Tue, 13 Apr 2021

  • Calgro M3 has been a developer for the past for 26 years and focuses on integrated social developments, that move people closer to services like transport, health, education, and access to shopping facilities.
  • The group has been at the centre of land eviction clashes in the Western Cape and Gauteng, but CEO Wikus Lategan says the company is on the mend and has tightened up its security and is managing possible invasions.
  • Calgro's stock has been affected by challenges the company has faced in recent years, but Lategan says it's undervalued, which is why it began buying back its shares.

It's been a tough three years for property developer Calgro M3, as the group dealt with land invasions and declining government infrastructure spend, but CEO Wikus Lategan believes the group has room to grow in the business of social housing.

The group, which has been a developer for the past for 26 years, listed on the JSE in 2007, and focuses on integrated social developments, that move people closer to services like transport, health, education, and access to shopping facilities. In addition to the integrated housing Calgro also develops affordable and gap housing, as well memorial parks. But it hasn't been smooth sailing for the group, which has had to contend with the impact of protests and land invasions in some of its mixed integrated and affordable properties in the Western Cape and in Gauteng.

Its Scottsdene development became the centre of a showdown in 2018, as people clashed with police in an eviction battle. In Johannesburg, its Fleurhof development also faced a similar challenge, following invasions and clashes with police, as well as electricity shortages.

In an interview, Lategan explained that the group lost more than 70% of its revenue over a 60-day period during the turbulent days and had to spend more than R100 million on security and damage-related costs. Its share price also took a beating, declining more than 80% in the past three years and currently trades at almost R2.

But Lategan said the company is on the mend and has tightened up its security and is managing possible invasions.

"We've got intelligence in the neighbouring communities plus security companies, so generally we know a week or two in advance that there are planned invasions. We've also learned that it is much cheaper to have high security forces and high alert, to make sure these invasions don't happen, than to try and evict people afterwards," said Lategan.

The group has also been affected by a decline in the government's infrastructure spend, but the Calgro CEO said that too, is under control and the developer has decreased its government work to between 10% and 20%, from 50% five years ago. Much of its focus, has turned to the private, affordable housing market.

Despite starting off as a developer of pricier properties in areas like Fourways in Johannesburg, Lategan said Calgro will continue developing integrated housing and affordable housing, even with the challenge they bring.

"If you look at the social benefits, I think Calgro will keep forging ahead even if the tide is against us because... I always say, if you feel down, go drive in these informal settlements and then say your conditions are so bad, and that's what keeps us driving ahead," he said.

He added that the group had learned a lot from its experiences and had put measures in place to ensure that history did not repeat itself.

"And I think if you look through this Covid period, all the land invasions, a lot of other developers had and we didn't. Never say never but I think we've learned to manage it a lot better and deal with these challenges," the CEO said.

The Sandton-headquartered company is taking the same approach with the memorial parks it develops and manages, where Lategan said people should be able to bury and visit their loved ones in a tranquil setting.

"It's really making a difference and I think that's what's driving us... we have made good money over the years from that, yes we've had three terrible years, but we've learned, as long as we keep learning," he said.

The company is now eyeing growth in the expansion of its memorial parks and growing its market share in all its portfolios.

As for its stock Lategan said although it has been impacted by the challenges the company has faced in recent years, it's undervalued, which is why it began buying back its shares, valuing them at between R12 and R15.

"It's our intention to continue to buy back shares at low levels in a way to enhance long term shareholder value, for the shareholders who want to be in the business. I think over the last two, three years... we've done enough to illustrate what we believe the value is. If you can't see it, then we'd rather buy it back," he said.

Source: News24

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