Calgro has high aspirations for Bankenveld development

Calgro M3 has finally clenched the strategically positioned Bankenveld District City development after nearly seven years of negotiations.

The JSE-listed group is counting on Bankenveld as its next growth frontier, according to outgoing CEO Wikus Lategan, and it is expected to bridge the gap between Sandton and the underdeveloped surroundings.

This comes as the group reported that headline earnings per share (HEPS) for the six months to end-August increased to 101.4c from 78.88c a year ago, benefiting from a positive product mix and lower infrastructure costs.

Revenue declined 26.4% to R507m, primarily driven by reduced unit sales due to pressure on consumers and delayed transfers, but the group’s profit after tax rose to R97.57m from R84.85m. Lategan attributed the rise to the income statement starting to benefit from historical land and infrastructure costs.

“We never revalued our land, so some of the lands are sitting at 10-, 15-year historic prices. Infrastructure has been installed over the years, without escalation,” he said.

The Bankenveld land was transferred from the University of the Witwatersrand to the Calgro M3 and Eris Property Group joint venture in September. The JSE-listed firm said bulk and link infrastructure construction would get under way in the first quarter of 2025. Calgro would fund 60% of the R250m required for this first phase.

Lategan told Business Day that the development would ultimately enhance Johannesburg’s infrastructure with 6,000 units being developed in the first phase alongside a road connecting Woodmead to Marlboro Drive.

“So immediately, the flow of traffic is going to be enhanced in the whole of the area, uplifting the area,” said the CEO.

“This is one of the best, if not the best, located land. It brings affordable housing to the doorstep of your richest mile in Africa and brings people closer to job opportunities.”

He said that by implementing programmes for artisans, Calgro intends to transfer skills to the local community and create jobs.

While Calgro’s town planning rights are in the process of being approved, pending the final engineering design, the CEO said it intended to start building its first top structures during the first quarter of 2026 and turn over the first units by the end of February 2027 at the latest.

“Bankenveld must reset what residential development can do for SA and the people of SA,” said Lategan. “It must be a new norm in terms of social amenities, parks, recreational facilities ... it must reset the standard.”

The group’s memorial parks segment grew revenue by 59% to R31.7m and this business now accounts for 6.26% of group revenue.

The lay-by sales offering grew by R14.7m and now has an active book of R40.7m, which will convert to revenue when sales are fully settled. It said the growth in reservations, particularly through the lay-by option, indicates consumer preference for flexible payment options in the current environment.

Strategic capital allocation remains a priority for Calgro, it said, with R138m invested in infrastructure across key projects including Fleurhof, Jabulani and Belhar during the period.

Moreover, the acquisition of additional land in Fleurhof would add about 2,500 new units to the group’s pipeline and reinforce the long-term strategy of focusing on a select number of key projects where significant long-term bulk and link infrastructure investments have already been made or where such investments are minimal in comparison to the anticipated returns.

Subsequently, it is gearing up to dispose of the Witpoortjie project and it will progressively trade out developments such as Scottsdene and Jabulani in the next 24 to 30 months. Its primary focus will be on three major integrated projects in Gauteng and one, potentially two, in Cape Town, after the disposals are finalised.

A total of 869 units were handed over compared with 1,192 units a year ago while 1,539 units are under construction, with most expected to be completed by the end of February 2025.

While the number of units handed over was lower than the previous period, the positive product mix and lower infrastructure costs offset this reduction, leading to an improved gross profit margin of 29.69%, it said.

Calgro’s robust pipeline, consisting of strategic large-scale developments Fleurhof, South Hills, Bankenveld and Belhar, combined with trading out of other developments, positions it to deliver a future pipeline of more than 38,000 units.

Calgro’s share price initially slipped as much as 14.15% on Monday before recovering a little to end the day 10.20% lower at R6.60. This was its biggest one-day fall since November 2022 and leaves it with a market capitalisation of R755m.

Update: October 14 2024
This story has been updated with new information.

gumedemi@businesslive.co.za
mackenziej@arena.africa