WESTERN PROVINCE RUGBY FOOTBALL UNION
Newlands’ Groundhog Day threatens to bring down a once-great institution
In the seemingly never-ending saga of the Western Province Rugby Football Union and the redevelopment of Newlands Stadium, president Zelt Marais faces a vote of no confidence on 20 September.
Hundreds of pages could be written — and they have been, by lawyers — to explain the legal battles around the redevelopment of Newlands Stadium and the impact on the Western Province Rugby Football Union (WPRFU).
But the reality of this situation, in which the WPRFU faces potential and fatal lawsuits of more than R500-million, is that it’s come about through a combination of structural limitations, ego, incompetence and circumstance.
Current WPRFU President Zelt Marais will face a vote of no confidence on 20 September. The only surprise is that it has taken this long to table the motion after more than 10 clubs finally made the move.
After years of mismanagement, Marais’ term has been a case study in why the system of giving elected officials so much power in sport should come under scrutiny. It has been catastrophic.
But it’s too little, too late, and the vote is unlikely to pass anyway, underlining the WPRFU’s structural weaknesses. The factions in the union’s club structures do not vote on issues, but on allegiances. Marais will survive as a symbol of a broken and antiquated system.
And even if he is ousted, the alternative is deputy president Moneeb Levy and even vice-president Ronald Bantom, who have both been part of the leadership structure that has led the WPRFU into this precarious position. Deckchairs, Titanic and all that.
Daily Maverick and several other publications have documented in detail the ongoing saga at Newlands, which is far from over. But, at this junction, it’s best to pause and consider how the future of a once-proud rugby union is at the mercy of several property developers.
In brief, Flyt Property Investment (Pty) Ltd is suing the WPRFU and its trustees for R388-million in damages and also claiming back its loans of more than R113-million, according to court papers lodged this year.
If Flyt is successful the WPRFU would cease to exist, because it simply cannot afford such catastrophic losses. These legal challenges centre on the redevelopment of Newlands Stadium.
Subsequent to Flyt’s legal action, a new property development entity entered the equation, the unknown and terribly named Staytus. It plans to replace Flyt as Newlands’ development partners with the WPRFU. Staytus offered to pay Flyt a settlement fee of R205-million to drop the lawsuits.
This was accepted by the WPRFU executive committee (exco) and by Flyt. Marais, though, despite the mandate from his exco, refused to accept the “term sheet”, which has stalled the deal. Perhaps that is for the best, perhaps not.
The reality is that the WPRFU has nowhere to turn after so many poor decisions.
Who is Staytus and what is its track record? Well, it appears that Staytus consists of two developers — Handre Basson and Dr Werner Roux. Neither appears to have any apparent track record of completing large, inner-city developments.
The impasse has led to legal letters from Staytus to Marais, threatening a court interdict to compel Marais to do as the exco says. Marais, not for the first time in these dealings, claims he has another, better suitor. Even if he does, it shouldn’t matter, because the WPRFU exco made its decision to go with Staytus, for better or worse. Given the union’s track record it’s inevitably going to be worse.
In the meantime, though, legal bills are mounting at the cash-strapped union, and it is suffering untold reputational damage. The WPRFU leadership is rightly viewed as a bumbling bunch of incompetents who shouldn’t be allowed to run a tap without supervision.
How we got here
There are several intersecting threads that brought the WPRFU to this point, but broadly speaking it has been a string of poor decisions and lack of foresight, especially under the current leadership.
In 2014 SA Rugby’s then-president Regan Hoskins warned its biggest unions that their long-term survival depended on private equity funding.
The reality was that SA Rugby’s disbursements from TV rights deals would not be enough to offset the dwindling income streams which unions were starting to experience around that time.
Fan attendances were down, corporate suite sales were diminishing in tough economic times and sponsorships were not easy to find. Deep-pocketed investors were viewed as a way out. At that point the SA Rugby constitution did not allow private equity partners to hold a majority stake in a union.
SA Rugby, though, accepting the reality, changed the constitution to allow majority private equity ownership, removing the bureaucratic hurdle that stood in the way.
The Lions are largely bankrolled by investor Altman Allers, while the Sharks immediately sold minority partner SuperSport another 10% stake worth tens of millions of rands. And late last year the Sharks concluded a deal with the New York-based MVM Holdings to buy a majority stake in their professional arm.
The Bulls initially pulled in billionaire Patrice Motsepe and have subsequently also included Johann Rupert’s Remgro to bulk its private equity share.
The WPRFU resisted, even though in 2015 Remgro was already a 25% stakeholder in the union. All the WPRFU needed to do was to work on that relationship and make it stronger. Instead, they drove Remgro away in acrimonious circumstances.
There was an arrogance at the WPRFU that as the richest union in terms of resources, in terms of fixed assets (it owns 11 properties around Cape Town valued at an estimated R250-million) and playing depth through a powerful schools and university system and a vibrant club scene, it wouldn’t be dictated to by a private investor.
Now those 11 properties are bonded to Flyt and the WPRFU is scrambling to redevelop Newlands with anyone willing to play nicely.
Added layers of complexity
At the same time as the South African rugby industry started feeling the financial pinch and seeking investors, the issue of Newlands Stadium’s long-term viability was a concern at the WPRFU.
The grand old ground needed repairs and modernisation to last another 50 years. That wouldn’t be cheap, especially in the increasingly difficult trading circumstances.
And there was another option. When the Cape Town Stadium was completed for the Fifa 2010 World Cup, pressure also mounted for the WPRFU’s exit from Newlands to Green Point.
It took more than 10 years, because there were many pros and cons to the move. But as Newlands started crumbling and the costs of its upkeep kept rising, the benefits of staying dwindled.
Cape Town Stadium offered an iconic state-of-the-art complex, in a desirable location, maintained by the city. Yes, the WPRFU would be tenants, but it was in a strong bargaining position because the City of Cape Town was desperate to have the Stormers and WP as its anchor tenants.
As far back as 2013, the WPRFU asked developers for proposals to redevelop Newlands as an income stream if the union relocated to Green Point. It received about 20 feasible proposals at one point. But at the time the City of Cape Town’s terms to move to the new stadium were “laughable”, as one source said, and the idea was shelved.
The WPRFU instead relooked at renovating Newlands Stadium. It agreed in principle with Investec’s Property division in 2015 to upgrade the stadium.
The plan was that the North Stand would be redeveloped into a mixed-use office/retail and residential space, reducing Newlands’ capacity from 50,000 to 35,000. The rest of the stadium would be upgraded (bathrooms, concession stands in particular) and the pitch resurfaced and modernised — all at Investec’s expense.
The WPRFU hierarchy at the time believed that 35,000 was big enough for Super Rugby and Currie Cup matches and iconic, one-off Springbok Tests could be played at the Cape Town Stadium.
But, as ever in WP rugby, there were many agendas at play and ultimately the deal did not get past the executive of the WPRFU even though the council (the union’s 90-odd clubs) almost unanimously approved the deal.
Inevitably, Newlands continued to age and eventually the WPRFU decided to seriously restart negotiations with the city about a move to Green Point. By this stage both parties were more positive about making it happen and there was more give and take.
Those dealings were not always straightforward. The major sticking point they overcame was when there was agreement by the city to add more corporate seating to accommodate the WPRFU’s now dwindling list of suite holders. In 2019, the WPRFU’s move to Cape Town Stadium was confirmed.
The WPRFU relocated its rugby operations to the Cape Town Stadium by February 2021. And that should really have been that.
Investec was still interested in redeveloping the Newlands precinct. While the move to Cape Town Stadium was being finalised, talks about Newlands’ future moved into high gear between the WPRFU and Investec.
Litany of errors
It took more than a year for Investec and the WPRFU to reach an agreement as there was careful due diligence carried out by both parties. Investec Property would take on all the risk. They are, after all, experienced property developers. The WPRFU would have no risk but slightly less back-end return on sales.
But Marais, who became president midway through the WPRFU/Investec courting process, walked away from the Investec deal in late May 2020, hours before it was due to be confirmed. Marais cited problems with the term sheet and suspensive conditions not being met (sound familiar?).
A few weeks later Marais presented the little-known Flyt as an alternative to Investec at a council meeting. He confirmed that he started negotiations with Flyt on 3 June 2020, creating the picture that he was not negotiating behind Investec’s back.
Investec had already advanced R50-million to the WPRFU in late 2019 after heads of agreement were signed to help the rugby union’s cash flow. Five months on, Investec were now out of the picture thanks to Marais.
Under the proposed Investec terms, the rugby union was set to be paid hard cash up front (R110-million). But instead of being partners in the redevelopment of Newlands, Investec would hold a 99-year lease on the land and would have taken on all the costs of redevelopment.
In return, the WPRFU would have had a 5% share in any profits derived from that plan, plus a further 3.5% share from the resale of any units developed.
Despite the framework for the Investec deal taking more than a year to finalise, somehow comprehensive due diligence on the Flyt agreement was done in a matter of three weeks.
Marais sold the plan to the council on the basis that the WPRFU would receive an immediate R112-million loan from Dream World Investments (Flyt’s parent company) to cover its existing debts to Remgro and Investec Bank. The council backed Marais and walked away from Investec.
Dream World paid more than R52.97-million to Investec Bank on 21 August 2020, and on the same day paid R57.76-million to Remgro to clear its debts.
As security for the loan, 11 properties owned by the WPRFU were registered with Dream World. According to subsequent court papers lodged by Dream World at the Western Cape High Court in March 2021, the WPRFU “acknowledged that it was indebted to Dream World in the sum of R250-million”.
The WPRFU and Flyt became 50% partners in a new company set up with Flyt to redevelop Newlands and another plot called Brookside. Even though the WPRFU is not a property developer, it somehow believed this was a better arrangement.
The Flyt deal has subsequently turned sour over a dispute over the agreed valuation of Newlands.
While all this was going on, the WPRFU rejected a R106-million offer from MVM Holdings for a 51% stake in the professional arm of WP Rugby. After being strung along for months, MVM moved on and bought into the Sharks.
And despite promises on 26 May 2021 that a private equity deal was “imminent”, there has been no announcement to that effect from the WPRFU.
This brings us full circle back to the current situation. To no one’s great surprise, the Flyt deal turned ugly. A new, unknown player named Staytus, which was only registered in January 2021, has somehow raised R205-million to settle with Flyt.
Think about that for a moment. Flyt duly paid more than R113-million to settle the WPRFU’s debts in mid-2020 and incurred several other costs, but could walk away with a R205-million settlement.
After doing almost nothing 13 months after settling the WPRFU’s debts, Flyt will make a tidy R90-million and move on. That’s good business on their part.
And if it all comes off, Staytus will form a development company with the WPRFU where those 11 properties will be bonded as security (sound familiar?).
The WPRFU will start a new relationship as property development partners with Staytus (sound familiar?), but this time with a R205-million debt instead of a R113-million debt, before a sod at Newlands has been turned.
With leaders like this, the WPRFU doesn’t need enemies. DM