RESTRUCTURED SHAREMAX GROUP
UPDATE COMMUNICATION
31 January 2012
The Boards of Directors (“Boards”) of the Restructured Sharemax Group report as follows.
SCHEMES OF ARRANGEMENT PROCESSES
1. The Boards are pleased to announce that the High Court has sanctioned all the
Schemes of Arrangement in respect of the Zambezi Companies, the Villa Companies
and the Income Plan Companies, as proposed during November 2011 to relevant
scheme creditors and scheme shareholders.
2. The relevant Court Orders sanctioning the Schemes have been registered with the
Companies and Intellectual Property Commission in accordance with the provisions of
the Companies Act.
3. During December 2011 the Scheme in respect of the Growth Plan Companies, as
proposed during November 2011 to relevant scheme creditors and scheme
shareholders, was approved and adopted in accordance with the provisions of the
Companies Act.
4. As provided for in the Schemes, the Registrar of Banks has, in terms of the Banks Act,
formally withdrawn all the Directives which pertained to the repayment of funds, which
were issued during September 2010, in respect of Sharemax Investments (Pty)
Limited, all the Sharemax Syndication Companies and the Individuals against whom
such Directives were issued.
5. Following the aforesaid, all four Schemes have become unconditional with effect from
20 January 2012.
6. The unfortunate delay in obtaining sanctioning of the Zambezi, Villa and Income Plan
Companies’ Schemes is regretted. This was caused by the actions of parties who
attempted to intervene in the sanctioning process of those Schemes, under
circumstances beyond the control of the Boards. These parties withdrew their
intervening actions. Save for additional legal costs to the Sharemax Syndication
Companies in opposing the attempted intervention, the delay did not result in any
losses or further costs to the Sharemax Syndication Companies or Investors.
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7. Attention is drawn to the fact that the Directives and their effect had, since October
2010, been under formal judicial Review, up to the date of the withdrawal of the
Directives as aforesaid.
8. The Boards are satisfied that no relevant transgression of the Banks Act exists in
respect of the Restructured Sharemax Group which may negatively, or at all, impact
on the continuing affairs and/or the assets of the Restructured Group.
9. The Boards are furthermore satisfied that there exists no illegality in the Restructured
Group that could affect the affairs of the Restructured Group or the restructured
interests of Investors going forward.
10. The Boards thank the thousands of Investors who voted in such overwhelming
numbers in favour of acceptance and approval of the Schemes. In excess of 99,5%,
both in number and in value, voted in favour of the Schemes, to the best benefit of all
34,000 Investors.
11. The Boards have commenced implementing the Schemes and the successful
restructuring of the historical Sharemax Syndication Companies group, resulting from
the successful Schemes of Arrangement processes.
12. The historical Sharemax Syndication Companies group is now part of an unfortunate
chapter in history.
13. The Boards and Investors can now look to the future and the enhancing of the affairs
and value of the Restructured Group and the assets in which Investors had historically
invested, and now remain with their restructured interests.
14. The Boards will do all in their power to add and unlock value in the best interests of
Investors, not only in terms of monthly income, but also in terms of the maximum
capital repayment as envisaged in the Scheme Circulars.
15. Business is continuing in the ordinary course, without risk of interference from third
parties with agenda’s pertaining to profiteering from actions aimed at unwarranted
and unfounded liquidation, judicial management or similar processes, which actions
caused immense hardship and contributed to the loss of value of the historical
Sharemax portfolio.
16. The Boards have embarked upon the procuring of short and long term funding in
order to, inter alia, upgrade various of the shopping centres within the Restructured
Group and as priorities, to complete the road works at the Zambezi Mall, complete
current upgrading activities and procure optimal tenanting in all centres.
17. The Boards are also in discussion with various parties in regard to furthering the Villa
Mall project as soon as practicably possible.
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18. The Receivers for scheme creditors and scheme shareholders having been appointed
in terms of the Schemes, have commenced the preparation of Debenture Certificates
to be dispatched in due course to Investors, in terms of the provisions of the Schemes.
19. The Boards emphasise that no basis or need exists for any judicial or statutory
sanction or supervision of any kind in respect of the management or affairs of the
Restructured Group, and that all affairs of the Restructured Group are under the
control of the Boards, working in conjunction with the Receivers to the extent
necessary as per the relevant provisions of the Schemes.
20. The Boards thank the South African Reserve Bank for the opportunity afforded to the
Boards to procure the restructuring of the affairs of the historical Sharemax
Syndication Companies group, as successfully as such restructuring has been
achieved, resulting in the Restructured Group.
21. The Boards furthermore thank all the Advisors for their valued assistance during the
process of restructuring.
FURTHER PROGRESS
Further and regular progress reports and updates will follow with information on specific
properties, their upgrades and development, as soon as practicably possible.
Please note that this information will be available on the Frontier website
www.frontieram.co.za. You are welcome to visit this website for regular updates and
background information.
Investors will be informed directly via sms of any communication placed onto the web.
Please also note that only this website, sms’s, telephonic and personal communication,
including emails and letters, directly to and from Investors, will in future be the official
medium of communication utilised and acknowledged by the Restructured Group.
Queries may be directly addressed by contacting the Frontier Client Services at 0860 77 77
22 or emailing admin@frontieram.co.za.
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A plea for a proper investigation into the debacle.
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ALEC HOGG: Well, Chris de Beer has got a similar case that he's digging into. He's a lawyer at De Beer Janse v Vuuren & De Wet. Chris, you've taken a particular interest in Sharemax. We'll get on to that in a moment, but why? What stimulated you to be interested in this whole saga?
CHRIS DE BEER: Hi Alec. Ja, we are acting on behalf of investors in some of the syndication companies and we had a proper look. We've been investigating the scheme for a while now, and ... down to the fact that in our papers we basically state in 700 pages what we believe the state of affairs is. Certainly some of the syndications are doing much better than the others, but the application is brought with a view of ultimately ensuring protection of investors and the public.
ALEC HOGG: You mention an application. You too are going to the courts to try and resolve an issue that you feel is problematic with those who are currently running the Sharemax portfolios. Why are you concerned that they aren't doing a good job?
CHRIS DE BEER: As far as "basically concerned that they are not doing a good job", I think the concern is more regarding the powers that are divested to the statutory managers. They are appointed in terms of the Banks Act, and they've got ... limited powers, whereas if you apply for a judicial manager they've got far more powers than the statutory manager, and they can do proper investigations into financial affairs. They can deal properly with any irregularities if there should have been any. They can better ensure the protection of investors.
ALEC HOGG: You say that you are representing investors. How many investors are those, Chris?
CHRIS DE BEER: Well, it's a group of investors. You've got people putting a lot of money in...
ALEC HOGG: So it's a lot.
CHRIS DE BEER: Pensioners as well. One of my clients put R10m in one of these syndications.
ALEC HOGG: What possessed him to do that? R10m in a Sharemax syndication?
CHRIS DE BEER: It's a lot of money into what was sold as being a good property investment.
ALEC HOGG: So he bought the story, he gave some broker, what, probably R3m in commission, and he's now struggling to get his money back, or at least to get some of it back?
CHRIS DE BEER: You see, that's the reason I say, Alec, there should be proper investigation into this. We don't want to be responsible with statements we make. The bottom line is that we see that some of the properties, specifically the latest ones, are grossly overvalued. And we can't see how with limited powers any statutory manager can properly protect investors and the public. If you have a look at the profile of the investors, I mean, it's old people, it's basically a mix. But ja, it should be a very responsible approach, and that's why we also try to ensure continuity by requesting the court to appoint the statutory managers as the co-judicial managers.
ALEC HOGG: So you want judicial managers. In South Africa's history, though, the past 27 years, only one property has come out of judicial management. All the others have actually gone bust. Is that not something that might happen here - that you then get the liquidators getting their hands on Sharemax, and heaven knows if anything's going to come out after that's happened.
CHRIS DE BEER: What I can tell you about that, Alec, is that at this stage we are approaching the court to get the permission in terms of the appointment of the statutory managers to bring judicial management applications in respect of seven of the syndication schemes. I think the two most problematic schemes are the Zambezi Retail Park and The Villa Retail Park. We are basically bringing two judicial management applications for Zambezi and for Villa.
ALEC HOGG: Those are the two biggest ones, are they?
CHRIS DE BEER: Yes. The two biggest ones, the two latest ones and also the ones with the biggest problems, looking at values.
ALEC HOGG: Chris, just on a broader sense, you say you put together 700 pages for the courts. Is there stuff that's come out in your investigation that we haven't seen yet from Sharemax?
CHRIS DE BEER: Alec, I can tell you this much. The papers are available from tomorrow at 10 o'clock, on an internet website. It's a link that you can find on the internet site. It's a public document, so anybody who wants to read it can go and read it there.
ALEC HOGG: How bad were these guys - Mr Willie Botha and his team, his cohorts?
CHRIS DE BEER: Well, I think it's for the reader to decide. At this stage we are strongly of the view that there should be further investigation into the affairs of the group. I think it's quite clear that there have been irregularities, otherwise there wouldn't have been statutory managers. But ja, I think specifically if you look at the way that they conducted loans between the companies - I think that's something that needs to be attended to.
ALEC HOGG: Chris, just finally - did you track down any assets abroad, overseas?
CHRIS DE BEER: Well, at this stage we haven't really had the opportunity to do that, but that's something that a judicial manager will probably have a proper look at, and we'll investigate that as we go further.
ALEC HOGG: Chris de Beer is a lawyer at De Beer Janse v Vuuren & De Wet, and he's done some serious investigation, as you heard, into Sharemax. We will be posting that link onto Moneyweb tomorrow. You can go and read the 700 pages and make up your own mind.
( Money Web)
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Special Report Podcast: Niki Vontas – CEO, Bonatla
Niki Vontas cries foul says communication process to shareholders is flawed.
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ALEC HOGG: It’s Tuesday December 13 2011 and in this Boardroom Talk special podcast, Niki Vontas, chief executive of Bonatla Property, joins us now. Niki, good to have you on the programme, there’s been big developments in the Sharemax saga. From your perspective though, you did propose a rescue scheme and walked away, why? What was the background to that?
NIKI VONTAS: I put together a proposal that was originally accepted by the directors of Sharemax and they circulate it to the constituencies. Unfortunately, if you remember, there were a lot of public debates and public analysis in the Financial Mail or the Finance Week in which I commented and obviously I commented on controversial findings of my due diligence and they invoked this disclosures to the press for canceling the transaction summarily for disclosure of, for a breach of non-disclosure, which I find very funny because the press knew almost as much I knew already.
ALEC HOGG: So, you didn’t really walk away it was more a question of being kicked out.
NIKI VONTAS: I need to tell you I still haven’t walked away, there could be still some surprises but I cannot comment on that yet.
ALEC HOGG: But at the moment shareholders or investors, 35 000 of them, at Sharemax have actually voted in favour of a rescue scheme that’s being decided on right now. You don’t think it’s such a good idea?
NIKI VONTAS: Well, first obviously I wouldn’t like to comment on the process but from the little I’ve seen, if you visit the Sharemax website you’ll see that there’s less than 200 people visiting that website a day, there’s very little visits. What you find generally speaking in this doomed [UNCLEAR] syndication schemes like Bluezone that we salvaged or Sharemax or [UNCLEAR] or Realcor, you’ll find that the investors are generally older investors, generally Afrikaans, they haven’t got an email address, they haven’t got proper communication skills and they really rely on [UNCLEAR] communication to get decisions or information passed onto them. So, what I dispute really is that the process is completely flawed. I don’t believe that proper documentation has been circulated to investors to allow them whether or not they will get the investment of such a long period as [UNCLEAR] ten years and what Magnus Heystek, in fact, commented on the Business Report is absolutely right. It’s a total circus.
ALEC HOGG: It’s a circus you say?
NIKI VONTAS: It’s a total circus…[UNCLEAR] a total circus because if you want to put a proposal to 30 000 or 40 000 people on most probably the biggest failure in physical property in South Africa, you at least make the owner of at least the proper analysis of the merit or the pitfalls, you give feasibilities, you give time value of money, your present value, the returns over such a long period. You give them some form of information to ponder about and you don’t give them such a short time basically. Basically to me it’s a little bit of a hit and run operation that’s basically the way I consider it.
ALEC HOGG: From a business perspective though, can this rescue plan that has been proposed work?
NIKI VONTAS: I don’t think so. You’ll find that the Sharemax [UNCLEAR] is not finished, you’ll find some further applications for liquidations, further litigation. Obviously by now the investors are desperate and therefore they are going to consider anything but I still believe that in property there is always a solution. Sometimes if the difficulties are extreme, like in Sharemax, the solutions are more extreme but I still believe its investors deserve proper information in order to make a proper decision. They should, I think…if you want to talk to shareholders you can work like in the old Company Act, [UNCLEAR] to get special resolutions, you conduct meetings, you’ve got quorums and things like that. I haven’t seen anything of that sort. It looks like a bosberaad and the next day you basically announce a 99.9% approval. Last time I’ve seen that it was 1938 and 1939 in Hitler’s referendum. So, my feeling, you need to apply corporate governance, the new companies act, you need to apply proper process to give the time and information to investors to decide whether or not these solutions be good for them an what applies for them, applies for anybody. If I do that transaction, they should also call special meetings and give information and give analysis and ask the press to comment. This thing is a little bit of an occult operation.
ALEC HOGG: Do you know Connie Myburgh, the lawyer who’s behind this rescue scheme?
NIKI VONTAS: Yes, I’ve heard about him, yes.
ALEC HOGG: I believe our investigation journalist, Julius Cobbett, says that he was one of those who vigorously defended the Garek disaster. Lots of people lost much money there as well. What is his motive in this? Are you saying that his motive perhaps is questionable?
NIKI VONTAS: I believe Mr. Myburgh was involved also, if I remember, with Colin Barnard and the fiasco on the Melrose Arch deal with the mine pension fund in 2004, on which I think the late Ian Fife put some very nice article on them, so there must be a bibliography on the SM available if [UNCLEAR]
ALEC HOGG: So, if the courts are to sanction this, would you then try to go to court to get it reversed?
NIKI VONTAS: No, we’ve got other things pending but I cannot believe a court, looking at the way this process was handled, is going to sanction it. I don’t believe a proper judge is going to sanction a process like that. It’s the biggest failure in property in South Africa with 40 000 or 45 000 victims that are asked to give the money over and most of them, I can guarantee you, will be dead before the last payment because they are generally - the syndication investors in all these schemes – are generally retired people, who unfortunately invested their life savings in a property investment with obviously a property and a financial risk and therefore they lost their investment and now ask to receive the return on the investment through their estates because a lot of them won’t survive that [UNCLEAR], I can tell you that.
ALEC HOGG: Niki, outside of Sharemax there’s another controversial property issue going on at the moment, where the shareholders in a company called Accentuate or 26% shareholders there are tackling the management on a lease that was signed by the management before the property was sold. Do you have any insight into this?
NIKI VONTAS: Well, no, I’m quite aware of that transaction, all I can comment from what I…and I pursued it over the last year as well, all I can comment is that first if you as a director are involved in a property company and you’re obviously a director of the operating company, which is listed on the AltX I think, you should technically, if you sell that property company or the property you should have a related party circular, whereby you recuse yourself from any voting on your shares and you allow your shareholders to decide if this deal is good or bad for the company. I don’t think this process was followed and the other comment that I have is that if you do a leaseback, industrial leaseback, traditionally the operating company sells its property by signing a lease and obviously receives the proceeds from the sale of the property. In this case the property went into a ten year onerous lease but without receiving any proceeds from any sale. The proceeds of the sale went obviously to the shareholders of the property company or the directors, I suppose, and therefore there’s no merit whatsoever. If I was in the property company I would have only signed a three or four year lease or five year lease because it doesn’t help you to be on the [UNCLEAR] for ten years for the benefit of somebody else who’s unrelated to your operations.
ALEC HOGG: You call it an onerous lease, is it above market rates?
NIKI VONTAS: It is, I would say it is. There is obviously, although it’s an industrial area, they could argue that the ratio of non-industrial space to office space is not the same because traditionally in industrial property you find that 80% of your space is industrial and perhaps 15% to 20% of the gross lettable area is offices, in this Steeledale property you’ll find the ratio of office is higher but still I believe Steeledale is Steeledale, it’s not a prime area anymore. It used to be a good industrial area in the olden days of apartheid but for the new change of…since 1994 a lot of the old industrial areas, which are very largely your areas in the south were generally created to separate the white townships from the black townships. Now it’s not anymore the case. Your new industrial areas are created just for the economic value, not anymore for a demarcation between racial groups. I think all the…I visited, in fact, two or three of these industrial areas like Troyeville and Booysens, all these areas are basically declining quite substantially at the present moment because there’s an exodus of these industrial tenants towards your Lindor Parks [UNCLEAR], your Medowdale, all your new generation industrial townships.
ALEC HOGG: How did you get involved in investigating the Accentuate deal?
NIKI VONTAS: I put an offer two years ago, I put an offer last year, which obviously didn’t succeed.
ALEC HOGG: Because you were…for what reason?
NIKI VONTAS: Well, I was not satisfied with the transaction.
ALEC HOGG: Oh I see, so you actually had the opportunity to see the transaction and you felt that it wasn’t fair?
NIKI VONTAS: Well, I’ll tell you want makes me nervous. In a similar transaction what you should do technically if you want to be really fair the director should engage with the company in which they’re also directors, I suppose, the listed company, and say, listen guys we want to get out of this property transaction, we want to sell back the property to Accentuate, so the tenants must buy the property at a market related price so there’s no conflict of interest. So, suddenly now Accentuate is the owner of the property company, okay at a market related value, so the directors obviously take the proceeds, cash the proceeds. But now Accentuate at least can sign the ten year lease after having received its proceeds from the sale. So, the correct way to do it would be to sell back the property to Accentuate and allow Accentuate to do the ten year lease with the new buyer. That would have been much more fair.
ALEC HOGG: What would the difference in value be for this property without a ten year lease and with a ten year lease?
NIKI VONTAS: Well, what counts is not the length of the lease, it’s the confident of the tenant. [UNCLEAR]. My argument is that your lease is first as good as the tenant, the property is really a pretext. In property investment you could have a big tent in the Kalahari desert with Microsoft as a ten year tenant, it’s better to have that and have the cash flow than having a beautiful marble building in Steeledale with Accentuate as a tenant for ten years.
ALEC HOGG: So, in other words it’s the ten year lease that’s the important part here. What would that be worth on this…?
NIKI VONTAS: What counts is the discounted cash flow of this lease, basically it’s all the ten year income streams, which your present value at a discount rate, which is your [UNCLEAR] rate, which takes into consideration the risk free, let’s say the total return from the bond market, which is a risk free rate, plus a little risk premium attached to the risk of this property, its location, its age, the Accentuate financial covenant. So you could discount anywhere at around I would say 16% to 18% discount rate. If you discount this cash flow of this ten year lease at this rate you will arrive at a net present value, which will give you the value of the property.
ALEC HOGG: And roughly, this property, what would the deal have gone through at?
NIKI VONTAS: I would hesitate to give you my comment on that.
ALEC HOGG: But what were you prepared to pay for it with a ten year lease?
NIKI VONTAS: Me, I took the income and, if I remember, I capitalised at around 13% yield. If I can give an example at the present moment, prime property transactions are arrived at at capitalising the first year net income from rental at around 9%. The Accentuate deal I would have capitalised at 13% because I would have expected a much higher initial return, taking into consideration the risks. So, I touched around the 13% return. But obviously my deal didn’t arrive because it was not acceptable.
ALEC HOGG: But in rand terms what would that make it worth?
NIKI VONTAS: Try to remember, to tell you the truth…
ALEC HOGG: Is it a R5m deal or a R20m deal?
NIKI VONTAS: No, no, no, it was, if I recall, it was a R7m or R8m deal, if I recall.
ALEC HOGG: All right, so it’s not a huge deal then.
NIKI VONTAS: No, it was not a major consideration because ultimately it was a B grade industrial property in a B grade industrial area. Also, if I recall, there were other tenants in that property [UNCLEAR], if I can remember.
ALEC HOGG: Niki Vontas, the chief executive of Bonatla.
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Sharemax collapse ‘will hurt economy’
January 26 2012 at 05:00am
By Roy Cokayne
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Roy Cokayne
THE COLLAPSE of the Sharemax group of companies and the subsequent scheme of arrangement and offer of compromise to creditors and shareholders is set to have a massive knock-on effect on the economy.
André Prakke, a chartered accountant who has investigated the affairs and schemes promoted by Sharemax over many years, is adamant that investors in Sharemax’s various schemes will not get any further money out of them despite the sanctioning of the scheme of arrangement by the North Gauteng High Court on Friday.
“That money is gone. The construction companies are still owed millions. That money will have to come from somewhere. This tragedy will unfold by the end of this year,” he said.
Brenthurst Wealth Management director and financial advisor Magnus Heystek echoed Prakke’s views, saying individual investors still stood to lose a great deal of money despite the approval of the scheme of arrangement.
Heystek said an independent investigation of the scheme of arrangement had estimated that investors would only get back 10c in each rand that they had invested.
However, Heystek said if investors felt their financial brokers had let them down, they could take the brokers to the Financial Advisory and Intermediary Services Ombud. They could claim back up to R800 000 of their invested capital if the advice they received was shown to be inappropriate.
Prakke said the knock-on effect on the economy of investors losing their money was enormous because the estimated 30 000 investors translated into about 60 000 dependants, most of them pensioners who were reliant on income from these schemes.
This meant the state would have to look after their pensions and medical care, he said.
“The worst is that the people who caused this will never have to answer (for their actions) as things are happening now. There is serious corruption behind this. Where the corruption is I don’t know but it will come out in the next five years,” he said.
Prakke stressed investors in Sharemax had no certainty of outcome because the scheme of arrangement was based on the premise that funding would be obtained to get the scheme off the ground and to complete The Villa and Zambezi Retail Park.
But Prakke questioned what would happen if funding could not be obtained.
He said Sharemax’s entire operations and planning and preparations for the scheme of arrangement had in recent times been funded by diverting money from income-producing property syndications in the group, with the approval of the statutory managers appointed by the Reserve Bank, but without the knowledge of investors in these specific schemes.
This was both irregular and illegal in terms of both the old and new Companies Act without first obtaining the authority and approval of shareholders from these specific income-producing schemes at special meetings.
The analysis in the schedules to the scheme of arrangement revealed this diversion had so far cost between R12 million and R13m, which had been provided for over a long period of time by diverting funds from income-producing schemes, but a further R9m still had to be paid, Prakke added.
Pierre Hough, a strategist and economic crime investigator, said the provisions of the Companies Act could not be used to fix the contraventions by Sharemax of the Banks Act.
Hough said an investigation by the registrar of banks found the issuing of shares and linked debentures was a contravention of the Banks Act and none of the shareholders and creditors therefore became lawful shareholders in terms of the Companies Act.
In addition, Hough said the properties that were being syndicated were not transferred to the syndication vehicle at the time the shares and linked debentures were issued, which meant there was nothing underpinning the share issue.
Hough said the scheme of arrangement meant shareholders were compromising themselves and would lose their money while the people who caused the mess could “just walk away”.
He questioned whether the statutory managers appointed by the Reserve Bank had complied with their responsibilities because they “had failed to take possession and control of the assets of Sharemax”. page 18
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Charges laid over Sharemax scheme
18 Oct 2010
Sharemax’s attorneys, Weavind & Weavind have apparently been charged with fraud by Pierre Hough, managing director of Chase International who laid the charges at the Brooklyn Police Station on behalf of one of his clients.
According to station commander, Brigadier Andre Wiese, a case of fraud had been opened but this matter had been transferred to the commercial crimes unit in Pretoria.
Hough says Weavind & Weavind failed to respond to a demand for repayment of a R200k deposit originally paid to the attorneys by one of Chase International’s clients. He has apparently lodged a claim with the fidelity fund of the Law Society of the Northern Provinces in an effort to get the client’s money back.
Hough has accused Weavind & Weavind of theft amid allegations of fraudulent non-disclosure and misrepresentation in the prospectus published for the Zambezi Retail Park.
Hough has also accused the attorneys of transferring money out of their trust account prior to the property being transferred to the syndication vehicle. The Department of Trade and Industry specifically prohibits the withdrawal of funds from a trust account prior to the properties being transferred.
Apparently Zambezi Retail Park and The Villa – other properties in the Sharemax portfolio – have not yet been transferred to the syndication company.
