Rescue plan for landmark Cape Town property

The company that owns Mandela Rhodes Place has applied for a business rescue plan, acknowledging it is "financially distressed".

This comes after Irelandbased Anglo Irish Bank moved to liquidate West City Precincts in August, claiming it owed the bank R219m.

Now West City Precincts' majority shareholder, Frank Gormley, has lodged an application at the Western Cape High Court in a bid to save the company.

A business rescue plan is a relatively fresh concept under the new Companies Act, which came into effect in May. It allows a chance for cashstrapped companies to be saved before they are liquidated.

In an affidavit, Gormley, the Irish businessman behind developer Eurocape, which manages Mandela Rhodes Place, defended West City Precincts against liquidation.

He said the company was "financially distressed" and was unlikely to be able to pay its mounting debts within the next six months.

The economic downturn had had an "adverse effect" - the Rainbow Shop had vacated the premises in February, and Azura restaurant closed down three months later.

Gormley said that, if the company was placed under business rescue and restructured, it might be able to pay its debts and "continue to exist on a solvent basis".

According to Anglo Irish Bank, Mandela Rhodes Place showed a loss of R7.8m in 2010 and R20m in 2009, taking into account fair value adjustments and finance costs.

However, Gormley said that, although it reported a loss of R5m in 2007 (the first full year of trading) and R3m in 2008, it had made an operational profit in each subsequent year. He disputed the bank's claim that the company was insolvent, saying West City Precincts' assets, valued at R247m, outweighed its R220.7m in liabilities. The company was solvent "by a comfortable margin".

In a separate affidavit by Eurocape's financial manager Marc Smith, submitted to the court in opposition to the liquidation application, he said liquidation would result in Mandela Rhodes Place's assets being off-loaded all at once.

"The consequence is that they would not achieve anywhere near the prices that they otherwise would."

Mandela Rhodes Place is a sectional title development, with some of its flats privately owned. West City Precincts owns 62 of the 180 flats, as well as all the commercial space and the parking lot.

Gormley alleged that the bank's motives for liquidation were "questionable".

"It is engaged merely in a debt-collecting exercise, consistent with media reports that the Irish government is in the process of winding down the bank, which became a byword for the unregulated lending practices that destroyed the Irish banking sector."

He said Mandela Rhodes Place needed to trade for another three to five years to pay all its debts.

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