Fortress, one of the former members of the Resilient stable of property companies, says the Financial Sector Conduct Authority (FSCA) must now ascertain how short sellers and asset managers deliberately weakened its share price in 2018, costing investors more than R100bn.
Robin Lockhart-Ross, an independent nonexecutive director at Fortress, said the company wanted the FSCA to adequately probe parties that had made accusations against Fortress.
The industrial and commuter retail landlord was responding to a report released by advisory firm PwC at the weekend, which said it was unable to find any evidence that the company’s governance had been inadequate in 2017 and 2018 but that there had been irregularities in the conduct of some of its longer-standing directors in the-run up to its 2009 listing, including CEO Mark Stevens and current chair Iraj Abedian.
The report followed an independent investigation led by PwC that began at the end of November 2018, following a sell-off of more than R100bn in shares of Fortress, Resilient, Nepi Rockcastle and Greenbay (now called Lighthouse Capital).
Lockhart-Ross, who led a sub-committee created to co-operate with the investigation, said the report had been unable to find any wrongdoing at Fortress. He said the report may have highlighted irregularities that occurred years ago, but these had not led to a loss in value for shareholders. He said PwC had, in each case, found Fortress’s directors had not operated illegally or negligently but rather had occasionally been involved in technical corporate governance breaches, which have since been rectified.
Stevens has been accused of benefiting unfairly from related party deals prior to the Fortress listing, including one where Madison Park, in which his private company MWS Investments owned a stake, sold 13 properties to Fortress. PwC said Fortress did not overpay, and over the long run the fund benefited from the sale, but Stevens also should have disclosed his conflict of interests.
Stevens, who, last December said he would depart as CEO within the next 12 months, said he was pleased with the report.
Abedian was formerly chair of Pangbourne, a group bought by Capital Property Fund in 2011, which was later taken over by Fortress. He was accused of losing his independence as a director and not disclosing his direct interests with businesses with which Pangbourne did business. For example, Pangbourne lent money to Pan African General Equity Company (Page) to acquire its interest in Aspire. Abedian was a shareholder in Page.
But he said he had fulfilled director roles at Fortress and companies related to it including Pangbourne to the best of his ability, and had always declared any shareholder interests.
During the sell-off the four companies’ shares, which began in January 2018, various reports were released by or leaked from hedge fund and asset managers, in which allegations were made that the companies were trading at premiums to their net asset values, which were unrealistic, and that the companies’ profits had been inflated artificially.
This prompted the FSCA to investigate the four companies and the trading of their shares to find out if insider trading or market manipulation or false reporting had occurred.
Lockhart-Ross said that Fortress’s board and executives were now waiting to see what the FSCA will find against asset managers, short-sellers and any other parties.
Cy Jacobs, CEO of 36One, a hedge fund manager that wrote reports about Fortress, said his company had chosen not to engage with PwC at the FSCA’s request “as they felt that our engagement might well compromise and prejudice their investigations”.
Said Jacobs, “We remain confident that our findings and views about Fortress are accurate and that the truth will come out.”
Correction: May 30 2019
In an earlier version of this report it was incorrectly stated that Mark Stevens has left his role as CEO at Fortress. Stevens is set to be replaced by CEO-designate Steve Brown, but a handover date has not yet been set.
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