Tongaat Hulett to wind down its property arm

Indebted sugar company Tongaat Hulett will slowly close down its property company but is still selling some land and investigating potential developments, according to the division’s business rescue plan published on Friday.

Tongaat Hulett Development (THD) is the property arm of the sugar producer that converts farming land into property developments. It owns extensive tracts of land in KwaZulu-Natal and is the first unit of the sugar company to publish its business rescue plan. The business plans of Tongaat Hulett, its SA division and its feeds division will be published at the end of May.

Tongaat Hulett and its subsidiaries were placed in business rescue, a process to save the firm from bankruptcy, in October as debt far exceeded assets. Fraud discovered in 2018 revealed a R12bn hole in the accounts.

In the plan for the development firm, business rescue consultants Metis Advisory say they will close down THD in a measured way while remaining open to sell some land to property developers. The plan suggests they are open to realise more value for the large land portfolio. Practitioners are trying to avoid adverse effects on the KwaZulu-Natal property market, according to the plan.

THD owes R7.7bn to banks and other creditors, an amount which far exceeds the cash available. According to the plan, banks will get 7c for every rand owed. Unsecured creditors, those it owes money to who are not banks, will get nothing.

Had it gone into liquidation, the banks would have got 2.5c for every R1 owed.

In a statement, the business rescue practitioners say they realise it is difficult for creditors who are owed money to walk away with nothing, adding that they tried their best to find development opportunities.

“We realise this is a very difficult situation. We have therefore spent a significant amount of time since business rescue commencement evaluating opportunities where construction activities or property development projects could potentially continue with the support of THD’s post-commencement financiers. Discussions with these affected stakeholders are at an advanced stage.”

After the riots and looting in KwaZulu-Natal in 2021 and publicity about the construction mafia activities, many property development companies are reluctant to invest and build in the province.

The business rescue practitioners will divide the extensive land portfolio into different categories such as precincts, individual land and joint ventures. They will sell the different land pieces where possible to realise optimal value, according to the plan.

Where they can, they will try to bring existing development to completion as this is more profitable than half-complete developments.