Fund Update

August 23rd, 2023

Aurora Funds Management Limited (Aurora), in its capacity as responsible entity for the Aurora Absolute Return Fund (ABW), Aurora Dividend Income Trust (ADIT), Aurora Fortitude Absolute Return Fund (AFARF), Aurora Global Income Trust (AIB), Aurora Property Buy-Write Income Trust (AUP) and HHY Fund (HHY) (collectively the Funds) provides the following market update, where applicable, in relation to the Funds’ investments in RNY Property Trust (RNY) and Molopo Energy Limited (Molopo).

This Fund Update is supplementary to, and should be read in conjunction with, the earlier Fund update provided on 23 February 2023.

RNY Property Trust update
RNY Property Trust (RNY) is an Australian unlisted property trust with five (5) commercial property assets located in the tri-state area of New York, USA, with 3 properties located in Long Island and 2 properties located in Westchester County, collectively having 830,000 sq feet of lettable office space. Huntley Management Limited is the responsible entity for RNY and Aurora Funds Management Limited is the investment manager.

In August 2021, RNY’s US lender to RNY Australia Operating Company (US LLC), ACORE Capital (‘the Lender’), advised that it would not extend the Loan facility through to October 2022, as contracted, as the Lender considered that documents relating to the net worth test were not administratively executed to its satisfaction and constituted an event of default. Aurora refutes the position adopted by the Lender and notes that the Lender nonetheless continues to rely upon the documents.

In late 2022, the Lender took steps to enforce its security by seeking to commence foreclosure action, seeking to appoint a receiver, and selling the mezzanine debt in the US properties through a Uniform Commercial Code (UCC) auction process. ACORE also advised that default interest of circa US$11 million was due under the loan, however provided no formal paperwork to support this was claim. The UCC auction process was ultimately cancelled after RNY’s related entity, RAOC, acquired the mezzanine debt and paid the associated fees (circa US$1 million).

In March 2023, the Supreme Court of the State of New York County of Nassau (in Long Island) appointed a Rent Receiver over the five RNY properties, being a party independent of the party nominated by the Lender. The Rent Receiver posted a bond and filed an Oath with the Court around 11 April 2023, thereby formalising his appointment. Notwithstanding this appointment, CBRE continues to manage the RNY properties.

Based on recent discussions with the Rent Receiver:
 The strong leasing activity and Letters of Leasing Intent at Tarrytown prior to the Rent Receivers appointment, as mentioned in the last Fund Update of 23 February 2023, have not materialised and no new leases have been executed since March 2023; and
 The Rent Receiver’s remuneration is based on a % of cash receipts and expenditures (including operating costs and capital expenditure) rather than a time-based arrangement.

Aurora denies that the Group was in breach of the loan obligations and continues to defend the enforcement actions taken by the Lender. In the meantime, the additional expenses associated with the Rent Receiver represent a permanent diminution in value for RNY unitholders.

RNY owns 100% of RNY Australia LPT Corp (Maryland REIT) which in turn owns 75% of RNY Australia Operating Company LC (US LLC), which in turn owns the five RNY properties in separately held subsidiaries. Aurora and parties associated with it, including its Funds, own 79.9% of the units in RNY, with Keybridge Capital Limited (ASX: KBC) holding 17.3% and the remaining unitholders holding 2.8%.

Since the last Fund Update, attempts have been made to resolve the deadlock situation with the Lender. Until this matter is satisfactorily resolved, and a new debt facility can be agreed, there is significant uncertainty regarding the valuation of the subordinated loans and equity interests in RNY.

The Lender has, on several occasions, expressed interest in taking over ownership of the RNY properties, however, has stated that it would only be prepared to offer token consideration.

Based on the uncertainty created by the Lenders actions as outlined above, including unsupported claims for default interest, the Aurora Board considers it appropriate to fully impair to nil the carrying value of its equity investments in RNY and the subordinated loans it has advanced to RAOC, until such time as the impasse with the Lender can be resolved.

The fair value of the RNY equity investments and subordinated loans is based on significant estimates and judgements adopted by the Board of Aurora based on all available information about RNY as at the current date. The Aurora Board is aware of the material impact this decision will have on Aurora and its Funds.

Further, Aurora notes that RNY’s second largest unitholder, Keybridge, has fully impaired the carrying values of its 17.3% equity investment in RNY as well as the subordinated loan it advanced to RAOC (which was used to acquire the mezzanine debt in the US properties). Keybridge has stated that the recoverability of its interests in RNY is dependent upon the prevailing market value of the underlying US properties less the senior debt. Further, given the state of the broader market, expectations on property values and the status of the dispute with RNY’s Lender, Keybridge considers its subjective valuation to be appropriate.

The Aurora Board considered the range of possible values and determined that the fair value of the RNY equity investments and subordinated loans held by Aurora and its Funds should now be valued at nil.

Aurora will continue to pursue its options to resolve the deadlock with the Lender.

Molopo Energy update
In a letter to shareholders, dated 2 May 2023, Molopo Energy Limited (Molopo) advised “the Company has approximately AUD$16.9 million in cash and a debt owing to Molopo from a subsidiary of Renergen Limited of approximately AUD4.2 million which has preconditions to its payment and, from 1 January 2023, now accrues interest.”

Further, it added that “as foreshadowed at last year’s Annual General Meeting the Board’s focus has been concentrated on defending the long running Canadian proceedings against the Company’s subsidiary Molopo Energy Canada Limited (MECL) which were commenced in 2011. Since our meeting last year those proceedings are continuing and have now progressed through the discovery process and interrogation of witnesses which has been both detailed and time consuming.

The proceedings involve the claim for damages by 3105682 Nova Scotia ULC (310) against MECL and Crescent Point Holdings Inc and Crescent Point Energy Corp (Crescent Point) arising from the sale of the Company’s subsidiary’s oil and gas assets in 2011. Crescent Point has cross claimed against MECL in relation to potential losses it may incur. The claims for damages by 310 are significant and complex and are being strongly defended by both MECL and Crescent Point but again at significant expense to shareholders. It was anticipated that a court directed mediation would take place in April this year, however, the mediation has now been scheduled for the 5th and 6th December 2023 in Calgary.

The Board will continue to vigorously defend the proceedings.”

Aurora notes that the value of the Funds (AFARF/ABW and AIB) investment in Molopo was written down to nil during the year ended 30 June 2021. The Funds have not adjusted the carrying value of its investment as it is waiting on the outcome of other litigation matters that Molopo is involved in.

The Funds continue to adopt a carrying value of $nil per Molopo share. Aurora will re-assess the carrying value of its investment in Molopo based on further information being released by Molopo regarding its financial position.

Redemptions

Given the uncertainty created by the abovementioned matters, where applicable, Aurora considerers it prudent to maintain a temporary hold on Redemptions until the outcome of the above two (2) matters is known.

Board Changes

July 9th, 2023

Aurora Funds Management Limited (Aurora) is pleased to announce that Mr Jeremy Kriewaldt has been appointed as a Non Executive Director of the Company.

Mr Kriewaldt is a lawyer in private practice, specialising in corporate and commercial law, including mergers and acquisitions, capital raisings and foreign investment, financial product development and securities markets. He started his own practice in 2018 and was previously a partner of Atanaskovic Hartnell (2004 – 2018), Blake Dawson Waldron (now Ashurst) (1990-2003) and served as Counsel to the Takeovers Panel in 2003-2004.

Mr Victor Siciliano who joined the Aurora Board in January 2018 has resigned as a Director of the Company. The Board would like to thank Mr Siciliano for his contribution to the Board during his tenure and wish him all the very best in his future endeavours.

Fund Update – 23rd February 2023

February 23rd, 2023

Aurora Funds Management Limited (Aurora), in its capacity as responsible entity for the Aurora Absolute Return Fund (ABW), Aurora Dividend Income Trust (ADIT), Aurora Fortitude Absolute Return Fund (AFARF), Aurora Global Income Trust (AIB), Aurora Property Buy-Write Income Trust (AUP) and HHY Fund (HHY) (collectively the Funds) provides the following market update, where applicable, in relation to the Funds’ investments in RNY Property Trust (RNY) and Molopo Energy Limited (Molopo).

RNY Property Trust update

RNY Property Trust (RNY) is an Australian unlisted property trust with five (5) commercial property assets located in the tri-state area of New York, USA, with 3 properties located in Long Island and 2 properties located in Westchester County, collectively having 830,000 sq feet of lettable office space. Huntley Management Limited is the responsible entity for RNY and Aurora Funds Management Limited is the investment manager.

On 6 October 2020, during COVID-19 (which greatly impacted New York city), Aurora closed a Loan Modification with RNY’s US lender, ACORE Capital (Lender) with a larger facility to fund certain planned capital works (as required by the Lender), with the following key terms:

  • a three-year term – comprising an initial 6-month term, one six-month extension and two 12-month extension terms following the initial term;
  • interest only;
  • an existing loan facility of US$76.2 million, with US$64.6 million having been drawn, leaving US$11.6 million available for approved capital expenditures and leasing costs;
  • a new mezzanine loan facility of US$15.6 million to fund additional approved leasing costs and capital expenditures; and
  • RNY to complete the approved capital expenditure program.

Through the course of 2022, the Lender made various overreaching demands of RNY, including multimillion dollar claims for fees, which Aurora disputes, and demands that all the buildings be sold in an accelerated manner, for total sale consideration that would have amounted to circa US$92 million.

Separately, Aurora worked with an alternate financier (being a Tier 1 financier) to refinance the 3 Long Island properties (representing approximately two thirds of the portfolio’s lettable area), based on a signed Term Sheet for US$60 million of debt finance (before reserves) on those properties at prime lending rates (locked for 10 years in March 2022). The valuations obtained for the three Long Island properties, in an orderly market, to support this alternative financing exceeded US$90 million.

In addition, based on comparable recent sales of properties in the Westchester area, the value of the remaining 2 RNY properties (in Westchester) is in the vicinity of US$30 million, with these buildings having benefited from circa US$7 million of recent capital improvements.

In late 2022, the Lender took steps to enforce its security by seeking to commence foreclosure action, seeking to appoint a receiver, and selling the mezzanine debt in the US properties through a Uniform Commercial Code (UCC) auction process. This UCC process has the result of transferring the equity in the properties to purchaser of the mezzanine finance (which in this case totalled just US$1.7 million). The UCC auction process was ultimately cancelled after RNY’s related entity, RAOC, acquired the mezzanine debt and paid the associated fees (circa US$1 million).

Aurora is actively defending any enforcement actions taken by the Lender, and engaged US Counsel in June 2022 to assist. In addition, Aurora is working to resolve the deadlock situation with the Lender. Until this matter is satisfactorily resolved, and a new debt facility can be agreed, there is significant uncertainty regarding the valuation of the subordinated loans and equity interests in RNY.

RNY Leasing

Following the substantial capital works program, Aurora is encouraged by the current levels of improved leasing velocity. Aurora is however cautious given the current turbulent economic conditions and interest rate environment; and remains optimistic with the short to medium term prospects of the Portfolio. Furthermore, Aurora is pleased with the retention of its current tenants, with minimal reduction in the portfolio occupancy since the on-set of COVID.

Some recent new leasing highlights include:

  • Full floor tenant (22,128 sq ft) signed with high-credit tenant on commercial terms at Westchester County property.
  • Letter of intent with second full floor tenant (circa 22,000 sq ft) at Westchester County property. Similarly high credit tenant on commercial terms. This lease is expected to be finalised in the short-term.
  • Letter of intent with third full floor tenant (circa 23,000 sq ft) at neighbouring Westchester County property. Similarly high credit tenant on commercial terms. This lease is expected to be finalised in the short-term.
  • Letter of intent with tenant (circa 10,000 sq ft) at Westchester Country property. Similarly high credit tenant on commercial terms. This lease is expected to be finalised in the short-term.

Aurora is diligently working to convert the above-mentioned leases into executed deals. If completed, these prospective leases should materially enhance the occupancy and financial characteristics of the Portfolio.

Molopo Energy update

On 17 December 2021, Molopo Energy Limited (Molopo) advised (on its website) that it had settled the legal action against the former Molopo directors for A$12 million. This equates to 4.8 cents per Molopo share (based on 249,040,648 shares on issue).

Aurora notes that the value of the Funds (AFARF/ABW and AIB) investment in Molopo was written down to nil during the year ended 30 June 2021. The Funds have not adjusted the carrying value of its investment as it is waiting on the outcome of other litigation matters that Molopo is involved in.

The Funds continue to adopt a carrying value of $nil per Molopo share. Aurora will re-assess the carrying value of its investment in Molopo based on further information being released by Molopo regarding its financial position.

Redemptions

Given the uncertainty created by the abovementioned matters, where applicable, Aurora considerers it prudent to maintain a temporary hold on Redemptions until the outcome of the above two (2) matters is known.

Yours faithfully
Aurora Funds Management Limited

John Patton

Signed Fund Update

AUP Delisted from the ASX

June 15th, 2022

Aurora Funds Management Limited (Aurora), in its capacity as responsible entity for the
Aurora Property Buy-Write Income Trust (“AUP” of “Trust”), provides the following update to
unitholders regarding the current status of the Trust including future redemptions and/or
buy-backs.

RNY Property Trust
As of 31 December 2021, the Trust had loans receivable of $3,395,631 plus accrued interest
of $1,240,996 from RNY Australia Operating Company (“RAOC”) and RNY Property Trust
(“RNY”). The Directors consider the loans and accrued interest from RAOC and RNY to the
Trust to be fully recoverable and therefore there is no Expected Credit Loss associated with
these loans.

In addition, the Trust holds 218,783,206 units in RNY which are carried at 1.1 cents per unit,
equating to $2,406,615.

Future Redemptions
Aurora is mindful of the impacts on AUP’s liquidity following the cessation of trading on the
Australian Securities Exchange (ASX). Aurora is currently working on several initiatives to
enable AUP’s loans to be repaid, including the potential refinancing and/or sale of RNY’s
properties. Following the execution of these initiatives, AUP will endeavour to fund off-market redemptions, taking into consideration the liquidity of the Trust.

RNY Update
RNY’s portfolio has continued to maintain its occupancy at pre-pandemic levels, with
increased leasing interest being shown across properties. Furthermore, RNY has received
several unsolicited offers for its properties at values at least equal to current valuations.
RNY is currently considering these offers and will update RNY unitholders accordingly.

Delisting from the ASX

February 26th, 2021

On 21 January 2019, ABW was suspended from Official Quotation, with the ASX stating:

“The securities of Aurora Absolute Return Fund (‘ABW’) will be suspended from quotation immediately under Listing Rule 17.3, pending clarification of the validity or otherwise of the appointment of a new responsible entity of ABW. The securities will remain suspended until further notice.”

On 24 August 2020, the ASX released a listing of entities that had failed to pay their listing fees, which included ABW, and noting that unless the listing fees were paid by 28 August 2020 that those entities would be removed from the Official List with effect from the close of trading on 28 August 2020.

ABW paid the listing fees before the deadline, after the ASX advised on 28 August 2020:

“There is time enough for AFML to take steps to get ABW securities reinstated to quotation should that be AFML’s objective although we acknowledge the court action by Primary must make it more difficult in the circumstances.”

On 23 September 2020, the NSW Court of Appeal handed down a decision, with costs to ABW, to the effect that Aurora Funds Management Limited was the responsible entity of ABW.

With this matter resolved by the Courts, which was the basis for the ASX suspension, ABW made a number of requests to ASX to have the suspension lifted.

On 22 October 2020, Aurora Funds Management Limited provided a written response to a letter received from the ASX, dated 15 October 2020, which included references to ABW.

Notwithstanding that ABW continued to made further requests to the ASX to have the suspension lifted, it was not until 16 December 2020 that the ASX provided its queries. ABW provided a written response to the ASX queries on 18 December 2020. Since this time, ABW has followed up with the ASX on 13 January 2021, 22 January 2021, 1 February 2021, 11 February 2021, 15 February 2021 and 19 February 2021. Still, the ASX suspension was not lifted.

Given the length of the ASX suspension, notwithstanding the resolution by the NSW Supreme Court of the identity of the responsible entity (being Aurora Funds Management Limited), ABW has now formed the view that it receives no benefit from the ASX listing and elected not to pay the latest ASX listing fees.

On 22 February 2021, the ASX released a listing of entities that had failed to pay their listing fees, which included ABW, and noting that unless the listing fees were paid by 26 February 2021 that those entities would be removed from the Official List with effect from the close of trading on 26 February 2021.

Based on ABW’s experience with the ASX, it does not consider that the ASX will ever lift the suspension. ABW has therefore made the decision to delist from the ASX.

KBC Second Supplementary Bidder’s Statement

March 30th, 2020

This document is a supplementary bidder’s statement under section 641 of the Corporations Act 2001 (Cth). It is the second supplementary bidder’s statement (Second Supplementary Bidder’s Statement) issued by Aurora Funds Management Limited as responsible entity for the Aurora Dividend Income Trust (ARSN 151 947 732) (ADIT) in relation to its off-market takeover bid for the ordinary shares in Keybridge Capital Limited that ADIT does not already own. This Second Supplementary Bidder’s Statement supplements, and should be read together with, ADIT’s bidder’s statement dated 7 February 2020 (Original Bidder’s Statement) and ADIT’s First Supplementary Bidder’s Statement dated 5 March 2020. This Second Supplementary Bidder’s Statement prevails to the extent of any inconsistency with the Original Bidder’s Statement and First Supplementary Bidder’s Statement. Terms defined in the Original Bidder’s Statement and First Supplementary Bidder’s Statement have the same meaning in this Second Supplementary Bidders Statement. A copy of this Second Supplementary Bidder’s Statement was lodged with ASIC on 30 March 2020. Neither ASIC nor any of its officers takes any responsibility for the content of this Second Supplementary Bidder’s Statement.

Read more here.

ADIT Takeover Bid for the ordinary shares in Keybridge Capital Limited

March 24th, 2020

Aurora Funds Management Limited (ACN 092 626 885), as responsible entity for Aurora Dividend Income Trust (ARSN 151 947 732) (ADIT), refers to the off-market takeover bid for the fully paid ordinary shares in Keybridge Capital Limited (ACN 088 267 190) (KBC).

ADIT’s Supplementary Bidders Statement, dated 5 March 2020, detailed its improved cash consideration of 7.0 cents for each fully paid ordinary share (Improved Bid), which which was subject to Keybridge shareholders being granted the ability to withdraw their acceptances (Withdrawal Condition) from the WAM Active bid.

On 13 March 2020, Aurora announced that ADIT had freed its bid of all defeating conditions which included the Withdrawal Condition. As such, ADIT’s takeover bid for KBC is 7.0 cents per share.

HHY Fund to cancel Entitlement Offer

March 16th, 2020

Aurora Funds Management Limited (Aurora), in its capacity as Responsible Entity for the HHY Fund (Fund or HHY), provides the following update in relation to its Entitlement Offer originally announced on 25 February 2020.

Cancellation of Entitlement Offer

Considering the recent heightened global market volatility, Aurora has decided that it is in the best interests of unitholders to cancel the Entitlement Offer and refund all amounts to unitholders who participated in the capital raising. All application monies received under the Entitlement Offer will now be refunded in full without interest, pursuant to the terms set out in the Entitlement Offer booklet, with refund transfers commencing from Wednesday, 18 March 2020.

KBC Bidders Statement – Updated

March 9th, 2020

Aurora Funds Management Limited as responsible entity for the Aurora Dividend Income Trust (ADIT) is offering to acquire all of your fully paid ordinary shares in Keybridge Capital Limited (ASX: KBC) issued on or before 10 February 2020, through the Bid contained in this Bidder’s Statement.

Read the Bidders Statement here.

KBC Supplementary Bidders Statement

March 5th, 2020

Aurora Funds Management Limited as responsible entity for the Aurora Dividend Income Trust (ADIT) is offering to acquire all of your fully paid ordinary shares in Keybridge Capital Limited (ASX: KBC) issued on or before 10 February 2020, through the Bid contained in this Bidder’s Statement.

Read the Bidders Statement here.

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