More stuff and non­sense about Zam­bezi Mall

Mur­mur­ings be­hind closed doors

Finweek English Edition - - INSIGHT - VIC DE KLERK

“GOOD NEWS! From 1 July 2011 Zam­bezi in­vestors own the build­ing. The trans­fer process is un­der way. Fur­ther in­for­ma­tion will be made avail­able to the me­dia within the next few days. See BLOG.” That cryptic mes­sage ap­pears on the web­site of Fron­tier AM, the new iden­tity cre­ated to han­dle the in­ter­ests of the old Share­max. Jour­nal­ists, in­clud­ing me, are blocked and can’t ob­tain ac­cess to that blog and its won­der­ful good news. But from the lit­tle bit of in­for­ma­tion I was able to get hold of, it cer­tainly doesn’t nec­es­sar­ily sound like good news for those in­vestors who be­gan in­vest­ing R755m in this ghostly build­ing north-east of Pre­to­ria some four years ago.

Finweek has been say­ing for the past 18 months that – even un­der the most favourable cir­cum­stances – your in­vest­ment isn’t worth more than 10c in the rand. We be­lieved – and still be­lieve – a quick liq­ui­da­tion of the en­tire pro­ject would pro­vide the best re­turn for in­vestors. How­ever, the Reg­is­trar of Banks – who as far back as Septem­ber last year had al­ready de­clared the whole Share­max scheme an il­le­gal de­posit­tak­ing op­er­a­tion – has granted a new board un­der the lead­er­ship of for­mer Judge Wil­lie Hartzen­berg an ex­ten­sion to try to reach a bet­ter so­lu­tion for in­vestors through a Sec­tion 311 scheme in terms of the old Com­pa­nies Act than the in­evitable huge losses that would re­sult from a liq­ui­da­tion.

The first pro­posal con­cern­ing Zam­bezi Mall sub­mit­ted to the court ba­si­cally in­volved the fol­low­ing: Paul Kyr­i­a­cou, the owner of Capi­col, which es­tab­lished the build­ing, would re­main the owner and pay Share­max in­vestors 70% of the net rental in­come un­til more or less the full amount of R755m had been paid back to them.

The “good news” for Zam­bezi in­vestors now ap­par­ently be­ing an­nounced on its in­ac­ces­si­ble blog may in fact be very “bad news”. The fact of the mat­ter is Kyr­i­a­cou wasn’t able to ob­tain R100m against a first mort­gage over the build­ing. Is any­body in­ter­ested in ad­vanc­ing money for the mall? In its for­mer prospec­tuses com­piled by Share­max as the pro­moter – and used to at­tract money from the pub­lic – there were two val­u­a­tions putting the value of the build­ing at R930m. The val­u­a­tions were con­ducted by a cer­tain Sarel Jo­hannes Eloff and WG Haese. One of the direc­tors of Fron­tier is Do­minique Haese. She was for­merly the com­pany sec­re­tary of Share­max Zam­bezi Re­tail Park Hold­ings, the com­pany into which in­vestors’ money went.

The “good news” now is Kyr­i­a­cou couldn’t ac­cess the money and he’ll in­stead trans­fer a por­tion – pre­sum­ably por­tions eight and/or nine of Stand 5 Derde­poort, on which the build­ing was erected – to in­vestors. Un­for­tu­nately, the bad news is the prop­er­ties re­main sub­ject to all the li­a­bil­i­ties re­lated to por­tions eight and nine and that the prop­erty will be trans­ferred to in­vestors as en­cum­bered.

The li­a­bil­i­ties in­clude Kroon’s re­ten­tion right of prob­a­bly more than R60m, the restora­tion and build­ing of roads at R10m, other mi­nor jobs plus, pre­sum­ably, rates and taxes ar­rears, which could reach a com­bined to­tal of R100m.

Kyr­i­a­cou couldn’t ob­tain the money but most likely those fi­nan­cial ad­vis­ers who orig­i­nally con­vinced in­vestors to put money in the mall will be able to talk in­vestors into putting more money into the build­ing. What’s R100m if they could get R5bn from the in­vestors for pre­vi­ous Share­max pro­mo­tions?

The other good news for in­vestors is the court has now set a fi­nal date of 30 Septem­ber 2011. Zam­bezi’s board must have drawn up all the nec­es­sary plans and held all the re­quired meet­ings with in­vestors by that date. Once the court ap­proves all this, the nec­es­sary mir­a­cles will no doubt oc­cur.

The new board will ob­tain the R100m or more needed to com­plete the mall, ten­ants will be fall­ing over them­selves to oc­cupy the cur­rently vir­tu­ally va­cant cen­tre and in no time there will be enough money to re­sume in­ter­est pay­ments to in­vestors.

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