Mystic Blue Trading 511 (Pty) Ltd

(Under Provisional Judicial Management)

Masters Ref: T7647/09

better known as:

*Prospect Close*

Holding Company:

Copper Sunset Trading 239 (Pty) Ltd

 

Documents on File:

 

1. Notice of Motion

2. Court Order

3. Provisional Certificate of Appointment

 

PROSPECT CLOSE
MYSTIC BLUE TRADING 511 (PTY) LTD
INCOME STATEMENT as from 17/11/2009 to 19/02/2010
INCOME			EXPENSES
Vacancy factor 0%
Monthly rental income November 2009	130,787.62		Operational Expenses November 2009	83,009.08
				83,009.08
Monthly rental income December 2009	259,085.19		Operational Expenses December 2009	17,621.03
				17,621.03
Monthy rental income January 2010	669,789.75		Operational Expenses January 2010	163,601.16
			Once off Expenses January 2010 (Valuations)	40,022.77
			Once off Expenses January 2010 (Loan repayment)	2,290.73
				205,914.66
Monthly rental income February 2010	239,585.30		Operational Expenses February 2010	61,866.92
			Once off Expenses February 2010(Legal and accounting)	148,047.75
			Once off Expenses - LDP Auditors (still to be paid)	50,817.40
				260,732.07
	1,299,247.86			567,276.84

     

      1.                  Bluezone Property Investments (Pty) Ltd (in liquidation) has a claim for Rent Roll and Administration

           of R 224 895 against the company.

2.                  The company has a claim of R 417 886 against Bluezone Property Investments (Pty) Ltd (in liquidation).

3.                  The current account is held with FNB under acc number 62148048764 and is showing a zero balance. The Nedbank account is held under account number 901-591-8470 and has a credit balance of

            R 814 410.39 as on the 1^st of March 2010.

4.                  The property’s vacancy factor is 0% as on end February 2010.

5.                  The company’s liability for VAT at 30 November 2009 is estimated at R 433 432.

6.                  Total Immediate Obligations of the company : R 962 829.75

7.                  The provisional Judicial Managers signed a new lease with SPE Towbars (Pty) Ltd for an amount of

           R 34 000 per  month.  

8.                  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 22 June 2007 under reference number 2007/017056/07. The company’s registered office appears to be that of its auditor, Loubser Du Plessis Incorporated, and is given as De Waterkant Building, 10 Helderberg Street, Stellenbosch. Hennie Lamprecht is given as the sole director.

 

The company sole asset of significance is an office block situated at Prospect Close, Route 21 Corporate Park, Irene and which it acquired in October 2007 at a cost of R 34 588 847. The property was valued by J.T. Seyffert in January 2008 for R 39 500 000 and by Quadrant Properties for R 38 700 000 and was syndicated by Bluezone in February 2008 for R 42 300 000. 

 

The property was purchased from Mystic Blue Trading 161 (Pty) Ltd , a company owned by the HCL

Family Trust. It appears that the property was purchased by Mystic Blue Trading 161(Pty) Ltd for

R 25 460 000 in December 2005 and on-sold to the company, at an apparent profit of R 9 128 800.

 

A commission of R 538 115 was paid to Northern Spark Trading 254, owned jointly by Hennie Lamprecht and Paul Scheepers. 

 

The offer was fully subscribed and the minimum subscription of R 42 300 000 obtained by the closing date. Of the amount received from investors, the company obtained a loan of R 41 176 500 from Copper Sunset Trading 239 (Pty.) Ltd. (“CST 239”), some R 1 123 500 less than envisaged. We have been unable to explain the difference, without access to the records of Honey & Partners.

 

THE ADMINISTRATION OF THE COMPANY POST SYNDICATION

 

The projected income and expenditure statement contained in the disclosure document (page 90) made provision for advertising income of R 720 000 p.a. from a Billboard.

 

R 500 000 was provided for the construction and approval of the Billboard as part of the acquisition and syndication costs (page 19 read with page 2 of the disclosure document). The forensic auditors have

reviewed the rent roll of the seller at this time, and have found no evidence that the “Billboard” ever existed. This caused not only a loss of monthly income of R 60 000, but (at a capitalisation rate of 9,5%), some

R 7 500 000 loss in value of the property.

 

This would appear to be a material deviation from the information placed before investors. Even if it was envisaged that a billboard would be erected, the failure to do so, and the resultant loss of income caused the property to be grossly overvalued and should have been subsequently disclosed. The R 500 000 set aside

to pay for the Billboard was returned by Honey and Partners, together with an amount of R 196 000 (either investors money or interest or both). Both amounts were wrongly transferred to Bluezone’s bank account, instead of being returned to Investors.

 

In addition, both valuers, Quadrant Properties and Syffert, included the non-existant income from the Billboard in arriving at their valuations in January 2008. 

 

From February 2009, the company has been paying only part of the VAT to SARS, resulting in a liability to SARS for unpaid VAT to November 2009 of R 433 432. Included in this amount are penalties of

R 36 665 and interest of R 23 894. SARS is aware of the shortfall.

 

The company has never rendered an income tax return to SARS and is in arrear from the 2008 tax year.

 

 FINANCIAL POSITION

 

§         The Prospect Close Place property has been valued by Messrs Valuers & Appraisers at

      R 30 000 000. This resulted in a write down in the carrying value of the property of R 11 699 300;

·        The unpaid VAT of R 433 432 has been provided for;

·        Rent collection and management fees of R 224 895 to Bluezone have been provided for;

 

The company’s liabilities exceed its assets by R 12 614 935 (based on Messrs Valuers &

Appraisers’ valuation) and is therefore insolvent.

 

CONCLUSION

 

Despite the problems that the company has endured, Route 21 Corporate Park is a sought-after

investment and the property is well tenanted. For this reason, the forensic auditors believe that the

company can trade out of its difficulties, given time.

 

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