Funds run dry in KZN property industry

Scores of hotel, residential and golfing estates in KwaZulu-Natal are going bust as the recession continues to bite deep into the property industry, leaving subcontractors and homeowners in desperate financial straits.

The historic South Coast Selborne Estate, once the stately home of the baronial Crookes family - and the first golf estate development in the country - is bankrupt, and an application has been lodged by FirstRand Bank against the upmarket Cotswold Downs golfing estate in Hillcrest.

The Mercury understands that at least 12 hotel and golf estates in the province have also run out of funds, some before construction began.

Mark Poole, of Strauss Daly Attorneys, who is handling the Selborne estate, agreed that the pressure on golfing and residential estates was because of the global recession.

"I know of at least five developments which are struggling at the moment," she said.

Poole said while the owners of homes at Selborne were not affected directly by the liquidation, the value of their properties would depreciate.

"There is also a massive residential development in Pinetown where the properties were sold off-plan. The buyers then loaned the money they got from the banks to the developer upfront to build their homes. Now the developer has gone into liquidation and the purchasers are left high and dry."

Multi Mania Investments, the developer of the Protea Hotel in Umhlanga, which is hosting visiting World Cup football teams, is also in a bitter legal wrangle with the hotel group's partly owned management company, Altivex.

Altivex took over the R160 million project when Multi Mania ran out of money in 2008. Several subcontractors who worked on the hotel say they are owed large sums of money. Carpenter Hannes Bekker, who is owed R300 000, said he had exhausted every avenue to get his money.

"The worst is seeing these guys profit from the World Cup while we are retrenching staff," he said.

Nick Proome, of Elphick Proome Architects, who is owed R250 000 from the project, said he knew of several projects where developers had gone bust. "During the boom years vets, dentists and people without any experience suddenly became developers. Big guys can sustain the loss... it's the small contractors who get into trouble," he said.

This week, the American-based owners of the Hampshire Hotel development in Ballito laid charges of theft and damage to property against North Coast plumber Basil Raison, who allegedly shut off the water at the hotel and removed some of the plumbing equipment to force the owners to pay the R160 000 he was still owed. The new hotel was completed in March this year, but several subcontractors have remained unpaid to date.

Similarly, a massive development in Ballito, called Ciconia, which ran out of money before construction got beyond the second floor, is also now in liquidation.

Mark Taylor, of éLan, one of the biggest development companies in the province, said while he still remained bullish about his R10 billion Blythedale Estate on the North Coast, he was also feeling the pinch of the recession.

"The banks are not willing to fund developments. We thought the KZN Growth Fund... might be interested in the fact that we are going to create 30 000 jobs over the next eight years, but it had no impact whatsoever. We are now trying to get money to start from Switzerland and the United Arab Emirates."

Garth de Klerk, MD of Coface, an international trade solutions group, said the project failures in KZN were a national trend. "Bank financing is based on the strength of the pre-sales which, in the present economic climate, are poor," he said.

The Mercury

Posted at 09:58AM Jun 30, 2010 by Editor in Industry  |  Comments[1]