R135m building owner denies price inflation claim.
The owner of the of the R135 million building sold to Fetakgomo Tubatse municipality in Limpopo has denied claims by residents that the purchase price was inflated to benefit himself but would not produce documentary proof that the agreed amount was determined by an independent valuation report.
Polokwane-based Charalambos Kourtoumbellides, the owner of Tubatse Properties, insisted there was nothing untoward with the transaction. The provincial Treasury had cast aspersion on the deal, saying it was unclear how the two parties had arrived at the purchase figure of R135m, including Vat of R20.2m.
The Treasury was also concerned that the transaction ran the risk of being declared “irregular expenditure” after it flouted the supply chain management processes.
Earlier this week, a national newspaper reported that the Sekhukhune Residence Forum threatened to embark on a legal bid to nullify the transaction, saying it was “ethically unsound”. The local lobby group believed the municipality should instead spend almost R50m of the R135m on expanding the council offices it currently owned.
Municipal manager, Walter Phala said the building in question was now used as regional offices of the municipality. However, the building was too small to accommodate all the workers. He said building new offices would cost in the region of R200m, including R2m monthly rentals incurred by the municipality while it waited for the project to be completed.
There were suspicions raised that the property’s market value may have been inflated following reports that the two valuers hired by the municipality came up with purchase figures of R70.8m and R64.5m, respectively. The figures were irreconcilable with those by the two valuers appointed by Kourtoumbellides, who priced the building at R153m and R146m, respectively.
“The fact that they claim that that building is inflated is absolute rubbish, and I will be prepared to confess that statement before any committee or court for that matter and verify that. I practically gave that building away to the municipality, it was sold for R20m under its current value,” said Kourtoumbellides.
The building was constructed more than 10 years ago at a cost of R89m. So, at the end of the day I have a practically R5m profit. I practically gave that building away to be quite honest with you,” he added.
He emphasised that he “played open cards” by even showing the municipality his financials and that he wanted to get rid of the building because it was “a headache” to him. He also said that he got rid of the building for his own personal reasons and that he was not prepared to sign another 10-year lease agreement. Kourtoumbellides explained that the building is too far from him because it is in Tubatse and he is in Polokwane.”
Asked how he arrived at the R135m purchase price, whether an independent valuation report existed, and who compiled it, Kourtoumbellides said the property was valued in accordance with the regulations, and that all documentation is available for anyone wanting to verify.
Both parties initially entered into a lease agreement in 2006, but the 10-year deal only took effect in June 2010 until May 2020. In terms of the purchase agreement, the municipality would pay a deposit of R50m and a monthly instalment of R2.9m over a period of three years.