Wealthy investor slams Elanor Investors’ track record as ‘deplorable’

ASX-listed Elanor is scrambling to secure a $125 million lifeline to recapitalise from its major investors, Singaporean fund manager Rockworth Capital Partners, but the longer the situation drags on the shakier the rescue plan appears.

While that’s happening, billionaire Paul Lederer is separately stalking the listed Elanor Commercial Property Fund with a $285 million takeover offer, which is due to expire on Monday at 7pm AEDT. The view from within the Lederer camp is that it’s very unlikely to be extended.

Acceptances are tracking at about 36 per cent (up from 33 per cent), with an updated substantial notice to be lodged as early as Monday, say sources with knowledge of the tally not authorised to comment publicly.

Lederer and his lieutenants are hoping to top 40 per cent by the time the bid closes, but may not get enough traction to hit 50 per cent and trigger an automatic extension of the offer.

The focus will then shift to whether Lederer will be successful in using that holding as leverage to change the fund’s responsible entity, being Elanor Funds Management.

Elanor, which manages more than 15 funds and a string of property assets including retail centres, hotels and commercial office assets, believes the bid from Lederer for the Elanor Commercial Property Fund is opportunistic and an independent board committee is holding firm in its rejection of the offer.

Weighing options

But the company risks losing further mandates and partners unless its rescue and recapitalisation plan with Rockworth Capital Partners can be faultlessly executed.

To add further problems for Elanor Investor Group’s management, led by interim managing director Tony Fehon, an ex-Macquarie banker, is global asset manager PGIM with which it has a joint venture.

PGIM is weighing options including taking control of its property joint venture, which it has with Elanor, or selling the underlying asset, according to people familiar with the deliberations who asked not to be named. A decision is yet to be made. A PGIM spokeswoman declined to comment.

In July 2024, PGIM and Elanor acquired a 19-hectare site in Mulgrave, Victoria, that was leased to Woolworths until mid-2026. Now Woolworths is contemplating extending that date, which has the potential to upend development plans for the site.

Elanor’s issues, which are many and messy, hark back to its debt levels, where gearing has more than doubled in the year to June 30, 2024 to 66.9 per cent, and also the loss of a valuable mandate. It lost the mandate for the $3 billion real estate portfolio of wealth firm Challenger Life, which is moving to property giant Charter Hall.

When the arrangement with Challenger is formally unwound this week, Elanor’s funds under management will drop below $3 billion, markedly lower than the $6 billion it oversaw at June 30, 2024.

Now as Elanor, which has been suspended from ASX trading for almost 14 months, seeks to lock down the $125 million rescue package from Rockworth, investors and affiliates are watching with trepidation and some are losing patience. The rescue package also includes Elanor purchasing Singapore-based investment platform Firmus Capital.

Due diligence on the recapitalisation plan is ongoing with key deliberations relating to the rescue happening in Singapore last week, while the parties are also engaged with regulators on required approvals.

The clock is ticking, though, as Elanor had previously told investors it anticipated an extraordinary general meeting would be held in early November. The parties must be mindful that the recapitalisation is coming up against a sunset date, or deadline, of November 30, and Elanor is yet to send a notice of meeting to investors on the proposal.

Against that backdrop, mud slinging from both sides has occurred in the battle for the listed Elanor Commercial fund, leaving investors sandwiched in the middle.

‘Costing me significantly’

Ken Campbell, a wealthy professional investor whose holdings in Elanor entities are now valued at $50 million, down from $70 million, is certainly feeling pain in his hip pocket. He owns about 8.7 per cent of the Elanor Commercial fund and is frustrated with its board and management alongside the parent entity.

“It’s just deplorable,” Campbell tells this column. “The whole thing has been a bad taste, I’ve got to say, and it’s costing me significantly.”

Still, Campbell, whose fortune was amassed partly through investments in the Western Sydney property market, says while Lederer has a “great reputation” he doesn’t intend to accept the billionaire’s offer.

“I’d be taking a massive loss if I did that,” he says. “I don’t want to see the group fall down, but it concerns me that the continuation of the way they’re doing business, that that’s a possibility. In all the trusts that I’m involved with, there’s only one meeting the original IM [information memorandum].”

Campbell is also seeking answers from Elanor Investor Group, the parent, around whether it’s still accruing management fees from its trusts.

Hindering Lederer’s quest for control of the commercial fund is that independent expert Kroll Australia found the offer was neither fair nor reasonable. It came to the conclusion the bid on offer was below the low end of its valuation range of 73 cents to 75 cents per security, spurring the fund’s independent board committee to recommend investors reject it.

At the heart of Lederer’s attempts to gain control of the Elanor Commercial Property Fund is a fiery dispute between him and the parent entity.

Call it a lawyer’s field day given what’s at stake. That’s because there was a two-year standstill agreement, which expires in 2026, put in place when Elanor sold shares in the commercial fund to Lederer last year. This means the fund’s manager and responsible entity could not change during that period.

Those in the Elanor bunker believe the legal agreement stands, and they are closely keeping tabs on Lederer’s tactical plays, sources with knowledge of the agreement say.

The Lederer camp, however, has received legal advice suggesting the standstill arrangement can be waived if various performance criteria haven’t been met.

While it’s been an intense timeline of events in this battle, the legal wrangling certainly suggests there’s more to come.

Lederer, whose fortune is estimated at $1.98 billion by the Financial Review Rich List, underscored by the sale of his smallgoods business Primo, launched the Elanor Commercial bid a week after the parent company announced a stabilisation plan.

Highly opportunistic timing

While he has come out swinging at Elanor, it must also be noted that Lederer hired two executives from the group he has accused of poor performance and governance. Elanor’s David Burgess and Ryan Pittman joined the Lederer group ahead of the family office seeking control of the commercial fund.

As official interest rates have declined and operating conditions improved, the worst may be over for parts of the retail property and office market, which also makes the bid’s timing highly opportunistic.

The key question, though, is whether Elanor, which has been helmed by Fehon since September last year, has the wherewithal to get the recapitalisation across the line and stem damage to other parts of the business. Glenn Willis stepped down from the top job amid Elanor’s debt woes.

A raft of asset sales have already occurred, but Elanor remains in a precarious position.

Fehon also has to focus on getting Elanor’s financial accounts up to date, given it is yet to file interim and full-year 2025 numbers with the ASX.

The 2024 accounts, audited by PwC, were only released to the ASX last month and highlighted “material uncertainty” around the company’s ability to continue as a going concern. Unsurprisingly, the accounts pointed to the recapitalisation plan as key to Elanor’s future.