R30m property shocker: Old Mutual unrepentant

Old Mutual's property group decision-makers are standing by a decision that cost policyholders R30m. Rather than selling a building to the highest bidder, Old Mutual offloaded it to a lower bidder - which in turn sold it for a juicy profit to the highest bidder.

Old Mutual cited "competitive" reasons to Hyprop at the time it rejected an offer of R120m for Nedbank Gardens, in Johannesburg's Rosebank, but Hyprop then bought a big share in the building from the successful buyer.

Madison Property Fund Managers executive director Marc Wainer told Moneyweb's SAfm this week: The building "was owned by Old Mutual, but they didn't want us to own it because they saw us as a competitor, so they sold it to a third party for R90m. And obviously we have done a deal with the third party. So a nice deal for us, not so good for Mutual policy or shareholders. They gave up R30m, and we still have it," said Wainer.

He added that his team went to the buyer and said: "Look, this is what we are prepared to pay. So let's do a deal." 

But Old Mutual's message when asked to explain its decision was along the lines of this: Policyholders should be grateful the property was sold at a profit - albeit a dramatically lower one - and that therefore this was not a problematic investment deal.

In a brief statement faxed to Realestateweb.co.za - property news division of the publicly-listed Moneyweb group - Andries Breytenbach, fund manager of the Triangle Development Fund of Old Mutual Investment Group Property Investments, said it was "the owner's prerogative to not sell the property at the highest price".

He later admitted that the investment was a policyholders' investment, in other words ultimately owned by individuals who invest savings in Old Mutual savings policies or products. But he said: "The property was sold at a profit, therefore there was no negative impact to policyholders." Breytenbach declined to reveal what this profit was.

Breytenbach also said the R30m "was more an opportunity cost" rather than an "apparent loss to the policyholder".

Old Mutual declined to say why it sold for less than the highest offer but that it "is not necessarily our policy not to sell to competitors".

Analysts told Realestateweb they were puzzled about the decision.

David Shapiro, director of Sasfin Securities and a regular guest and market commentator on Moneyweb's SAfm, said he is not a property expert, but wonders why anyone would sell the property for less when there was a higher bid. Also, because the property belonged to policyholders, he wonders why Old Mutual was worried about competition - and why the eventual buyer was able to "flip" the deal and make a very handsome profit.

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