Principle Capital, the company run by Brian Myerson, the activist investor, has threatened legal action unless a South African property investment company under its management pays out a disputed performance fee.

Principle manages South African Property Opportunities, the Aim-listed investment company, as the majority partner in a joint venture called Proteus Property Partners.

The challenge by Principle rests on the calculation of adjusted net asset value, which determines whether a fee of £5m ($8m) would be payable to Proteus.

With 52 per cent of Proteus, Principle is in line to be paid £2.5m should the company show a growth in adjusted net asset value of more than 12 per cent a year from admission to Aim in 2006 to June 30 2009.

Sapro has calculated that it had an adjusted net asset value of £83.3m at the end of 2009 in accordance with guidelines produced by the European Public Real Estate Association, up 27.1 per cent from June 30 2008, but less than the minimum adjusted NAV of £84.2m that it said was needed for the fee to apply.

Principle said its lawyers were writing to Sapro to challenge its conclusion on NAV, which can be determined differently under the rules of both EPRA and the International Financial Reporting Standards.

Principle said that it intended to pursue the case in court unless an agreement was reached.

“It seems that they [Sapro] have taken the EPRA triple NAV calculation, which allows a claim for tax,” the company said. “The definition of the adjusted NAV in the management contract is pretty clear. [Principle] can’t see any grounds on which they are working at all.”

But David Hunter, Sapro chairman, said: “The board took independent professional advice on the matter and this is the calculation of NAV as prescribed in the management contract.”

Proteus is set to have its contract terminated in October 2010 in the wake of a strategic review to help address a wide discount to net asset value.

The company was supported by QVT, another activist shareholder, which controls almost 29 per cent of the stock. Principle controls about 23 per cent, while Sapro also represented 11 per cent of Principle Capital’s assets under management.

Sapro is focused on funding and managing real estate developments in southern Africa. It has so far made investments in 15 development projects across a range of sectors.

Its shares were flat on Monday at 65.5p.

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