Calgro lining up cheaper $25m loan
August 2018 that it termed 'among the most difficult experienced by Calgro M3', the property developer is now looking at cheaper finance for its housing and allied projects
JSE-listed property developer Calgro M3 is in talks with an unnamed development finance institution for $25m in unsecured funding for the firm’s future projects, says CEO Wikus Lategan.
Calgro builds large-scale integrated developments, rental units and private memorials.
The new funding will be in addition to the €25m it secured from Proparco, the private sector financing arm of French development bank Agence Française de Développement.
Lategan said the company would implement the new property projects in 12 months.
The company said it is investigating memorial parks in Tshwane and KwaZulu-Natal, one new residential development project as well as some potential properties to be acquired and developed for the real estate investment trust (Reit).
Calgro deliberately slowed activities when some of its projects experienced problems in the six months ended August 31.
Illegal invasion and occupation of houses under construction cost the company R65.2m during the half-year period, Lategan said.
Calgro estimated that the damage and security costs caused by squatters at its Fleurhof development, south-west of Johannesburg, came to R36.3m, and R21m at its Scottsdene development in Cape Town.
Lategan said the six months to August were among the most difficult experienced by Calgro M3, which faced several major challenges, including macro- and micro-economic uncertainty and the policy indecision pertaining to land expropriation.
Lategan said the company had temporarily halted work at its Fleurhof and Scottsdene developments.
“Our Scottsdene and Fleurhof projects were shut down because of illegal occupation, with additional security and repair costs amounting to approximately R65m. Associated claims are in the assessment process but not yet finalised and so not accounted for. This will be an income with no associated expense when approved,” he said.
The company said it had 10 projects under way, with 3,377 units under construction during the reporting period, and 1,843 completed.
It said it had also slowed investments into new infrastructure in order to alleviate the pressure on its working capital.
Lategan said the development finance institution was affordable, compared to loans from commercial banks. He said the company’s housing projects were aligned with the institution’s mandate to invest in the social housing sector.
In the six months, Calgro’s net profit more than halved from R60.7m to R29.7m. The company’s administrative expenses increased by 55.51%, compared to the previous period.
The company attributed the increase to higher marketing and advertising costs, salaries and wages, and professional fees. Calgro said the 303.31% increase in professional fees related to “professional capacity created to assist with project management mentoring, land invasions as well as an electrical specialist for Fleurhof”.
Calgro’s basic earnings per share decreased by 50.16% to 23.78c, while headline earnings per share decreased by 93.48% to 3.11c.
Calgro shares on the JSE were up 26.16% on Monday to R9.50.