Sharemax still owes Capicol

Troubled Sharemax Investments owes R64.5-million to Capicol, the developer of the Zambezi Retail Park, according to an arbitration ruling.

Capicol chief executive Paul Kyriacou said yesterday that the outcome of the arbitration left investors “in a precarious position” because Sharemax had 90 days to pay but did not know if it had the capital.

Kyriacou warned that if Sharemax did not pay Capicol, the developer would have to launch another procedure, such as a liquidation application, to obtain the amount owing.

“That will be a terrible day for shareholders (of Sharemax). It’s the last thing we want to do but the builders would do it to us if we do not do it,” said Kyriacou.

WF Kroon, the builder of the centre, had the right to retain possession of the property until its debt was paid for work completed. Kyriacou’s “wild guess” was that R60m was owing to WF Kroon.

Damages payable by Sharemax to Capicol because of the extra costs incurred due to the delay in the transfer of ownership of the centre would be determined early next year and would be “probably double this award”, he said.

The board of directors of the Zambezi Retail Park yesterday said it would focus on the options available to secure the funding of the R64.5m and “ensure the property is transferred to the investors as soon as possible”.

It said full funding for the property could not be obtained from investors until the purchase price was agreed, because this could result in over subscription or over funding.

The board said options it was urgently considering to ensure the fastest possible resolution included bank finance; contractor WF Kroon, to which Capicol owes the outstanding amount, taking a bond on the property; and/or a further prospectus.

“Agreement on the best financing options is expected this year, with transfer to investors in 2011,” it said.

The board sought the arbitration because of a dispute between Zambezi Retail Park and Capicol about the outstanding amount of the purchase price for the centre.

Capicol claimed R178m was owed, while Zambezi Retail Park claimed this amount was too high and based on invalid lease agreements.

Kyriacou said this “terribly sad state of affairs” could have been avoided by the directors of Sharemax Zambezi Retail Park Investments because Capicol made repeated attempts to resolve the matter in a manner that best protected investors.

He said this included an offer made by Capicol, signed by the Sharemax Zambezi Retail Park Investments directors, in which Capicol offered to refund the investors the full syndicated amount.

However, Kyriacou added that the directors failed to present this offer to the investors “leaving the already vulnerable investors to once again stomach the consequences”.

Sharemax defaulted on monthly payments to investors from September and construction on both Zambezi Retail Park and The Villa, a R3.5 billion retail development east of Pretoria, stopped in the same month when funds due from Sharemax to Capicol dried up.

Statutory managers to Sharemax and all its syndications were appointed by the registrar of banks in mid-September to manage the repayment of investments after an investigation found Sharemax’s funding model contravened the Banks Act.