Registered users can save articles to their personal articles list. Login here or sign up here

Nova plans to sell another five properties

Sharemax rescue scheme fails to inform investors of imminent sale.

Nova Property Group, the rescue vehicle of the failed Sharemax investment scheme, has put five shopping centres valued at nearly R150 million up for auction without informing investors about the impending sale of four of the centres.

The five properties are set to be auctioned off by Auction Inc on May 30. Details of the auction can be found here.

This sees the trend of recent years – in which Nova has sold numerous properties without repaying all the debentures attached to the specific properties – continuing. (The debentures related to Silverwater Crossing and Magalieskruin Shopping Centre were in fact repaid).

Details of the properties Nova has now put on auction:

Property

Disclosure of intent to dispose to investors

2018 valuation

Current per annum income as per auction documentation

Carletonville Centre

Not disclosed

R51.8 million

R3.4 million

Shoprite Secunda

Not disclosed

R24.7 million

R4.2 million

Secunda Plaza

Not disclosed

R17.1 million

R2.8 million

Carnival Centre

Not disclosed

R21.3 million

R1.4 million

Athlone Park

Disclosed

R32.4 million

R3.7 million

   

R147.4 million

 

The marketing descriptions on the auction page are brief and offer limited information, but suggest that these centres offer excellent turnaround opportunities. 

Qualified audit and depressed cash flows

The proposed disposal of the properties on auction follows the release of dismal annual financial statements (AFS) last year, which highlighted a dire operational cash flow forecast.

The AFS were qualified by the group’s auditor, Nexia SAB&T, who not only questioned the valuations of Nova’s properties, but also raised concerns as to whether Nova can continue as a going concern.

The AFS also revealed Nova’s dire cash flow position. During the period, the company burned through nearly R24 million of cash and at the end of the period only had R5.7 million cash in the bank.

It is therefore evident that Nova will need either debt funding or the proceeds of the disposal of additional properties to cover operational expenses.

One of the operational expenses placing a drain on cash flows is the salaries of executive board members. In the previous financial year, the board paid itself nearly R17 million. According to Moneyweb’s calculations, these salaries represent 23% of the total cash the group received from customers – or R1 of every R4 received – in the 2018 financial year, as well as 10.9% of total operating expenses.

Read: Nova teetering on the verge of insolvency

In another development, Liezl Gildenhuys, a former financial director of the company, alleges in court papers related to an ongoing constructive dismal case before the Labour Court that the proceeds from the sale of properties were used to fund operational expenditure and not to repay debenture holders or upgrade properties.

She alleges that Nova disposed of nine properties valued at R242 482 364 and that the proceeds were not repaid to debenture holders. These properties are 148 Leeuwpoort Street, Oxford Gate, Rivonia Square, Nelspruit Hyper, The Fern, Whale Rock, Shopmakers Village, Parkside and Die Meent.

Gildenhuys also alleges that she was fired after reporting alleged accounting irregularities to the Nova board, Nexia and the Independent Regulatory Board for Auditors (Irba).

Nova denies Gildenhuys’s claims and is defending the case.

Read: Former finance director claims Nova ‘misrepresented’ its financial position

No response from Nova

Moneyweb put detailed questions to Nova CEO Dominique Haese and chairman Connie Myburgh related to the auction, the reason why the properties are to be sold, and whether the proceeds will be used to repay investors, but they did not respond. Nova has previously suspended communication with Moneyweb (see the statement below).

Nova communiqué

A particularly interesting development is that Nova did not inform debenture holders of its intention to put the properties up for auction, despite publishing an update on its commercial activities on its website in February. This statement briefly gave updates on the group’s portfolio of assets.

Although the update for the Athlone property disclosed its imminent sale, the updates for the other four properties do not.

It is also interesting to note that despite the recent sale of several other properties and the raising of more than R230 million, the Nova statement does not refer to any significant capital upgrade or refurbishment taking place at a single shopping centre in the portfolio.

Response from debenture holders

Roger Johnson, chair of the Nova Debenture Creditors Action Group (NDCAG),expressed his concern regarding the intended disposals and said it would lead to the further erosion of Nova’s asset base.

He added that in 2017 and 2018 Nova sold several properties (Checkers Virginia, Benoni Hyper, Silverwater Crossing and properties related to Brookfield Investment) without any prior communication to debenture holders, except for a March 2017 communiqué that informed Silverwater Crossing and Magalieskruin debenture holders that their debentures had been repaid.

“Why are some sales proceeds applied to debenture repayment and others not?” he asked.

Said Johnston: “The NDCAG suspects that, as with Rivonia Square, the other funds received from a number of these sales have been diverted into the company’s working capital and have been applied to who knows what undeclared purposes and expenditure. Perhaps it is this money that is keeping the company afloat and funding the allegedly excessive remuneration of the directors?”

Nova has previously suspended correspondence with Moneyweb. The response below was sent to Moneyweb in November 2016.

Dear Mr van Niekerk,

It is regrettable that our efforts in engaging Moneyweb openly, constructively and in a bona vide fashion has not been reciprocated. In response Moneyweb has chosen to publish articles without prior reference to us, and in breach of your undertaking to allow us to see and comment on the articles first, which articles twist the facts, articulate a number of inaccuracies and untruths and seek to slander and defame the Nova Group and its directorate. We are considering our position and our rights in this regard are reserved.

It has become clear to us that any information that is provided by us to Moneyweb, will be twisted and used out of context for the purpose of further negative reporting of and concerning the Nova Group and its directorate and given that no further productive purpose would be served in engaging with Moneyweb, the Nova Group has decided to break off all forms of communication with Moneyweb. We will accordingly no longer respond to questions Moneyweb pose to us, requests for commentary on proposed articles or for that matter to any articles that Moneyweb might publish, subject of course to a reservation of the right to deal with any matter Moneyweb might publish, in a court of law.

Please ensure, should you elect to publish anything further regarding the Nova Group and any of its functionaries, that you include in such publication our above position, verbatim.

Yours faithfully,

Dominique Haese

CEO Nova Property Group

Get access to Moneyweb's financial intelligence and support quality journalism for only
R63/month or R630/year.
Sign up here, cancel at any time.

AUTHOR PROFILE

COMMENTS   10

To comment, you must be registered and logged in.

LOGIN HERE

Don't have an account?
Sign up for FREE

Bet the directors won’t be losing out in any way…

People, people, please understand.
Connie and his sidekick have expensive lifestyles to fund.
They need to sell
To fund their habits.
Now, when nothing happened in 2017 when they sold without notice, they will do it again!
So, whats the problem?

Is it a mere coincidence that Connie Myburgh is also a Non-Executive Director of ORTHOTOUCH, yet ANOTHER FAILED PROPERTY SYNDICATION SAGA??

See Ryk’s brilliant articles, links below:
https://www.moneyweb.co.za/in-depth/investigations/the-peculiar-case-of-the-picvest-billions-part-1/
https://www.moneyweb.co.za/in-depth/investigations/the-peculiar-case-of-the-picvest-billions-part-2/
https://www.moneyweb.co.za/in-depth/investigations/the-peculiar-case-of-the-picvest-billions-part-4/
https://www.moneyweb.co.za/in-depth/investigations/the-peculiar-case-of-the-picvest-billions-part-4-2/
When is the Justice System finally going to clamp down??????????

Ryk
Thank you for standing up for the silent group who want the shenanigans of Myburg et al to become known.
Pity that Regulator is doing nothing to assist.
Clever move from Myburg to ‘suspend’ communications with MW – that way he is under not pressure to respond to your probing questions. But, I hope problems await them on the horizon if they continue.

Commercial properties are valued as a multiple of operating income not potential income.

Thus looking at the above figures for Carletonville Centre the Nova valuation is 15.23x the operating income (or put differently it has a cap rate of 6.5%), since I am not operating in the commercial space I don’t know if this is a “fair” value, but then why has some of the other centres so much higher cap rate? (17% for Secunda plaza)

Even if this is “fair” value, since it is being auctioned off the chances of the properties reaching these values might (will probably) not be reached…

My question is, which related party (to the directors) will be buying these properties for a few cents on the rand???

Mmm, very interesting that they managed to pay out some debentures on sold properties and not others such as Rivonia Square. I suppose they think they have got away with that one with the excuse that their exorbitant salaries need to financed!!! And, they’re not ashamed of it!!

Is’nt this the two that removed directors illegaly from a company.
How do they continue?

Nova day, nova nonsense.

Lock up the Georgious as quickly as possible.

.What a perfect opportunity for debenture holders to apply to court even on a semi-urgent basis to appoint a Business Rescue Practioner this maybe their last chance to protect their investment and recover money from within Nova and put the directors on a shorter leach. Don’t wait. They can even block the sale of the assets and preserve the asset base.

Interesting advice from Mr Prakke.
His advice/statements as an expert
witness during a case in the High Court of KZN, Case Mo 4827/2013 was, however, not well received by the judge. For ease of reference the following synopsis:

In the High Court of South Africa Kwazul0-Natal Division, Pietermaritzburg
Case Mo: 4827/2013

In the matter between:

Shane Alan Symonds and Johanna Aletta Symons (Plaintiffs)

And

The Rob Roy Investments cc t/a Assetsure (Defendant)

Before Judge Ploos van Amstel

Judgement delivered on 10 December 2018

Expert witness statements by Mr Prakke and Mr Throssel (an investment manager) for the plaintiffs
1. Investment in The Villa is an “above average” investment risk and “higher than high”.

2. Criticized obligation to pay interest to investors before there was a rental income stream. This could only mean that the interest was paid out of invested capital.

3. The vacancy factor budgeted for was too low.

4. The projected rental per square meter was too high.

5. The syndication structure was illegal and that it contravened the Banks Act of 1990.

6. Upfront commission and other expenses were too high.

7. The public companies involved were insolvent.

8. The projected returns were not feasible.

9. The prospectus omitted material information.

10. The defendant (Financial advisor) should have performed a due diligence investigation and explained the cost of the units to the plaintiff (investor).

11. The defendant failed to act in accordance with his professional obligations and the requirements of FAIS.

Findings by Judge

1. The Sharemax scheme did not fail because of

a. high commissions paid to those who sold the investment; or

b. the companies concerned were unlisted; or

c. of the interest paid to investors from the outset; or

d. the scheme ran out of investors; or

e. the rental income turned out to be inadequate; or

f. a lack of transparency.

2. None of the risks mentioned by the expert witnesses for the plaintiffs can be said to be the cause of the loss to the plaintiffs.

3. The cause of the loss was the intervention by the Reserve Bank and not any breach on the part of the Financial Advisor.

4. Interest paid to the investors was generated by the funds in the attorney’s trust account, together with the funds advanced to Capicol in terms of the sale of business agreement, on which it paid interest .

5. Evidence does not justify a finding that the commission of 6% compromised the Financial Advisor’s independence.

Load All 10 Comments
End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR

Podcasts

SHOP NEWSLETTERS TRENDING CPD HUB

Follow us:

Search Articles:Advanced Search
Click a Company:
server: 172.17.0.2