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PROPERTY: Boschendal's Value Plunges


Recent Western Cape Business News

THERE’S a fair bit of intrigue in the news that Kuwait-controlled leisure property group IFA Hotels & Resorts has bumped up its stake in winelands property icon Boschendal to 37.33%.

IFA paid major Boschendal shareholder, Citation Holdings, R9.6 million for another 5.25% of Boschendal – a transaction that would infer a valuation of around R200 million for the Franschoek property (which is still awaiting the development of a luxury hotel, upmarket residential properties and a shopping centre).

When IFA made its first foray into Boschendal during mid-2006 the company paid R54 million for a 19.25% stake. At that point a value of over R270 million could be inferred for Boschendal. In other words the inferred value of Boschendal has dropped by more than a quarter – a hectic fall even in these torrid economic times.

But it seems the value crimp at Boschendal has not fazed IFA around the ambitious developments being planned.

A press release accompanying the latest transaction suggests the first phase of the development - the Boschendal Founder’s Estates - will now be further improved with all related infrastructure.

It seems current development plans for the second phase, the proposed mixed-use development on Boschendal’s 2 240 hectare estate still includes residential homes (set within villages of varying size), an upmarket retirement village, a boutique hotel and a mixed-use precinct combining shopping, offices and apartments.

But a much more fascinating aspect of IFA’s latest transaction at Boschendal comes in the officially stated rationale for the acquisition.

It seems the IFA deal resulted in a ‘restructuring’ of the shareholding in Boschendal with IFA owning 37.33% and mining house JCI owning 62.67%.

How exactly JCI – which was once the corporate domain of the late Brett Kebble – comes to own 62.67% is not clear to CBN.

Last time CBN looked JCI owned 35% of Boschendal via two entities - a direct investment in Moregate and a debenture agreement with Kovacs.

According to the IFA announcement, the remaining 62.67% stake is held by JCI “as a result of their settlement with all other shareholders”.

The announcement adds that the restructure means that IFA and JCI will jointly assume control over Boschendal with both parties committed to creating a development that will “complement their internationally recognised portfolio of top quality integrated resorts”.

It will be interesting to see what kind of commitment JCI can bring to Boschendal in terms of funding the envisaged development as the full picture of the financial status of the mining house is yet to emerge.

Interestingly JCI – at the end of March 2007 – valued its (then) 35% stake in Boschendal at R127 million – based on a third party offer to purchase 20% of the company’s investment in Boschendal.

This inferred a value of nearly R350 million for Boschendal – a far cry from the value inferred in IFA’s latest transaction.

At that stage the JCI board had indicated that the long term value of the Boschendal investment “could be in excess of the suggested R127 million.” In fact, a circular sent out by JCI at the end of 2008 values the Boschendal stake (still reflected as 35%) at R160 million.

While CBN could not find any details of the Boschendal transaction on the JCI website, the additional shares in the property were presumably also acquired from Citation Holdings. Citation, a Luxembourg-registered company, was one of the original consortium that acquired Boschendal from Anglo American for R323 million in 2004.

At the time of the original deal Citation held around 70% of Boschendal, so it seems safe to presume that is where JCI garnered its additional shareholding.

The emergence of JCI as a majority shareholder of Boschendal will surprise pundits who might now be looking at the controversial corporate as more than just a mining company.

Naturally, there’ll be a fair bit of interest in how much JCI paid for its additional stake in Boschendal (we’d guess around R50 million). And exactly how debt-laden JCI funded the transaction should also be fairly interesting to gauge…

IFA, by the way, did not cash-up for its additional stake in Boschendal. It swopped properties at Zimbali (IFA’s other major development in KwaZulu-Natal) for Citation’s stake.

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