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Villa Retail Park Investments (Pty) Ltd has made an offer to acquire the half-built derelict shopping mall The Villa in Pretoria.
If successful, Villa Retail – which is controlled by the Nova Property Group, the rescue vehicle of the failed Sharemax property syndication schemes – envisages completing The Villa project.
It believes this will extract the inherent value of the development as originally envisaged.
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There is also the possibility of the offer leading to the enhancement of the returns of 7 000 Sharemax investors and shareholders – according to George Nell, the business rescue practitioner (BRP) for Thumos Properties 1 (Pty) Ltd.
Thumos, previously named Capicol 1 (Pty) Ltd, is in business rescue. Its only asset is a 70% undivided portion of the land on which The Villa has been built.
The remaining 30% is owned by Villa Retail.
Thumos was also the original developer of the mall and contracted GD Irons Construction to construct The Villa.
The offer
The conditional offer was made by Connie Myburgh, director of Villa Retail, to Nell, who published the business plan for Thumos on 28 April.
It has been included in the business plan as one of two options.
The offer – a copy of which can be viewed here – involves the acquisition by Villa Retail of the entire immovable property located at the corner of De Villebois Mareuil Drive and Delmas Road in Wingate Park in Pretoria, subject to Villa Retail obtaining the financing contemplated in the offer.
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The second option in the business plan involves a proposal by the BRP for the voetstoots sale of Thumos Properties’ 70% undivided share in the immovable property by way of private treaty and/or public auction and/or sheriff’s auction.
Despite Villa Retail Properties’ contrary position, Thumos is entitled to transfer a further 50% interest in the property.
Diminishing value … and R600m creditor
The business plan notes however that “the immovable property’s value is diminishing by the day and will not even reach a sale price equal to the GDI [GD Irons Construction] claim(s)”.
The only secured creditor in Thumos Properties at this stage is GD Irons Construction, which last year obtained a high court order in terms of which Thumos was ordered to pay it R249.4 million for unpaid costs incurred in the building of The Villa.
With interest, the award by the High Court in Pretoria to GD Irons Construction amounts to almost R500 million.
GD Irons Construction has also been classified as a secured creditor for an accepted claim, at an adjusted value of R9.85 million plus interest, for the preservation and upkeep of The Villa after it established a lien over the property because of non-payment by Thumos.
A further claim by GD Irons Construction for monthly expenses of about R87 300, which it has been incurring on behalf of Thumos since the firm went into business rescue on 15 March 2021, has been accepted as an administration cost after business rescue, subject to submission of proof of payment.
Nell confirmed to Moneyweb on Friday that GD Irons Construction is currently the only secured creditor in Thumos Properties’ business rescue process and currently has the sole right to determine which option in the business plan, if any, is accepted.
He said the company will, in terms of the Villa Retail offer, be required to take a significant “haircut” of its total claims.
GD Irons Construction’s claims total just under R600 million. The Villa Retail offer will result in it only receiving R200 million in full and final settlement of these claims.
Attempts to obtain comment from GD Irons Construction on Friday were unsuccessful.
Villa Retail claim rejected
The BRP has, at the publication of the business plan, rejected Villa Retail’s claim of R1.3 billion.
This claim emanates from Thumos allegedly causing such damages to Villa Retail, and a further R6 million claim that arose from an acknowledgement of debt Villa Retail had to sign in favour of the City of Tshwane to obtain transfer of its 30% undivided share in The Villa properties.
The business plan does however say that these claims could be accepted or given a voting interest after the BRP obtains legal advice on them.
In a reference to Villa Retail, the business plan states: “The gravitas of this relevant stakeholder (who represents the rights of no less than 7 000 investors) and the prospect of the implementation of the sale of business amendment agreement, as well as prolonged litigation that could hamper the implementation of any approved business rescue plan, is relevant.”
Perceived upsides
The business plan indicates that the BRP supports the Villa Retail proposal because it will, subject to certain conditions, provide:
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An amount of R200 million to GD Irons Construction in full and final settlement of its claims;
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An amount of R20 million for the City of Tshwane for the clearance certificate of The Villa properties;
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Consolidation of the unconsolidated erven constituting The Villa property;
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That Villa Retail will pay the outstanding bulk contribution costs for The Villa property to the City of Tshwane, estimated at R100 million, and which is an existing obligation of Thumos;
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That Villa Retail will pay the costs for the upgrading of the roadworks related to The Villa property, estimated at R120 million, and which is an existing obligation of Thumos;
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An amount of R15 million for the professional team/contractor creditors; and
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An amount of R3 million to Quebec Electrical Contractors CC in full and final settlement of its claims.
The business plan states that the proposals contained in the offer from Villa Retail have in principle been well received, but that the BRP anticipates that several aspects of the offer will need to be refined.
“For purposes of this plan, read with the Villa Retail offer, it is assumed that the company will be in a position to effect transfer of the immovable property,” according to the business plan.
“Considering that it took the BRP close on two years to facilitate the proceedings that led to the Villa Retail offer, and in a bona fide effort to on the one hand harness the momentum that has been brought about by the Villa Retail offer, and to on the other hand avoid a further stalemate of these proceedings, which will in all likelihood be the company’s death knell, the BRP in terms of this option proposes that the creditors be afforded the opportunity to actively participate in the formulation of the execution version of the Villa Retail offer.”
Not a simple either/or situation …
Nell further confirmed that if the legal opinion being sought about Villa Retail’s claims and voting rights was to accept these claims, it could result in Villa Retail and GD Irons Construction “blocking one another”.
“I can then propose a new plan to try and unlock the block,” he added.
“I have had negotiations with both parties in the room and I am seriously trying to get them in the room again to resolve this matter on the basis that they must give an opportunity to Villa Retail until the end of October to raise the money.
“If they cannot raise the money, then it’s an auction,” said Nell.
“Something must happen. I think the publication of this plan is the only thing that has happened in the last 10 years except the judgment of GD Irons Construction.”
Meeting for affected persons
Nell said that as BRP, he has a statutory obligation to convene a meeting of affected persons within 10 business days for the publication of the Thumos Properties’ business plan.
“That I’ve done and it [the meeting] is [scheduled for] 15 May 2023 but I have also sensitised the affected persons that the meeting will probably be adjourned because of necessary and expedient factors, including the outstanding legal opinion.”
Villa Retail’s Connie Myburgh did not respond to a Moneyweb request for comment.
Sharemax, which promoted and marketed The Villa and a number of other property syndication schemes, collapsed in 2010 after the findings of a registrar of banks investigation that Sharemax’s funding model contravened the Bank Act became public knowledge.
This led to new investments drying up, Sharemax being unable to make monthly payments to investors, and the registrar of banks appointing statutory managers to Sharemax.
Read:
CIPC asks Nova to explain why it should not be closed down [Apr 2021]
CIPC concerned about Nova’s ability to repay debenture holders [Nov 2021]
Sharemax rescue vehicle makes a U-turn on payments to investors [Dec 2021]
Criminal charges were lodged against Sharemax in March 2012 for alleged contraventions of the Bank Act.
Nova Property Group, a rescue vehicle born out of a scheme of arrangement, now owns all the syndicated properties, while the investors were offered either shares or debentures.
About 18 000 investors invested an estimated R5 billion in Sharemax’s various property syndication schemes.
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