A property investment firm controlled by Dublin-based company Treasury Holdings is set to receive a windfall of more than €72 million following a settlement with its former financial adviser.
Real Estate Opportunities (REO) has been embroiled in a legal battle with Aberdeen Investment Managers since filing a claim against the UK company in 2005. The dispute centred around the heavy losses sustained by REO's non-property investment portfolio under the management of Aberdeen.
A settlement has now been reached with Aberdeen, which provides for an immediate cash payment to REO, followed by a further cash payment in January 2008.
Aberdeen indicated yesterday that the cost of the settlement amounted to £30 million (€43.78 million). This amount is in addition to tax, and provisions which the company had already made.
However, REO, which is 57 per cent owned by John Ronan and Richard Barrett of Treasury Holdings, estimates that the net effect of the settlement will exceed £49.7 million (€72.5 million). The company said that this equated to an enhancement of 19.6 pence per share.
Aberdeen has also agreed to drop the counterclaim which it took against REO over unpaid management fees. Legal action taken against Aberdeen by Treasury Holdings stemming from the flotation of REO in 2001 has also been settled for an undisclosed amount.
When REO was established initially, it was structured as a quoted split capital investment trust, with its funds divided between property and high yield bonds. Aberdeen held a significant stake in the company and three representatives sat on the board of directors.
However the poor performance of its income portfolio led REO to dismiss Aberdeen as its investment manager in 2003. The property firm indicated at the time that its income portfolio had incurred losses some €248 million. Aberdeen said yesterday it did not admit any liability and did not accept REO's claim.
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