The Villa: Decision on future of ‘tombstone’ mall delayed

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18-05-2023
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Moneyweb
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Depending on findings of a legal opinion several aspects of the business rescue plan may need to be revised.

A decision on the future of The Villa, the half-built derelict shopping mall in Pretoria’s eastern suburbs that was promoted and marketed by Sharemax as a property syndication scheme, has been delayed.

A meeting of affected persons held this week to determine the future of Thumos Properties 1, the original developer of the mall and whose only asset is a 70% undivided portion of the land on which The Villa has been built, was adjourned until 9 June.

Thumos Properties 1 previously named Capicol 1, entered a voluntary business rescue process in March 2021 and George Nell was appointed the company’s business rescue practitioner (BRP).

The proposed business rescue plan for the company was published on 28 April.

Reasons for adjournment outlined

In a letter to affected persons this week, Nell advised that the meeting was adjourned on the basis that it “is necessary and expedient” to do so because of a number of factors.

These were that the BRP:

• Has since the publication of the proposed business rescue plan received numerous inquiries regarding claims;
• Is awaiting a legal opinion from senior counsel in relation to the determination of the validity of the claims of Villa Retail Park Investments;
• Is endeavouring to facilitate engagements between the promoters of Options A and B of the business rescue plan to find common ground that may lead to the resolution of the disputes between the parties; and
• Is awaiting an alternative proposal (Option C) from David Pieterse, who undertook to submit this proposal to the BRP by 19 May.

Nell said considering these factors, it is necessary and expedient to adjourn the Section 151 meeting to 9 June, or such further date as may be necessary and expedient, until a decision regarding the company’s future has been taken in accordance with Sections 152 and 153 of the Companies Act.

He said the possible Option C will need to be considered by the BRP and affected persons alike prior to the commencement of the Section 151 meeting.

Nell told Moneyweb that Pieterse was previously on the team with Paul Kyriacou that 12 years ago planned and started construction of The Villa.

Kyriacou is former MD of Capicol and the sole director of Thumos Properties 1.

Pieterse was previously listed as a director of Capicol.

Legal opinion pending

Nell added that depending on the findings of the legal opinion from senior counsel on the determination of the validity of the claims of Villa Retail, a number of aspects addressed in the published business rescue plan may need to be revised.

Option A in the business rescue plan, proposed by Villa Retail, involves its offer to acquire The Villa properties and complete the construction of the mall, subject to a number of conditions.

These include Villa Retail securing foreign investment to fund the completion of the mall.

Villa Retail Park Investments is a subsidiary of the Nova Property Group, the rescue vehicle of the failed Sharemax property syndication schemes.

Nell said the numerous inquiries received regarding claims against Thumos Properties 1 since the publication of the proposed business rescue plan are being attended to on an ad hoc basis and the BRP will aim to resolve these before the Section 151 meeting.

The only secured creditor in Thumos Properties 1 at this stage is GD Irons Construction, which as such currently has the sole right to determine which option in the business plan, if any, is accepted.

Public auction is an option

Option B of the business rescue plan entails the sale of The Villa via a public or sheriff auction.

GD Irons Construction has claims valued at almost R600 million accepted by the BRP.

These relate to the high court award GD Irons Construction obtained last year in terms of which Thumos Properties 1 was ordered to pay the company R249.4 million for unpaid costs incurred in the building of The Villa.

With interest, this award amounts to almost R500 million.

It has also been classified as a secured creditor for an accepted claim at an adjusted value of R9.85 million plus interest for the preservation and upkeep of The Villa after it established a lien over the property because of non-payment by Thumos Properties.

A further claim by GD Irons Construction for monthly expenses of about R87 300 – on behalf of Thumos Properties – that it has been incurring since the firm went into business rescue on 15 March 2021 has been accepted as an administration cost after business rescue.

This is subject to submission of proof of payment.

Villa Retail Park owns the remaining 30% of The Villa.

Validity of claim to be determined

Upon publication of the business plan the BRP rejected Villa Retail’s R1.3 billion claim emanating from Thumos Properties 1 allegedly causing such damages to Villa Retail.

However, the BRP is awaiting a legal opinion from senior counsel in relation to the determination of the validity of this claim by Villa Retail.

Nell said these claims “could however be accepted or afforded a voting interest after obtaining the legal advice”.

The BRP has accepted a further R6 million claim from Villa Retail that arose from an acknowledgement of debt that Villa Retail had to sign in favour of the City of Tshwane. This was to obtain transfer of its 30% undivided share in The Villa properties.

Villa Retail previously instituted legal proceedings against Thumos Properties 1.

Settlement agreement

Nova Property Group said in July 2022 that in terms of a settlement agreement entered into in 2011, Villa Retail acquired a further 50% undivided share in The Villa Mall.

It said this settlement agreement was subject to the payment of certain amounts by Villa Retail and fulfilling certain obligations.

Nova claimed all these amounts were paid and all obligations were fulfilled prior to the end of February 2012, entitling Villa Retail “to the transfer of the said further 50% undivided share of The Villa Mall”.

“Thumos Properties 1 (Pty) Ltd, formerly Capicol 1 (Pty) Ltd, under the sole directorship of Mr Paul Kyriacou, failed and refused to transfer the further 50% undivided share of the Villa Mall to Villa Retail, despite full performance and demand by Villa Retail for such transfer, resulting in complex litigation ensuing,” the company claimed.

“This litigation has been ongoing for the past 10 years. The aforesaid litigation has been the main reason for the delay in finalising the construction of The Villa Mall.”

Nova further alleged that Kyriacou, through Thumos 1, misappropriated about R680 million of the funds paid by Villa Retail to Thumos Properties 1 for the construction of the The Villa “for his own personal benefit, as opposed to utilising the funds to pay GD Irons [Construction] and to further construct the Villa Mall”.

“The effect of the above is that Villa Retail has a claim of some R680 million against Thumos 1 and Mr Kyriacou in his personal capacity, in addition to its claim for the transfer of the aforesaid further 50% undivided share of the Villa Mall,” it said.