A private equity firm controlled by former Babcock & Brown executive Rob Topfer, and advised by industry stalwart James Burkitt, claims to have the money and the support of aggrieved dealer groups (notably PIS) to make it the best party to take over struggling direct property manager, Orchard Funds Management.
Topfer’s firm, Taemas Bridge Capital, last week ran second in the race to secure exclusive due diligence rights over Orchard’s property portfolio valued at $1.5 billion, whose funds have breached banking covenants and have borrowings of $1.3 billion.
The exclusive suitor until this Friday is Cromwell Group, the listed property group which has offered to buy Orchard’s management company, currently chaired by Charles Macek, for $15 million.
However Cromwell has not pledged anything concrete beyond that, which is where Taemas Bridge believes it has the superior proposition. It has secured an agreement from London-based billionaire brothers, the Reubens, to tip $100 million into Orchard’s funds, while Burkitt claims he’s got support from four additional family offices for a total recapitalisation war chest of up to $120 million.
Burkitt says the dealer groups most exposed to Orchard, which has frozen redemptions and ceased paying dividends, are supportive of the Taemas Bridge plan. These are understood to include Professional Investor Services (PIS) and the Newcastle-based group of ex-PIS planners, Centre Capital.
The planners are understood to suspect Cromwell will wind up Orchard’s $700 million Diversfied Property Trust, which is said to have debts of over $520 million, and would be unlikely to match the cash pledged upfront by the Reubens-backed Taemas Bridge.
One planner, Paul Holly of Subiaco-based Utopia Financial Services, yesterday sent a letter to Cromwell seeking more details of its intentions for Orchard, and voicing support for the Taemus Bridge offer.
“To us the best result for the clients in Orchard is an injection of capital that pays out the banks, restores distributions and allows the assets to recover over time. All other solutions to date such as capital raisings, sell down of assets and injections of capital for an equity stake are detrimental to existing unit holders and therefore not something that we would welcome,” Holly’s letter said in part.
Burkitt said that in his opinion, Orchard’s board had picked Cromwell over Taemas Bridge with their own reputations in mind, given that an Australian listed property group might be considered a “safe pair of hands” compared with private equity.