Pride of Africa Development

At the beginning of the 2015 financial year, Grand began the development of "Pride of Africa Nature Estate", a high-end nature estate in the south of Johannesburg. The development consisting of 15 high-end residential properties was completed on 28 February 2018. The total cost to develop all 15 properties was R32 000 000. The costing schedule related to this development is attached in Appendix 1 below. Management's plan was to sell each residential property at a mark-up of 35% on cost. On 30 June 2018, Grand realised that the high-end residential properties had remained on-hand longer than anticipated and decided to perform some market research to determine the reason for this. The result was that an overwhelming number of potential buyers would rather rent the properties instead of purchasing them in order to avoid the high maintenance costs that these houses would attract. Grand decided to lease all the properties out under operating leases and actively started marketing the properties for leasing on 30 September 2018. On 01 November 2018, Grand signed an agreement for the leasing of all 15 properties to a multi-national company that has offices in Alberton. The lease will be for a period of two years beginning 01 November 2018. The high-end residential properties will be used to house expatriates working for this company and their families. Residential properties in and around Pride of Africa Nature Estate have a useful life of 40 years. It is company policy to recognise investment property in accordance with the fair value model of IAS 40: Investment Property. The fair values of the 15 high-end residential properties are also attached in Appendix 1