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Friday Oct 05, 2018

Land sale doesn’t add up

This week, Mayor Patricia de Lille asked City of Cape Town manager Lungelo Mbandazayo to initiate a forensic investigation into Site B on the foreshore, auctioned to Growthpoint Properties in 2016.

Two weeks ago, Ndifuna Ukwazi published key documents online exposing how residents of the city may have lost up to R140million, money that the city said had been earmarked for providing basic services and housing for poor and working-class people across the city.

Our investigation into how this happened raises serious questions about the competence of City of Cape Town officials and politicians to govern and whether they understand the transformative potential of public land at a time when the nation is rightfully angered by the lack of land reform, redistribution and restitution.

In September, Growthpoint submitted plans to develop a 100m skyscraper on Site B. Growthpoint owns more than 500 buildings across three continents, including a 50% stake in the V&A Waterfront, and has an asset value of R122.3billion. It already owns the buildings next door, where the ENS and Investec offices are located.

What caught Ndifuna Ukwazi’s eye in the notice, however, was that Growthpoint was asserting that it already had the rights to 46000m² of bulk or floorspace – enough to build the skyscraper. We remembered that the maximum permissible bulk advertised at the time of the auction was 17500m². How was this possible?

The city subdivided the old power station land into parcels after it was decommissioned. These were then registered in April 1996 and a rezoning substitution scheme came into effect granting each parcel rights.

Site B was granted 17500m². A month later, the then-premier, Hernus Kriel, amendment the rights so that it could be sold together with Site A to the south. The consolidated land called Site AB was granted a total of 69000m² of floating bulk rights, which was also confirmed in the title deed restrictions.

In 1997, the larger Site AB was sold to a French company, the Compagnie Generale de Batiment et de Construction. The same land was sold back to the city three years later in 2000 for R27m. This was then swiftly subdivided into Site A and Site B for a second time.

In 2004, Site A was sold to Coessa and planning approval was granted to develop an exclusive residential tower called The Icon. What is important is that the amended bulk rights across both parcels of land remained at 69000m². The Icon on Site A used up 22896m², leaving the remainder of 46104m² on Site B. A zoning certificate confirms this.

Finally, in 2011, permission was obtained from the council to dispose of Site B. The city advertised it then and again in 2015, but failed to award the tender.

In 2016, the land was auctioned for R86.5m, but the prospectus stated the maximum permitted bulk was 17500m². This is important. At R86.5m, Growthpoint ostensibly paid R4942 per bulk metre squared, which would have been a fair price for prime land in the inner city and surrounds. However, in reality, with 46104m² bulk rights, Growthpoint paid closer to R1 880 per bulk meter squared, which is less than half the price.

At a market price, we estimate the land could have sold for between R185m and R240m, leaving the city out of pocket by up to R140m, and not the R58m that the mayor is now quoting. Which begs the question, who knew and who is responsible?
Ruby Gelderbloem (director of property management), Kevin Jacoby (executive director for finance at the time) and Ian Neilson (Mayco member for finance at the time) were responsible for managing and disposing of the City of Cape Town’s land.

Initially, Ian Neilson argued that Growthpoint had bought the land, but not yet all the rights available. In our opinion, if the city were able to own and sell bulk rights it would fundamentally change the land and property regime (for the better), but this is not supported by the current policy and legislative framework.

Growthpoint itself changed tack. Initially the chief executive for Growthpoint in South Africa, Estienne de Klerk, stated that they would be meeting with the city to ascertain if more funds needed to be paid, but by the end of September the Group chief executive, Norbert Sasse, said the company believed the price it had paid was more than fair.

Growthpoint contracted two consultants to submit the development application: Japie Hugo and Nigel Burles. Hugo used to work for the City of Cape Town. He was the director of what was then called Planning and Environment from 1994 to 2005, when Site B was granted the amended rights. He was also appointed the executive director for Energy, Environment and Spatial Planning from 2012 to last year. Site B was auctioned in 2016.

Burles runs his own town planning consultancy and is also a member of the Municipal Planning Tribunal, which is an independent body established to adjudicate on land use decisions.

What has been sorely lacking to date is an honest account of what happened. The officials and politicians who act as custodians of public land do not seem to understand the state’s obligation to redress spatial apartheid and advance the right to housing. When this is absolutely impossible and land is sold, the government must secure a fair market value.

At this point we should all welcome the forensic investigation. It must be swift, the results must be made public, and those officials and politicians who are responsible must be held accountable. Instead of granting Growthpoint permission to build, the City must reverse the sale, recoup the lost money and use its land in a way that benefits all residents in the city.


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