Typical illustration of Calgro M3 residential units and amenities
For a long time, Calgro M3 investigated participating in the residential rental market. This led to Calgro M3 partnering with SA Corporate Real Estate (through their wholly owned subsidiary Afhco) for the first phase of our investment and which in turn led to the establishment of the Afhco Calgro M3 Consortium (Pty) Ltd (a Real Estate Investment Trust (“REIT”)), to service the low to mid-tier residential rental market in South Africa. Of the first tranche of 3 852 units, 1 556 units have been completed and handed over to the consortium since November 2017.
During the current year, a decision by the partners was taken to unbundle the joint initiative as a result of differences in economic drivers between a listed REIT group and a listed property developer. The unbundling led to Afhco retaining 740 units in South Hills and 288 units in Jabulani. Calgro M3 Real Estate retained 152 freestanding units in South Hills, 176 multi-storey units in Scottsdene and 200 units in Fleurhof, all of which were completed and delivered to the REIT JV over the past 18 months. The remaining undelivered units in Fleurhof, Scottsdene and Belhar will be completed and either retained as rental properties or sold to third-party customers, depending on the cash flow position and outlook of the Group at that stage. The 828 units in Fleurhof (which include the 200 completed historically) that were earmarked for the REIT JV, have already been sold to the Gauteng Department of Human Settlements that will pay the purchase price on a progress draw-down basis.
The Group remains firmly committed to its strategy of growing this rental business as a form of risk diversification and to supply an annuity income stream.