Debt-ridden company seek ‘rates holiday’
The Durban Point Development Company has asked the eThekwini Municipality to write off 10 years of outstanding rates.
|||Durban - Saddled with debts of more than R235 million, the Durban Point Development Company has asked the city to write off 10 years of outstanding rates – or to give it a rates holiday for another five years.
The company, which hopes to transform the stagnant Point waterfront area by building multi-storey hotels, residential and commercial developments, has acknowledged it is in no position to pay off its unpaid rates or shareholder loans in the immediate future.
According to a report compiled by the eThekwini city manager and six other senior city officials, the company blamed its cash flow problems on a series of legal challenges and a property market slump.
The company is jointly owned by the city (50% via the Durban Infrastructural Development Trust) and the other 50% by ROC Point (80.4% via the UEM Sunrise group of Malaysia and 19.6% via the Vulindlela empowerment group).
The Durban Point Development Company (DPDC) has approached the eThekwini Municipality, a 50% shareholder in the company, for a rates exemption/deferment until such time as the project reaches a state of profitability.
But the city report says: “It will be unwise to grant DPDC an exemption from paying any rates as this will be precedent-setting and could threaten the sustainability of the city’s rates base, concluded city manager S’bu Sithole and six other senior city officials.”
They said it would be more appropriate to grant the company a rates deferment in terms of which rates would be settled after five years, when the company hoped to reach a state of profitability.
The company currently owes R78.46 million in shareholder loans to the Durban Infrastructural Development Trust; R78.63m in rates to the city and a further R78.46m in shareholder loans to ROC Point.
The report, presented last week to the city’s Economic Development and Planning Committee, noted the DPDC had been granted a 10-year rates holiday which had expired on June 30, 2013.
The company had now settled its rates obligation in respect of the year ended June 30, 2014 from its own limited cash resources.
“However, the company has not had any sales for the past three years and its present resources do not permit any payment of rates. The amount available in the DPDC’s bank account as at May 31, 2015 is only R868 270. In addition, the project management company Renong Overseas Corporation SA has not been paid for their services since taking over as project managers from December 1, 2014 due to the lack of sufficient cash resources.”
Currently, the DPDC is liable for R111 241 in rates every month for properties in Bell Street, Camperdown Road and Timeball Boulevard.
“Once these lots are sold, rates will be charged to the new owners who will then be liable for the rates. The deferment of rates will cease for such properties upon sale and payment will become due on a monthly basis.”
The report says that owing to the appointment of Renong Overseas Corporation as project managers for the Point development, there is now a closer relationship with the Malaysian shareholder.
“The Malaysian shareholder is extremely keen to unlock the full potential of the Point development and willing to invest substantial sums in multi-storey iconic top structures like a hotel and luxury residential apartments,” says the report, noting that the outlook for development “looks bright and promising, but there is a short-term challenge of generating operational cash flow”.
From 2020, however, the company is expected to reverse debts into a positive cash flow, with financial projections indicating a surplus of more than R2 billion once the full development is realised.
As a result, the city manager recommended that the council consider deferring the DPDC’s rates for another five years.
“In view of the strategic importance of the Point Waterfront development, council should consider approving the deferment of rates for properties registered in the name of the DPDC for the period July 1, 2014 to June 30, 2019, it being understood that when transfer of any land parcel takes place to any other party, rates will become payable by the new owner and the deferred portion on the respective property will be due and payable.
“Any rates accrued up to the point of sale on the remaining properties will remain deferred until the expiration of the deferment period of June 30, 2019, at which date, the entire accumulated amount will become due and payable.”
* UEM Sunrise/Renong representative Soban Bevarah did not respond to requests for comment on Tuesday.
The Mercury
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