South Africa’s disastrous R3.5 billion shopping mall that stands completely empty

The Nova Property Group, which has been involved in a decade-long legal battle surrounding The Villa shopping mall, is technically insolvent.

Nova Property Group is the rescue vehicle for the Sharemax property syndication scheme. Sharemax collapsed fifteen years ago, leaving investors out of pocket.

The R3.5 billion Villa Retail Park was 75% complete when Sharemax collapsed and became one of the most prominent casualties of the debacle.

The Villa was set to be one of South Africa’s largest shopping centres, rivalling Menlyn Park and Mall of Africa as prominent Gauteng shopping destinations.

It is situated on the corner of Delmas and De Villebois roads in Moreleta Park, one of Pretoria East’s busiest intersections.

It comprises a gross building area of 302,744 m², of which 111,285 m² is zoned for offices, conferencing facilities, education, training and retail.

For reference, Fourways Mall, the biggest mall in South Africa, has a gross lettable area (GLA) of 178,202 m², while Mall of Africa has a GLA of over 131,038 m²

The project attracted R1.5 billion in investor funding. Sharemax promised retail investors exposure to prime commercial property.

The investment scheme took a wholesale building and turned it into a retail product, in which individuals could invest through shareholding.

Sharemax acted as the promoter where “well-located, prime suburban shopping centres are registered and managed as a single company”.

Therefore, the individual investors obtained a shareholding in a shopping centre with a building as an underlying asset without a bond.

Construction started in January 2009 and was expected to reach practical completion at the end of August 2011.

However, the Sharemax collapse halted the project. Despite construction close to completion, efforts to revive the project have failed, and ongoing litigation has left the mall in limbo.

In 2011, Capicol CEO Paul Kyriacou said that developing The Villa shopping centre would cost R700 million and R800 million.

However, legal entanglements have prevented any resolution, leaving the mall empty and unfinished.

Villa Retail Park Investments steps in

In May 2023, Villa Retail Park Investments, controlled by the Nova Property Group, offered to acquire The Villa.

Nova Property Group CEO Dominique Haese said the group’s goal remains to complete the construction of the Villa Mall.

Haese said repaying relevant Villa Debenture Holders who had historically invested in this project was even more important.

According to the Nova Property Group’s annual financial statements, debentures linked to Villa Retail Park amounted to R690 million.

However, she said this was funding-dependent. Funding to complete the Villa Mall is being pursued.

“Unfortunately, no further details than what has been communicated can be shared at this stage, but any material will be communicated when appropriate,” she said.

In a communique from December 2023, Nova Property Group stated that the goal was to complete the project within three years.

It remains to be seen whether this plan will materialise, as legal entanglements have prevented any resolution thus far, leaving the mall empty and unfinished.

The project has been abandoned for fifteen years, and a recent visit to the site showed no sign of activity.

The Nova Property Group’s annual financial statements for the year ended 29 February 2024 raised further concerns about its financial state.

It showed that the Nova Property Group has assets of R2.244 billion and liabilities of R2.360 billion, resulting in negative equity of R90 million.

It means that Nova Property Group is technically insolvent. Simply put, it cannot settle all its liabilities if all its assets are liquidated.

It is not a death sentence. There are situations in which a company is technically insolvent but still able to meet its financial obligations.

However, technical insolvency creates a situation where bankruptcy becomes a more likely outcome if left unchecked.

Nova Property Group reported a loss of R46 million for the year, further weakening its financial position and raising doubts about its prospects.

The Villa Retail Park is the biggest asset in the Nova Property Group portfolio, with a “fair value” of R750 million.

The property had a purchase price of R1.598 billion. However, a reversal in the purchase consideration and fair value adjustments reduced the value to R750 million.

“The Villa Retail Park has been disclosed at 80% of its fair value based on the last valuations performed,” Nova Property Group said.

The last valuation of The Villa Retail Park was on 28 February 2022, performed by Mr. E Uys, Mr. A Steyn, and the board of directors.

Villa Retail Park photos