Cape Town - Gullible investors are risking losing hundreds of millions of rands in a suspect "property syndication", despite marketers' rosy promises.
Units in Spitskop Village Properties are marketed at R100 000 a unit (debenture and share) since mid-March last year by a sister company Blue Zone Property Investments.
The marketers of Spitskop want to raise R425m for a township development on a piece of land between Steelpoort and Burgersfort in Mpumalanga that the municipality values at R1m.
The planned development is shaky because of land claims against the piece of ground of which some were already awarded. A mining group also owns mineral rights on part of the land and there is no water.
It has been learnt that about R200m had already been invested in the scheme and investments worth millions of rands are being recruited daily by eager marketers who earn 10% commission.
According to marketing documents the investment runs to 2009, with interest of 9.5% being paid in the first year, 10.12% in the second year and 10.81% in the third. There are already signs that investors could burn their fingers.
Banks Act
The marketing arm Blue Zone is in the first place not registered with the Financial Services Board (FSB) to sell shares in a property syndication or to give advice on it.
In addition, in 2004 land claims were lodged on part of the land, of which the Land Claims Court already granted two. Samancor also owns mining rights on parts of the land.
The South African Reserve Bank also appointed inspectors to investigate the business operations of Spitskop and its sister firms Blue Zone and Blue Dot Properties for alleged contravention of the Banks Act.
At the end of last month, five investors who invested R875 000 in the scheme between October 25 last year and March this year asked for the liquidation of Spitskop because the scheme is technically insolvent according the them.
Interest are currently still being paid to investors but apparently from money recruited from new investors.
No water
In the liquidation application, the applicants argue that Spitskop is making gross misrepresentations to investors, withholding information, allegedly contravening the Banks- and Companies Act as well as it being technically insolvent.
Since the middle of last year already potential investors are apparently being told that the rezoning for the development of the land is as good as done, but an application in this regard was only handed in in June this year.
Before rezoning can be done, the owners must first prove that that there are no land claims, that water can be relayed and that there are no mineral rights registered on the land.
Besides the land claims already awarded and Samancor's mineral rights, the Tubatse local municipality already indicated that permanent water would not be relayed to the area.
Discrepancies
From the Spitskop liquidation application it also seems that serious discrepancies exist with the valuation and resale of the land on which the "syndication" is being sold.
The land of 198 ha was bought for R1.05m in 2003 by Blue Dot Properties. The current municipal valuation is R1m.
The same land was sold by Blue Dot to Spitskop Village Properties for R118.3m.
According to the court application, the money was however paid back to Blue Dot and the land was only registered in Spitskop's name in July this year, presumably after it raised enough money from the public to pay the sale price.
The applicants argue that Spitskop would, after having paid the R118.3m, only had R11.7m left from the R130m already recruited from investors.
avanzyl@rapport.co.za
- Rapport