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Tongaat Hulett says 39% of 8 019 ha portfolio in last stages of conversion

Tongaat Hulett CEO Peter Staude

Tongaat Hulett CEO Peter Staude

26th May 2015

By: Tracy Hancock

Creamer Media Contributing Editor

  

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JSE-listed Tongaat Hulett CEO Peter Staude told shareholders and analysts on Tuesday that of the company’s land assets, 39% was either in the process of undergoing an environmental-impact assessment, being released from agriculture, had formally submitted a planning and development application, was shovel ready or had final approval and was entering the start of construction of buildings and infrastructure.

The estimated timeframes for the different stages were 24 months, 8 months, 1 month and 3 months, respectively.

Staude was “very proud” of the progress the company was making in terms of land conversion of cane land into property development, while it continued to develop its cane supply, particularly in rural areas.The company saw the conversion of its land portfolio as a key enabler of its drive to achieve value creation for all stakeholders through an all-inclusive approach to growth and development.

Tongaat Hulett noted that in the past four years it had created some 7 175 jobs in rural areas through the plant of 28 687 ha and expected this to increase with a further 12 000 ha project currently under way in collaboration with the Jobs Fund.

Staude stressed the importance of reviewing whether value was being created for all stakeholders during land conversion as any stakeholder could “pull the plug” on developments.

He was speaking at the company’s results presentation for the year ended March 31, where the sugar producer released version two of its Portfolio of Land Conversion in KwaZulu-Natal.

Tongaat Hulett’s land conversion activities yielded an operating profit of R829-million from the sale of 108 developable hectares during the year under review. This was a decline from the R1-billion it generated from the sale of 259 developable hectares.

Sales were largely from Cornubia, where R8.2-million was paid for every developable hectare; Izinga/Kindlewood, where R6.3-million was paid for every developable hectare, and Umhlanga Ridge Town Centre, where more than R25-million was paid for every developable hectare.

Tongaat Hulett CFO Murray Munro explained that momentum on larger land sales continued, with single sales of 19 developable hectares in Izinga and 27 developable hectares in the new area of Cornubia.

The company identified seven demand drivers for the conversion of land, for which it provided possible five-year sales outcomes for each.

Developable hectares for high-intensity urban mixed use was expected to range between 80 and 150, with profit for every developable hectare between R22-million and R35-million.

The housing markets were the second demand driver listed, comprising mid-market housing, affordable housing and government-subsidised housing. Mid-market housing ranged between 125 and 175 developable hectares at R3.5-million to R6-million a developable hectare. Affordable housing ranged between 20 and 150 developable hectares at a profit of R2.5-million to 3.8-million. Government-subsidised housing was expected to require between 200 and 722 developable hectares at R2-million to R2.4-million a developable hectare.

The third demand driver was high-end markets, which entailed high-end city hotels and residences, coastal resorts catering to domestic, charter and incentive markets and high-end residential developments. As a whole, high-end markets were expected to demand between 34 and 116 developable hectares, with profit between R21.5-million and R39-million a developable hectare.

Residential services was the fourth demand driver, with developable hectares at between 15 and 66 developable hectares expected to generate a profit from R3.8-million and R6-million a developable hectare.

The office market was next at between 7 and 50 developable hectares, which were expected to yield a profit of R6-million and R15.4-million a developable hectare.

Warehousing, logistics, industrial, business park, manufacturing and big box retail was the sixth demand driver, which Tongaat Hulett estimated could see demand for between 150 and 350 developable hectares, at R6-million to R9.5-million each.

Unique clusters of opportunity were the last demand driver, ranging between 4 and 200 developable hectares at R4-million to R7.5-million a developable hectare.

Of the company’s 8 091 ha, 886 developable hectares, all of which were owned by Tongaat Hulett prior to 1913, were currently subject to gazetted land claims.

“The commercial strategies in an ever-changing environment are being positioned to allow for the development opportunities that are likely to occur beyond five years,” Tongaat Hulett advised.

Beyond five years 336 ha were expected to be acquired for Sibiya coastal growth and consolidation, 211 ha for Ballito/Zimbali expansion into eThekwini, 279 ha for Umhlanga airport expansion and consolidation, 615 ha for the consolidation of the region to the east of the airport, 388 ha for the northern expansion of Tinley Manor, 1 794 ha for coastal consolidation of the far north and 48 ha for northern residential expansion.

Lastly was the urban expansion west of Durban at 619 ha, comprising 82 ha for consolidation of the urban core, 429 ha for lifestyle residential and 108 ha for integrated residential expansion and a recreational precinct.

Edited by Creamer Media Reporter

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