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Conrad Mwanawashe Business Reporter
Fidelity Life Assurance stands to make more than $200 million profit before tax from the sale of 11 624 residential stands on Langford Estate. Following shareholder approval of FLA’s acquisition of 81 percent of the estate, in a land for debt swap deal with CFI Holdings, managing director Simon Chapereka said the addition of Langford will grow the company’s balance sheet.
FLA sees profits rising to $200 761 000 from the sale of 11 624 stands at $14 400 each.
Mr Chapereka said in the event that the stands sell at $12 500 a profit of $160 424 000 will be realised while the worst case scenario will see the company making about $81 562 000 selling the stands at $9 250 each. He said FLA expects to invest about $50 million in development costs.
The company sees development cost savings as a result of use of off-site infrastructure developed by Fidelity Life Southview Park.
The transaction will see FLA assuming CFI’s $18 million debt in the form of $16 million bank debts and settlement of $2 million to other creditors.
Of the assumed bank debts, a $2 million deposit has been placed in trust with one of the banks.
The remaining $14 million will be secured by bonds on the land to be issued by FLA in favour of the banks. Interest on the assumed debts will be 10 percent on a reducing balance.
Additional insurance income from the project of $8,7 million will be realised.
Interest will be charged at 10 percent per annum on the outstanding balance for each stand.
Langford Estates comprises of 834 hectares and is expected to yield 11 264 residential stands.
“The $14 million of the assumed debt will be serviced over a fairly long tenure of seven years thus alleviating cash flow pressures as would be the case with servicing short term borrowings. There will be a grace period of two years on the debt principal repayment,” Mr Chapereka said.
The acquisition is seen as a significant development and a continuation in property development which is a profitable line of business.
Government statistics estimate a housing backlog of two million units with Harare having a 500 000 units backlog.
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