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PROPERTY: Grappling With Boschendal's True Value

 



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JCI, the long suspended mining conglomerate formerly controlled by slain mining magnate Brett Kebble, has made a most interesting value pronouncement on Franschhoek-based leisure property, Boschendal.

In its latest Net Asset Value statement JCI, which hopes to be re-listed on the JSE, placed a value of almost R400 million on its stake in Boschendal.

That value – which stands as at the period ending December 2009 – is well above the R160 million value accorded to JCI’s Boschendal stake at the end of 2008.

JCI’s investment in Boschendal - which equates to around a 62% stake in the iconic property - is held through an investment via Moregate and JCI Investment Finance.

There has been a recent structural change to this ownership when in July last year JCI Investment Finance acquired Kovacs’ Boschendal shares and Kovacs settled the debentures.

The Boschendal investment – as reflected on JCI’s latest Net Asset Value statement - has then been valued at the price contained in that purchase agreement.

The JCI board reckoned the nearly R400 million valuation for the Boschendal stake was ‘fair and reasonable’.

By inference, if JCI’s 62% stake is worth close to R400 million then the total enterprise value for Boschendal must be worth some R650 million.

But CBN readers may query this valuation. In the middle of 2009 CBN reported that Kuwait-controlled leisure property group IFA Hotels & Resorts had bumped up its stake in Boschendal to 37.33%.

At that point IFA paid another Boschendal shareholder, Citation Holdings, R9.6 million for another 5.25% of Boschendal. This transaction inferred a valuation of around R200 million for the Franschhoek property – which is currently under development (including the building of a luxury hotel, upmarket residential properties and a shopping centre).

As we pointed out in our initial article when IFA made its first foray into Boschendal during mid-2006 the company paid R54m for a 19.25% stake. This meant a value of around R270 million could be inferred for Boschendal.

There is a big difference between R200 million and R600 million – and CBN would guess the real value of Boschendal will only be able to be accurately extracted once the development has neared completion.

In the meantime, we can throw some more confusion on the Boschendal matter. The latest circular sent to JCI shareholders shows an illustrative pro forma calculation of the Investec ‘raising fee’.

In this calculation JCI’s stake in Boschendal is marked at cost to R120 million. A note explains that “the estimated market value of Boschendal has been assumed to be the same as the base cost as JCI has no basis to substantiate an increase in the value of the investment.”

Uh…okay.

 


 
 
 
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