By Daneel Knoetze
An apparent valuation blunder by the City of Cape Town appears to have gifted a developer up to R140 million - money that may otherwise have gone to service delivery and upliftment in poor communities.
The City auctioned off Site B in the Foreshore during a “fierce” bidding contest in September 2016. The buyer was Growthpoint, one of the biggest property developers in the country, which submitted a successful bid of R86.5 million.
But recently uncovered documents appear to show that the City sold the property at much less than its market value.
The details are complicated (a more technical explanation is in the grey box below). Here is the simple explanation:
When large developers buy a vacant property — such as Site B which is currently a parking lot — they are interested not only in how many square metres of land the property occupies, but also how many square metres of floor space a future development on the property, such as a tall building or multi-storey shopping centre, could have. This is called the maximum permissible floor area.