Investec in the rough at Pinnacle Point

Investec may be forced to take more bankrupt golf estates onto its balance sheet if next month’s liquidation application of cash-strapped AltX-listed developer Pinnacle Point succeeds.

The investment bank’s property division has already appointed a dedicated team, under former Johnnic Properties MD Raymond Hofmann and Darryl Mayers, ex-MD of Vered Estates, to help manage its growing portfolio of distressed golf estates.

Investec was one of SA’s most enthusiastic financiers of golf resorts during the recent boom years. But sales at most of the newer projects — second-home golf resorts in particular — have dried up. That has left a number of developers unable to repay their bank debt.

Investec Group risk manager Ciaran Whelan says he’s not at liberty to disclose the size of the bank’s golf development loan book or what portion of it is non-performing. But the FM understands the group’s exposure to struggling golf estates exceeds R1bn, comprising about a dozen different developments.

The first Investec-financed golf estate that went belly-up was the Ernie Els-designed Highland Gate Golf & Trout Estate in Dullstroom. The bank was apparently owed R160m. Investec applied for Highland Gate’s liquidation in early May 2009 and tried to sell it under the hammer. But there were no takers, prompting Investec to spend more money on completing the 18-hole golf course. It’s rumoured that running the golf course alone is costing Investec R1m/month.

A similar approach has been adopted at other Investec-financed developments such as Pinnacle Point’s Gardener Ross near Centurion, which the bank has bought back in. Investec’s application for the liquidation of another two Pinnacle Point golf estates on which it is owed about R80m — Pinnacle Point in Mossel Bay and Clarens Golf & Trout Estate in the Free State — will be heard on June 1.

Whelan says the Clarens development may well be added to the bank’s balance sheet as most of these stands are still unsold.

Investec is also in the process of negotiating a deal with the liquidators of The Hills in Pretoria, which is in a bad state of disrepair. Cotswold Downs near Durban, financed jointly by FirstRand and Investec, is another development that was recently placed in provisional liquidation.

Investec is also involved in the Nondela Drakensberg Mountain Estate near Harrismith

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