The 20-year lease for one of Fish Hoek’s prime beachfront properties, The Galley, could once again be up for grabs.
The City is questioning the legitimacy of the bid and has referred the matter to its Immovable Property Adjudication Committee (IPAC) for a decision but is recommending the property be re-auctioned.
The lease for the restaurant, which has been the face of the beachfront since 1987, expired in 2016 and has been extended on a month-to-month basis since then.
In 2018, the City published a notice calling for public participation on the proposed closure and lease of the restaurant and said there would be a competitive tender process.
However, in November last year, the City advertised it as one of several properties and property leases across the metro that was up for auction (“The Galley lease up for auction,” Echo, November 9, 2023).
The lease was sold to the highest bidder, restaurateur, and former owner of the Harbour House Group, Michael Townsend, for R380 000 on November 23 last year (“End of an Era for The Galley,” Echo, November 30, 2023).
But when the restaurant, which had been due to close at the end of May, continued to operate, speculation grew on social media.
The legitimacy of the bid is being questioned after it came to light that Mr Townsend made the bid on behalf of the Kalk Bay Waterfront Development (KBWD), the lessor of the Harbour House building at the Kalk Bay Harbour, and not his own business, K2023, a subsidiary of Sweetheart of the Rodea (Pty) Ltd.
Mr Townsend is the biggest shareholder of KBWD.
A letter from the City’s lawyers to Mr Townsend, seen by the Echo, states that on the day of the auction, Mr Townsend made the winning bid of R380 000 per month but it seems that he made an offer on behalf of KBWD which he was not authorised to represent.
The City said each bidder had to register before the auction and Mr Townsend was only registered to bid on behalf of K2023, with bidding number 517.
However, after the lot was knocked down to Mr Townsend, he indicated to the auctioneer, Stefanus Olivier, of High Street Auction Company, that he was bidding on behalf of KBWD, and the winning bid number was recorded as number 512.
The City told the Echo that it had received a letter from “one of the parties” seeking clarification on the matter following the auction.
The letter from the City’s lawyers states that Sweetheart of the Rodeo (Pty) Ltd deposited an amount of R1 915 045.47 into KBWD’s bank account and it was paid to High Street Auction Company.
“It seemed that KBWD and K2023 want to proceed on the basis that the former would contract with the City but that there may be some kind of subcontracting arrangement aimed at ensuring the participation of the latter,” the letter says.
Mr Townsend said the amount comprised one month’s rent including VAT and commission of 5% of the cumulative value of the first 60-month installment of the lease.
According to the letter, the City’s attorneys made several efforts to obtain clarity on the identity of the highest bidder but video footage of the auction was inconclusive.
However, according to an affidavit from Mr Olivier, the winning bid was placed by Mr Townsend and he (the auctioneer) recorded the winning bid as number 512.
The letter states that Mr Townsend was not authorised to represent KBWD as the registered bidder for KBWD was former director Roderick Bothman with bidder number 512, but he did not participate in the auction.
Mr Townsend said that before the auction he and the directors of KBWD had agreed that both entities would bid on the lease, and they had agreed that KBWD would sign the lease for the property and he would be the operator ensuring that KBWD would benefit financially.
He said he was willing to bid up to R180 000 while KBWD said it was willing to go up to R225 000.
Mr Townsend said while Mr Bothman was present at the auction, he had noticed that he (Mr Bothman) was not actively bidding and therefore he bid on behalf of KBWD.
He said he had continued bidding above R225 000 as he believed it was the right decision for KBWD to continue until the bid was won as the site is a “world-class site”.
Following the auction, he said, according to the tone of emails between the parties, everyone was on board and appeared happy that they had won the bid. However, KBWD had then objected to the arrangement but had not given him any indication why.
He said they had asked him to buy the shares of the stakeholders who had wished to sell their shares following the agreement.
“I made them an offer and bought the shares,” he said, adding that it was never expected that any other shareholder except himself would be held liable for any cost of this lease, the renovation, and operation.
Mr Townsend said the City had allowed him and KBWD to make representations to IPAC last month to motivate whether he or KBWD should be accepted as the legitimate bidder, and he was awaiting the outcome.
The letter states: “On the facts, it seems clear that the representative of K2023, Mr Townsend, took part in the bidding but then made an offer on behalf of another entity, KBWD, which he was not authorised to represent. In the circumstances, no valid offer was made by Mr Townsend. On the facts, it cannot be said that the offer complies with the City’s mandate.”
Mr Townsend said he would not appeal the outcome from IPAC and should the lease be re-auctioned, he would bid again.
Mr Bothman said he had resigned as director in June and was not mandated to speak on behalf of KBWD.
The Echo was unable to get comment from the current director despite several calls and WhatsApp messages.
Mathea Eichel, who along with her husband, Herbie, continues to hold the lease on a month-to-month basis, declined to comment.
In response to a media enquiry from the Echo, the City said it was following due process and could not comment further as IPAC had not yet decided on the matter.
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