More bad news …

for in­vestors in the Share­max syn­di­ca­tions

Finweek English Edition - - COMPANIES & MARKETS - VIC DE KLERK vicd@fin­

AF­TER THE PAST three months – dur­ing which the “new” Share­max passed on in­creas­ingly more in­for­ma­tion to its in­vestors – the tragic news is be­com­ing glar­ingly clear: the mire is far deeper than ini­tially feared. Of the 19 so-called in­come projects – that is, ex­ist­ing build­ings that have been re­ported on for months and where only the ac­tual net rental is be­ing paid to in­vestors – it’s clear the seven, per­haps even nine, will have to be ur­gently put in an “in­cu­ba­tor”.

Bonatla’s Niki Von­tas, who looked at the pos­si­bil­ity of mak­ing an of­fer for the Share­max group last year, cre­ated that term. The need for an in­cu­ba­tor in­di­cates a se­ri­ously ill pa­tient. Even un­der the best con­di­tions the chances of sur­vival are pretty slim.

The cur­rently pa­thetic state of some of its shop­ping cen­tres and other build­ings – a state of de­cay would per­haps be a bet­ter de­scrip­tion – also con­firms Share­max’s so-called prop­erty man­age­ment team was quite sim­ply in­com­pe­tent and di­rec­tion­less over the past five years. In­vestors in the fol­low­ing syn­di­ca­tions – the lat­est in­ter­est re­turn for each is given – should be concerned: very concerned. Not only is your in­ter­est in­come now a frac­tion of the cross-sub­sidised re­turn of a few months ago, the time has also come to for­get about the old or new di­rec­tors’ fine words. At best, you’ve prob­a­bly al­ready lost 75% of the value of your in­vest­ment. The in­cu­ba­tor cases are:

The three new “self-ap­pointed” di­rec­tors of the Share­max syn­di­ca­tions – prob­a­bly un­der the guid­ance of econ­o­mist Dawie Roodt – def­i­nitely don’t have the knowl­edge or ex­pe­ri­ence to save these cen­tres. The ex­ist­ing Share­max prop­erty team has al­ready shown it can’t do it. What we need is some­one like Niki Von­tas, but more likely a liq­uida­tor or auc­tion­eer who will sell the prop­erty/ies at auc­tion and make an end of the mat­ter.

In­vestors in the 12 other in­come prop­er­ties – now reg­u­larly re­ported on – on av­er­age re­ceive about half the in­ter­est they were ac­cus­tomed to in the past. There’s very lit­tle like­li­hood of this im­prov­ing much over the near fu­ture. Many of the prop­er­ties are mar­ginal cases any­way, and what they need es­pe­cially now is ex­cel­lent

DAWIE ROODT Look­ing for a mir­a­cle

man­age­ment – which isn’t avail­able. The pos­si­bil­ity of some­one get­ting his money back soon is ex­tremely un­likely. Re­mem­ber the two so-called of­fers last year for the Share­max prop­er­ties – Bonatla’s and Real­cor’s – were all on paper. No cash.

Prospects for in­vestors at the two ma­jor ones – Zam­bezi Mall (R750m) and The Villa (R1 500m) – look even worse. The ar­bi­tra­tor, Ad­vo­cate Johan Louw, de­cided late last year that in­vestors in Zam­bezi Re­tail Park still owe the de­vel­oper, Capi­col, an­other R65m. Capi­col, in turn, ap­par­ently owes the builder, WF Kroon, around R65m.

Zam­bezi Mall’s new di­rec­tors will prob­a­bly have to ap­proach an or­di­nary bank for an ad­vance of the R65m – per­haps R100m if the ne­ces­sity for road­works is added – on the strength of a first mort­gage. There’s just one prob­lem and that is the hon­est and sus­tain­able in­ter­est in­come from the shop­ping cen­tre is prob­a­bly in­suf­fi­cient to ser­vice an ad­vance of R100m. The bad news for in­vestors is that the chances are slim of them ever earn­ing in­ter­est on their Zam­bezi in­vest­ments. And if it’s sold at a liq­ui­da­tion auc­tion there won’t be much cap­i­tal left for those in­vestors who came via the Share­max route.

As for the big one – The Villa, the R3 000m plus devel­op­ment that fi­nally caused the Share­max house of cards to col­lapse – it’s a fine ruin, right next to an op­er­at­ing waste dump. It doesn’t even have any tourism value.

The fi­nal group of Share­max prod­ucts, about which lit­tle is said these days, is its so-called cap­i­tal projects, such as the planned golf es­tate called The Bay near Hart­beespoort Dam.

For­tu­nately, the fail­ure of those in­vest­ments has no ef­fect cur­rently on in­vestors. Af­ter all, they were promised in­ter­est of 20%/year – but only payable af­ter five years, or even much longer. This group of in­vestors have prob­a­bly ac­cepted by now that their cap­i­tal is com­pletely lost. Write it off as soon as pos­si­ble.

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