More stuff and nonsense about Zambezi Mall
Murmurings behind closed doors
“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.