Estate Living Magazine Invest SA - Issue 45 September 2019 | Page 56

C O M M U N I T Y
L I V I N G
FINANCIAL
RESERVE
PLANNING
FOR ESTATES
The world is changing faster than any of us can comprehend. So how can homeowners associations
and estate managers plan for the future? And what is reserve funding, anyway?
It might seem obvious for any well-managed estate to hold financial
reserves that’ll buffer it against future challenges in maintenance
costs, replacement of assets, and even changes in social and climatic
conditions, but the sad truth is that many don’t – or if they do, they rely
on arbitrary figures like multiples of their monthly levies (typically, five
times), which have no basis in the challenges they may face.
The reserve fund isn’t a legislative requirement for HOAs or estate
managers in South Africa (as it is in countries like the USA), but having
one makes sense in today’s climate of uncertainty.
This is why the management of St Francis Links, the Eastern
Cape residential estate and Jack Nicklaus signature golf
course, takes reserve planning far beyond mere financial
projections.
In an exclusive interview, company CEO and director of golf,
Jeff Clause, and financial officer and company secretary, Andrew
Barton, emphasised that their financial reserve planning forms part of
a holistic exercise that’s repeated every year, and that delivers
projections (and investments) that look as far as 25 years into the
future.
‘It’s about planning through continuous risk assessment,’ says
Andrew. This includes a careful look at things like resources (water and
electricity supplies, sewerage and grey water), asset maintenance
(moveable as well as immovable property), the environment (the
effects of climate change being the big challenges here, of
course), and community (safety and security, real world and cyber
crimes, etc.).
Water supply
According to Jeff, the developers weren’t aware – when they
opened for sale to home owners in 2006 – that the estate would, for
need to invest in a complete water treatment programme within a
period of little more than a decade. Or that this would entail everything
from installing a new water treatment plant to the purchase of a truck
to deliver water to individual construction sites in order to ensure that
builders didn’t waste precious potable water.
But, thanks to actions taken in the light of annual analyses designed
to reveal ‘exactly where we are’, St Francis Links is mostly self-reliant
as far as water is concerned. And, thanks to careful planning for this
unforeseen situation, it’s achieved this (and all its other, originally
unplanned, capital expenditures) without ever raising any special
levies. ‘If you want to hear a dirty word, just mention a special levy,’
says Jeff.