Calgro chief executive Wikus Lategan said yesterday the real estate investment trust (Reit) established with SA Corporate Real Estate, the Afhco Calgro M3 Consortium, did not own any rental units at this stage. However, Lategan said land had been transferred to the Reit, and the first phase, involving the construction of 3852 units valued at R1.5bn, had started.
Lategan said the first units would be handed over to tenants in June, and the business would start making a contribution to the group from July.
He said the Reit would be acquiring more rental units from Calgro, other developers and other portfolios.
“We don’t want any concentration risk in the Reit by having too many rental units in one area. That is why we want to diversify as much as possible and to buy units from other developers,” he said.
Lategan believed the partnership with SA Corporate Real Estate would enable them to build one of the biggest residential Reits in South Africa.
“This will yield annuity income to the group in future, which will stabilise ‘lumpy’ cash flows generally associated with property development,” he said, adding that the group’s memorial parks business had turned profitable after operating for only 18 months, with R1.25million in operating profit in the year to February from revenue of R4.3m.
Calgro’s first memorial park was developed on Rand Show Road off the N1 near Soccer City and comprised 37 000 burial sites. Lategan said “just over 1 000” burial sites at this memorial park had been sold, and management was positive this business would begin to make a more substantial contribution to profits in future.
He added that the acquisition of Fourways Memorial Park for R22m would assist with unlocking and fast-tracking growth in this segment.
Calgro yesterday reported a 4 percent decline in headline earnings a share, to 133.08c, in the year to February, from 138.96c the previous year.
Revenue rose 29percent, from R1.2bn to R1.6bn.
Operating profit improved 43percent, from R160.2m to R228.9m.
Cash on hand increased by more than 200percent, from R80.1m to R240.8m.
A dividend was not not declared.
Shares in Calgro closed unchanged at R17.15 on the JSE on Monday.
BUSINESS REPORT ONLINE