Municipality scoffs at Rupert’s valuation of Leopard Creek

The dispute between SA’s richest person, Johann Rupert, his associates and the Nkomazi Local Municipality in Mpumalanga over the valuation of the Leopard Creek Golf Estate has lifted the lid on the headwinds facing the luxury golfing estate sector.

Rupert and his partners have questioned the R1.56bn valuation tag placed on the property by the municipality, insisting that it is worth just R330m.

Leopard Creek, which hosts the annual Alfred Dunhill Cup is the on the banks of the Crocodile River and borders the Kruger National Park.

The 355ha facility has an 18-hole golf course designed by Gary Player, a clubhouse complex measuring 3,600m², about 97 residential sites, tennis and squash courts, a swimming pool and a gym among other facilities.

Rupert, who is worth about $11.3bn according to Forbes, owns 50 stands, and Leopard Creek Investments owns 47, which are not for sale.

Rupert’s 50 stands afford him four memberships per stand.

In an interview with Business Day, he described the affair as a scam. He said Leopard Creek had agreed to pay municipal fees “out of goodwill”, despite the fact the municipality provides no services to the property.

“We had a legal agreement, a contract. They accepted the money for a decade and then arbitrarily tore up the agreement and quadrupled the bill,” Rupert said.

“They provide nothing. We do our own roads, our own water and we buy electricity directly from Eskom. We told them to cut off our services, but they said they couldn’t because they don’t provide any.”

Rupert said the dispute was causing economic damage in the region. “I want to build a hotel; there are at least two hotel groups who want to invest but there is no certainty about taxes and rates.”

The long running dispute dates back to 2017 when the municipality placed a R1.3bn valuation on the property. Leopard Creek disagreed and said a private valuation company put the price at R450m.

After much wrangling with the municipality, in 2020 Leopard Creek approached the Valuation Appeal Board for the Ehlanzeni district. The board dismissed the objection and set the property’s value at R1.56bn.

Aggrieved, Leopard Creek said recently the property’s value had decreased from R450m in 2017, to R330m now. It then approached the Mpumalanga court, seeking the valuation to be set aside, arguing that the valuation appeal body failed to consider relevant considerations and acted arbitrarily in dismissing its application.

In furtherance of its case, Leopard Creek has hired property mogul David Nagle, who has been involved in developing Houghton Golf Estate, Eye of Africa Golf Estate and Serengeti Golf Estate.

Nagle testified that the golf course estate market is saturated and developments were being offered and bought at a substantial discounts. 

He cited Eye of Africa as an example, which he said he bought for R115m from an Australian bank that lost nearly R500m on the development.

He further argued that golf estates are not profitable in and of themselves but their presence aids in selling the associated real estate.

He stressed that the location of Leopard Creek would also affect its value, as the property is far away from any of the large cities in SA, “making it an unreasonable destination to frequent and of limited practical use to a purchaser”.

Nagle further pointed to the high costs of maintaining a golf course, putting the figure at R30m per year. He said these costs are what makes the developments unattractive to potential developers or buyers.

In his testimony, Johan Piek, club director of Leopard Creek Country Club, said the property was heavily subsidised by the developers, in particular Rupert.

He said Rupert had since 2017 spent R48m in upgrading the golf course, adding that should Rupert end his involvement with Leopard Creek, the present business model would no doubt change and the estate would be less exclusive.

Peak said the club runs as a break-even entity and the objective is not to make a profit but essentially to stabilise the subscription paid by members.

The municipality’s expert witness Derrick Griffiths, from Griffiths Valuation, testified that as at July 1 2017, there were 113 developed sites, 59 undeveloped sites and 90 unsold undeveloped sites at Leopard Creek.

He said no expense is spared in maintaining the golf course and that the sites are owned by some of the wealthiest people in the country.

Griffiths said while many golf estates around the country have gone insolvent, they are not in the same market and cannot be compared to Leopard Creek.

The court ruled in Leopard Creek’s favour and ordered the valuation appeal body to reconsider the matter and to consider and weigh the evidence of the witnesses of both sides before coming to a conclusion on the value of the property.

The final outcome will go a long way in determining the rates and taxes the golf estate will pay to the municipality.

Cyril Ripinga, the municipality’s spokesperson said the decision of the high court has been appealed.

“The matter is sub judice ... [but] we also want closure,” he said.

Samuel Seeff, chair of Seeff Property Group, said buyers often buy a golf estate home not for the investment value, but for their lifestyle, though good capital growth is important to all buyers.

“Broadly speaking, golf estate properties have enjoyed good capital value growth of around 8% to 10% on average during the property boom period. Golf estate properties are also very popular for rental investments and second homes, and they are also quite popular with foreign buyers in certain areas such as the Western Cape — Erinvale Golf Estate in Somerset West for example,” Seeff said.

“Some estates have seen excellent growth such as Boschenmeer in Paarl and De Zalze Golf Estate in Stellenbosch where prices have doubled over the past 10 years. A substantial number of sales above R20m were concluded in De Zalze last year. Zimbali (with an average price of R8.55m for freehold) on the KwaZulu-Natal North Coast is another good example of a popular golf estate where values have grown since its inception, but there are many [other] examples.”

Seeff added that the Steenberg Golf Estate in Constantia, Cape Town, is arguably the top golf estate with a median price of R13.9m.

Note: June 11 2023
This story has been updated with comment from Johann Rupert.

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