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29 May 2013

Financial statements reveal R2.2bn loss for Sharemax investors

Download the financial statements Nova Group’s directors wouldn’t make public.

Financial statements for Nova Property Group show that investors who bought Sharemax products have lost R2.2bn. Nova is the company that owns all the properties that used to belong to investors in the various Sharemax property syndication companies. Nova was formed as a result of a ‘Section 311’ rescue scheme which received court sanction in January last year.

The full Article on Moneyweb is available HERE.

The Financial Statements are available HERE.

Here is a breakdown of the losses suffered by Sharemax investors:
Syndication value
Value in 2012
% decline
financial statements
148 LeeuwportBoksburgR 9 700 000R 5 679 539-41%
CenturionR 6 140 000R 5 860 347-5%
DurbanvilleR 28 000 000R 21 976 348-22%
The Village
NelspruitR 29 400 000R 27 689 974-6%
WitbankR 100 900 000R 88 485 933-12%
NelspruitR 31 000 000R 29 954 077-3%
MagalieskruinPretoriaR 29 900 000R 23 530 753-21%
FloridaR 118 500 000R 117 327 860-1%
PretoriaR 75 000 000R 68 408 427-9%
PretoriaR 80 000 000R 68 506 629-14%
CarletonvilleR 38 400 000R 33 420 151-13%
Johannesburg & VirginiaR 50 000 000R 34 498 826-31%
BenoniR 102 000 000R 81 435 035-20%
De Marionette
Secunda & MeyersdalR 86 000 000R 73 405 961-15%
Athlone Park
Amanzimtoti and PotchefstroomR 93 700 000R 50 456 578-46%
Range View
DalparkR 30 000 000R 16 402 710-45%
Bromhof and SecundaR 72 500 000R 63 285 127-13%
Liberty MallWelkomR 200 600 000R 120 226 031-40%
RivoniaR 258 000 000R 113 272 115-56%
NelspruitR 64 200 000R 55 045 952-14%
Whale Rock
MargateR 12 200 000R 2-100%
Mont Rouge
HartebeesportR 31 700 000R 18 553 679-41%
DullstroomR 41 900 000R 14 500 000-65%
Berg en Dal
HeidelbergR 48 900 000R 29 849 389-39%
RustenburgR 114 900 000R 87 000 000-24%
HartebeesportR 61 000 000R 42 006 831-31%
MontanaR 83 200 000R 54 475 245-35%
TheresaparkR 47 440 000R 28 538 826-40%
LimpopoR 20 900 000R 11 551 924-45%
LydenbergR 13 000 000R 10 754 112-17%
DainfernR 16 300 000R 1-100%
Retail Park
PretoriaR 756 000 000R 234 645 951-69%
The Villa
Retail Park
PretoriaR 1 590 000 000R 498 102 553-69%
R 4 341 380 000
R 2 128 846 886

These figures appear from the Financial Statements of Nova as more fully disclosed in the Moneyweb Article referred to above.
Gareth Shepperson

UDZ tax incentive lucrative boon for property investors

UDZ tax incentive lucrative boon for property investors

The Urban Development Zone (UDZ) tax incentive seems to be one of the best kept tax break secrets of the South African property sector.

Since its introduction by the Treasury in 2003, a steady stream of investors has been using the scheme to invest in property in areas earmarked for the incentive, such as the Cape Town central business district (CBD).

The Cape Town central business district has benefited extensively from the Urban Development Zone tax incentive scheme.

However, not enough investors have taken advantage of this profitable incentive. Investors and developers need to acquaint themselves with the scheme, and take advantage of its tangible benefits.

The Cape Town CBD, a world class premier business destination, has certainly made use of the scheme. Close to R15 billion has been invested in the city centre since the scheme was promulgated.

Between 2006 and 2011, the City of Cape Town has issued location certificates to UDZ applicants for R2bn of new construction, and R1.16bn of refurbishments. Of this amount, 73 percent occurred in 2010 and 2011 alone. The city estimates that these investments have in turn generated approximately 35 000 permanent and temporary job opportunities.

It is a win-win situation for investors and the government. Investors not only have the opportunity to be located in strong commercial nodes such as the Cape Town CBD, they also get a tax write-off or a straight line accelerated depreciation, which allows them, as taxpayers, to write off an asset within a declared UDZ. Straight line accelerated tax deduction is based on a special depreciation allowance on capital investments in either refurbishing existing properties or building new properties in the identified areas.

The government, on the other hand, through the capital investment by the private sector, realises its goal of revitalising commercial and residential buildings in business districts that were previously at risk of decentralisation.

A flagship of the UDZ in the Cape Town CBD is the R1.6bn Portside development, which will be the city's tallest building on completion next year.

The co-investors of the development, FirstRand and Old Mutual Properties, cite the financial savings realised through the UDZ programme as one of the reasons they committed to investing in the CBD, alongside their confidence in the future of the city centre as a quality business environment. The UDZ allowance is designed to cover all construction costs related to the erection, extension, addition or improvement of buildings.

The tax incentive can only be claimed by the end-user or taxpayer of the property, who must use the building or part of it for trade purposes.

It is not just JSE-listed companies that can benefit from the UDZ. Any ownerbuilder or owner-first purchaser is eligible for the incentive; it does not matter if they are an individual, company, close corporation, trust or partner in a partnership.

Hip House, a building in the CBD, utilised the incentive to transform what used to be a run-down neglected office block with low-rent tenants, to what is now a building with dual commercial and residential zoning, occupied by one of the country's largest digital media agencies, a premier film production company, boutique travel advisory and a luxury retailer.

The developer is passing on the 55 percent discount available to the first buyer of the completed properties, meaning that the cost per square metre of these luxury units in net terms is under a third of the comparable price in more established areas along the Atlantic Seaboard and the Waterfront.

Passing on the tax benefit to purchasers and using the UDZ incentive to "sweeten the deal" for property brokers are additional benefits of the scheme that make it an attractive proposition. Being able to pass on the tax benefit is an excellent amendment to the incentive by the Treasury. When the UDZ scheme was initially introduced, only the person who undertook the construction or refurbishment of a property could claim the UDZ allowance. This meant that the incentive was of no value if a developer constructed or refurbished a building, and then later sold that building to a purchaser. This is no longer the case.

Previously, the incentive was seen as too complicated. While there are rules and qualifications that need to be met to qualify for the scheme, as with any regulation, there is no catch with the UDZ scheme, nor is it a complex affair.

Organisations such the Central City Improvement District (CCID), the Cape Town Partnership and local governments such as the City of Cape Town are ensuring that information on the incentive is simplified and easily accessible.

Early this year, the Treasury announced the extension of the sunset clause of the UDZ incentive from March 31, 2014 to March 31, 2020. This means that more investors have even more time to apply for the incentive.

The updated UDZ maps, along with a guide to the scheme and other useful information, may be downloaded from the City of Cape Town's new planning web portal, www.capetown.gov.za. Potential investors can also visit the CCID's website, www.capetowncid.co.za, for answers to frequently asked questions on the scheme.

The Cape Town Partnership - the collaboration between the public and private sectors working together to develop, promote and manage the Cape Town central city as a place for all citizens - will also facilitate access to information and best practice to use the UDZ to the benefit of the city centre.

It is hoped that more investors will make use of the extended deadline and take advantage of the tax write-offs presented by the incentive. While profit should be incentive enough for any investor, the added value of investing in the Cape Town CBD is the return on investment that will come from having a property located in a premier business destination and in a quality, world-class environment.

Rob Kane
Chairman, Cape Town Central City Improvement District
Business Report

21 May 2013

Sharemax property investors misled by 'copy-and-paste error'

Sharemax property investors misled by 'copy-and-paste error'

Sharemax's directors told their auditors they made a "copy and paste" error in the prospectus of the Zambezi property syndication that misled investors about the security of their investments.

This is revealed in the latest determination by Noluntu Bam, the Ombud for Financial Services Providers, in which she orders an adviser, who is an accredited Certified Financial Planner, as well as Sharemax and four of its directors, to make good the loss suffered by an elderly woman who invested in the scheme.
Click to enlarge
The Zambezi property is now an empty shopping centre, and millions of rands need to be spent to rectify problems with the roads around the centre, the ruling reports.

Investors stopped receiving payments in 2010.

In her latest ruling, Bam relates replies from Advoca Auditors, then known as Act Audit Solutions, to her questions about whether the auditors reported the transfer of investors' funds out of the trust account of Sharemax's attorney, Weavind & Weavind, to the developer of Zambezi as an irregularity to the Independent Regulatory Board for Auditors (Irba).

The transfer was irregular because the Zambezi prospectus stated that investment funds would remain in the trust account of Weavind & Weavind until the property was transferred into investors' names.
Click to enlarge
Property syndicates are also required to keep investors' funds in an attorney's trust account until the property is transferred to the syndicate. This is in terms of a general notice issued under the Consumer Affairs (Unfair Business Practices) Act by the Department of Trade and Industry (DTI) in 2006.

The promise that funds would be held in a trust gave some peace of mind to investors such as 73-year-old Mrs B, who invested R490 000 in Zambezi on the advice of her financial adviser, Edward Carter-Smith.

Bam says most investors would not have participated in the syndicate had they been informed their funds would not enjoy the protection of an attorney's trust account.

But despite the DTI's notice saying it applied to all property syndications, Advoca told Bam it obtained legal advice that the general notice did not apply to the Zambezi syndication or Sharemax's other troubled scheme, The Villa.
Click to enlarge
Advoca also told Bam that the Sharemax directors said the transfer of the money from their attorney's trust account was no reportable auditing irregulatory because the reference to the money being held in trust should not have been in the prospectus and was a "bona fide 'copy and paste' mistake" made during the drafting of the prospectuses.

Bam says it is "startling" that the directors are claiming there was a mere mistake in the prospectus, as it was a material clause and the prospectus had been issued repeatedly between 2007 and 2010.

The ombud says the claim is disingenuous and against the probabilities.

She says the auditors do not give any details about when the error was discovered and what action, if any, was taken to inform investors.

Bam says the auditors did not accept the directors' explanation and reported the matter to Irba anyway. However, they did not report the matter timeously, she says, and they ought to have known that investors' money was being lent to the developers of Zambezi, who used the same funds to pay 14 percent interest back to Sharemax.

In an earlier determination, on a complaint by Mrs S, a widow who invested R649 000 in Zambezi, Bam also asked Sharemax's directors to explain the irregularity, and reported Weavind & Weavind to the Law Society.
Click to enlarge
In her latest ruling she says she found their explanation "unacceptable".

The only reasonable conclusion that can be drawn from the directors' conduct is that they were "involved in a scheme calculated to defraud members of the public", the ombud says.

Bam says Sharemax was a Ponzi scheme and its directors broke the law.

For this reason, as in the earlier matter, Bam found Sharemax and its four directors, Gerhardus Goosen, Johannes Botha, Dominique Haese and Andre Brand, liable together with the adviser who recommended the scheme to the pensioners.

A company trading as Unlisted Securities South Africa, which allowed advisers and brokers who were not qualified to use its licence to sell Sharemax to investors, was also held liable.

Sharemax has appealed the earlier matter.

Bam says Mrs B complained that she and her 71-year-old husband were in poor health and had told Carter-Smith she was a conservative investor and did not want "all her eggs in one basket".

Carter-Smith told Bam that Mrs B had invested in the PIC (Picvest) property syndicate previously and she found the Sharemax syndicate better suited to her needs.

Carter-Smith told Mrs B she could earn a 50-percent return on Zambezi in the first year, and the risks were as remote as that of the banks collapsing

Bam says that, as an adviser with 25 years' experience, CarterSmith should have realised that a return of 50 percent "is ridiculously extravagant" and questioned how it was possible.

She says Carter-Smith failed to comply with the code of conduct under the Financial Advisory and Intermediary Services Act by failing to give advice "honestly, fairly, with due skill, care and diligence".

She says Carter-Smith failed to apply his mind to the fact that Mrs B was a pensioner, unable to tolerate risk, and she had asked for her capital to be guaranteed with some growth and an income. Carter-Smith asked Mrs B to sign a disclosure document that made it clear that Sharemax represented a risk to capital and that income was not guaranteed.

He also failed to offer Mrs B alternative products, Bam says.

Personal Finance

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16 May 2013

EAAB's intern monitoring system almost 'unworkable'

Although I am not an Estate Agent by profession, I do deal with Estate Agents on a daily basis and would be interested to know if Estate Agents share the opinion of Tony Clarke, Managing Director of the Rawson Property Group???

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EAAB's intern monitoring system almost 'unworkable'

The latest figures from South Africa's Estate Agency Affairs Board show that currently only 32,718 estate agents are still working in the formal recognized sector of the industry.

Of these, 10,373 are now fully qualified agency principals, 12,162 are full status (i.e. fully qualified) estate agents and 10,183 are interns learning to become fully fledged agents. Another 47 are attorneys who have chosen to acquire Fidelity Fund Certificates.

Tony Clarke, Managing Director of the Rawson Property Group, stated that it is now law that all new entrants to the estate agency profession, regardless of whatever qualifications they may have, have to be registered with the EAAB as interns and have to be monitored by their principals or by a full status estate agent (one who is fully qualified and has had a Fidelity Fund Certificate for at least three consecutive years) for a period of at least 12 months.

Interns are not allowed to perform any action which could affect the outcome of the sale unless they do so in the presence of and under the supervision of a mentor. All documentation, for example, has to be completed under the mentor's surveillance and any valuation of a property can only be accepted if the mentor has also inspected it. Similarly, any negotiation regarding price and conditions has to be done under the guidance of their mentor.

These rules, said Clarke, are exceptionally difficult to apply because, as the EAAB employment figures above show, there are so few fully qualified estate agents in South Africa and most of them are working long hours to maintain their own turnovers and meet their budgets.

To give an intern the full monitoring required by the EAAB, said Clarke, could mean that the mentor would have to devote as much as half his working time to this task - which only a few qualified estate agents are prepared to do.

"Inevitably, therefore," said Clarke, "estate agents and principals are reluctant to be involved and this will mean that they hold back on taking on interns. These rulings have, therefore, created a barrier to entry into the profession and, along with certain factors, have held back the transformation of our sector."

The rulings, added Clarke, could now result in dishonesty because the busy qualified estate agent, unwilling to hold back the progress of his intern, might sign the required forms testifying that the intern had received his full supervision, when in fact this had been done inadequately in terms of the EAAB rulings.

"The intern rulings, in my view, show that the EAAB is out of touch with how agencies and estate agents work," said Clarke. "I fear that they will encourage mentoring estate agents to act in a way that, although helpful to their protégées, is not strictly in line with the rules."

Another intern stipulation which has proved to be difficult to apply, said Clarke, is that which lays down that the intern has to inform any person who he is involved with in a property matter - especially his clients - that in fact he or she is still an intern.

"Although there will always be exceptions, the majority of clients, we have found, object to this and prefer to deal with a qualified estate agent, thereby denying the intern the opportunity to get the necessary experience. It has to be said that while no one wishes to deceive the client, the ruling about disclosing the intern's status is, in our view unnecessary, and, it can be added, the chances of a previously disadvantaged intern being fully accepted by clients will always be fairly low."

Another 'issue' that most estate agents find irksome, said Clarke, is the fact that the intern is expected to keep an onerous logbook of all his work activities and this again has to be approved and signed off by the mentor.

"The plain truth is that the EAAB board will never have the staff or the time to assess the interns' logbooks adequately and if such log books have been manipulated, with the consent of the mentor, they are very unlikely to have any way of discovering that."

"The real test of the intern should, we believe, be the exams that he writes at the end of his training period. These will show what he has learnt or what he has failed to learn. A logbook is, therefore, superfluous and nothing more than a nuisance."

Asked what he recommends as solutions to the current difficulties, Clarke said that the best plan would be to revert to the old system adopted by the EAAB, under which the estate agent was supervised on an on-going basis but to a far less stringent degree than currently is expected to happen. Everything he did - and particularly any documentation on which he worked - had to be checked, verified and approved by the mentor. Under the old system, said Clarke, the intern was allowed a far freer hand and greater scope to take the initiative and grow. The new system is a barrier to the Industry's transformation initiatives.

Rawson Property Group Press Release

15 May 2013

New electric fence regulation set to be implemented

In my humble opinion, this is yet another example of an over-regulated "nanny state", where the "man in the street" is being drowned in red tape.

As an attorney, I guess that I should be happy if government puts so much legislation in place that the individual can't possibly keep track of it all and at any given time may be breaking a hundred laws without even knowing it ... the only beneficiaries being the attorneys dealing with the fall out.

HOWEVER, at the same time it restricts free economic activity and thereby harms the economy ... which is bad for property attorneys (except maybe insolvency practitioners and those representing bank robbers).

Gareth Shepperson

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New electric fence regulation set to be implemented

Property owners are going to have to be more careful about who they contract to install electric fences so as to comply with a new regulation.

A new regulation stipulates that electric fences should be certified before a property can be sold.

This regulation stipulates that all electric fences be certified and come with an electric fence system certificate of compliance, as reflected in Regulation 12 of the Electric Machinery Regulations of 2011.

This applies only to systems that came into existence after October 1 last year.

However, it also will apply in cases where the system is

Paltered or added to, or where the premises changes ownership after October 1 this year. Any property transfer after that date, therefore, carries with it the obligation to provide a certificate if there is an electric fence in place.

All properties - including residential, commercial and sectional titles within complexes - must comply.

A number of people have complained about the regulation on social networks, with many saying the it was meant to protect burglars.

"Next they will tell me to remove my burglar proofing because a burglar might get stuck in it and hurt himself... This is total insanity. I'll remove my fence when they remove the criminals," said one.

SA Electric Fences Association founder member Etien van der Merwe said the regulation actually protected innocent people within the property. He added that electrical output from fences had always been regulated.

"Energisers are controlled: the electrical machinery regulations stipulate a certain output. Adjusting fences to be more lethal is actually illegal."

The regulation would ensure installers were held accountable and minimise flyby-night installers.

Failure to have a compliance certificate could cost one a great deal, said John Graham, the chief executive of HouseCheck Home Inspection Services.

"If you don't have the certificate, you can't sell your house, and if somebody gets hurt by a non-compliant fence, you could get sued."

He said electrical fence installers had to write an examination and be registered with the Department of Labour by October 1 this year.

What makes an electric fence compliant?

•It must be installed by a registered electric fence installer, not a non-specialist company.

•Owner must have an electric fence system certificate of compliance.

•Output should not be adjusted to make it more lethal.

•There should be proper warning signs about the existence of an electric fence visible from driveway and pavement.

•It should not over-hang into a neighbour's yard or pavement.

Penalties for non-compliance

•You cannot sell your house without the certificate.

•If someone gets hurt on your property, you have a legal obligation, you could get sued.

•One might have to upgrade to be compliant or be forced to remove the fence.

The Star

14 May 2013

Tshwane boasts of property and tourism at travel show

Tshwane boasts of property and tourism at travel show

Tshwane hopes to woo tourists to the Jacaranda City with its exhibition at the annual travel show, Indaba, being held in Durban. The exhibition showcases all the capital has to offer, from ambitious property developments to sporting events and even wildlife.

Among the developments being promoted is the 110-storey Symbio City, planned to tower over Centurion and include residential, hotel and shopping facilities.

On the tourism front, the city is offering a range of options, including monuments and attractions for nature lovers, including the Groenkloof and Rietvlei nature reserve, the National Zoological Gardens and the Dinokeng Game Reserve, where one can see the Big 5 on the city's doorstep.

Executive mayor of Tshwane Kgosientso Ramokgopa said that as part of the city's Inner City Regeneration Project, work will start on the Tshwane International Conference Centre (TICC) and supporting mixed-use developments.

The TICC site will include three hotels, retail space, offices, residential apartments and a public transport facility.

The project, worth several billions of rand, will create at least 15 000 jobs.

Another massive development is the Symbio City development, a reflection of the range of economic opportunities, cultural experiences and physical environments Tshwane offers.

Ramokgopa said the City of Tshwane was already well on its way to staking its claim as a leading African sports capital, and was promoting the Tshwane Open Golf - the first edition of which was held today.

But what may most surprise visitors to Indaba is Dinokeng. It combines private land to create a 90 000ha reserve with a range of activities including game drives, horse riding, hiking, quad biking, balloon rides and cultural tours.

Pretoria News

10 May 2013

Julius Malema's property auctioned for R5.9 million

Julius Malema's property auctioned for R5.9 million

Expelled ANC Youth League (ANCYL) president Julius Malema's half-built mansion in Sandown, Joburg, was sold for R5.9 million on auction yesterday.

The half-completed property in Sandown, Johannesburg.

The buyer was Norman Tloubatla, chief executive of the company Magnified Designs. He left in a hurry, in a white Porsche, after clinching the purchase. He refused to speak to reporters.

Auctioneer Pieter Geldenhuys said the auction for the three-storey property had gone exceptionally well.

"It actually exceeded my expectations."

He said he expected the property to sell for between R4m and R4.5m.

Much more needed to be spent to complete the house, which would be the best in the neighbourhood, he said.

Asked if the fact that the house previously belonged to Malema had played a role in the interest shown, Geldenhuys said: "Without a doubt. I must say this specific property drew a lot of interest, even internationally."

The house was sold in less than a hour.

Geldenhuys started the bidding at R5m, but no one was interested.

He joked about the bidders all looking down, saying: "It doesn't matter where we start, it's where we end."

The price was then dropped to R2m before the first bidder raised a hand. The home was attached by the court to help cover Malema's tax bill. He owes Sars R16m. Malema bought the property in 2009 for R3.6m.

He had the existing structure torn down and began building his own mansion. The plans provide for a private cinema room, a cigar lounge, a pool and a spa bath, a wine cellar, a coffee bar, and a lift. There is also a "song room". However, the home has no fittings, flooring, plumbing or windows yet.

On March 19, the former ANCYL leader had his Limpopo farm, worth approximately R4m, seized by the Asset Forfeiture Unit.

National Prosecuting Authority (NPA) spokesman Medupe Simasiku said at the time, that the property had allegedly been acquired with the proceeds of fraud, corruption, theft, and money laundering. The alleged crimes were perpetrated against the Limpopo department of roads and transport, Simasiku said. Alternatively, the property had been used to launder money.

In January, sheriffs seized Malema's Sandown and Polokwane homes. Sars rejected a R4m settlement offer on the houses in February.

Malema also faces charges of fraud and racketeering related to the irregular awarding of a R52m tender to OnPoint Engineering in Limpopo.


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