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Sydney-based Lederer Group has today offered both a $206.6 million takeover proposal for the Elanor Commercial Property Fund (ASX: ECF) and a scathing assessment of the fund's eponymous responsible entity Elanor Investors Group (ASX: ENN), which still hasn't filed its financial reports for FY24.
The Elanor group launched the fund as an initial public offering (IPO) in December 2019, but ceased being a shareholder in September last year when it sold its 12.6 per cent stake to Lederer, although it stayed on as the fund's manager.
This made Lederer the largest shareholder in ECF, committing an additional $50 million in capital as it bulked up holdings to their current level of 27.5 per cent.
At the time of the share sale the Elanor group - also based in Sydney - had been in a share trading suspension for more than two weeks as it explored options for refinancing debt, and had started divesting hotel assets within another fund.
The company flagged to the market that it would be late in submitting its preliminary financial report for FY24, but more than 11 months later its financials remain unknown.
When the Lederer partnership was announced, the new investor's chairman Paul Lederer said he was a "big believer in the Australian office market".
"We have the patience and ECF has the great team," he said at that time.
Today that patience appears to have worn thin with Lederer announcing its intention to make an off-market takeover offer for the fund at 70 cents per share, representing a 5.3 per cent premium to the close of trading on Friday and valuing ECF at approximately $285 million.
The bid was preceded by the announcement a week ago that Elanor had lost its mandate to manage the Challenger Life Company (CLC) real estate portfolio, with its responsibilities to be wound down by 15 October.
In the same announcement, the Elanor group revealed it had entered a strategic alliance with Singapore-based Rockworth Capital Partners, whereby its new partner would invest up to $125 million into Elanor to recapitalise the business, stabilise the balance sheet and reduce gearing.
As a key part of the new alliance, Elanor would acquire Singapore-based real estate investment manager Firmus, which is 70 per cent owned by Rockworth and 30 per cent owned by its CEO, current Elanor director Su Kiat Lim.
Elanor claimed the deal, which if approved by shareholders will see Rockworth lift its holding in ENN from 11.8 per cent to 47.9 per cent, will allow for the continued active management of the real estate assets of ECF and other existing managed fund capital partners.
"There is an expression: enough is enough. Challenger is leaving Elanor for a reason," said Lederer in today's announcement.
"I do not believe Elanor's obsession with saving itself at any cost is good for ECF investors or the industry. I want ECF investors to know: I have been listening to you. If you want to sell your ECF securities, I will buy them at the best price they have traded in the last 12 months and it is my pleasure to provide this assistance to you.
"If you continue to invest alongside me, I promise you that my team and I will spend every day thinking about how to make you money."
Lederer Group has more than $1.2 billion invested in real estate assets including investments in several listed real estate investment trusts (REITs).
The shareholder claims it approached the board of ENN with a proposal to acquire the management rights to ECF on 9 May. It alleges a conflict of interest in the fact the board of ENN and the responsible entity (RE) for ECF are the same.
"In its engagement to date, it has not been apparent that the RE of ECF has been able to act independently," the Lederer Group stated.
Lederer has raised several concerns about Elanor's 28 July announcement, alleging a lack of accountability by the board and a lack of oversight that led to its suspension from the ASX and insolvency risks.
The suitor has also claimed there was a lack of transparency around why Challenger Life, a transaction consummated less than two years ago, has been unwound.
"It would appear that Challenger Life, a significant institutional investor, was not satisfied with the service offering by ENN which led to their departure," the group said.
Lederer also pointed to the impact of the loss of the Challenger Life mandate on staff within Elanor, some of whom have had responsibility for looking after ECF, and the "impact this may have on the ability to manage ECF going forward".
The group is also concerned that if Elanor's proposed transaction goes ahead, Rockworth and Su Kiat Lim would collectively own 61.5 per cent of ECF, as well as the ability to each nominate a director to the ECF board and therefore influence its management.
Lederer has also expressed concerns around Elanor's desire to become a pan-Asian funds manager, and the risks that comes with such an investment vehicle with substantially changed asset holdings and exposures.
"In this regard, we note the ASX announcement referenced Elanor's strategic alliance with Rockworth would support ECF's funds management activities without much explanation or any evidentiary support for that disclosure," the group stated.
In a separate announcement to the ASX, Elanor said it was considering its response to the offer.
ENN shares remain suspended from trading, but ECF shares are up 2.56 per cent today at 68.2 cents per share (cps).
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