Helmke Sartorius von Bach | Jul 1, 2020 | 0
Trustco has high hopes for Herboth’s Blick, expects new development to contribute almost 70% of total value of all its property holdings
Trustco announced last week that it has obtained approval from the Ministry of Urban and Rural Development for the further development of the peri-urban estate, Herboth’s Blick. Despite the seemingly good news, the diversified insurance, investment, real estate and mining group’s share price on the Johannesburg Securities Exchange remained sticky, in fact falling by another 5% after the announcement.
Since the beginning of 2019, Trustco shares have taken back around 55% of their value, following the spectacular 100% appreciation in the fourth quarter of 2018. On Thursday 12 September, the share shed another almost 10% bringing it down to N$6.25, a level it has last seen in October 2018.
Following a spat between Trustco and investors earlier this year over adjustments to the so-called fair value of its properties, most notably the extensive tracts of undeveloped land it owns, Trustco was hoping that the announcement of another major project in its property development portfolio, will boost the lagging share.
Regarding the further development of Herboth’s Blick and its impact on the group’s balance sheet, Trustco stated in a SENS announcement “To unlock the future potential in land value, an application for the permission of the need and desirability to establish the new township was submitted to the [ministry] during the reporting period. It is estimated that the increase in fair value, once the new approval has been obtained would be significant.”
The application for township development was submitted to the ministry just over a year ago, and last week, 02 September, it was approved in principle.
“The provisional approval is subject to certain documentation to be compiled and a meeting to be held between the representative of the Issuer and the Local Authority within a 60 day period,” according to the SENS.
Citing comparable land values, Trustco said once developed, it will increase the value of the land from the current carrying value of N$30 per square metre to between N$1650 and N$2200 per square metre, depending on whether it is residential or commercial land. This will have an enormous impact on the value of the entire project.
“Upon final approval by the Minister for the Need and Desirability for Township establishment on the Herboth’s Blick development, a re-valuation of the property will be attended to as such approval will have a significant effect on the fair value of the property investments of the Issuer. This long term development comprises 68% of the total property land bank portfolio,” stated Trustco.