HCI: Property projects on the go

WHO would have dreamed that adventurous investment conglomerate Hosken Consolidated Investments (HCI) would relish being a major player in the local real estate development sector?

But HCI’s year to end-March results list an array of property development projects that the company — better known for its investments in the gaming, media, textile, energy, liquor and transport sectors — is currently tackling with some vigour all around SA.

Last week CEO Johnny Copelyn noted significant progress in the company’s first two property development ventures. The Kalahari Village Mall in Upington was completed during the financial year ending March. Copelyn said the mall was trading in line with expectations.

He said the first phase of The Point in Sea Point, Cape Town, was also completed during the year. This development is expected to be completed in August this year.

HCI’s total investment in the Kalahari Village Mall and The Point will top R700m.

There are several other property projects on the go. HCI is involved in the Blue Hills Centre development in Midrand, where earthworks and civil works will be starting soon.

In addition, Copelyn said light industrial space was being developed on the Gallagher Estate premises — one of HCI’s oldest property investments that came with the acquisition of Johnnic.

A joint venture with Tsogo Sun, Abland and Standard Bank in Bryanston was also progressing well. The planned total development cost of all phases of this development comes in around R1,8bn.

It seems HCI is keen to build even more property development capacity. After the close of the financial year the company snapped up the Lynnridge Mall property in Tshwane, where Copelyn says refurbishments will kick off shortly. The group also took transfer of industrial land in Modderfontein subsequent to year-end, with a further industrial property in Durban awaiting transfer.

Meanwhile HCI is also securing rental flows, with Copelyn pointing out that office space owned by the company in Cape Town, La Lucia and Midrand was substantially tenanted.

He said the lease renewal for the single-tenanted office building in La Lucia is currently being negotiated.

HCI’s year-end results recorded property revenue at R81m and profit before tax was a chunky R70m. Headline earnings, which strip out revaluations of properties, came in 40% higher at R31m.

At this point questions might be asked around whether HCI would covet any of the large industrial and commercial property portfolio owned by its media and industrial subsidiary, Seardel Investment Corp.

Seardel has in recent years managed to convert large swathes of its industrial land — which once housed its traditional (but struggling) clothing and textile operations — into industrial parks and commercial complexes housing external tenants.

Seardel reported last week its overall property values increased by 6% to just over R1bn in the year to March, from R944m in the prior year. Seardel CEO Stuart Queen said the increase was driven by R37m spent on redevelopments, R39m on property acquisitions and R39m in upward revaluations at year-end.

More significantly property-derived revenue rose 28% to R119m as developed properties were completed and accounted for over a full 12-month period.

Revenue from external tenants increased 51% to R72m or 60% of the total property revenue and might feed into HCI’s new enthusiasm for property.

Source: Financial Mail