DETAILS of how an ambitious but unsuccessful sectional title scheme finally sank the company that developed the Radisson Hotel building unfolded in the Port Elizabeth High Court last week as a judge granted a final liquidation order.
Advocate Pierre Rossouw SC said in papers before court it was agreed – between all stakeholders – that the liquidation proceedings be finalised quickly.
This to avoid any uncertainty that could lead to hotel bookings being cancelled and to ensure the job security of staff members and the smooth running of the hotel.
He said in papers before the court that the company that was in financial trouble was the owner of the building but the hotel business, while not profitable, was doing fairly well with a 60% occupation rate in the week and 30-40% over weekends.
More business was expected to be generated by the proposed opening of the Boardwalk Conference Centre.
Absa Bank said it was owed R100-million loaned to Auspex for a sectional title scheme at the hotel.
Under the scheme investors would buy suites in the hotel and then lease them back to Auspex. Investors were guaranteed a 7.5% return or about R2-million per suite.
Only 33 suites were sold eventually but, according to the court papers, Auspex failed to pay the agreed returns to any of the investors.
Loan agreements before court further detail efforts by Port Elizabeth businessman Ben Nyaumwe to get access to more and more loans to fund the development.
At one stage, he told the bank he would have at least R70-million worth of pre-sales.
The loan conditions were amended several times to extend the deadline for payment in an effort to accommodate future sales of the sectional title units.
Eventually, a mortgage bond for R206-million was registered in favour of Absa Bank. This was later reduced to R150-million.
The company also owes the Industrial Development Corporation (IDC) R190-million for a loan secured by mortgage bonds and a share transfer.
At present, a representative of the IDC is the only director left on the board of Auspex after Nyaumwe resigned last year.
Attempts to restructure the company's debt were also unsuccessful.
The court heard further that Auspex had received an adverse audit opinion for the 2011 financial year, with auditors raising concerns over the position of the company.