Calgro’s shifting asset portfolio and housing developments

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SIMON BROWN: I’m chatting with Ben Pierre Malherbe. He is CEO at Calgro M3. A disclaimer up front — I hold shares in Calgro M3.

The results for six months ending August 2026. Revenue up 1.2%, Heps down 4.6%.

Ben Pierre, we’ve been chatting – a transitional period to a degree for Calgro. Part of that is disposing of non-core assets. That’s a key strategic priority. It’s going to take some time, though. Talk us through how that’s going.

BEN PIERRE MALHERBE: Thank you, Simon. I think there are two sides to that.

Firstly, it is the sale of the non-core assets, but hand-in-hand with that is trading out the non-core projects. So there are two sides of this equation.

The selling off of the non-core assets will take a little longer. We said we’ll take a five-year view. We know the value of these projects. We don’t want to give them away. We know what they’re worth.

But the trading out of non-core projects – we’re making good progress with that, although you can’t see it in the numbers as yet, looking forward to the full-year results.

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SIMON BROWN: The trading out – you say you’ve stock in excess of what, around 1 500? You are sort of doing sell-down construction. But this is a tough economy to be selling property. Fuel, inflation, interest rates – this is not an easy time to be to be operating and doing even lower-cost housing.

BEN PIERRE MALHERBE: No, you are 100% right, Simon. It’s not an easy operating environment. And what have seen is that consumers are under pressure, and we expect them to be under pressure for a while still.

But the rental market recovered quite a lot faster than that market, and currently we’re leaning towards those what we call ‘bulk sales’, where we sell them off to people specialising in the rental market – and that market has been good to us in the six months.

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SIMON BROWN: Got you, got you. And that solves, as you say, the problem particularly around banks and the like. The key strategic shift here – and you talk around it in these results as well – concerns five large-scale developments, geographic diversification in the Western Cape and Gauteng – and you can kind of see this starting to come into play.

You do mention you’re looking for a Western Cape project, perhaps.

BEN PIERRE MALHERBE: Yes, Simon, definitely. The Western Cape was extremely good to us in the six months – actually the last 12 months. There’s a lot of uncertainty in the Gauteng environment and working with the city, and we said we’re not going to chase Heps at all costs.

We don’t want to build for the sake of building. It doesn’t make sense building units if you’re not sure where they’re going.

So, as I said, we’re focusing on these bigger take-off agreements. We’re carrying about 1 500 units under construction or in stock.

We’ve enough service opportunities, so we didn’t feel pressure to just build for the sake of building.

SIMON BROWN: We have an election next month. I know – in the previous five-year-ago election, I think it was – you had some real challenges with sites being occupied and the like. That was under your predecessor.

Is that a concern for this election, or is the concern more that there’s going to be a changing of the guard, and we don’t know who’s going to be the person to speak to come the 5th of November?

BEN PIERRE MALHERBE: Yes, I think that is the challenge we’re currently facing. There will be a change of guard – whether it’s internal or external doesn’t make a difference. With the change of guard the one thing that we must just keep in mind is that the election is not that golden wand that fixes everything.

It’s a transition period we’re going into and – listening to some of the interviews, what happened in Cape Town with a changing of the guard there – it takes longer than you think.

We are comfortable that we have sufficient service opportunities. That means services in the ground that will allow us to build. We’ve sufficient stock to sell.

So we’re taking a view on investing in strategic infrastructure like the Bankenveld District City project, where we are currently putting in big road infrastructure.

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That’s a long-term investment because one thing we must be very careful of: just trading out of non-core projects or just selling these projects is not the solution. We need to balance that trading out of the non-core with investing in our core business.

We need to keep on going in core business, and we’ve selected that the bulk infrastructure, those big strategic infrastructures, are where we prefer to spend our money currently.

Read: Housing group shifts focus from non-core projects in strategic overhaul

SIMON BROWN: And that is,  as you said, the Bankenveld District City project up here in Gauteng. So it will be plus-20 000 units when it’s complete way down the line.

And you’re busy doing that, the bulk infrastructure, the link infrastructure. A lot of work, a lot of spend, but nothing until you can get it done.

Is that on track? If I recall, it was [for] Q1 financial year ’28 – which is kind of middle of next year?

BEN PIERRE MALHERBE: Yes. So, Q1 next year we’ll be able to complete the bulk-and-link requirements for the first phase, and I think we’re breaking it into bite-sized chunks, if you can call 5 900 bite-sized. But we’re not going to try and install all the infrastructure there for the next 10, 15 years.

So the requirement currently is to say by April next year we’ll be in a position where we can start with the internal infrastructure and the building of units on 5 900 opportunities. And I think that’s our first target.

We’re not looking at the bigger picture, the full 20 000. Let’s just start because we need to start recovering. Currently it’s a one-way. We invest quite heavily in the project, but we’re not able to get anything back as yet –  and that’s putting a whole lot of ratios under pressure.

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SIMON BROWN: Yes, absolutely. And it’s building that infrastructure which you need. What sort of price targets are you looking for with Bankenveld? Who’s going to be your sort of customer?

BEN PIERRE MALHERBE: We’re definitely looking at the lower end of the market, and that’s why it was so important to wait for the City of Johannesburg. That is our preferred partner – not the Province or the National Department of Human Settlements.

It’s because we need to get into the market, and the more assistance we get through the City of Johannesburg, the lower we come into the market.

So, if the city is refunding us for the big road infrastructure, I don’t have to put that onto ‘per unit’ as I sell them on the stand.

The intention is still to play in this integrated market, and the first-time home finance social housing and partially subsidised market.

SIMON BROWN: Yes. And a giant market. I mean, 5 900 is a lot of units, but I think in scope of demand it’s a drop in the bucket.

Your Memorial Parks continues to tick along. It’s doing well. And the one stat that really jumped out at me was that in the new Rustenburg one, I think, 60% was lay-by. The lay-by really is going strong, and Memorial Parks going strong.

BEN PIERRE MALHERBE: Memorial Parks is going strong; there’s no question about it. I think the contribution in the group can’t be understated. Memorial Parks is currently allowing us to grow into these big projects.

We can start to spend money on these projects with a longer-term view. We’re not under pressure to get inflows back immediately, so it’s a great business to have currently.

Saying that, because our exposure to the public sector is not as high leading up into these elections, we held back a little – and that also distorted the numbers a little, reflecting a bigger contribution than it is.

Read: Calgro M3 is digging deep into infrastructure and memorial parks

As soon as Bankenveld is contributing and the money starts coming back, that 10% contribution will probably come back a little, and then we’ll grow it from there.

So I think we must just put into perspective where the development business is currently finding itself.

SIMON BROWN: That’s a great point. And it’s not because Memorial Parks goes backwards, but because the developments sort of leap forward as you start selling units.

Ben Pierre Malherbe, CEO of Calgro M3, always appreciate the time.

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