millions combined losses.  The best place to answer these questions may be in the court, but certainly will not be in the offices of those still immersed in the appalling unresolved issues of the 1980s.

Soon to be offered to investors, some would say not before time, is some help from the Securities Commission which has spent some time studying the antics of the various property syndicators.  It seems certain that before long, it will be unwise for a promoter to advertise "cash returns" that bundle up rental returns and payment of capital and assume that revaluations of the property will restore the (repaid) capital.

It almost seems certain that radio advertising will be under closer scrutiny, and the claims made by talkback salesmen might also be defined as advertising subject to advertising laws, and thus all laws.  All of these improvements will be welcomed, whatever the feelings about their being overdue.

Source: The Mail Horowhenua 7 October 1999

For news articles on the Flat Rock Forests Trust, forestry, the Serious Fraud Office, one immigrant family's experiences, immigration specialists, fraud, juries, logging, and more, pressing the "Up" key below will take you to the Table of Contents for this News section.  Or you may wish to visit the Forestry Trust Table of Contents to read how a unit trust went bust.  Or the Topics Table of Contents which offers a different approach to lots of topics - among them poisonous insects, eating dogs, what's addictive, training vs teaching, tornados, unusual flying machines, humour, wearable computers, IQ tests, health, Y chromosomes, share options, New Jersey's positive side, oddities, ageing, burial alternatives, capital punishment, affairs, poverty, McCarthyism, the most beautiful city in the world, neverending work and more...