Ex­plain, please

Com­pany owes in­vestors an­swers about Zam­bezi Mall

Finweek English Edition - - Money Clinic - VIC DE KLERK vicd@fin­week.co.za

AF­TER MANY DE­LAYS, the new Zam­bezi Mall shop­ping cen­tre north-east of Pre­to­ria – into which in­vestors put around R543m be­tween Jan­uary 2008 and March 2009 – opened last week. Capi­col is the de­vel­oper and Share­max the pro­moter of the 30 000sq m shop­ping cen­tre, which has been val­ued at more than R1bn.

In­vestors should be concerned about their fu­ture in­ter­est in Zam­bezi Mall. That’s a per­sonal opin­ion, based on the fol­low­ing: Prospec­tus No 10 of Share­max Zam­bezi Re­tail Park Hold­ings, which opened on 1 De­cem­ber 2008 and closed on 1 March 2009, men­tions an amount of R543m that’s al­ready been at­tracted by prospec­tuses one to nine. Some R439m of that was used to pay off the pro­vi­sional buy­ing price of R930m for the Zam­bezi Mall to de­vel­oper Capi­col. Prospec­tus 10 was meant to at­tract a fur­ther R126m, of which R100m would go to Capi­col.

We don’t know how much Prospec­tus 10 ac­tu­ally at­tracted, and nei­ther Share­max MD Wil­lie Botha nor his le­gal rep­re­sen­ta­tives were pre­pared to an­swer our ques­tions in that re­gard.

If the full R100m of Prospec­tus 10 – which was ear­marked for the pur­chase price of Zam­bezi Mall – was at­tracted it would push Share­max clients’ in­ter­est in Zam­bezi Mall up to R539m, or 57% of the R930m buy­ing price. If no new money was at­tracted their in­ter­est would be only 47%.

We as­sume the clients or in­vestors re­cruited by Share­max de­posited R630m in Zam­bezi Re­tail Park Hold­ings. Some R500m of that was used to buy a 53,75% in­ter­est in Zam­bezi Mall. Of the re­main­ing R130m, around R98m went to Share­max for its costs and prof­its and R32m to a cash

It would be rel­a­tively easy for Share­max to al­lay fears by send­ing a de­tailed news­let­ter

flow deficit fund, which will be used to sup­ple­ment deficits in rental in­come over the first three years. Hope­fully, Share­max will soon in­form in­vestors of the ac­tual fig­ure it re­cruited as pro­moter of the project. In­vestors are cer­tainly en­ti­tled to a de­tailed progress re­port.

Now Zam­bezi Mall has been of­fi­cially opened in­vestors will re­ceive a “guar­an­teed” in­ter­est of 10% on their in­vest­ment. To en­sure that, the net rental in­come from Zam­bezi Mall must be at least R119m/ year (53% of that is R63m, or 10%/year on R630m). Ac­cord­ing to Prospec­tus 10 the space avail­able to be leased in Zam­bezi Mall is around 30 000sq m. In or­der to pro­vide Share­max’s in­vestors – with their 53% in­ter­est in the Mall – with an in­come of R63m/year, or just more than R5m/month, a net rental of al­most R330/month/sq m and a gross in­come of at least R400/sq m is needed for the en­tire shop­ping cen­tre.

We doubt whether that’s fea­si­ble, es­pe­cially in Zam­bezi Mall, which is sit­u­ated on the weaker side of the Mon­tana devel­op­ment re­gion to the north of Pre­to­ria. It would be rel­a­tively easy for Share­max to al­lay such fears by sim­ply send­ing a de­tailed news­let­ter to those in­vested in Zam­bezi Mall. That’s the least they de­serve af­ter all the un­cer­tainty about the world’s fi­nan­cial mar­kets over the past two years and the cur­rent un­cer­tainty, es­pe­cially re­gard­ing in­vest­ments in new and even ex­ist­ing shop­ping cen­tres.

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