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Copper Moon Trading 248 (Pty) Ltd (Under Provisional Judicial Management) Masters Ref: T7652/09 better known as: *Property 259* Holding Company: Pacific Breeze Trading 129 (Pty) Ltd
Documents on File:
1. Notice of Motion 2. Court Order
1. You will note that the expenses exceed the income. This was financed by loans where the provisional judicial managers received extension of powers dated 27 November 2009 and as set out above on page 3 of this report. 2. Included in the expenses is an amount of R 115 335.25 which includes professional fees of forensic auditors, arrear taxes and legal fees. 3. Bluezone Property Investments (Pty) Ltd (in liquidation) has a claim for Rent Roll and Administration of R 140 205 against the company. 4. There is amount of R 845 011 owed by Bluezone Property Investments (Pty) Ltd (in liquidation) to the company for an intercompany loan as determined by the forensic auditors. 5. The current account is held with FNB under acc number 620-8249-2952 and is showing a zero balance. The Nedbank account is held under account number 901-591-8543 and has a credit balance of R 212 516.12 as on the 1st of March 2010. 6. The property’s vacancy factor is 0% as on end February 2010. 7. There is an outstanding liability for Income Tax of R 46 528 (including penalties and interest of R 2 339) which remains unpaid. 8. Total Immediate Obligations of the company is : R 628 403.45 9. No provisional judicial management fees have been charged or collected from the company, neither has the Master of the High Court granted any fees to be collect by the judicial managers as on date of this report. Forensic Auditors’ Report Findings The company was incorporated on 18 April 2005 as Copper Moon Trading 248 (Pty.) Ltd. under reference number 2005/011381/07. The company’s registered office is given as 623 Prince George Avenue, Brenthurst, Brakpan and its postal address as P.O. Box 2413, Brakpan, 1540. There is no reason for this, and the address should be changed immediately to Castle Walk Corporate Park. Hennie Lamprecht is given as the sole director.
The company sole asset of significance is a 3 storey office block in Kent Avenue, Randburg that is now let to SGS South Africa (Pty.) Ltd, and which it acquired in October 2005 at a cost of R 7 500 000. In the disclosure document to Investors, the purchase price was disclosed as R 8 400 000.
The difference of R 900 000 was paid to M. Barlett and P. Wildman as a “commission”. Both Bartlett and Wildman were former employees of Bluezone. The commission was not disclosed to Investors.
The property was valued by J.T. Seyffert in April 2006 for R 13 400 000 and formed the basis of a syndication arrangement by Bluezone at a value of R 12 300 000. The difference between the syndication value and actual cost, amounting to R 3 900 000 was explained in the Disclosure Document to Investors as follows: Purchase Price 8 400 000 Marketing Commissions and other costs 1 715 000 Bluezone Vacancy Fund 367 658 Revamp Fund 800 000 Interim Interest to Investors 80 000 Bluezone Gross Profit 887 342 Total Syndication Amount R 12 250 000
The “Bluezone vacancy fund” of R 367 658 and the “revamp fund” of R 800 000 never existed.
THE ADMINISTRATION OF THE COMPANY POST SYNDICATION
Up to June 2009, the company consistently paid the net income to its Holding Company. At the end of May 2009, Murray & Roberts vacated the premises and SGS came in from 1 September 2009 at a significantly lower rental to that paid by M & R (some 27% less).
The company has rendered a VAT return to August 2009. The company has rendered an income tax return up to the 2008 tax year. There is an amount outstanding on the income tax account of R 47 045.
FINANCIAL POSITION
· The Property has been valued by Messrs of Valuers & Appraisers at R 8 500 000. This resulted in a write down in the carrying value of the property of R 5 600 000. Whilst the write down is significant, this is understandable in view of the fall in the company’s net rental income with the new SGS lease;
· Unpaid property and admin expenses of R 372 863 have been accrued, including R 224 580 due to C & I Property Services for commission due on the negotiation of the SGS lease, and
· Provision has been made for a rent collection and management fee payable to Bluezone on gross rentals, amounting to R 140 205.
In the absence of any subordination agreement by the Holding Company, the company’s liabilities exceed its assets by R 4 424 060 (based on Messrs Valuers and Appraisers’ valuation) and is therefore insolvent.
CONCLUSION
In order to meet its immediate financial obligations, the company will need to withhold any form of payment to the holding company for the foreseeable future. With its reduced net rental income from the SGS lease, the company will similarly have to reduce its interest commitment to the holding company going forward.
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