The Crumbling of Concrete Equities
Angry investors are seeking to unravel the mystery behind a high-profile real estate syndicator’s doings that have left their life savings in limbo
by Scott Messenger
For a few hours one Tuesday evening in May, Calgary’s Southside Victory Centre seems the perfect place for the shareholders to meet. At least in name. As much optimism and hope fills the church’s sanctuary – a cavernous warehouse converted with grey industrial cord and slate-blue paint – as you’d find here among Sunday’s faithful. And thanks to recent successes, the 300 or so in attendance ride a sense of triumph, tempered only slightly by the ongoing strategizing for a fight yet to come, and by the plastic containers circulating amongst the congregation to collect funds for the war chest.
As far as takeovers are concerned, this one’s going reasonably well, at least according to Terry Town, the wiry middle-ager with the mike at the front of the room. By day he’s president of a Calgary filing and storage systems company. But recently, beginning not long after Concrete Equities’ March proposal to sell buildings he’d invested in, Town has spent off hours on a campaign to keep control of the properties.
Usually when a company like Concrete — a major Calgary-based real estate syndicator familiar to most as former sponsor of CBC TV’s Dragons’ Den — plans to turn over or refinance assets, the result is a hefty shareholder payout.
For one thing, it’s a buyer’s market. For another, the new deal involves investors trading real assets they’d purchased for unsecured debentures. Or at least it did, before Town and the steering committee, the small cast of concerned investors seated on the Southside Victory stage, began the work of seizing control of the troubled portfolio of assets.
“We’re the worst group of investors you can have,” Town says with the tone of one with the upper hand. Applause rises from an audience diverse enough to prove the dream of getting rich by real estate transcends age, gender and ethnicity. What Town means by “worst” is they’re not going to stop until they know what went wrong. Concrete blames the recession. But it would seem that’s only a small part of this story, if any of it. Earning respectable initial returns, investors had tolerated, even accepted, management that seemed doomed to dysfunction from the beginning. Recently returned CEO Dave Jones played the absent founder; current president Vincenzo De Palma, whom you might recognize from Concrete’s TV ads, drew from a background mostly spent selling lumber out of Prince George, B.C.; 20-something executive Vinnie Aurora’s qualifications included being the son of a colleague of Jones; and, along with experience as an investment industry veteran, office manager Dave Humeniuk bore the albatross of a lifetime ban from selling real estate in the province of Alberta. The result: a corporate environment poisoned by infighting and finger-pointing and which produced no significant financial reporting, a lapsed mortgage, allegations of impropriety and incompetence, no dividends since the start of this year despite purportedly cash-positive properties, and, because of it all, more than 2,000 investors raring for a fight.
“Every day that goes by that we don’t take control of these buildings, money leaves our bank accounts,” Town tells the audience. Thus the move motivated by fear of losing RRSPs, life savings, even their homes, to replace Concrete with Steven Butt, partner at Calgary’s Avenue Commercial. As of tonight the dissident investors have already voted in the switch on two buildings. However, Concrete has refused to acknowledge the decisions, leaving investors frustrated and confused, certain there’s something they’re not being told. Regardless, they’re voting on a third property. As Town and the committee pass out ballots, Butt, currently one of the property managers, takes the mike. Tomorrow he’ll be visiting Concrete’s offices to collect financial records he suspects to be, at best, incomplete, but enough to reveal what went wrong. With that in hand, he’ll get on with getting dividends back into the hands of investors. The truth of what has happened with the Concrete investments will be known, he insists. “At the end of the day, we’re going to be OK.” The audience applauds, unaware that they are the main characters in a cautionary tale of just how bad a seemingly good deal can get.
As it turns out, optimism and hope, which drive so many Alberta investors to place trust where it might not belong, only mean so much when it comes to the markets. Seeing as far as the end of the day is one thing. It’s what happens the morning after that’s so hard to predict.2 3 4 5 6