Elanor’s $125m rescue deal loses key CEO recruit as conflict concerns emerge

Ian Mackie, former top LaSalle Investment Management, executive is Elanor Investors Group chairman. Picture: Lyndon Mechielsen

Elanor Investors Group has announced terms of a recapitalisation plan, but missing from it will be the headline name that was to join as the new chief executive.

DataRoom understands that Centuria executive Jesse Curtis withdrew from a plan to run the business after he was tapped for the role.

Elanor, led by Tony Fehon, on Monday announced that Singaporean investor Rockworth would put forward a recapitalisation plan worth up to $125m for the business, as Challenger Life extracts itself and unwind mandates.

DataRoom understands that Challenger Life will instead invest funds with rival real estate fund manager Charter Hall.

Sources say that the challenge with the latest deal that has been tabled is that it entrenches the current board, which had been in place since when Elanor first faced problems with the business.

Also, it denies existing shareholders a chance for a premium in the future by selling 60 per cent of the company to a director or major shareholder, Su Kiat Lim.

The announcement has raised eyebrows within the investment community surrounding conflicts of interest, providing Mr Lim a director position while the company has bought his business and gives him a 13 per cent stake in Elanor.

But Elanor said the deal was a catalyst to deliver on a Pan Asian growth strategy and would take its assets under management to $3.3bn.

The deal involves Rockworth providing $70m of debt, $55m of capital notes and 30 million unlisted warrants at 1c per warrant.

Proceeds will be used to repay in full its lender Keyview, redeem existing Elanor corporate notes and provide additional working capital.

Elanor will buy all of Firmus Capital, with $784m of assets under management at December across the retail and office sectors.

Firmus is 70 per cent owned by Rockworth and 30 per cent owned by the Firmus chief executive, who is Elanor director, Mr Lim.

Elanor said that the Firmus acquisition would be based on an enterprise value of 7 times earnings before interest, tax, depreciation and amortisation for the 2025 financial year.

It would also be based on net tangible assets and would be paid for through shares in Elanor.

As a result, Rockworth would increase its holding in Elanor from 11.8 per cent to about 47.9 per cent.

Mr Lim would become a new Elanor security holder and would hold about 13.6 per cent.

Challenger and Elanor would cancel the 20.3 million Elanor securities held by a subsidiary of Challenger and the distribution agreement with Challenger’s business Fidante would be terminated.

The $640m of retail and hotel assets jointly owned by Abu Dhabi Investment Council and Challenger Life, would continue to be managed by Elanor, the company said.

Rockworth Capital has been one of Elanor’s major investors, holding over 10 per cent in the ASX listed group.

Elanor has been involved in an asset selldown program and moves to stabilise its balance sheet after its high debt level resulted in it breaching agreements with its lenders.

It suspended trading and cancelled its distribution as it considered a range of options to stabilise and maintain its ongoing financial position, where its debt was at 45 per cent of its equity.

It last updated investors on the ASX in April, saying that corporate noteholders owed $40m had waived covenant breaches and increased the notes coupon to a fixed rate of 15 per cent per annum.

It was to be paid quarterly, but reducing to 12 per cent following the repayment of debt to lender Keyview.

Elanor struck a $125m refinancing deal with Keyview Financial Group last year.

Advising on the refinancing was MA Moelis.

The company had also been selling hotel assets within the Elanor Hotel Accommodation Fund and was to exit the hotels, tourism and leisure sector.

Key assets are Tasmania’s Cradle Mountain Lodge and the Mayfair Hotel in Adelaide, with the announced sale of the latter for $75m, below its $91m book value.

Established in 2009, Elanor Investors is an ASX-listed real estate funds management group.

It originates and manages real estate assets across Australia and New Zealand to deliver returns for both Elanor’s funds management capital partners and Elanor securityholders.

The business, chaired by Ian Mackie, was previously run by former Lehman Brothers Australia head Glenn Willis, who co-founded Moss Capital and Grange Securities, which was bought by Lehman Brothers.

For the six months to December 2023 – the last results reported by Elanor – it posted a $23.8m loss, while net debt was $46.5m.