Attempt to Block Offering Fails : Public Trading Begins in Stock of New Centennial Group Inc.

Centennial Group Inc., a newly formed real estate investment company based in Orange, began its initial public offering Friday as the first of its more than 26.6 million shares began trading on the American Stock Exchange on a “when issued” basis.

The offering of the company’s shares began just four days after four disgruntled limited partners filed suit in Orange County Superior Court, alleging that Centennial’s founders are unjustly enriching themselves in the conversion to a publicly traded company from a group of private partnerships with more than $200 million in investor funds.

But an effort to get a court order halting Friday’s trading failed, according to David B. Gold, a San Francisco attorney for the plaintiffs, who said he now will ask an Orange County judge to put any profits that Centennial’s founders make on the conversion into a special trust pending trial of the lawsuit.

Shares of Centennial Group Inc. began selling Friday for $7.75 each but dropped to $6.875 a share at the close of trading, with 70,800 shares changing hands.

Centennial, a consolidation of six limited partnerships and several private management companies, is distributing its stock over the next few weeks to the limited partners, who then can make their stock available on the exchange--meaning that the shares become available for trading when issued to the limited partners and when the partners decide to sell.

Centennial Group was formed in February by the same people who operate Centennial Beneficial Corp., a bank holding company that owns Sunwest Bank in Tustin, Heritage Thrift & Loan Assn. in Brea, some Orange County-based mortgage and leasing companies and the Sacramento First National Bank.

The company will own 38 properties, primarily in Riverside, San Bernardino, Sacramento and Phoenix.

The four limited partners’ suit, filed Monday, says converting the partnerships into a corporation is lining the pockets of Centennial Group founders John B. Joseph and Ronald R. White and is saving their management companies from possible bankruptcy.

The suit accuses the pair of overstating the value of the management and advisory companies they are folding into Centennial Group and of foisting onto the corporation several companies that are falling substantially short of projected earnings.

The suit says that the companies are worth $10 million at most but that Joseph and White stand to take $64 million in Centennial Group stock for the companies.

Joseph said Friday that the suit has no merit and that the conversion was supported by the bulk of the investors. “All it takes is a 50% vote of each partnership, and we had over 80% of each partnership voting in favor of the conversion,” Joseph said.

Joseph said that he and White each own about 12% of Centennial Group and have no plans to sell any of their shares.