Failed Durban Point property development revived
Finally, about three years after Ithala Bank announced moves to rescue the failed Dolphin Whispers project in Durban's Point area, funded to the tune of R84.4 million, the institution is ready to make the building a reality.
A file image of the unfinished project.
Initially intended as a residential development, the construction of Dolphin Whispers was stopped because of poor workmanship and project management.
But yesterday Ithala's spokesman, Siyabonga Maphumulo, said work had been renewed, with construction to resume in April.
"Ithala has submitted plans to (eThekwini Municipality) and approval has been granted (for it to be an office park)."
Maphumulo said there would be limited retail space on the ground level and mostly offices on the upper floors.
An original rendering .
"Ithala is committed to finalising this development and unlocking the value embedded in it. We have set ourselves the target of extracting maximum value from the project, and will continue to look into ways of achieving maximum return for the group (from the) building."
Background information on the project:
One of the Point Waterfront's plush developments is set to lose millions of rands after serious defects in construction caused the structure to "skew".
Some of the city's well-known business personalities have suffered huge financial losses.
Among those who have suffered losses with the liquidation of the property development company, Dolphin Whispers, is former president Nelson Mandela's granddaughter, Nandi Mandela and five Durban businessmen, Henry Masinga, Vaughn Charles, Marcel Henry, Rajen Naidoo and Craig Simmer.
Simmer is also involved in the running of the embattled Remant Alton, the company which runs the crumbling former Durban Transport bus service.
The city is planning to take back the bus service from Remant Alton after several attempts to bail it out have failed.
Dolphin Whispers has been liquidated after its directors allegedly failed to complete one of the Point Waterfront's multi-million rand up-market residential buildings.
The building is part of the Durban Waterfront Precinct, which is the city's residential and commercial development flagship project aimed at rejuvenating the Point Waterfront area.
Pietermaritzburg liquidator, Kurt Knoop, said Dolphin Whispers has been liquidated, because its directors "failed to furnish" the bond holder (Ithala Bank) with guarantees.
The bank, which lent the property development company R54-million for the construction of the building, requested more guarantees after the company ran into what they termed "serious financial shortfalls" which at present sit at R14-million.
The construction of the building began in 2005 and the contractor was Prainder Civils and Earthworks.
The liquidator said that in 2007 the architect and an engineer refused to sign a certificate for the project after serious structural defects were found.
Late in 2007, litigation between Dolphin Whispers and Prainder Civils and Earthworks CC began and eventually the contract was terminated.
Knoop said that in November last year, another contractor, Dezzo Projects was appointed to correct all serious structural defects in the 10-storey building.
"Dezzo Projects has also stopped working because there is no money to pay staff and to finance the remaining construction needed to complete the project," he said.
"Ithala Bank stopped payments because Dolphin Whispers failed to provide the bank with guarantees."
He said the estimated shortfall stood at R14-million as a result of additional costs caused by delays.
People who have paid deposits for apartments will have to wait another 16 months before they can occupy their properties, he said.
Knoop has assured buyers who had already paid for their apartments they would not lose.
"People who have paid deposits will not lose their money, it is with the attorney," he said.
Knoop said they were considering two options to ensure the building was completed.
"Liquidators can sell the building as it stands or continue building it and pay the creditors," he said.
Dolphin Whispers' attorney, Neeraj Ramnarain said it was unfortunate that the company was liquidated.
"My clients do not oppose the liquidation. We seek to finalise the order. An advertisement will be placed in newspapers this week," said Ramnarain.
He said his clients could suffer a "huge" potential financial loss as a result of the liquidation.
Ithala Bank spokesperson Zama Mosery declined to comment.
Daily News, March 14, 2008
R80m Ithala loans unlikely to be recovered
Nearly R80 million in loans and advances from the publicly funded Ithala Development Bank seem irrecoverable, in respect of results prepared for its 2008/09 financial year.
Moreover, several projects funded by Ithala's subsidiary, the KZN Growth Fund, have been spectacular failures, having guzzled well over R88m.
These were among disclosures to the provincial standing committee on public accounts made in Pietermaritzburg yesterday by Ithala CEO Sipho Shabalala.
The latest figures bring Ithala's total of loans at risk, some dating back to 1988, to about R700m. However, Shabalala said these figures did not mean the loans were irrecoverable, or that the bank was no longer trying to recover the debts.
The bank, which has been under fire in the past for making loans to those with political connections, says it is reviewing and tightening its lending policy.
Shabalala said the client-bank confidentiality clause meant the bank could not to reveal debtors' names.
Referring to the KZN Growth Fund, he said: "Projects we funded have been performing very, very badly. Only one project has redeemed itself and has started performing well, but three are performing badly."
Committee members were angry that the fund's directors had been paid huge performance bonuses, despite the bad performance of the projects.
The DA's John Steenhuisen was concerned about the revelations concerning the fund.
"The failure of all but one project indicates that there is something seriously wrong with the criteria being used to provide loan finance and to monitor and control the progress of these projects. Despite the fact that the fund cites job-creation as one of its key objectives, the DA seriously doubts whether any real work opportunities have been created outside a small circle of company executives. The DA has also questioned the future viability of the fund."
Meanwhile, investigations are under way to determine why staff exceeded a loan benchmark of R15m in respect of the R85m loan to developers of the Dolphin Whispers building, at Durban's Point, which has proved a flop.
Ithala was now stuck with a property that was structurally defective and would cost a further R75m to put into a desirable state.
Shabalala said Ithala was exploring several options to get rid of the property and recover its investment, including putting it on the market. Alternatively, the building would be turned into an office block, but this would cost a further R25m.
"Walking away from the project does not seem to help," he said, adding that it might be turned into an office block to accommodate Ithala subsidiaries now renting space elsewhere.
Committee chairman Mike Tarr dubbed Ithala the government's "sorry saga".
Ithala was investigating whether it could prosecute staff responsible for approving the Dolphin Whispers loan.
The bank was also investigating 103 fraud cases, with 41 being completed.
"A total of 23 disputed withdrawals and deposit cases were investigated. There were cases of bank accounts being opened fraudulently, that were reported to internal audit. There was one case of money laundering reported to internal audit," the bank said to the committee.
The Ithala Development Finance Corporation Limited was formed by promulgation of the KwaZulu-Natal Ithala Development Finance Corporation Act on March 2, 1999, the successor to the KwaZulu Finance Corporation.
Its objectives were to mobilise finances and provide financial and support services to the people of KwaZulu-Natal; finance and monitor implementation of development projects; assist in development of the province's human resources and its social, economic, financial and physical infrastructure; promote private sector investment and the participation of private sector and community organisations in development projects; and to act as the government's agent in performing development-related tasks.
The Mercury, October 14, 2009