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Cape Town releases forensic reports into its sale of land to Growthpoint

Maintains the deal was above board.

The City of Cape Town is sticking to its guns that the controversial sale of ‘Site B’ in the city’s Foreshore area to JSE-listed Growthpoint Properties is all above board.

Late on Monday the city released its forensic reports into the R86.5 million sale, which concluded that it “sold Site B at the correct permissible floor area” or development bulk of 175 00m². However, the same report raised concerns that poor record-keeping in its Planning and Building Development department could be behind the whole debacle.

Pressure for reports to be made available

The release of the reports comes in the wake of civil society groups and opposition political parties calling for them to be released to the public in recent weeks, after the city officials said no irregularities were found in the investigation. The investigation was led by the Forensic Services Office in the city manager’s office). The Good party has also asked the Public Protector to investigate the matter.

Civil society groups have criticised the city for selling the prime site at below market value, claiming it has up to 46 000m² of development bulk and should be valued as much as R227 million. Civil society groups including Ndifuna Ukwazi, Reclaim the City and GroundUp have been protesting the sale for more than a year.

The city released two reports into the sale on its website, a forensic report dated 27 February 2019; and, a supplementary forensic report date 2 May 2019. The initial 47-page report raised several “control issues” around the city’s Planning and Building Development Management department.

“During the course of the investigation it was noted that Planning and Building Development Management failed to maintain adequate records which resulted in incomplete documentation,” the report states.

“As the custodian department, Planning and Building Development Management also failed to definitively quantify the permissible floor area and the potential accessible bulk of Site B It was noted that a bundle of documentation was provided to (the) Property Disposal (department) for their perusal and interpretation. This therefore, places the Property Disposal department at risk as they are not planning experts and thus they rely on the data provided by Planning and Building Development Management,” it noted.

‘Lack of planning and coordination’

The report also raised concerns around the “lack of integration planning and coordination between the departments within Property Management who are responsible for the disposal of City owned land”.

Growthpoint was the highest bidder for Site B which the city put on auction in September 2016. It paid R86.5 million for the property and took transfer of the site on March 7, 2017. Growthpoint is looking to invest around R2 billion into a new high-rise mixed-use development for the site that will include office, retail and hotel space.

Growthpoint plans to invest around R2bn in developing the site into a high-rise development. Picture: Supplied

According to the forensic report, the city commissioned independent valuations of the site that showed “the best estimated market value” for the land was R80 million. This was based on approved bulk rights for the site of 175 00m² and “taking into consideration that the purchaser may apply to the city to access additional bulk of approximately 30%”.

In a statement announcing the release of the report, the city said: “There has been much misinformation about the sale in the past months. The City’s Forensic Report shows that 17 500m² of permissible floor area was available as stated. The investigation was based on data that was relevant to Erf 165639, referred to as Site B, for the period August 1994 to December 2018.”

It added: “In all documentation, including the auctioneers pack, the permissible floor area was consistently listed as 17 500m² with a height restriction of 55m.”

Site has a ‘complex history’

The forensic report noted that Site B had a “complex history of rights, limitations, restrictions amendments and transfers which took place during the years 1994 to 2001”. It said that as a result the city’s Property Disposal department relied on information provided to it by the city’s Planning and Building Development Management department.

“However, Planning and Building Development Management did not provide (the) Property Disposal (department) with a definitive quantification of the permissible floor area and the potential accessible bulk in respect of Site B. For this reason, Property Disposal followed a cautionary approach and utilized the right allocated and detailed in the Substitution Scheme i.e. 17 500m².”

As part of its so-called complex history of rights, Site B was previously part of a bigger land parcel made up of sites A, B and K, which was once collectively referred to as Site AB and earmarked for a much bigger development that never got off the ground.

This combined site according to the forensic report had a development bulk of 69 000m². After bigger plans for Site AB failed, the city reverted to separate sites and sold Site A several years back to another property company, which used about a third of the available development rights at the time.

Civil society groups have used this as the basis behind their argument that the city sold Site B to Growthpoint below market value.

They claim that Site B could effectively still have remaining bulk development rights of up to 46 000m².

The city contends that development rights for the bigger land parcel (Site AB) had lapsed, and Growthpoint’s current bulk rights are for the auctioned amount of 17 500m². In its forensic report, the city includes the legal opinion of advocate Frank Pelser regarding the rights of Site A, B and consolidated Site AB.

“As Growthpoint is not the owner of Site AB, neither Growthpoint nor Site B is entitled to the allocation made in respect of Site AB. It should be noted that Site AB is a different and larger land unit. The re-subdivision of Site AB into its original form will stand until it is set aside by judicial review. In law Site AB is no longer in existence, therefore, the allocated bulk cannot survive,” the city said in a summary of Pelser’s legal opinion.

The city’s forensic report however noted that Growthpoint could apply for access to additional bulk rights for Site B.

Growthpoint has refuted claims that it underpaid for the Site B property by R140 million. It said in a statement last week that it “did not know that the property had more rights prior to buying it on auction”.

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DA giving away prime property to its party funders…

DA / ANC…. two side of the same coin.

What information do you have to come to this conclusion? It would assist readers if you could present facts or at least a logical argument.

What utter nonsense, read the article. If you make wild statements, put facts behind them. This isn’t the comments forum for You Magazine

Well its no secret that Herman Mashaba was on the board of Growth point at the time. The sale of this property was always shrouded in controversy. Almost R150 million lost due to DA run municipality incompetence and maladministration…

@teampublichealth

Nonsense, the article clearly states that the property was valued at R80m and it was an auction, not exactly a shady deal in a back alley.

DA seemed to have made 6m more than they should have based on property prices.

Did you not read the article? The property was valued at 80m and they managed to get 86m in a auction.

I know the internet is full of dumb people and propaganda but this whole thing seems like the city of CT should get a pat on the back for selling above market.

The DA well and truly seem like the only party in SA that can really be trusted with finances, not perfect but a huge cry from the ANC/EFF.

The City hss made a huge loss through its own incompetence. Don’t see why arm’s length buyer must be prejudiced?

Another day but same Africa blame song by the useless parasitic bloated municipalities-i did not know ,it was not me ,it was the other dept /deputy ,i cannot count , i deny deny deny I have done any wrong , it was the other guy , procedures were followed. Fools

Sorry auntie Pat. The PP is slightly occupied at present, and won’t have time in her current term to help you. She has a certain Minister she needs to have removed. Then there are a pile of investigations of events that took place in the nineties that need to be attended to. Perhaps you can refer your request (with a donation attached) to the Corruptheid State Committee at Looters House. They might be able to ace your request.

The R227 million valuation, where did they get that from cause its a far cry from R80 million. The opposition in the other hand will have sold the site for close to nothing given their track record (referring to the ANC)

How did you reach this conclusion? It was the DA led municipality that lost us R150 million.

This article has nothing to do with the ANC…

The ANC is the DA’s version of “Blame it on Apartheid” excuse.

How exactly did they lose R150mil? The article refers to an open auction, if the value of the land was closer to R227mil, then surely another property developer would have bid more than R80mil? Or are you suggesting there was collusion between all those bidding in the auction?

I was at this auction, I went through all the docs (I’m not in any way affiliated with any of the parties mentioned in this article, or the auctioneer). In my opinion, the price was fair (plus comm plus VAT). You buy a property with its existing zoning, not zoning it MAY one day get. Growthpoint would have and still does have significant holding, finance and development costs before a single brick will be laid. The price was correct within a 5% variable either way

Thanks, that corroborates what is in the article.
If the property was valued at 80m, it got close to that in a auction and someone was at the auction and verifies this then it really seems like a non-event of a story.

I am not familiar with these civil groups but seems more political than logical.

Surely in the interests of the Municipality and its Ratepayers, the alluded to increase in the ‘permissible floor area’ should have been included as a condition of the sale at the higher price to be resolved within a selected time period? This would have made for a more just sale for both buyer and seller.
Further question I have is why have a ‘possible’ increase? Why is that question not resolved by the responsible Section before the /auction sale takes place?

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