The controversial sale of the landmark Cape Town waterfront, which appears to include the transfer of 22km of coastline and 90km² of sea to foreigners, could be a due-diligence fiasco that could embarrass both Transnet boss Maria Ramos and the new foreign owners, and pave the way for a lawsuit against Transnet.
The Sunday Times reported yesterday that Transnet secretly sold coastal land and a vast sea area when it disposed of the Victoria & Alfred (V&A) Waterfront to investors from London and Dubai. The owner of the V&A is Lexshell, which is owned by Istithmar (an investment arm of the Dubai government), UK investor London & Regional, and a local black economic empowerment group.
The transport utility was now desperately lobbying MPs in a bid to block legislation that would make coastal land public property and prevent the transfer of the coastal land and sea, the newspaper reported.
This could result in a huge claim against Transnet from the buyers.
Property economist Erwin Rode of Rode & Associates said this was either the “best joke of the year” or “someone didn’t do their due diligence exercise on the property”.
“Before you buy or sell a property of any kind, either the buyer or the seller should do, as a matter of course, a proper due diligence to ensure there are no worms in the can. It is surely the implication that no ‘proper’ due diligence was done or that it was half-baked,” said Rode.
David Green, MD of property brokers Pace Property Group, said it was a “legal question” whether Transnet was entitled to sell shorefront and ocean bed property to a third party.
“If they did it erroneously then certainly a potential purchaser may have a claim, unless the purchaser should have reasonably known that such a contract was not possible in the first place,” said Green.
But Transnet had previously reclaimed substantial portions of the Cape Town foreshore in order to extend the and harbour. This could mean the utility had a special dispensation to continue to do so. “But it’s not to say that Transnet has acted incorrectly without investigating the background and other agreements Transnet may have in place with regard to that particular tract of real estate,” he said.
Green said a due diligence exercise may have been performed and the purchasers and sellers satisfied themselves that this particular transaction was legal and that further reclamation of the sea and shorefront was possible.
He did not think there would be “much impact” on foreigners investing in SA if the V&A deal fell through, as this was a “particular situation and an unusual one at that”.
Marc Wainer, executive director of Madison Property Fund Managers, which manages Hyprop Investments assets, one of the initial bidders for the V&A in 2006, said this was the “first I’ve heard about it” when asked about the deal.
Wainer said Hyprop was one of the initial bidders but withdrew because the “price was too rich”. Because it withdrew so early, Hyprop did not do a due diligence exercise. “It looks like Transnet has got itself into a mess,” said Wainer.
