Resilient boss comes out swinging in defence
Property maven Des de Beer puts market fears to rest
The market is still giving Resilient and Fortress B shares a wide berth despite strenuous denials by Resilient’s management that the property company’s empire builders have spent years manipulating its shares. Resilient CEO Des de Beer and financial director Nick Hanekom address concerns about the extent of Resilient’s cross-holdings:
DDB: They’re relatively small in relation to the market caps.
NH: Remember Nepi is a company in its own right, it’s massive. They’re real businesses in foreign jurisdictions.
Which you started …
DDB: We put in seed money. Remember there is only one cross-holding, which is between us and Fortress and we should have disconnected it, we know that. It’s fully disclosed, the legitimate asset managers have looked at it and the disclosure’s been there forever.
Why not “disconnect”, knowing the market’s unease with the relationship?
DDB: We were getting round to it. We actually ran ourselves absolutely ragged last year. We will deal with it. They’re trying to push us for it now. The whole theme is there’s this stock coming to the market and we’re going to disappoint them; there’s no stock coming to the market. We’re going to have to wait until it’s finished.How would the cross-holding bond be cut?
DDB: There’s a hundred ways to do it, we could merge them (Resilient and Fortress). That terrifies them (the hedge funds) senseless because then we’ve called all the stock.
But why, then, go to the trouble of creating Fortress in the first place?
DDB: Because it’s got a logistics thing … it’s actually a fantastic business, it’s much sexier than retail. Mark (Stevens, Fortress’s CEO) also doesn’t like offices, they’ve got all these junky offices in Sandton and Bryanston, that stuff is absolutely poisonous, he inherited that.
But he inherited it with companies that you set up?
DDB: No he didn’t, (it was) Pangbourne which was quite a broken business that the institutions put in our books. Pangbourne merged into Capital etc and Barry Stuhler reached retirement age, and it then went into Fortress.
What about Nepi?
NH: We totally agree that the entire Nepi should have been inside Resilient. But we just can’t have it inside Resilient because of exchange control. How else do you do it?
You said you’re going to retire in two to three years?
DDB: At 60. Do you need this? You don’t want to be a listed company in South Africa anymore, particularly when you’re on a premium – you’re going to be attacked. The next one’s coming.But you wouldn’t be “attacked” illegitimately?
DDB: You would. This is not legitimate. What’s legitimate about this? The market’s got all the information. This innuendo about some transfer of shares between one company because I’m retirement planning to another … it’s not a trade. It was off-market.
NH: Does it make sense to you to say: Resilient’s got a R60-billion market cap and we did trades of R122-billion in 2017? It shouldn’t make sense to you.
There are statements I can show you, where the opening balance is 100 and the closing balance is 100. There is no trade on the broker statement and yet it’s recorded as a trade.
They actually took the scrip, gave it to a lender and the lender gave it to SocGen to short. It’s not us.
Why is this happening only to Resilient?
DDB: Because we’re the premium company. We trade at a premium. Who’s the previous company they targeted? Same guys – EOH.
But EOH has tons of issues …
NH: “There’s a theme here which you need to get. South Africa is jittery, so the mere fact that you can throw allegations or mark the price down by short selling creates panic everywhere.
But short sellers have plenty to lose if they get it wrong …
DDB: They don’t, not in this market.
NH: But they’re out by that time.
How have your bankers reacted to the assault on your shares?
NH: If you had to say our entire listed investments – Nepi, Greenbay etc – are worthless, zero, we would be at 49% gearing and our covenants wouldn’t be breached. That is how extreme it is.
What about shareholders?
NH: We take every phone call, we help every person. I want to assure people that their cash is okay – they’re going to get their dividend in two weeks.
What then are the risks to Resilient’s distribution?
NH: We are supposed to generate cash flow – that’s our jobs. Go and buy the correct asset so that you can protect the value of what you paid for it: that is on management. If we buy the wrong mall, our shareholders should say, you’re fired. The distribution is the most important number for property companies.