Calgro M3, SA Corporate venture to boost rental options in metros

ACCESS to low- to mid-market residential rental options in the country’s metros is set to be boosted by a joint initiative by listed affordable housing developer Calgro M3 Holdings and SA Corporate Real Estate.

SA Corporate and Calgro M3 are to be the joint shareholders in a new company, Afhco Calgro M3 Consortium.

Afhco, an 100 percent subsidiary of SA Corporate, will be the majority and controlling shareholder in the new company with a 51 percent stake. Calgro M3 will hold the remaining shareholding through Calgro M3 Real Estate, a new wholly owned firm.

In the first phase of this new initiative, Afhco Calgro M3 will acquire new units developed by Calgro M3 in Johannesburg and Cape Town for a total consideration of R1.639 billion.

This will be followed by further acquisitions from Calgro M3 over the next few years.

The transaction is still subject to the approval of the competition authorities.

Rory Mackey, the managing director of SA Corporate, said yesterday that the intention was to build a substantial residential portfolio in the next few years, with the ultimate goal of reaching property investments in the residential market in excess of R10bn.

Wikus Lategan, the managing director of Calgro M3, said the housing shortfall in metropolitan areas was estimated at a mammoth 2 million units and the residential portfolio of the new firm would give South Africans access to rental options within the country’s metros.

“Despite government’s commitment to closing the gap, spending on infrastructure for housing development is under pressure. This… initiative will assist government in improving living conditions for ordinary South Africans,” he said.

Asset class Mackey said SA Corporate believed residential property investment as an asset class represented a compelling case, with the opportunity to establish a portfolio of significant scale in a sector with underweight listed exposure and defensive characteristics.

Lategan said Calgro M3 was excited about this new venture. “Entering into an agreement with SA Corporate… will ensure that Calgro M3’s strategic decision to enter this market is undertaken with a reputable partner who will drive the management, marketing and growth of the (firm).”

Lategan said an added benefit of the partnership for Calgro M3 was that it would strengthen its annuity income drive. He said the annuity income and expected dividend stream would enhance the group’s ability to gear its projects into the future, with the additional funding accelerating the group’s growth.

The companies said their medium- to long-term intention was to ensure that long-term value and sustainability was created from a substantial portfolio that would set new standards in terms of rental accommodation in the lower end of the market.

SA Corporate acquired Afhco in 2014 for about R439million through its subsidiary SA Retail Properties. Afhco then had a portfolio of more than 5 000 residential apartments valued at about R1.47bn.

The purchase consideration was based on an Afhco portfolio value of R1.476bn and group debt of R1.037bn on the date the agreement was signed.