Johannesburg - Investors in the controversial Sharemax group’s second-biggest scheme, Zambezi Retail, who are currently not receiving any interest, may soon receive both good and bad news.
The good news is that the dispute between Sharemax and Capicol, the centre’s developer, over the ownership of the shopping centre may soon be resolved. Should this happen, it would be possible to resume investors’ interest payments.
The bad news is the uncertainty whether investors will receive the income from their investments that they did before payments ceased.
The agreement between Sharemax and Capicol was that on completion the centre would be transferred to Sharemax for an agreed price.
But this agreement was never finalised because Capicol claimed that Sharemax had failed to pay the developer all it was supposed to pay. The centre’s builders had also not all been paid in full.
The centre therefore still belongs to Capicol, and not to the Sharemax company into which investors put their money, and Capicol has consequently refused to pay over the rental income to Sharemax.
The dispute was referred to arbitration and on Wednesday the two parties’ legal teams will deliver their final arguments before the arbitrator, advocate John Louw.
Louw will give his decision on Friday.
What the arbitration is about is whether or not Sharemax still owes Capicol any money, and the outcome will determine the direction the negotiations regarding the centre will take.
If the decision goes against Sharemax, this would be a problem, because there is no money left to pay in the difference. Another solution would then have to be found.
One possibility would be for Capicol to take a stake in the centre, meaning that the Sharemax investors would have a smaller interest.
At this stage it is also uncertain whether the rental income from the centre corresponds with the estimates in Sharemax’s prospectuses.
Since the SA Reserve Bank’s statutory managers intervened in Sharemax investors have received only the actual income from the buildings, which income has in no way been subsidised.
So it's no wonder that in its latest statement the new board of the Sharemax companies has warned that Zambezi investors may have to be content with a lower income than initially forecast.
What is most important is that steps are under way to remove the legal obstacles so that investors can at least again earn some income, although this may be less than anticipated.