South African Property Review
PROPERTY SOUTH AFRICAN
May 2017
REVIEW
PROPERTY REVIEW - LogoTreatment.pdf
INNER CITY REJUVENATION TUHF funding
ONE on ONE
Defending against the heist Finance
TABLE BAY
The mother city’s newest mall May 2017
FINANCIAL FOCUS Retirement villages an alternative investment
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2016/08/25
11:31 AM
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contents
May 2017
PROPERTY SOUTH AFRICAN
REVIEW
South African Property Review
PROPERTY SOUTH AFRICAN
May 2017
REVIEW
PROPERTY REVIEW - LogoTreatment.pdf
INNER CITY REJUVENATION TUHF funding
ONE on ONE
Defending against the heist
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2016/08/25
11:31 AM
ON THE COVER With so much being said about our recent downgrades, we look at some investment opportunities that take a long term view, from funding to retirement villages.
Finance
TABLE BAY
The mother city’s newest mall May 2017
FINANCIAL FOCUS Retirement villages an alternative investment
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From the CEO From the Editor’s desk News Planning and development Water use authorisation process Legal update The Supreme Court of Appeal of South Africa Legal update Regulation of Agricultural Land Holdings Bill published for comment Education, training & development The University of Pretoria, in conjunction with SAPOA, recently celebrated a graduation ceremony for its Certificate for the Commercial Property Practitioner 2017 Alternative investments Investing in retirement? Investing in retirement Making the case for life right Investing in retirement Investing in retirement developments One on one It’s not TUHF to get funding One on one Daylight robbery Developments Second wave of Waterfall development well underway Developments Table Bay Mall Beautiful West Coast landmark REITs SA REITs a sound investment platform CTCC investments Investment confidence in Cape Town Central City Investment overview Property, a robust investment Investment overview Governments everywhere are considering the imposition of higher taxes on foreign buyers REITs Emira’s intelligent strategies drive the phased redevelopment of Knightsbridge Events East London AGM breakfast session What’s on Upcoming events Off the wall Most expensive building built FOR EDITORIAL ENQUIRIES, email mark@mpdps.com Published by SAPOA, Paddock View, Hunt’s End Office Park, 36 Wierda Road West, Wierda Valley, Sandton PO Box 78544, Sandton 2146 t: +27 (0)11 883 0679 f: +27 (0)11 883 0684
Editor in Chief Neil Gopal Editorial Adviser Jane Padayachee Managing Editor Mark Pettipher Copy Editor Marguerite Lithgow Public Relations Officer Maud Nale Production Manager Dalene van Niekerk Designers Eugene Jonck Sales Robbie Pansegrauw e: rob@mpdps.com Finance Susan du Toit Contributors Cobus Bedeker, George Radford, Marguerite Lithgow, Michael Evans, Portia Mkhabela, Remi Kuti, Samantha Bartlett, Willem Eksteen, William Midgley Photography Mark Pettipher DISCLAIMER: The publisher and editor of this magazine give no warranties, guarantees or assurances and make no representations regarding any goods or services advertised within this edition. Copyright South African Property Owners’ Association (SAPOA). All rights reserved. No portion of this publication may be reproduced in any form without prior written consent from SAPOA. The publishers are not responsible for any unsolicited material. Printed by Designed, written and produced for SAPOA by MPDPS (PTY) Ltd e: mark@mpdps.com
e: philip@rsalitho.co.za
from the CEO
SA could be in for a bumpy ride following credit listing downgrade On Monday 3 April 2017, rating agency Standard & Poor placed South Africa’s credit outlook at junk status. Following the announcement, the rand fell by 2 percent to the dollar in response to the news of the downgrade, while government bonds also weakened sharply.
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our months prior to this, the rating agency kept the country’s sovereign credit rating at one notch above junk status, with a negative outlook, while Fitch adjusted its outlook to negative from a stable notch above junk. According to a press release issued by S&P, the negative outlook reflects their view that political risks will remain elevated this year, and that policy shifts are likely, which could undermine fiscal and economic growth outcomes more than they currently project. Their release highlights South Africa’s pace of economic growth as continuing to be negative on a per capita GDP basis. Further, S&P expects that inflation will fall back below 6% this year and remain in the target range of 3 to 6% over our three‑year forecast horizon. The rating downgrade to sub‑investment will have a negative impact on the housing market and consumers as a whole. It is not likely to affect the average citizen in the short term, but could restrict access to credit in the long term and possibly lead to several interest rate increases over the course of the year. A fall in the rand will increase inflation and place pressure on interest rates, as well as the cost of imported goods. The result of all of this is that the country will be in a ‘Catch 22’ situation, and struggling to claw its way back from junk status. The SA listed property index has been on a back foot since February. Investors who have enjoyed attractive returns from property stocks may have been disappointed with the dreary performance of the sector, thanks to the volatile Rand and bond market. Bond yields have risen on the back of a weak Rand. Stanlib’s Head of Listed Property Funds, Keillen Ndlovu said at some point this year
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that the sector was up almost 6% but all gains were eroded by higher bond yields. The property sector generally has a relationship with bond yields—when bond yields fall property prices rise, and vice-versa. Nesi Chetty, Head of Property at MMI Investments & Savings said that despite the big swings in the SA listed property index, property stocks are trading at an attractive forward yield of 7% to 9%. Heightening the attractiveness of valuations in the sector is that SA-focused, JSE-listed property companies are still posting inflation‑beating dividend growth of 8%. SA-focused property companies have emerged as the best-performing stocks, and the biggest losers are offshore property stocks, which are still recovering. If fiscal and macro-economic performance deteriorates substantially from our baseline forecasts, S&P could consider lowering the rating. It is far easier to maintain an investment status than it is to improve the status, once downgraded. Research concluded by Rand Merchant Bank revealed that, on average, it takes approximately seven to eight years for a country to recover from a downgrade. But there could be light at the end of the tunnel, as S&P concluded that it could revise the outlook to ‘stable’ if they see political risks reduce and economic growth and/or fiscal outcomes strengthen, compared to their baseline projections. With an uncertain future looming, South African consumers are urged to prepare themselves financially by reducing debt levels and putting away savings. Neil Gopal, CEO
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from the Editor’s desk
Is it really all doom and gloom? My role as editor is not to be biased towards one event or another, it’s to look at what is happening within our industry and to bring, through the pages of Property Review, what is current and in trend to SAPOA’s members, however the events of the past month have caused me to reflect a little…..
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From what I can see, we still have the infrastructure, the manufacturing plants and the industrial capabilities within South Africa and there is plenty of room to grow. 4
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ot too long ago South Africa was a pariah on the world stage, sanctions were being enforced and our trade and sports activities were under the microscope. Without wanting to harp on too much about the time pre our democratic change, South Africa was forced to stand alone, imports were expensive and our goods and services were shunned. Roll forward to last month’s downgrading, and the Rand taking a dive, even to a non economist like myself, some of the effects on our daily lives are obvious; fuel will inevitably go up, which will have a knock on effect on food prices and our delivery and transportation services, which will eventually lead to an increase in levies and possibly taxation. For the building and construction sector within the property industry, be it commercial or residential, those imported goods and materials will obviously cost us more, which means our quantity surveyors and project managers are going to have to revisit their calculations—project costs are going to go up! To put this in context, whilst South Africa was a pariah, the country worked together and was self-sustaining, we had manufacturing and food security, and some of our inventions did make it out to the rest of the world. Countries that have manufacturing and industry based economies tend to be powerful players on the world stage, this therefore begs the question, "Where have our manufacturers gone and what has happened to our domestic industries?" From what I can see, we still have the infrastructure, the manufacturing plants and the industrial capabilities within South Africa and there is plenty of room to grow. Forgive me for being an eternal optimist, but what is stopping us as South Africans from being that self-sufficient country? When I look back to the beginning of the year, there was a positive air to our industry going forward, Port Elizabeth, Durban, Cape Town and Johannesburg are all manufacturing opportunities in the form of developing industrial and transport hubs, free trade zones and inner city rejuvenation, there are new
malls and cities being built, not to mention residential and housing complexes as well! Looking specifically at this month’s Property Review, it seems appropriate that our theme is Finance, a broad subject, and we’ve homed in on retirement investments. Our article on retirement villages gives a snapshot of the market, although statistics are difficult to mine, we’ve put together some interesting figures as well as looked at the different options to buy into, and to consider when developing a complex. We talk to Old Mutual as well as the Evergreen Group about some of the funding options available. REITs is also a topic that is worth looking into, likewise we’re offering an overview of it’s history in South Africa and a few pointers as to who should be considering investing in the listed sector, while Neil, our CEO, in his message talks about how the recent S&P downgrade could undermine fiscal and economic growth outcomes more than they currently project. Inner city rejuvenation has been a topic for many a discussion, and we came across TUHF, who have been in existence for some fourteen years. Whilst always looking to our bigger corporates for assistance with funding, TUHF has helped many entrepreneurs get started on the property ladder. The Waterfall development between Jo’burg and Pretoria is coming to life beyond the Mall of Africa, and Cape Town is about to witness the opening of what could be considered its ‘last’ major mall, Table Bay Mall. With malls and the recent heists in mind, we talk to SABRIC’s CEO Kalyani Pillay about cash in transit security; it's certainly a huge consideration to take into account for our mall owners and developers. Our Off the Wall feature delves into the most expensive building built… and finally… Let’s take a positive view about the downgrades...YES, we will be forced to tighten our belts, but out of adversity comes strength, we need to look inward and develop our own sustainable industries—South Africa can do it. Enjoy reading this issue! Mark Pettipher, Managing Editor
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industry news Investing in sustainability is more than a risk management tool
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nvesting in sustainability and The Carbon Trust Standard (TCTS) is not just a risk management tool. “Being recognised as an independently verified, environmentally sustainable organisation enhances brand value and can also drive innovation,” says Dr Mehran Zarrebini, CEO of PFE International, holding company of Van Dyck Carpets. The certification recognises success in reducing carbon emissions, and provides a framework for organisations to enhance their operational sustainability. Van Dyck's journey towards adapting their business model began in 2012, after implementing an environmental management system during 2011. “At the time, we had recognised that climate change risks could significantly impact on our operations in many dimensions, such as resource scarcity, and they were largely out of our organisation's control. Disruptions in the supply chain would dramatically affect our production processes.” Van Dyck began accounting for its greenhouse gas emissions in 2012, following the methodology prescribed in the Green House Gas Protocol. “Our level of detail extended beyond the certification needs and included many of the voluntary reporting requirements such as employee and airline travel together with emissions associated with the transportation and distribution of our goods throughout South Africa and beyond,” Zarrebini explained. The focus on energy conservation has helped the company reduce its greenhouse gas emissions by 20.7% in absolute terms and 24.5% as a function of intensity during the period 2012 to 2014. “Since 2012, our carbon footprint has reduced from approximately 11,200 tonnes per annum to 4,200 tonnes per annum, a reduction of more than 6,500 tonnes.” Zarrebini concluded, “We are moving to a world of scarce resources, in which companies will increasingly need to consider their total return, not just on assets and equity, but on resources and their efficient use.”
Shoppers flock to the opening of the eagerly anticipated Springs Mall
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quarter of a million people shopped at the new, world class Springs Mall during its first 10 days of trading. It opened on 16 March to become the first regional shopping mall in the Ekurhuleni city of Springs. The Springs Mall is a joint venture between Blue Crane Eco Mall (Pty) Ltd, Flanagan and Gerard Property Development and Investment, JSE‑listed retail REIT Vukile Property Fund and Murinda Investments, which is part of the Giuricich Bros Group. Located in the suburb of Casseldale, easy access to the mall is available off the N17 on Wit Road as well as Jan Smuts Road, which the developers have upgraded. With 48,000m2 of fully let, top quality retail space, Springs Mall anchor tenants include Woolworths, Pick n Pay, Checkers, and Edgars. It also has a Planet Fitness Just Gym, which is the first and only major
branded gym in the city. Set amid wetlands, Springs Mall is an environmentally sensitive structure. “As a developer, we are committed to creating property assets that are environmentally responsible and as energy efficient as possible,” says Gerard. Most of Springs Mall’s construction material and products were sourced locally, within a 50km radius of the mall, including its steel, bricks and mortar. It also used recycled materials, such as rebar. Careful building measures have minimised the building’s heat loads, optimised its natural light and used environmentallyfriendly, non-toxic materials. In addition to the environment, social and economic factors were also taken into account. Local companies, labour and material suppliers were used during the construction of Springs Mall.
Atlantic Hills Business Park – where industrial space makes business sense
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bland and its Partners have commenced work on a new Industrial Precinct situated on the slopes of the historic Durbanville Hills estate on the N7 near Cape Town, which will have easy access to major highways and arterial routes. The Atlantic Hills Business Park is set to evolve into a long‑term, value creation for its owners and tenants, the first of whom will take occupation in January 2018. The 72‑hectare site, with 45 hectares zoned for light industrial business, is ideal for distribution, warehousing and cold storage businesses. State of the art, fibre‑optic telecoms will also be installed on all sites.
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Two areas of the park have been earmarked for conservation, primarily to protect a rare species of Renosterveld fynbos found in this area that grows only on granite. The reserve will be fully environmentally protected and will offer tenants the pleasure of a green space near their place of work. Security will be controlled by the Master Property Owners Association by means of an up-to-date camera surveillance system located at entrances and other appropriate positions. Rapid response security personnel will respond to all issues identified by the security monitoring system.
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Stand sizes are flexible, and can be custom designed from 1,000m² to 100,000m² with sufficient power available for low‑ and high‑use purchasers or tenants. Abland offers tenants an all‑inclusive, completely integrated service that is tailor‑made to suit their specific needs. Premises on each stand will be purpose built to the tenant’s specific requirements with the infrastructure planned for maximum flexibility. A portion of the precinct will be developed for mixed use, offering tenants a retail component, including a petrol station with convenience shopping and fast food outlets. The development of the park is planned over three phases:
Phase 1, 60,000m2, Phase 2, 220,000m2 and Phase 3, 170,000m2 of land. The park will be a holistic development and promises to be visually striking. Strict design guidelines will be adhered to with each building complementing its surrounding buildings and environment, with a view to contributing positively to the immediate neighbourhood rather than standing in isolation. The design guidelines encourage simplicity, scale and vertical proportions, refined details and the use of a prescribed colour palette, establishing a recognisable and notable node.
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industry news
Atterbury wins tender to develop massive new Gauteng office for Deloitte
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tterbury has won the fiercely contested tender — 15 submissions by other property sector heavyweights contested for the prize — to develop a new Gauteng office for Deloitte in South Africa after an intense selection process by the leading professional services firm. Louis van der Watt, CEO and co‑founder of Atterbury, says: “We are thrilled to win this tender in a highly competitive environment, once again highlighting Atterbury’s ability to provide a deep understanding of Deloitte’s business and property strategies and to develop solutions to help achieve them. We look forward to working with this respected firm. This development continues Atterbury’s track record of creating flagship corporate head offices and top quality real estate assets for leading national and international blue‑chip businesses.” Deloitte’s new premises will be developed in the sought‑after location of Waterfall in Midrand, Gauteng, joining a number of leading corporates consolidating their operations in what is fast becoming South Africa’s leading business destination. The total estimated development cost is in excess of R1 billion. Mike Jarvis, Chief Operating Officer of Deloitte Africa, says: “The consolidation of our Johannesburg and Pretoria offices into one Gauteng office in Waterfall City promises to be an exciting journey. We are quickly outgrowing both
existing office spaces and are now in a position to bring together approximately 3,700 of our people into one, new, custom‑designed building in what is clearly an attractive corporate destination. Deloitte is constantly looking for ways in which our people can make a meaningful impact to our clients, talent and communities. This move will help us do exactly that by gearing our operations to attract the best talent and serve our expanding market.” The ultra-modern premises will comprise 42,500m2 of quality workspace, which will consolidate Deloitte’s current Woodmead and Pretoria offices in a single central location. The building has space capacity for close to 5,000 people. The landmark new Gauteng office premises will consist of a ground floor with six stories of offices and four basement parking levels including nearly 2,000 parking bays. Innovative commercial architecture practice Aevitas designed the new Deloitte headquarters, which will comply with a Silver LEED (Leadership in Energy and Environmental Design) Green Rating on completion. Bulk earthworks for the project will start in August 2017, with construction commencing on Deloitte’s new Gauteng office in the final quarter of this year. The development will be completed in the first quarter of 2020. Deloitte will begin operating from its new South African base from April 2020.
An exterior view of Deloitte's new Gauteng offices
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Cushman & Wakefield Excellerate opens new Tanzanian office
Marna van der Walt CEO Excellerate Group
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ushman & Wakefield Excellerate announced towards the end of March, that it would strengthen its presence in sub-Saharan African markets with a new office in the Tanzanian city of Dar Es Salaam. Marna van der Walt, CEO of Cushman & Wakefield sub‑Saharan Africa affiliate Excellerate Property Services, says: “Tanzania is an attractive and well‑established African market with great growth potential, strong institutions and many of our global clients are already in the market or wish to enter it within the next few years.” She adds: “With our established Kenyan office, our presence on the ground in Tanzania bolsters Cushman & Wakefield Excellerate’s offering in East Africa. We see this as a natural expansion. On a pan‑African level, Tanzania is a critical market and our new office enables us to provide a more comprehensive service to our local and global corporate clients operating in the region.” The Cushman & Wakefield Excellerate Tanzania team will offer a wide spectrum of services including strategic consulting, property management, project and workplace management, development management, specialised retail services, office and industrial leasing, broking,
valuations, advisory and due diligence, transaction management, estate management, research, procurement and supply chain management, facilities management and risk management. Property stalwart Simon Taylor will head the new Cushman & Wakefield Excellerate Tanzanian office. A British National, Taylor holds a Bachelors Degree in Property Surveying from De Montford University as well as an Architecture Diploma from Shrewsbury Polytechnic. In his most recent role, Simon was Head of Real Estate East Africa for US Oil & Gas Company Halliburton, based in Tanzania overseeing a portfolio of 72 properties in South Sudan, Uganda, Ethiopia, Tanzania, Kenya, Mozambique and South Africa. Before this, Simon worked as Global Head of Property for Hibu Group (formally Yell Group PLC) covering a portfolio of 300 properties in the US, UK, Spain, Lat-Am and Asia. With new roots planted in Tanzania, Cushman & Wakefield Excellerate remains focused on growing its on-the-ground comprehensive real estate services for clients that are in, or want to be in, the region.
Simon Taylor, Head of the new Cushman & Wakefield Excellerate Tanzanian office.
industry news
industry news
New Noordhoek retirement development attracts significant interest
Arthur Case CEO Evergreen Lifestyle
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major new residential development, the Evergreen Noordhoek Lifestyle Village, has attracted significant interest amongst retirees looking into moving into retirement lifestyle accommodation. At a recent launch event to prospective buyers on the Evergreen Lifestyle waiting list, well over half the units in the first phase of the construction project were reserved. “The quick take-up of units reflects the pressing need for more accommodation for the retired community,” comments Arthur Case, CEO of Evergreen Lifestyle. “In addition, the enthusiasm we saw at the launch event confirms our expectation that this lifestyle village will be particularly attractive to the market. Set on a huge site of over 16 hectares, large enough to allow us to include plenty of private open space and walking trails, and with amazing views across the Atlantic Ocean towards Chapmans Peak, this
lifestyle village has so much to offer prospective residents.” The village, with its sophisticated security systems and fibre-to-home internet, will consist of 150 houses and 200 apartments, set on a sloping hillside site located near both Noordhoek and Fish Hoek. In addition to the housing units, a Lifestyle Centre is planned: a gym, a heated pool, a care centre offering primary healthcare services and frail care, and various recreational services. An on-site bowling green and tennis court will also be available. According to Case, “The location is perfect for the needs of residents, since all facilities will either be available on-site or close by in Fish Hoek, a well-established, sizeable town.” “With a starting price for a life right of R2.1 million for a three-bedroom, two-bathroom, double-garage house, these properties will attract middle income-earners as well as wealthier people,” says Case. “And, since there are so many units in this complex, the benefits of scale mean that monthly levies should not be subject to major inflation.” Homes in the first phase of the development will be available to move into from the end of this year, with a further rollout following. Case concludes: “There is bound to be great interest in this complex which will certainly help address the backlog in quality, affordable retirement living.”
Aerial view showing location of Evergreen Noordhoek
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industry news Growing demand for Kenyan industrial properties
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n 2016, the industrial market in Nairobi saw an increase in both demand and supply of properties, with rental growth rate set to increase by between 8 to 10%, according to Broll Kenya Market Report H1 2017. Also in 2016, the sector witnessed an increase in both demand and supply of industrial properties, with approximately 641,031m2 of total GLA across Nairobi. Peter Small, Broll Kenya Managing Director says: “Rentals rose on average by 11% and as at Q4 2016, rentals (including service charge) averaged $3.98/m² along Mombasa Road and $3.04/m² along the Eastern bypass, Ruiru and Ruaraka while overall, industrial rentals were between $3.04/m2 and $5.2/m2.” Sought-after industrial locations include Industrial Area, a preferred node as it is near the CBD and offers lower rental rates, Mombasa Road, a newer industrial hub offering better amenities and easily accessible, and Ruiru, an upcoming industrial hub because of multiple access points. Ruiru is close to the Eastern and Northern Bypasses and it connects the area to Mombasa Road, JKIA, Limuru Road and the Nakuru‑Nairobi Highway. According to the report, rental rates have remained the same in Q1 2017 as they were in Q4 2016, pointing out that demand for industrial property is derived from demand. Due to the increased prevalence of e‑commerce, retailers such as Jumia, Kilimall, Vituzote.com and other small to medium online retailers require storage for their products. New retailers entering the market both local and international have also contributed to the demand for industrial property. "Furthermore," says Small, "the government has come up with an initiative to support and promote the manufacturing sector through the 'Buy Kenya, Build Kenya' initiative aimed at promoting the use of locally manufactured goods. The policy and monitoring framework, once fully implemented, will boost the stagnated manufacturing sector, increase its contribution to GDP and positively influence demand for industrial properties,” he says. Karen Koigi, Broll Kenya Head of Research explains that in Ruiru and Ruaraka, new or renovated industrial development occupancy levels were as high as 88% as at Q3 2016, with other industrial areas recording 68% occupancy levels. “Lower occupancy rates within the main industrial areas are an indication that non-manufacturing tenants continue to move away from the inner city to less congested and easily accessible areas located on the periphery of Nairobi.” Between 2015 and 2016, new and newly refurbished industrial properties recorded average occupancies of 86% in spite of increase in supply. Industrial Area that has experienced reduced tenant inquiries and occupancies due to traffic congestion, poor infrastructure and poor amenities recorded average occupancies of 68% in the fourth quarter of 2016. “Well-located and easily accessible industrial properties will continue to be in demand as tenants seek those properties that enable quick and easy access to and from major roads,” says Koigi. Although both demand and supply as well as rental rates are set to remain high in 2017, the sector has a shortage of A‑grade quality warehouses, lack of multiple access points from warehouses to major highways, as well as increased levels of traffic in and around Nairobi. New developments expected to come onto the market in 2017 include Infinity Industrial Park, Africa Logistics Properties development and a warehouse construction in Tatu City, among others. “We expect the industrial sector to change for the better in the next 5 to 10 years as new quality stock to meet tenants’ demands comes onto the market,” she adds.
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Cobus van Heerden, Atterbury Property Development
USD95 million Kumasi City Mall, Ghana, opens on 20 April 2017
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he new Kumasi City Mall in Ghana’s city of Kumasi will open on 20 April 2017. It is leading property developer and investor Atterbury Property Development’s fourth successful retail development in Ghana. Atterbury’s earlier trio of successful developments in the country are all in Ghana’s capital, Accra: Accra Mall, Westhills Mall, and Achimota Mall.
The world class, 18,500m2 modern mall, with potential for a future 10,000m2 expansion, will give the city of Kumasi its first one‑stop retail environment, with shopping and entertainment under one roof, when it opens next month. Although the mall’s public opening is in April, its formal launch will take place in early May 2017 in the presence of the King of the Ashanti Empire, Otumfuo Osei Tutu II Asantehene. Atterbury is developing Kumasi City Mall for its owners, and AttAfrica has been appointed asset manager, responsible for its day-to-day running and operations. Cobus van Heerden of Atterbury Property Development says: “This is the first big development we have undertaken in Kumasi, and it has been an absolute pleasure doing business here.”
Roadworks surrounding Cornubia development are underway
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s construction on the Cornubia residential and commercial development adjacent to Umhlanga Ridge continues apace, Tongaat Hulett looks at the infrastructure requirements within the immediate vicinity. “With key attractions such as the Cornubia Shopping Mall scheduled to open in September and residents and commercial tenants starting to take occupation, it is necessary to improve the access into the development,” says Mtura Matshini, Development Executive of Tongaat Hulett Developments. “In conjunction with the eThekwini municipality, we have been involved in the construction
of major roadworks to precede the anticipated increase in vehicle traffic.” The roadworks include a bridge over the N2 motorway to connect Cornubia with the Umhlanga Ridge town centre, as well as upgrading the Flanders Drive interchange. The N2 bridge will also contribute to the C9 corridor that feeds the City of Durban’s Integrated Rapid Public Transport Network, also known as the Go! Durban service. C9 refers to the Gateway route which runs from Gateway, through Cornubia and Phoenix to Bridge City, another Tongaat Hulett Developments project undertaken in partnership with eThekwini Municipality.
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planning and development
Water use authorisation process T
he Department of Water & Sanitation is technical report submitted to the CMA / P-CMA. There was a National mandated to sustainably manage and If there is any outstanding information, the Project that was protect the nation's water resources and this is technical report is rejected and the application undertaken in the past in done through the water use authorisation closed. This stage also determines whether the process, commonly referred to as the Water submitted information is sufficient for the which the National and Use Licence Application (WULA) process. The process to continue or whether it should be Provincial Operations National Water Act, 36 of 1998 and Regulations rejected. If all the required information has are the legislative frameworks used to manage been submitted, the application will proceed offices worked in the water resources. Below is a summarised to processing for a decision. The internal time collaboration to deal with overview of the authorisation process as limit allocated to this stage is 10 days. managed by the Water Sector Regulation the backlog on WULA Branch (vested within the Water Use Licensing Step 4: Processing & finalisation This stage thoroughly interrogates the applications. This project Authority Directorate). submitted specialist reports associated with was facilitated at Step 1: Pre-application enquiry the application. Where internal specialist reports are required, there is an internal time This stage provides the applicant with an a national level and opportunity to engage with the Catchment limit of 60‑days for the reports to be delivered. therefore applications ManagementAgency(CMA) / Proto‑Catchment Once all the information has been received the had been transferred Management Agency (P‑CMA). This step is case officer will compile a report which will be optional. Only the applicant who requires tabled at the Water Use Application Assessment from Provincial guidance about the type of water use & Advisory Committee (WUAAAC), which is Operations to the head authorisation and information required CMA and P-CMA based, for a recommendation. may undertake a pre‑application enquiry. Following WUAAAC recommendation, the office. In this regard Aspects discussed at this stage are to be application is forwarded to the CEO of the applicants were presented as part of the complete application CMA / P‑CMA for a recommendation. Upon receipt of the CEO's recommendation, upon submission. contacting head office the report is submitted to the National office for a recommendation by Branch: Water for any information Step 2: Application initiation This stage incorporates the application Sector Regulation and then the Responsible regarding the progress of submission, site inspection and the Authority (Director‑General) will make the their applications. compilation of the WULA technical report. final decision. Upon receipt of the final There is a newly introduced form for applying for a water use licence. The time limit allocated to this step is 146 days. It is important to note that applications are submitted at the Proto‑Catchment Management Agency offices which are based in the regions. There was a National Project undertaken in the past in which the National and Provincial Operations Offices worked in collaboration to deal with the backlog on WULA applications. This project was facilitated at a national level and therefore applications had been transferred from Provincial Operations to the Head Office. In this regard applicants were contacting Head Office for any information regarding the progress of their applications. It should be noted that this project was completed in November 2014.
The Regulations for Procedural Requirements for Water Use Licence Applications will be published in March 2017 for implementation with effect from 1 April 2017
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Step 3: Screening This stage assesses all the information submitted via the compilation of a WULA
decision, the Administration division will record the information in their Water Use Administration & Registration Management System, and thereafter the information is sent back to the applicant via the CMA / P‑CMA. The time limit for this stage is 144 days.
Step 5: Appeal process An appeal process is the final stage that can be undertaken in the WULA process, and is initiated by an applicant or any party that is aggrieved by the final decision, as briefly outlined in Step 4 above. The appeal process does not have time limits. However, any person who wants to appeal must do so within 30 days of having received the decision.
Authors: Mayathula, TB Khosa, L Tshikororo and N Khumalo. DWS: Directorate Water Use Licensing Authority, Branch: Water Sector Regulation
legal update
The Supreme Court of Appeal of South Africa SECTION 118(3) of The Municipal ACT
Terrific news for the property market. A recent court judgment has indicated that owners will no longer be liable for historical municipal debt on their property. The SCA held that the relevant provisions of the Rates Act, the Finance Act and the Systems Act read together, reinforced Amber Mountain’s view that the municipality was not entitled to withhold the property rates clearance certificate until it had received payment of the property rates for the entire financial year. Such property rates became due from the start of the financial year, and not on the start of the financial year. It further held that s 118(1) of the Systems Act plainly applied to municipal debts which had become due in the two years preceding the date of application for the certificate and did not apply to future municipal debts. The court accordingly dismissed the appeal, in favour of Amber Mountain’s.
Read the full judgement:
JUDGMENT Reportable Case No: 576/2016 In the matter between:
NELSON MANDELA BAY MUNICIPALITY APPELLANT and
AMBER MOUNTAIN INVESTMENTS 3 (PTY) LTD RESPONDENT Neutral citation: Nelson Mandela Bay Municipality v Amber Mountain Investments (576/2016) [2017] ZASCA 36 (29 March 2017) Coram: Cachalia, Theron, Dambuza and Mocumie JJA and Molemela AJA Heard: 7 March 2017 Delivered: 29 March 2017 Summary: Local authority : Rates : Property rates levied for a financial year : levying of rates an integral part of budget process. Interpretation : Acts to be read together as they form part of current system of local government : Local Government : Municipal Property Rates Act 32 of 2000 : s 13(1) : words and phrases : ‘as from’ : interpreted to mean that the rate is payable within the period of the financial year : s 13(1) read with ss 12, 26, 27 and 28 : obligation to pay property rates arises at the start of the financial year : obligation to make payment arises once the municipality has determined the date of payment and amount due : Local
Government: Municipal Finance Management Act 56 of 2003 : ss 15 to 19 : municipality’s duties to approve annual budget for each financial year, budget including projected revenue for current year based on collection levels to date : budget to be finalised before start of financial year : Local Government: Municipal Systems Act 32 of 2000 (the Systems Act) : certificate is issued in terms of s 118(1) in respect of municipal debts which have become due, not future debts : municipality’s rates policy to the contrary is ultra vires the Act and invalid.
ORDER On appeal from: Eastern Cape Local Division of the High Court, Port Elizabeth (Tshiki J sitting as court of first instance): 1 The appeal is dismissed with costs.
JUDGMENT Theron JA (Cachalia, Dambuza and Mocumie JJA and Molemela concurring): [1] This court is called upon to determine whether, following upon the sale of immovable property, the property owner is liable to pay the total rates on the property determined for the financial year or only the rates calculated until the property is transferred. The outcome of this appeal turns on the interpretation of various provisions of the Local Government: Municipal Property Rates Act 6 of 2004 (the Rates Act), the Local Government: Municipal Systems Act 32 of 2000 (the Systems Act) and the Local Government: Municipal Finance Management Act 56 of 2003 (the Finance Act). These Acts must be read together as they form the basis for the current system of local government. 1
[2] The facts giving rise to the dispute between the parties are largely common cause. The respondent, Amber Mountain Investments 3 (Pty) Ltd, was the previous owner of immovable property described as remainder of Erf 8757, Walmer, Port Elizabeth (the property). The respondent sold the property to Joburg Skyscraper (Pty) Limited. Before transfer of the property, the respondent required a rates clearance certificate, in terms of s 118 of the Systems Act, from the appellant, the Nelson Mandela Bay Municipality, (the municipality). The municipality’s financial year commences on 1 July in a year and ends on 30 June the following year. The municipality required payment of rates until the end of its financial year, being 30 June 2010, as a condition for furnishing the certificate. The municipality presented the respondent with an account for the sum of R2 281 014,68. The respondent paid the amount, under protest, in order to obtain the certificate. At the time of payment, the respondent’s actual indebtedness to the municipality was for the sum of R1 214 482,68. The respondent says that this constituted an overpayment of its obligations to the municipality of R1 066 532, for which it was entitled to be reimbursed. [3] The respondent instituted action against the municipality in the Eastern Cape Division of the High Court, Port Elizabeth. The matter proceeded on the basis of the agreed facts set out in para [2] above. At the request of the parties, the court directed that the issues be separated and that the sole issue for determination was: ‘whether
1 The preamble of the Systems Act reads: ‘Whereas this Act is an integral part of a suite of legislation that gives effect to the new system of local government’. South African Property Owners Association v Johannesburg Metropolitan Municipality & others [2012] ZASCA 157; 2013 (1) SA 420 (SCA) para 8.
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the [appellant] is obliged to refund a portion of the rates in respect of the remainder erf 757, Walmer, for the period from the date of transfer of the property to Joburg Skyscraper (Pty) Ltd on 25 February 2010 until the end of the [appellant’s] financial year terminating on 30 June 2010. . . due regard being had to the manner in which this issue has been pleaded by the parties, and in particular the validity of the second sentence in Clause 31 of the [appellant’s] Property Rates Policy for the 2009/2010 financial year’
[4] In the court a quo, as in this court, the municipality contended that in light of the relevant provisions in Chapters 2 and 3 of the Rates Act, the respondent was obliged, when it sought a rates clearance certificate, to pay the full property rate on the property for the financial year commencing 1 July 2009. The court a quo found that the respondent was only obliged to pay rates on the property until the date of transfer of the property to Joburg Skyscraper, ie 25 February 2010. It found that ‘it would be unjust for the [appellant] to claim rates from the [respondent] when it was no longer the owner of the property. The [respondent] can only be obliged to pay rates for property that is registered in its own name’. The court ordered that the
municipality repay the amount of R1 066 532, including interest, to the respondent. It is against this judgment that the appellant appeals, with the leave of the court a quo. [5] Municipalities are vested with original constitutional power to levy rates on property. 2 In terms of s 229(1)(a) of the Constitution a municipality has authority to impose ‘rates on property and surcharges on fees for services provided by or on behalf of the municipality’. The original power to levy rates is regulated by national legislation in the form of the Rates Act.3
Section 2(1) of the Rates Act empowers a metropolitan or local municipality to ‘levy a rate on property in its area’. Section 24(1) of the Rates Act provides that a ‘rate levied by a municipality on a property must be paid by the owner of the property’. Section 2(1) of the Rates Act, read with s 24(1) expressly empowers a municipality to levy and determine rates on property. [7] Of particular relevance to this dispute are ss 12 and 13(1) of the Rates Act. Section 12 reads: ‘12(1) When levying rates, a municipality must levy the rate for a financial year. A rate lapses at the end of the financial year for which it was levied. (2) The levying of rates must form part of a municipality’s annual budget process as set out in Chapter 4 of the Municipal Finance Management Act. A municipality must annually at the time of its budget process review the amount in the Rand of its current rates in line with its annual budget for the next financial year.
Section 13(1) reads: ‘(1) A rate becomes payable(a) as from the start of a financial year; or (b) if the municipality’s annual budget is not approved by the start of the financial year, as from such later date when the municipality’s annual budget, including a resolution levying rates, is approved by the provincial executive in terms of s 26 of the Municipal Finance Management Act’.
[8] It was argued on behalf of the municipality that ss 12 and 13 make plain that an owner’s obligation was to pay one annual property rate and that such liability arose, and was fixed, on the first day of the municipality’s financial year, namely 1 July. The use of the singular noun, ‘a rate’, so the argument went, in these sections and other sections of the Rates Act, is indicative that a single rate, for the entire financial year, is payable at the start of such financial year.
Accordingly, when the respondent sought a rates clearance certificate on 25 February 2010, its liability to pay a single rate for the entire financial year had already, by operation of law, been fixed as at 1 June 2009 and the municipality was entitled to require payment of the property rate for the entire financial year, before issuing a rates clearance certificate. [9] The nub of the municipality’s case is this. Once its financial year commenced, the respondent became liable to pay the rates fixed for that financial year and it was entitled to withhold the rates clearance certificate until it had received payment of rates for that financial year. There are pertinent questions which arise in the determination of the municipality’s contentions. Why does the legislation stipulate that a municipality must levy the property rate for a financial year (s 12(1))? Why does the levying of rates form part of a municipality’s annual budget process (s 12(2))? The answer to these questions will assist in determining whether the municipality’s contentions should be upheld. [10] As mentioned, the outcome of this appeal turns on the interpretation of various provisions of the Rates Act, the Systems Act and the Finance Act. In relation to the Finance Act, ss 15 to 19 are relevant. In terms of s 15, a municipality may incur expenditure only in terms of an approved budget. The council of a municipality must approve an annual budget for the municipality for each financial year, before the start of that financial year (s 16(1)). The mayor of the municipality must table the annual budget at a council meeting at least 90 days before the start of the budget year (s 16(2)). The annual budget must realistically set out the anticipated revenue for the budget year from each
2 Fedsure Life Assurance & others v Greater Johannesburg Transitional Metropolitan Council & others 1999 (1) SA 374 (CC) paras 44 and 45; Gerber & others v Member of the Executive Council for Development Planning and Local Government, Gauteng & another 2003 (2) SA 344 (SCA) para 23. 3 Body Corporate Croftdene Mall v Ethekwini Municipality [2011] ZASCA 188; [2012] 1 All SA 1 (SCA) para 14.
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revenue source (s 17(1)(a)). Section 17(3) of the Finance Act details various documents that are to be tabled with the annual budget, including draft resolutions approving the budget and imposing any municipal tax, and a projection of cash flow for the budget year by revenue source. An annual budget may only be funded from realistically anticipated revenues to be collected, cash‑backed accumulated funds from previous years’ surpluses not committed for other purposes and borrowed funds (s 18(1)). Revenue projections in the budget must be realistic, taking into account projected revenue for the current year, based on collection levels to date and actual revenue collected in previous financial years (s 18(2)). A municipality may only spend money on a capital project if the money for the project has been appropriated in the capital budget (s 19(1)(a)). It is clear from these provisions, that the collection of rates forms part of a municipality’s budget ‑ which must be determined before the financial year commences. [11] In regard to the Rates Act, its main objective is to regulate the power of a municipality to impose rates on property. The preamble of the Rates Act recognises that ‘there is a need to provide local government with access to a sufficient and buoyant source of revenue necessary to fulfil its developmental responsibilities’. It also recognises that income derived from property rates is a critical source of revenue for municipalities to achieve their constitutional
objectives.4 This was confirmed in Kalil NO & others v Mangaung Metropolitan Municipality & others,5 where Leach JA explained: ‘Sections 152(1)(b) and (2) of the Constitution oblige municipalities to provide services to their communities in a sustainable manner. In order to do so, a municipality is empowered by s 229 of the Constitution to raise funds by imposing rates on property in a process regulated by national legislation — the applicable legislation being the Systems Act, the Finance Act and the Rates Act’.6
[12] Two conclusions follow: First, it is clear from the relevant provisions of the Rates Act and the Finance Act that the levying of rates is an integral part of a municipality’s annual budgetary process. 7 Second, the approval of the budget must go hand in hand with the determination of rates, as the revenue from rates is essential to fund the budgeted expenditure.8 It is for this reason that the property rate is determined for each financial year. It is only once the rate is determined that a municipality can estimate its income for the financial year and prepare its budget in accordance with that projected income. [13] To return to the main issue in this case, when is the property rate payable? In terms of s 13(1)(a) of the Rates Act, a rate becomes payable ‘as from the start of a financial year’. (Emphasis added.) In my view, the use of the phrase ‘as from’ as opposed to the word ‘on’ is significant. The phrase ‘as from’ denotes the commencement of a
period while the word ‘on’ specifies a particular date. If the word ‘on’ had been used by the legislature, the rate would have been payable on 1 July, the start of the municipality’s financial year. Support for this view can be found in Kleynhans v Yorkshire Insurance Co Ltd 9 where Schreiner ACJ said: ‘It seems to me that the important words are those that fix the commencement of the period, which here are ‘as from’ (‘vanaf’) the date on which the claim arose. Those words are the typical words of commencement that bring the ordinary civil method of computation into operation’.10
[14] In attributing a meaning to the phrase ‘as from’, regard must be had to the ordinary meaning of the words, which must be determined in the context of the statute, read as a whole, with reference to the scope and purpose of the statute. 11 The Rates Act defines a ‘financial year’ as the period starting from 1 July in a year to 30 June the next year. Section 13 falls under Chapter 2 of the Act which is titled ‘rating’ and is preceded by s 12(1), which provides that a municipality must levy the rate for a financial year and that a rate lapses at the end of the financial year for which it was levied. [15] There are other provisions in this chapter of the Rates Act that provide assistance in the enquiry as to when a property rate is payable. Sections 26, 27 and 28 deal with the method and time of payment of rates, the furnishing of accounts and the recovery of arrear rates from tenants
4 A report issued by STATS SA (last updated September 2016) entitled, the ‘Quarterly financial statistics of municipalities September 2016’, sets out the income of municipalities. The total income of South Africa’s municipalities for the quarter ending September 2016 was about R54 million, of which the income from property rates was over R15 million. See http://www.statssa.gov.za/publications/P9110/P9110September2016.pdf accessed on 15 March 2017. 5 Kalil NO & others v Mangaung Metropolitan Municipality & others [2014] ZASCA 90; 2014 (5) SA 123 (SCA). 6 Ibid, para 6. 7 South African Property Owners Association fn 6 above, para 32 8 Ibid. 9 Kleynhans v Yorkshire Insurance Co Ltd 1957 (3) SA 544 (A). 10 Ibid, at 550F-H. 11 Consolidated Mines of South West Africa Ltd v Administrator, SWA & another 1958 (4) SA 572 (A) at 599A-C; South African Property Owners Association v Johannesburg Metropolitan Municipality & others [2012] ZASCA 157; 2013 (1) SA 420 (SCA) para 55; Liebenberg NO & others v Bergrivier Municipality [2013] ZACC 16; 2013 (5) SA 246 (CC); 2013 (8) BCLR 863 (CC) para 39.
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and occupiers. These sections read, in relevant part: ‘26(1) A municipality may recover a rate‑ (a) on a monthly basis or less often as may be prescribed in terms of the Municipal Finance Management Act; or (b) annually, as may be agreed to with the owner of the property. (2)(a) If a rate is payable in a single amount annually it must be paid on or before a date determined by the municipality. (b) If a rate is payable in instalments it must be paid on or before a date in each period determined by the municipality . . . . 27(1) A municipality must furnish each person liable for the payment of a rate with a written account specifying(a) the amount due for rates payable; (b) the date on or before which the amount is payable; . . . . 28(1) If an amount due for rates levied in respect of a property is unpaid by the owner of the property after the date determined in terms of section 26(2), the municipality may recover the amount in whole or in part from a tenant or occupier of the property’.
[16] The import of these sections is that the rate may be recovered on a monthly basis or annually, subject to an election by the owner. In respect of both payment options, it is the municipality that determines the date by which payment must be made. It is the responsibility of the municipality to produce a statement reflecting the amount due in respect of rates and the date on which the amount is payable. Section 28(1) is of particular significance. Once the municipality has determined the amount due and the date on which such amount is payable, and the owner fails to make payment on the due date, the municipality may recover the ‘amount due’ from the tenant or occupier of the property.
Section 28(1) does not entitle a municipality to recover the rate levied for the financial year from the tenant or occupier. [17] Importantly the Act distinguishes between what is ‘due’ and what is ‘due and payable’. In terms of s 13, the rate becomes payable (in the sense of the obligation to pay arising at that stage) ‘as from the start of a financial year’. Section 26 empowers a municipality to determine when the rate is due. If a rate is payable in instalments then the municipality is required, by way of written accounts, to advise the payee of the date on which the rate is due. [18] In the context of prescription and the distinction between what may be claimed and what is payable this Court said the following in Union Share Agency & Investment Ltd v Spain:12 ‘The distinction between the indebtedness being subject to the happening of an event and the payment being so subject is a vital one, and should not be overlooked.’
This passage was quoted with approval in Trinity Asset Management (Pty) Ltd v Grindstone Investments (Pty) Ltd13 by Willis JA who went on to say: ‘The very phrase “due and payable”, ie both “claimable” and “payable” as at a point in time, indicates that “due” and “payable” are not coextensive with one another’.14
This court has held that the phrase ‘prescription shall commence to run as soon as the debt is due’ as used in s 12(1) of the Prescription Act 68 of 1969, means that: ‘[T ]here has to be a debt immediately claimable by the creditor or, stated in another way, that there has to be a debt in respect of which the debtor is under an obligation to perform immediately.15
[19] In terms of s 27 of the Rates Act, payment of the rate is subject to the happening of an event, namely, the municipality’s determination of the amount to be paid and the date by which payment must be made. A property owner’s obligation in respect
of property rates arises at the start of the financial year when the municipality determines the rate. If the rate is payable in instalments, an owner’s obligation to make payment arises once the municipality has determined the date of payment and amount due. Put differently, a portion of the debt in respect of rates becomes due from time to time. For these reasons, the argument advanced on behalf of the municipality, that the determination of an annual property rate is indicative of an intention that a single rate for the entire year is payable at the start of each financial year cannot be sustained. [20] Adopting the tools of interpretation already referred to, and having regard to the definition of ‘financial year’ and the provisions of ss 12(1), 26, 27 and 28, the words ‘payable as from’ in s 13(1)(a)’, must be interpreted to mean that the rate is payable within the period of the financial year and not on 1 July as contended by the municipality. Counsel for the municipality conceded that the legislature could have inserted the words ‘due and’ payable in s 13(1)(a), without offending the scheme of the Act if it was the intention that the rates should be due and payable on 1 July of each year. [21] It is rule of statutory construction that provisions which interfere with protected rights should be narrowly interpreted. It is clear that the municipality’s requirement for rates to be paid for a full year, as a condition for the issue of a clearance certificate in terms of s 118 of the Systems Act, adversely affects the rights of property holders to alienate their property. In my view s 13(1)(a) of the Rates Act should therefore be interpreted narrowly to mean that the word ‘payable’ only fixes the rate for the financial year, but does not mean that rate is also due at the same time.16
Union Share Agency & Investment Ltd v Spain 1928 AD 74 at 80-81. Trinity Asset Management (Pty) Ltd v Grindstone Investments (Pty) Ltd (1040/15) [2016] ZASCA 135 (29 September 2016). 14 Ibid, para 14. 15 Deloitte Haskins & Sells Consultants (Pty) Ltd. v Bowthorpe Hellerman Deutsch (Pty) Ltd 1991 (1) SA 525 (A) at 532 H-I. 16 City of Cape Town v Real People Housing (Pty) Ltd 2010 (5) SA 196 (SCA) para 9. 12 13
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[22] The final question to determine is whether a municipality can, prior to issuing a rates clearance certificate, insist on payment of all rates, fees and charges in respect of the property for the current financial year, even if this period extends beyond the date of the certificate. Section 118 of the Systems Act reads: ‘(1) A registrar of deeds may not register the transfer of property except on production to that registrar of deeds of a prescribed certificate(a) issued by the municipality or municipalities in which that property is situated; and (b) which certifies that all amounts that became due in connection with that property for municipal service fees, surcharges on fees, property rates and other municipal taxes, levies and duties during the two years preceding the date of application for the certificate have been fully paid.’ (Emphasis added.)
[23] In my view the section is clear and unambiguous. The certificate is issued in respect of municipal debts which have become due in the two years preceding the date of application for the certificate and does not apply to future municipal debts. In City of Johannesburg v Kaplan NO & another,17 this court said: ‘No property may be transferred unless a clearance certificate is produced to the registrar of deeds that certifies full payment of all municipal debts as described in s 118(1) which have become due during a period of two years before the date of application for the certificate’.18 (Emphasis added.)
[24] Clause 31 of the municipality’s rates policy provides: ‘In the case of an application for a certificate in terms of s 118 of [the Systems Act], the full amount which remains unpaid, inclusive of all instalments, for the remaining financial year shall be payable’.
This could include debts incurred
after the date of application for a clearance certificate. Section 3 of the Rates Act empowers a municipality to make policy not inconsistent with the Act. In any event, policy cannot override, amend or be in conflict with laws and legislative instruments, otherwise the separation between legislature and executive will disappear.19 [25] This court in City of Cape Town v Real People Housing (Pty) Ltd 20 was faced with a policy in terms of which the municipality sought to ensure payment of debts for more than two years preceding the date of application for clearance certificate. Nugent JA said that:21 ‘… any proviso that would have the effect of entitling the City to withhold a certificate until all debts were paid – would nullify the express language of the section and it might just as well not be there. I do not think it is necessary to cite authority for the trite proposition that a term cannot be implied in a statute if it would contradict its express terms. Had it been intended not to limit the period to two years then the words would not have appeared at all. The dilemma in which the City finds itself is that it has left debts outstanding for more than two years albeit that the statute contemplates prompt collection. No doubt there are understandable reasons why that is so but the City cannot resolve its dilemma by subjugating the statute to a policy that would frustrate its terms’.
[26] The clear intention of the legislature was to limit the period in s 118(1) to two years preceding the date of application for the certificate. The municipality’s policy contradicts the express terms of the statute and ‘would frustrate its terms’. To the extent that the municipality’s policy is inconsistent with s 118(1), it is ultra vires and void.
[27] To sum up: the relevant provisions of the Rates Act, the Finance Act and the Systems Act read together, buttress the contention of the respondent that the municipality was not entitled to withhold the property rates clearance certificate until it had received payment of the property rates for the entire financial year. Such property rates became payable (but not due) from the start of the financial year. Further, s 118(1) clearly applies to municipal debts which have become due in the two years preceding the date of application for the certificate and does not apply to future municipal debts. The question posed in para [3] above must therefore be answered in favour of the respondent. [28] The appeal is dismissed with costs.
LV Theron Judge of Appeal APPEARANCES: For the Appellant: SC Rorke SC Instructed by: Doreen Mgoduka Attorneys, Port Elizabeth Webbers, Bloemfontein For the Respondent: LA Schubart SC Instructed by: Greyvensteins Incorporated, Port Elizabeth Kramer Weihmann & Joubert Attorneys, Bloemfontein
City of Johannesburg v Kaplan NO & another 2006 (5) SA 10 (SCA). Ibid, para 26. 19 Akani Garden Route (Pty) Ltd v Pinnacle Point Casino (Pty) Ltd 2001 (4) SA 501 (SCA) para 7. See also Clinch v Lieb 1939 TPD 118 at 125. 20 City of Cape Town v Real People Housing (Pty) Ltd [2009] ZASCA 159; 2010 (5) SA 196 (SCA). 21 Paras 14 and 15. 17 18
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Regulation of Agricultural Land Holdings Bill published for comment The Draft Regulation of Agricultural Land Holdings Bill (Bill) was published on 17 March 2017. Members of the public are invited to comment. By William Midgley, Cliffe Dekker Hofmeyr
T
he Bill, if enacted in its present form, will have far reaching consequences on the agricultural sector, affecting all owners of agricultural land and, in particular, foreign nationals and owners of agricultural land holdings determined to be in excess of ‘ceilings’ for land ownership, which excess will be available for redistribution, with or without expropriation. There has been limited publicity in regard to this very important Bill, and Cliffe Dekker Hofmeyr has decided to issue this alert to highlight the significant effects of the Bill and to remind clients of the need to engage with it. The Bill makes provision for the establishment of a Land Commission (Commission) appointed by the Minister responsible for Rural Development and Land Reform (Minister). The Commission is to establish a register of public and private agricultural land ownership. Every owner of a private agricultural land holding must lodge a notification of ownership with the Commission in the prescribed form within 12 months of the commencement of the Act, if enacted in its present form (Commencement). The notification is to include the race, gender and nationality of the owner, and the size and use of the agricultural holding. If a person is a foreign person (see below) or becomes one or ceases to be one, that person must also file a notification within 90 days of such change of status. ‘Agricultural land’ means all land other than land which forms part of a proclaimed township or land in respect of which an application for the establishment of a township has been submitted prior to the Commencement, land which is excluded by the Minister by notice in the Gazette or which has been determined to be non-agricultural land in accordance with the Spatial Planning and Land Use Management Act, 2013. Every person who acquires ownership of a private agricultural land holding after the Commencement must lodge a notification with the Commission within 90 days of the acquisition. A Registrar of Deeds (Registrar) may
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not register the transfer unless the notification has been lodged with the Commission. A ‘foreign person’ will not be entitled to acquire ownership of agricultural land from the Commencement. A ‘foreign person’ is defined as a natural person who is not a citizen or not ordinarily resident in South Africa, a foreign juristic person (excluding a foreign juristic person controlled by a black person as defined in the Employment Equity Act, 1998 (Black Person)), or a juristic person in which a foreign person or foreign juristic person holds
The Bill makes provision for the establishment of a Land Commission (Commission) appointed by the Minister responsible for Rural Development and Land Reform (Minister). a controlling interest, which includes a trust. After the Commencement, foreign persons may only conclude long leases of agricultural land (30 to 50 years) and such long leases must be registered in a Deeds Registry within 90 days of conclusion. A foreign person wishing to dispose of an agricultural land holding must offer it to the Minister who will have a right of first refusal to acquire ownership of such land. The Minister must exercise the right within 90 days. If the Minister does not exercise the right, “the foreign person must make the land available for acquisition to the citizens”. This process will presumably be addressed in regulations. A Registrar may not transfer such land unless these provisions have been complied with. The Minister must, after consultation with the Commission and the Minister responsible
for agriculture, “determine the categories of ceilings for agricultural land holdings in each district”. In making such determination, the Minister is to have regard for various issues such as “land capability factors” (which include cropping factors, current output, soils, viability, water availability and infrastructure), capital requirements, annual turnover, income levels, price margins and other prescribed matters. Certain public statements indicate that an ownership cap of 12,000 hectares may be imposed on foreign persons. Owners of agricultural land must notify the Commission “of the identity of the portion of such agricultural land holdings which constitutes redistribution agricultural land in terms of the provisions of the Act” (Redistribution Agricultural Land). The Bill makes provision for an arbitration process to be followed in the event of a dispute between the owner and the Commission, regarding such excess land. A Black Person must be offered the Redistribution Agricultural Land within a prescribed period, whereafter the Minister will have a right of first refusal to acquire such land for a further period. If the owner and the Minister are not able to reach agreement as to the price for the Redistribution Agricultural Land, the Minister may expropriate the land in question, subject to the expropriation laws at the time. Institutional funds which are owners of Redistribution Agricultural Land may apply for exemption from these expropriation provisions. If you are of the view that the objectives of the Bill may impact on you, and you require our assistance in providing commentary on the Bill, please contact Directors William Midgley or Attie Pretorius timeously, before 13 April 2017, to discuss the same. Please note that comments received after 13 April 2017 will not be considered. We have not considered the constitutionality of the Bill, but presumably this will be addressed in the Parliamentary process. The gazette containing the Bill is available free online at www.gpwonline.co.za, or you can contact Cliffe Dekker Hofmeyr for a copy.
legal update
The Expropriation Bill - not the draconian law property owners and investors may think By Michael Evans
W
Michael Evans, Partner & Head of Public Law at Webber Wentzel
Critics of the Bill have proposed an alternative bill which requires the expropriating authority to obtain a High Court order before confirming a proposed expropriation, and paying compensation in full before the expropriation. While these criticisms are worthy of consideration, and while the Bill can certainly be improved in certain respects, it is doubtful that the constitutionality of the Bill will be successfully challenged on these grounds.
e have recently heard a lot of populist rhetoric centred on the need for more aggressive expropriation policies and “expropriation without compensation”. Some of the loudest cries have come from the President, the Economic Freedom Fighters and other political stakeholders. The long and short of it is a call for the State to be allowed to seize land from property owners without compensation. Although the call is a popular mantra to spout by politicians looking for votes in a country where land ownership is both highly contentious and racially skewed, the simple truth of it is that there will be no “expropriation without compensation” for as long as section 25 of the South African Constitution, which protects the right to property, remains as is. Until now land expropriation has been addressed in The Expropriation Act, which predated the South African Constitution by two decades. It is a draconian piece of legislation which confers extensive powers on the authorities (including government departments and municipalities) to expropriate. Little protection is given to property owners. More recently, the Expropriation Bill, 2015 (“the Bill”), has been introduced as a complete replacement for the Expropriation Act. The introduction of the Bill has created some anxiety for property owners and investors, but this may be misplaced given that the Bill is vastly superior legislation in all respects and has been drafted in accordance with section 25 of the Constitution. The two most important innovations which the Bill has introduced relate to the process which the authorities must embark upon before expropriating property, and the manner in which compensation is determined. The Bill provides that: ●● the “power to expropriate property may not be exercised unless the expropriating authority has without success attempted to reach an agreement with the owner or the holder of an unregistered right in property for the acquisition thereof on reasonable terms”; and ●● furthermore, before deciding to expropriate property, the expropriating authority must undertake an extensive investigation and
information gathering process in order to determine whether it is necessary to expropriate the particular property. Since expropriation is a drastic step which deprives the owner of a property of the owner’s rights, the Bill effectively says to the authorities: investigate thoroughly, and then do all in your power to purchase the property on reasonable terms before expropriating. In terms of the compensation to be paid for expropriated property, the Bill incorporates the 25 of the approach adopted in section Constitution, which requires the amount of compensation to be “just and equitable”. This involves the determination of the market value of the property, adjusted by four factors: the current use, the history of the acquisition and use of the property, the extent of direct state investment and subsidy in the acquisition and beneficial capital improvement of the property, and the purpose of the expropriation. The meaning of these listed factors and “just and equitable” will, however, need to be fleshed out by our courts over time. Critics of the Bill have proposed an alternative bill which requires the expropriating authority to obtain a High Court order before confirming a proposed expropriation, and paying compensation in full before the expropriation. While these criticisms are worthy of consideration, and while the Bill can certainly be improved in certain respects, it is doubtful that the constitutionality of the Bill will be successfully challenged on these grounds. Overall, the pre-expropriation steps introduced by the Bill are very significant improvements to the current Act, which is totally outdated and needs to be replaced. The Bill largely incorporates the approach adopted in section 25 and will protect the owners of property in a manner which the current Expropriation Act fails to do. It should, in fact, go a long way towards ensuring that potential investors in property in South Africa are not deterred. Following from this, it is important that any misplaced fears about the Bill are put aside and that for the sake of expropriating authorities and property owners the Bill is finalised as soon as possible. SOUTH AFRICAN PROPERTY REVIEW
21
education, training & development
The University of Pretoria, in conjunction with SAPOA, recently celebrated a graduation ceremony for the
Certificate for the Commercial Property Practitioner 2017 By Portia Mkhabela
This is the nineteenth year the course is being offered, and the seventeenth time the course is being offered on a correspondence basis. To date 554 participants have already successfully completed the Certificate for the Commercial Property Practitioner, out of a total of 1,051 participants who have registered for the course over the years – the pass rate is therefore about 53%.
S
APOA has once again celebrated a total of 47 students who graduated from the CCPP course in partnership with the University of Pretoria School of Enterprises. The programme was celebrated in an official graduation ceremony which took place on 22 March 2017, at the CSIR in Pretoria. All 47 students have fulfilled examination requirements and have improved their knowledge in the commercial property field. The following top three students have performed at a higher level, and were rewarded accordingly: Jeanne-Pierre Kuger with 83%; Catherine Ramautar with 78%; and Rian Thompson with 75%. This is the nineteenth year the course is being offered, and the seventeenth time the course is being offered on a correspondence basis. To date, 554 participants have already successfully completed the Certificate for the Commercial Property Practitioner, out of a total of 1,051 participants who registered for the course over the years, making the average pass rate approximately 53%. This course prepares candidates to have a well-rounded view of the Commercial sector and to have a sense of the importance of understanding market analysis, financial mathematics and the property aspects of the full course.
Structure of the Certificate: The course consists of 21 modules of varying lengths (for self-study) and one block session of three days of full-time study. If you are thinking of taking this course, I strongly suggest that you discipline yourself to work according to the following programme, by
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SOUTH AFRICAN PROPERTY REVIEW
spending at least two evenings per week reading and studying the material.
Modules included in the programme: ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●
Property Development Retail and Shopper Behaviour Property Law Elementary Financial Mathematics Office and Industrial Markets Planning Controls and Regulations Building Technology & Services Building and Design Economics Property Tax Property Valuations Property Management Property Maintenance Negotiation Property Marketing & Estate Agency Property Investment
Evaluation: To gain admission to the examination, you must achieve an average year mark of 40% for the six assignments and have attended the block session. To successfully qualify for the Certificate for the Commercial Property Practitioner (issued by the University of Pretoria) a participant must obtain a subminimum of 40% in the examination, with an aggregate pass mark of 50%. The examination carries a weight of 60% of the aggregate mark, and the assignments of 40%. Contact: Portia Mkhabela Education & Training Manager at SAPOA t: +27 (0)11 883 0679 e: education.manager@sapoa.org.za
education, training & development
Top Student Jean-Pierre Kruger
Second student Catherine Ramautar
Third student Rian Thompson
SOUTH AFRICAN PROPERTY REVIEW
23
alternative investments
Investing in retirement? When it comes to choosing retirement property, there is a plethora of options out there. We take a snapshot look at what retirement properties offer and what some of the costs are. Compiled from various sources by Mark Pettipher
A
s a retiree it is advisable to have any retirement scheme contract looked at by an attorney to check the fine print, and there are also a number of industry associations that can provide assistance, such as the SA Association of Retired Persons (SAARP), the Cape Peninsula Organisation for the Aged (CPOA), and the SA Older Persons Forum.
RETIREMENT VILLAGE LOCATIONS
% PER PROVINCE
What are the differences between an old age home and a retirement village? The South African Association of Retired Persons describes the essential differences as follows: An old age home is a facility, normally belonging to a Church, a Trust or a charitable institution that makes provision for people who have fallen on hard times economically. It is also, more often than not, a governmentally backed facility. Old age homes have strict norms and rules of acceptance relating to income levels, rules of residence, etc., and ownership doesn’t even come into the picture for residents. A retirement village is an economically viable property development that provides for people who have available capital to invest and want to see their money: i) purchasing additional living benefits; ii) possibly showing a return on their investment, and/or iii) providing a higher standard of support services, such as specialised medical facilities and a meal service, etc., on site. Ownership is decidedly an issue for these folk, and they demand a say in the way matters are run in order to protect their investment. The choice of a retirement village is much like the choice you make when buying a house.
Property ownership schemes There are four buy-in options: life right, share block, sectional title, and individual/full title, and in each option the buyer has the protection of the Housing Schemes for Retired Persons Act, of 1988.
What is the difference between the schemes? Paul Rosenbrock from SAARP gave us the following definitions:
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SOUTH AFRICAN PROPERTY REVIEW
00.81 .81 %
Source: As listed in the South African Yellow Pages
22.42 .42 %
%
331.45 1.45
00.81 .81 %
%
22.43 .43 %
%
116.12 6.12
%
99.67 .67
332.25 2.25
%
44.03 .03
AVERAGE COST TO BUY
AVERAGE COST per Sqm
Western Cape
R1,382,194
R1581
Northern Cape
R821,250
R1408
North West
R1,343,830
R1272
Eastern Cape
R753,275
R1238
Free State
R2,036,500
R1884
KwaZulu - Natal
R1,954,187
R998
Mpumalanga
R1,054,727
R1094
Gauteng
R1,810,638
R970
Limpopo
R1,140,509
R600
Source: The prices were mined from various web sites, namely, Property 24, mitula.co.za, privateproperty.co.za, trovit.co.za, the prices and sqm, were as listed in the asking prices on the various site, on average 12 to 15 prices and sqm were taken down from the various provinces, ranging from the highest to the lowest, no distinction has been made between 1,2 or 3 bedroom facilities - these prices are current as of 18 April 2017. Infographic created by MPDPS.com
alternative investments The Sectional Titles Act, 95 of 1986 as amended. This Act regulates the rights of purchasers and sellers when the format of ownership of property vests via sectional title, which is a common form of retirement village ownership. There is currently in progress the Sectional Title Schemes Management Bill which will regulate the functionality of bodies corporate and the rules under which they function. The Sectional Titles Schemes Management (STSM) Act, 8 of 2011 was gazetted and signed by the President in June 2011, and it is not a major diversion from the Act, 95 of 1986 mentioned above, but is rather part of a process of consolidating all housing development legislation under one roof, namely at the Department of Human Settlements. This Act is vitally important in terms of, for instance: ●● Approval of development schemes ●● Applications to open sectional title registers ●● Registration of ownership ●● Ownership of common property ●● Exclusive uses ●● Sales and letting ●● Rules ●● Bodies corporate, their functions and powers ●● Insurance and damage to buildings ●● Regulations and liabilities or exemptions.
because of its other benefits such as lower monthly levies and less administration, and it is also considered to be an option for buying into a lifestyle.” Some of the distinguishing features of this type of retirement ownership are: ●● The buyer has a legal right to occupy the property for the duration of his or her life. ●● There is no ownership of the unit. ●● There are usually lower monthly levies and administration costs, and a two year estimate of the levy is required up front, by law. ●● Less capital is required to invest in this scheme because there are no transfer duties, VAT or bond registration fees. ●● The developer carries the responsibility of maintenance of the property. ●● When the life right terminates, by death or sale, it reverts back to the owner of the village, who can then resell it. Once resold, your client’s estate will receive the original purchase price plus a percentage of the net profit. ●● The total sale price is unlikely to have kept up with property market values. ●● A life right cannot be bequeathed to children, nor can children buy it for parents with the intention of living there themselves.
Share block and sectional title These seemingly similar types of ownership offer a substantial improvement on life right from the perspective of a purchaser’s rights participation as ‘part owners’ of the whole complex.
Life right
Share block
Expressed in layman’s terms, it could be said that you are merely paying a large once‑off rental which lasts for the rest of your life. In addition, you will be contractually bound to pay a monthly fee (levy) that will be submitted to approval by the Trustees at an AGM for as long as you are a resident. There are quantifiable cost savings when buying into a life right scheme because, unlike sectional title developments, the property is not transferred, therefore there are no bond registration costs, transfer duties or VAT fees to contend with. According to Cobus Bedeker, Managing Director at Evergreen Property Development, “Life right is the most popular form of retirement home ownership internationally but, as a scheme, it is a relative newcomer to South Africa. It is considered ideal for those who have less capital to invest, or simply
The origin of the concept of share block development lies in the fact that originally there was no sectional title Act or legislation that allowed developers to give purchasers rights to parts of a building. The key features of this type of ownership option are: ●● The retiree owns a share in the company that owns the retirement village, and a share certificate is issued making the retiree a shareholder in the village. ●● A sale agreement is still required—transfer duty and conveyancing fees are paid. ●● A share block transfer is not registered in the Deeds Registry. ●● There are regulations controlling this type of ownership to ensure full disclosure to shareholders. ●● The shareholder plays a role in the management of the scheme.
●● A levy fund exists to meet the running expenses and all shareholders contribute to this fund. ●● Shareholders are not liable for the debts of the management company. ●● Financial institutions may not offer finance to buy into such a scheme because there is no security against the loan. In one of many references on the internet, the Durban law firm Garlicke & Bousfield is quoted as follows: “The ownership of the shares entitles you to the use and occupation of the unit, which is secured by a ‘use and occupation agreement’ which is concluded between the purchaser, who is now a shareholder, and the company. Whilst you do not obtain ownership of the unit, a shareholder plays a vital role in the management of the scheme through a general meeting of shareholders.” The Share Block Control Act, 59 of 1980 also makes provision and methodology for conversion of this type of ownership to sectional title.
Sectional title Most retirement complexes today are developed as sectional title, or full title, ownership. Sectional title ownership is fairly well legislated in terms of The Sectional Titles Act, 95 of 1986 as amended. Purchase in this format of ownership allows buyers to apply for mortgage bonds, and the sale and purchase agreements are well regulated in terms of the Act. Because
The Housing Development Schemes for the Retired Persons Act, 65 of 1988 as amended with the regulations that form part of the Act. This is the main point of reference anyone will require when investigating a retirement village development. It provides defaulted protection to purchasers in retirement villages with which developers have to comply, and inter alia the following provisions are made: ●● It lays down contractual formalities. ●● It lays down the content of contracts. ●● It defines right of occupation to have the status of a registered lease. ●● It requires occupation alienation to be subject to a title deed endorsement. ●● It lays out consequences of cancelled contracts. ●● It defines the relief a court may grant in respect of contracts.
SOUTH AFRICAN PROPERTY REVIEW
25
alternative investments The Older Persons Act, 13 of 2006 and its regulations. This is an ‘umbrella’ or principal Act that has been legislated in such a manner that it forces changes to any conflicting legislation that might exist, ensuring that conflicting legislation be changed so as to conform to the intent of this Act. The importance of this Act cannot be over emphasised, especially in the very late stages of life when one becomes frail and is unable to defend oneself, as in the following circumstances: ●● Abuse of senior citizens takes many forms, and can range from physical to mental and even financial abuse. This Act is your armchair because it allows you to report abuse and be able to expect action. It says, for example: “The Director‑General or the social worker to whom a report has been made must investigate the matter.” Chapter 5, Section 25(3). ●● An official’s failure to act on reports is an offence. ●● This Act comes into its own especially when frail seniors are in a care facility. ●● No Retirement Village with a Frail Care facility should be unaware of the Act and its requirements. ●● This Act goes a long way toward ensuring the dignity of senior citizens. ●● It is important to note that Chapter 5 of The Older Persons Act states, under clause 26: “(1) Any person who suspects that an older person has been abused or suffers from an abuse related injury must immediately notify the Director General or a police official of his or her suspicion. (2) A person is not liable in respect of any notification given in good faith in terms of subsection (1). (3) A person who fails to comply with subsection (1) is guilty of an offence.”
you have a title deed that has been registered in the Deeds Office, and your representation is ensured in terms of provision in the Act, people generally regard this form of ownership as more stable than share block. The developer of a sectional title development can accept deposits only once the sectional title register has been opened. Some features of this type of ownership are: ●● Ownership of the unit or cottage in the retirement village. ●● Ability to sell or transfer ownership. ●● Selling the unit may result in giving up some of the resale price to the developer, and typically you could expect to lose between 20 and 40 percent of your sale. ●● A portion of a resale generally goes towards a levy support system, which allows everyone’s levy to be stabilised and protected against sharp increases.
With sectional title levies, residents can anticipate paying municipal rates and taxes as well as services. Full title Anyone living in a normal residential security estate (not a retirement village) would find only a few differences between the two, the most obvious difference being the age of the residents and the absence of youngsters running around. The owners of retirement properties with individual title do not have to conform to the prescriptive requirements of the Sectional Title Act and don’t necessarily have to do an audit annually by law (although it is usually done), and they work with a Home Owners Association instead of a Body Corporate.
Levy stabilisation funds According to Jennifer Paddocks in a Paddocks Press Newsletter (2009) article, levy stabilisation funds are common in sectional title schemes designed for retired persons. The rationale behind them is that retired people usually live off a fixed income and cannot afford to pay large increases in their ordinary levies each year. These funds allow bodies corporate to either set the ordinary levies of their owners at a fixed rate or to keep increases at or below the rate of inflation. Typically, a levy stabilisation fund is funded by once-off payments payable by owners when they alienate their units. These payments are normally calculated by determining a percentage of the ‘profit’ an owner has made on his unit, for example 25% of the difference between the acquisition price (the price the owner paid for the unit) and the selling price or market value of the unit when it is resold.
What do levies cover? With life lights, it is common for the levies to include insurance of the buildings, security, village staff salaries, upkeep of the property and infrastructure, and refuse removal. Levies may also subsidise the cost of catering. Water, electricity, telephone, DSTV and insurance of household contents are usually for the resident’s account. In the case of share block ownership, all the shareholders contribute to a levy fund, set up by the directors to cover operational and maintenance costs. As with sectional title, the levy will differ from scheme to scheme. A resident should also anticipate paying for municipal rates, taxes and services. With sectional title levies, residents can anticipate paying municipal rates and taxes as well as services. The body corporate usually decides what the levies cover, so this will differ from one complex to the next.
Budget costs when buying into a retirement village 2 Bedroom cottage
1 Bedroom cottage
2 Bedroom terrace
1 Bedroom terrace
R1,785,000
R935,000
R895,000
R700,000
R1,651
R1,412
R1,425
R1,313
Municpal Levy
R505
R245
R260
R198
Basic care
R170
R170
R170
R170
R2,326
R1,827
R1,854
R1,737
Purchase price Village levy
Monthly cost
These costs have been worked out by looking at an overall average found on various retirement village websites and are meant as an indicator only; Basic Care costs will vary depending on the complex’s level of service offered
26
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investing in retirement
Making the case for life right The South African retirement sector is still in its infancy, but as in North America, Europe and Australia, it is expanding quickly. The increasing number of seniors looking at buying into retirement schemes are often frustrated by the lack of desirable retirement options. By Cobus Bedeker
A
s a retiree, assuming you find a suitable village in the area of your choice, you will be confronted with various considerations that could have a profound impact on your future and your quality of life. One of these considerations is the purchase model offered by the developer. Most common in South Africa are the freehold and sectional title schemes. However, the life right option is used more extensively in countries with more developed and sophisticated retirement industries. Whilst there are pros and cons attached to every model, this article discusses the merits of life right. These not only answer the needs of the South African retiree, but secure the guarantees necessary for a relaxed and stress‑free retirement.
What makes life right so attractive? A life right scheme refers to a contract whereby a resident enjoys the same privileges as if the home were purchased by freehold or sectional title, except that the developer remains the sole owner of the property. This is crucial in that the developer carries the responsibility of the management, maintenance and upkeep of the property
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and the village. The price of the life right is predetermined and is always market related. Essentially, the life right could be viewed as a housing product, an insurance policy and a good night’s sleep all rolled into one.
Security of tenure for life Life right is protected by an Act of Parliament, namely the Housing Development Schemes for Retired Persons Act, No. 65 of 1988. The Act confers the right of occupation for the remainder of your life and that of your spouse, via endorsement on the title deed of the housing interest. In other words, no developer or property owner can interrupt your right of occupation. This is powerful security for the life right holder.
Professional management In a life rights scheme the developer is fully involved and provides financial, estate, healthcare and operations management. This takes a huge burden off the shoulders of a life right holder. The developer’s vested interest in the scheme will inspire him to ensure excellent management, services and operational efficiency. Anyone who has invested in a sectional title scheme knows that group decision
making by residents in the form of a Body Corporate can often be a messy affair. Those with the loudest voices and not necessarily the sharpest minds tend to have the greatest say. In any event, the headache of managing a retirement estate when you are in retirement is not a welcome burden. Remember, a sectional title scheme is only as strong as its weakest link. When certain members can’t afford a special levy, there is no big brother to step in.
A partnership for life Because the life right developer is in the retirement business and continues to own the physical asset, he does not abandon the village as soon as the last unit is sold (as is the case with freehold and sectional title retirement schemes). The life right developer will be concerned about every aspect of village life from building and garden maintenance, effectiveness of the security systems, and healthcare solutions, to operational cost efficiency and the quality of services that contribute to overall resident satisfaction. The market value of the development and its sister schemes relies on positive testimonials from existing residents. Essentially, what is good for the life right holder is generally
investing in retirement good for the developer, and vice versa. This commitment ensures the development is kept in pristine condition and that values appreciate accordingly, to the benefit of both the residents and the developer. The same cannot necessarily be said for many freehold and sectional title schemes, where challenges of management and the ravages of time may well devalue the property, the shared facilities and one’s own home.
Transparent costs and levies While transparency in terms of operating costs is built into life right legislation, developers of freehold and sectional title schemes have little incentive to build ongoing cost efficiency and levy affordability into their developments. This is mainly because the maintenance of the scheme becomes the responsibility of each resident. The life right developer knows that ongoing maintenance and cost management is his responsibility and, if only for reasons of selfinterest, will embed quality, efficiency and affordability measures into the development, resulting in its cost competitiveness and attractiveness over the long term. In addition, there are no special levies because these are prohibited by the Retired Persons Act. Beyond this, the Act requires the life right developer to provide “a statement of the basis upon which any levy payable by the purchaser is to be calculated, and an estimate, for a period of two years in advance, of the amount of the levy”. In other words, the retiree enjoys being able to plan around predictable costs thanks to levy transparency. There is also no transfer duty or VAT on top of the purchase price with the life right purchase model.
Self-governance
Peace of mind
Independence and self-governance are basic human needs that come into sharper focus as people get older. Buying into a reputable retirement scheme with a sound governing structure provides this independence. While life right schemes are managed by a managing agent appointed by the developer, residents express their aspirations via a residents’ committee. Because the interests and fortunes of the developer and the life right holder are so closely linked, a wise developer will pay close attention to the needs of life right holders. Furthermore, retirees share a common need for maintaining independence, living in a secure environment, having access to quality healthcare, predictable overheads and an active social life. All these qualities, in addition to freedom from stress and worry are maximised in a life right scheme.
This is the ultimate objective of every retiree and can be achieved by purchasing a life right with a reputable developer like Evergreen Lifestyle. In summary, here are the most important elements that contribute to this peace of mind: Physical security: This is managed by the developer, who wants to ensure that the properties and their residents are secure. Financial security: This is achieved via flexible purchase options which may allow purchasers to liberate some capital from the sale of the family home, and predictable and transparent levies. Financial peace of mind is also a consequence of knowing that the scheme is backed by a financially secure developer. Healthcare security: Assisted through on‑site healthcare facilities and a 24‑hour medical emergency device in every unit, help
can be summoned at the touch of a button. Social interaction: This is secured by living close to people with similar needs and interests whilst providing a fun, loving and caring community. This is not to say that peace of mind cannot be secured via other means or schemes, but a well‑run life right scheme offers all of the above ingredients for a secure, happy and stress‑free retirement. We predict that the demand for quality, well‑managed retirement schemes will outstrip supply over the coming years. We also believe that (as has been found in the international retirement industry) we will see an increase in the demand for the life right scheme because it is so perfectly tailored to the needs of retirees. Cobus Bedeker is Managing Director of Evergreen Property Development, a lifestyle retirement business wholly owned by the Amdec Group. SOUTH AFRICAN PROPERTY REVIEW
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investing in retirement
Investing in retirement developments Property Review talks to Gregory Coe and Gavin Wolmarans of Old Mutual Alternative Investments about development funding. As a property developer, there are a number of ways to source funding, and Old Mutual Alternative Investments could be one option. By Mark Pettipher
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s a fund partner, the Old Mutual Investment Group acts as any other investor would: once a complete understanding of the development project has been attained, and before any funding is agreed, each development undergoes a thorough due diligence check. “It’s not just about the project, we specifically look at who the developers are,”says Development Impact Funds (DIF) analyst, Greg Coe. “It’s important to us to be associated with reputable and well established developers, after all once we endorse a project by funding it, the Old Mutual Brand then becomes visibly associated with the project; our reputation goes before us and so we must take care of it.” Old Mutual Alternative Investments (OMAI) is one of the largest alternative investment managers in Africa with in excess of R50 billion in assets under management. We manage investment in private equity, infrastructure and a range of impact funds. The Development Impact Funds’ team within OMAI manages commercially sustainable investments, which have a scale of impact and positive development outcomes in
Aerial view of Evergreen Noordhoek
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“Old Mutual Alternative Investments (OMAI) is one of the largest alternative investment managers in Africa with in excess of R50 billion in assets under management. We manage investment in private equity, infrastructure and a range of impact funds.”
South Africa. Coe explains that “the Old Mutual Retirement Accommodation Fund (OMRAF) was birthed out of this space.” The DIF team originates and actively manages assets across a range of funds. Its assets include investments in affordable housing, SMME and end-user finance, access to quality education and retirement accommodation. Focusing on OMRAF, it was set up to look into and find solutions to the strong and growing demand for retirement accommodation in South Africa relative to the comparatively limited supply and supply growth constraints in funding retirement developments. OMRAF is a fund that aims to address the unique accommodation needs in the South African retirement market. This sector is under-resourced because retirement accommodation development generally has additional moving parts and layers of complexity to assess and manage, generally requires upfront investment in infrastructure and communal facilities, and typically does not lend itself well to pre-sales; all of which creates a funding challenge
investing in retirement for banks on conventional lending terms. Gavin Wolmarans explains, “We as a niche fund, with a deep focus and specialisation in this specific segment of the market, are in a better position to take a longer term view to make commercially viable investments which optimise risk and return, to build our long-term asset base. We understand that the potential occupiers need to see what they are buying into,” he goes onto say, “We encourage our developer partners to make sure that the services being offered are in place upfront.” Retirement accommodation development is a long-term investment. “We know that this aspect of a development may not be going to give us an immediate return on investment, that is why we partner with developers that take as big a risk and have as much of an interest in the success of the development as we do,” says Wolmarans. “OMRAF utilises an active asset management approach in the selection, acquisition and origination of these assets. Our investments are structured as long-term strategic partnerships in order to achieve large scale impact with positive outcomes.” “When considering a retirement complex to invest in, we prefer to see integrated developments being planned. Integrated complexes offer a more modern way of thinking, with complete facilities available, which typically would include a modern care centre with access to medical assistance, future options of home care, restaurant and other lifestyle amenities which may include a gym, swimming pool and ease of access and getting around the village,” says Coe. There are a number of investment options open to investors when embarking on developing residential and retirement villages because there are a number of ways in which they may be sold to the end user, including as sectional title, freehold or as a life right—in some cases
there may be a combination—for example, freehold and rental investments. Each option carries its own specific legislation legislation and return profile. As opposed to, sectional title ownership or rental, life right ownership comes in the form of an upfront payment whereby the occupant is purchasing the right to use the property, but not own it, for the duration of his life or until he elects to sell and move on. Similarly each development is unique and
“Typically, a purchaser would be aged 55 and over but, having once bought in, it doesn’t mean that you’re stuck with the life right because, whatever your reason for needing to move out, you can sell the life right on.” purchasers need to consider the specific attributes of each development and the tenure types offered—life right sales may be structured differently across different developments. Life Right properties cannot be encumbered, while the developer maintains a permanent presence, which carries with it a greater obligation in ensuring the effective management of the retirement village. The developer or owner of the underlying property has a vested interest in the development as maintenance and repairs will have direct bearing on the resale of the life right.
A life right development is an investment product which will see a return for the investor or developer over a longer period of time— assuming an average occupant’s tenure of some 7 to 12 years—of as long as 15 to 20 years for the ROI. However the long-term, cash-flow generating portion of the life right investment offers potential value far greater than that of a sectional title ownership, as it returns to the developer, and can then be resold, thereby giving a greater return on investment. What is common to all types of villages is that there are levies to be paid for the upkeep and maintenance reserves. In the case of Life Rights, a developer would endeavour to have a balanced number of units in a development, in an effort to reduce the levy payable, which in many ways will make a life right retirement option more attractive to potential residents. It allows for the predictability and stability of the cost of the levy. A particular characteristic of a purchaser of a life right unit, is that purchaser is likely to already own a property, they would be looking for a secure environment and are more demanding in the lifestyle benefits, assistance and care services they require. In a sense they would be investing in a lifestyle and possibly looking to release capital from an existing property asset. Typically, a purchaser would be aged 55 and over but, having once bought in, it doesn’t mean you’re stuck with the life right because, regardless of your reason for wanting to move out, you can sell the life right on. Normally, the first right of purchase would have to go back to the developer, and this would be defined in the life right agreement. In most cases, sought-after retirement villages have fairly lengthy waiting lists, which means that selling on of the right should not be an issue.
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one on one
It’s not TUHF to get funding A woman in property with the drive to put the right solutions in place, Lusanda Netshitenzhe of TUHF Limited talks to Mark Pettipher of South African Property Review about TUHF’s very respectable track record for bringing new life and hope to our decaying inner cities and aging suburbs, and its plans for further fundraising
Words by Marguerite Lithgow
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ormed in June 2003, TUHF is certainly an investment success story with just over 22,000 currently active, affordable rental housing units on its portfolio—all TUHF funded, about 518 buildings, and a current active loan book countrywide of two and a half billion rand. Worth noting is that TUHF doesn’t provide home loans for owner occupiers but provides commercial property finance for private sector developers of affordable rental accommodation. One of TUHF’s key goals is to stimulate the economy through sound investments, enabling it to address the vast and escalating need for decent, low cost rental housing for the lower to middle income groups in South Africa. At TUHF, many in senior management came from the social housing sector at some point in their careers, and saw that the dilemma of insufficient available rental property could be solved if the many abandoned buildings standing empty in the inner cities were properly renovated and made viable again. With responsible owner landlords taking care of the rejuvenated buildings and their rent-paying tenants, the accommodation shortage could be solved, and at the same time, the cities would again start receiving much needed revenue from rates, water, electricity, and be in a position to reinvest in the inner city infrastructure, reviving and upgrading all the services usually provided by a municipality. By providing financial backing to starter and emerging private developers who want to enter the property market, TUHF empowers individuals from all backgrounds and walks of life to be owner developer landlords who then, in effect, serve the same markets that social housing institutions serve, whilst gradually redressing the deterioration of South Africa’s inner cities and some identified suburbs. It is an innovative commercial venture with clear objectives, and it is working. This lateral‑thinking project, which first got off the ground in Johannesburg’s inner city and included some of its older suburbs,
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now also operates in Durban, Port Elizabeth, Cape Town, and Bloemfontein. According to Lusanda, “Most people of low to moderate income find it difficult to live far away from places of work and economic opportunity, so when they can find decent affordable rentals in the inner cities at least they are living centrally, and can connect easily with transport to different work opportunities. When we ‘densify’ our cities we also retard the problem of urban sprawl. It does not make sense to spend money on creating a
“Most people of low to moderate income find it difficult to live far away from places of work and economic opportunity, so when they can find decent affordable rentals in the inner cities at least they are living centrally, and can connect easily with transport to different work opportunities.” brand new township in a peri‑urban area which has to be serviced from scratch by the city, at great expense, when there are all these existing empty buildings going to waste in an inner city where all the municipal services are already well established, simply needing to be maintained.” She continued, “TUHF is known as ‘a good business’ because we are proven to be commercially sound and we are unapologetic in our need to make good profit for our
investors and shareholders, but we are also intentional about the impact we want to achieve and prefer to be ‘a good business that does good’. Our investment policies have tangibly enriched and improved the lives of all the people with whom we deal, at each end of the investment cycle and at every stage along the way.” Now that we have recently received some funding support from National Treasury’s Job Fund programme, we are required to report back with details of the number of short term and long term jobs we’ve created, including the new retail outlet jobs created, and we ourselves are just starting to appreciate the very large impact we are making on job creation as a result of this partnership with National Treasury. At least 21 percent of our emerging entrepreneurs are women, and we strongly support women coming into the property arena for the first time. They tend to be nervous first time buyers, and are also anxious about the inner city environment, but they make excellent landlords. Take the case of ‘maJosephine’, whom we funded to purchase and renovate a building and who now provides a safe home‑away‑from‑home for University of Johannesburg’s out of town students. When she approached us for our assistance with purchasing this particular building, we engaged closely with her, discussed what she intended to do with the building, advised her on the right purchase price, explaining how far we could go to meet her financial requirements, and assisted with her application to our Intuthuko Equity Fund for her 20% equity contribution required, clarified all unfamiliar financial concepts (such as, what loan‑to‑value ratio means), and assisted her from acquisition, construction, all the way to the letting of the building. She recently completed our accredited training course, the TUHF Programme for Property Entrepreneurship (TPPE) facilitated
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Lusanda Netshitenzhe, Senior Manager at TUHF Limited
through the University of Cape Town for all our customers, and this has provided her with further post‑purchase guidance on how to manage money coming in from rentals versus money going out on invoices, how to reinvest in and maintain the building so that it continues to increase in value, and becomes her means of releasing equity for further future investment and growing her property investment portfolio. MaJosephine is just one of the many previously disadvantaged individuals (PDIs) through whom we have achieved our core goals of enabling access to finance to small and emerging property entrepreneurs and, in our own way, ensuring inclusive economic growth, land re-distribution by means of willing purchaser and willing seller, and successful transformation that targets ordinary South Africans. Access to finance is the most difficult, even insurmountable, phase for our new property entrepreneurs, who often come from nothing. They are essentially unbanked because commercial banks consider the inner cities to be risky and therefore we try to close the gap for those who cannot get funding in the usual sense. Before approving any funding application we consider the state of the building and the character of the purchaser, and the demand for the residential and retail accommodation that the building supplies so it sustains the undertaking. If we find these are positive, and specifically that the purchaser will be a reliable landlord for us to empower, we are generally happy to approve such a funding request.” Talking about making adequate provision for the future, Lusanda explained, “For TUHF to keep up with the ongoing demands made on it to continue to provide access to finance and decent, affordable rental housing in inner‑city areas, it is very important that we continually find innovative ways to raise investment funds. Discussions, still at the embryonic stage, are underway with the Social Housing Regulatory Authority (SHRA) about how we can use government’s funds
invested in the Social Housing sector to target the regeneration of inner cities. SHRA wants to bring in private sector landlords, which is a new and exciting route for them to take to provide social housing units using the entrepreneurial nature of private sector landlords, in this way increasing the scale and pace of social housing stock provision. In our efforts to keep our Intuthuko Equity Fund going and growing, we are also looking to initiate a dialogue with SAPOA with its strong property portfolio of big corporate investors with whom we would be keen to discuss an investment into this initiative. A SAPOA-driven leadership in this would provide a hugely influential kick start to something big for enterprise development, and which would work well for SAPOA investors in terms of tax benefits and BBB EE requirements too, as well as a relatively good return on investments.
In a nutshell, we ●● empower PDIs by giving them financial opportunity to enter the property market ●● fill a gap in the investment marketplace with our funding of the unbanked property sector in inner cities ●● provide decent, affordable rental housing to the lower to middle income groups ●● regenerate existing abandoned buildings, filling a big gap in the demand for residential as well as retail space in inner cities ●● enable the provision of decent affordable rental housing through the conversion of defunct inner city office and light industrial space into residential space ●● regenerate inner cities by reviving payment of rates, electricity and water to municipalities, giving them revenue to use towards maintenance of inner city infrastructure ●● fund and promote women in the property environment
●● contribute to the densification of existing cities, thus avoiding the unnecessary municipal expenditure of urban sprawl ●● contribute significantly to short term and permanent job creation ●● contribute to and encourage the greening of buildings and inner cities ●● provide good, reliable investment returns for our investors.” “For us at TUHF, it’s all about giving back.”
“For TUHF to keep up with the ongoing demands made on it to provide access to finance and decent, affordable rental housing in inner city areas, it is very important that we continually find innovative ways to raise investment funds. Discussions, still at the embryonic stage, are underway with the Social Housing Regulatory Authority about how we can use government’s funds.” SOUTH AFRICAN PROPERTY REVIEW
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one on one
Daylight robbery In a disturbing yet enlightening tête-á-tête with Mark Pettipher, Managing Editor of South African Property Review, Kalyani Pillay shared some of SABRIC’s statistical insights about the armed highwaymen who boldly traverse our highways and byways, effectually preying on unfortunate cash in transit vehicles at various points between pickup and delivery. Words by Marguerite Lithgow
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s South Africans get poorer and the unemployment percentage creeps upward on the graph, violent crime affecting the cash in transit and banking sectors likewise increases, the more noticeably because the determined perpetrators who move boldly in amongst us are becoming more openly single minded as they go about their infamous affairs. Most pertinent to us within the commercial property sector is that, with many shopping malls going up, it follows that a lot of banks and financial outlets are installed in these huge shopping malls, obviously with cash being moved from cash centres to them and vice versa. Measure for measure, with every new development arises the potential risk of an armed hold-up for cash in transit, ATMs or bank customers themselves., The cash in transit companies must protect not only the cash but also their staff who carry it, so they take the transit business extremely seriously. Increasingly worrying not only to them and the banking sector, but also to the South African Banking Risk
“We consider this to be a crisis situation at the moment, especially with the shocking degree of violence demonstrated and the barefaced brazenness of the criminals. Much needs to be done and we, the industry, will continue to work with the police, who are also keen to eradicate these crimes and put the perpetrators behind bars.” 34
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Information Centre (SABRIC) is that in recent years attacks against the banking and transit industry have steadily increased in ferocity, frequency and daring. This year alone there have already been over 70 attacks. For what used to be known as a ‘cash in transit heist’, now classified as a ‘vehicle-onthe-road attack’, there are various modus operandi that come into play when cash is moved. Vehicle‑on‑the‑road attacks are intended to capture bigger amounts of money by perpetrators seemingly in possession of ‘insider’ information about details of vehicle movements and cash contents. Another scenario, the ‘cross‑pavement attack’ happens when the cash canister or dispenser is actually being carried, either from the vehicle to the retailer, or to inside a mall, or out to the transit vehicle, and the category includes attacks at the point where an ATM is being replenished. SABRIC, a not‑for‑profit company, focuses on industry efforts in the banking and cash‑in‑transit sectors to combat organised crime, and the company is continually releasing collated facts, figures and statistical information about current and ongoing criminal activity in the field, to alert their members’ customers to extreme vigilance in an endless drive to stay one step ahead of perpetrators. Set up 15 years ago as a closed door collaboration, SABRIC does not extend its services beyond its two sectors, nor does it dilute the focus of its attention to services for its customers. Collaboration with other crime fighting organisations is considered crucial for success, SABRIC works closely with organisations like the Consumer Goods Council of South Africa representing shopping centres; the South African Petroleum Security Industry representing garage forecourt security that houses ATMs, and the South African Insurance Crime Bureau, to mention but a few. Each focuses on its own area, while standing united to fight collectively against crime, and also complementing each other whenever necessary. As Kalyani explains, “Our key mandate is to support the banks and cash in transit companies’ fight against organised crime. We
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Profile on Kalyani Pillay Originally from Pietermaritzburg, Kalyani studied for her BA LLB degrees at the University of Durban-Westville and the University of Natal, Pietermaritzburg campus in KwaZulu‑Natal. She is an admitted attorney and conveyancer and practiced in Pietermaritzburg for many years. In 1995, Kalyani joined Government as Head of the State Attorney’s Office in Johannesburg. As a governmental law firm, the State Attorney is part of the Department of Justice. In 2002, she moved to the National Office of Justice, giving up law to head up the Systems Management and Optimisation Unit at the ISM. A few years later, Kalyani joined the Director-General of Justice as his adviser and then went on to join the National Prosecuting Authority as a Special Director of Public Prosecutions. Just over nine years ago, Kalyani moved from the public sector to join the South African Banking Risk Information Centre (SABRIC) as their CEO.
look at crime risk end to end, and work closely with law enforcement as well as other public and private companies to prevent, detect, analyse and react effectively. Hosting a central crime risk information repository enables us to provide our members with products that assist them in crime risk mitigation. Our all‑round collaboration as a group is vital to ensure that our strategies and tactics are properly focused and effective. Cash in transit companies always have to consider that incidents happen in public places that are impossible to secure properly, such as shopping malls and strip malls, surrounded by members of the public and with businesses in the offing continuing as usual. CITs have a number of practical security mechanisms in place to circumvent attacks, which of course cannot be publicly shared. They also have, as a priority, the vetting of their personnel which is carried out in accordance with their policies and procedures. In addition, they try to take the value out of possessing the cash by deploying various mechanisms and technologies as part of their crime prevention initiatives. Staff training, too, is an important area and significant investments are made in this regard. Our CIT companies and banks take security matters very seriously and go way beyond the current prescribed minimum security standards. Their challenge is they are dealing with sophisticated criminal syndicates who operate across boundaries. Perpetrators are highly skilled, heavily armed, whether with automatic and semi‑automatic weapons, or explosives, and are ruthless in method and intent—as witnessed by motorists a few weekends ago. Criminals used explosives to blow the CIT vehicle apart in the midst of heavy traffic on the R24 in Johannesburg, causing widespread consternation and panic. Crime syndicates collude with whomever necessary to obtain the right information to plan their robberies, stopping at nothing to inform themselves via a whole host of sources. Unfortunately, those providing information are often the pawns, and not the kingpins who are the masterminds behind these incidents.
Shopping centres and retailers do a fair amount to try and secure their business areas. Many employ security personnel and utilise technology as well. Every time violent crime surges they review the security measures they have in place to see what they can do to upgrade it. Securing retail premises is extremely costly and no doubt has huge financial implications on the businesses concerned, and probably their customers too, to some extent. The police have a huge task on their hands. Investigations have to be solid to hold up in court, hopefully to result in significant sentences that will take the value out of
“Shopping centres and retailers do a fair amount to try and secure their business areas. Many employ security personnel and utilise technology as well. Every time violent crime surges they review the security measures they have in place to see what they can do to upgrade it.” committing this kind of crime. Of course, the investigations having to be completed first, SABRIC has its work cut out to support the police and prosecution and always hopes for the criminal justice processes to be speedy and effective. We do believe that fighting crime is a collective responsibility. An extremely alarming issue at the moment is the vastness of the sums of cash being stolen as in the very recent, notorious airport heist, and the mystery of where it’s all going? Whose coffers is it filling?” SOUTH AFRICAN PROPERTY REVIEW
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developments
Second wave of Waterfall development well underway The second wave of Attacq’s Waterfall development beyond the Mall of Africa is well underway. Waterfall is Attacq’s core development and is a catalyst for regional growth in Gauteng. Waterfall is now recognised and rapidly gaining favourable business stature, as people see what is happening in Waterfall City and the commercial development in the area. Waterfall is quickly developing into Gauteng’s new lifestyle city where people can live, work and play. By Willem Eksteen
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very aspect of the central business district, Waterfall City, has been planned and designed according to new urbanism principles to include the centrally located 1.3ha Waterfall Park, the world-class Mall of Africa, various office developments, pedestrian-friendly landscaped sidewalks and more. “The concept behind Waterfall is to create a new lifestyle city where people can live, work and play,” explains Morné Wilken, CEO of Attacq. Attacq is a South African company with a quality diversified portfolio and development pipeline. “Waterfall is a strategic priority for Attacq as an infill development that is easily accessible, close to major transport. One must note that Waterfall, with Waterfall City as its nucleus, is in the centre of Gauteng as the economic hub of the country. It is the ideal infill development between Johannesburg and Pretoria with excellent access and infrastructure,” he says. “The urban fabric was a key design consideration for Waterfall and was used to create public spaces that encourage both pedestrian movement as well as pedestrian pause areas. The overall result is a park-like environment across the city that is not only pleasant to look at but also entirely usable,” says Wilken. During construction, more than 27,000 jobs will be created in Waterfall and upon completion around 60,000 people will work in the city and surrounds. “Attacq is proud to invest, develop and grow Waterfall and Waterfall City as a world class lifestyle city,” states Pete Mackenzie, Head of Development at Attacq. “Attacq has internalised the complete development and management of Waterfall City. We are in the unique position that in the future, Waterfall will be a city that has been developed, owned and managed by a single company—Attacq,” says Mackenzie.
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“Our crown jewel, Waterfall, Mall of Africa, performed above expectation in the eight months of trading to 31 December 2016. The Mall of Africa generated an exceptional monthly average trading density of R2,777 per square metre and achieved more than 1.1 million visitors per month since opening on 28 April 2016. The mall’s average gross rental per square metre is about 16% below other comparable super regional malls. This positions Mall of Africa well for future value growth,” says Wilken.
The second development wave
“Waterfall is a strategic priority for Attacq as an infill development that is easily accessible, and close to major transport. It is notable that Waterfall, with Waterfall City as its nucleus, is set in the centre of Gauteng as the economic hub of the country.” Morné Wilken, CEO of Attacq
Four more buildings were completed in Waterfall in the last nine months. The Allandale, Dimension Data, Torre Industries and Amrod buildings increase the total directly held gross leasable area by 70,424 m2 in Waterfall. The second wave of the Waterfall development will enhance the lifestyle experience at Waterfall even further. “We look forward to the opening of the PwC Tower and Annex in February 2018. The opening of the PwC Tower will add an additional 3,500 mostly high LSM people to Waterfall,” says Wilken. “Currently we have active enquiries for more than 298,000m2 of additional business space in Waterfall, including 172,000m2 of light industrial space,” added Wilken. An exciting agreement has been concluded with BMW Group South Africa where a Regional Distribution Centre (RDC) of 32,000m2 will be developed by Attacq for the luxury German vehicle maker in Waterfall Distribution Campus. Construction on the RDC facility started in March 2017. The imposing Gateway West building, located on the Magwa Crescent entrance into Waterfall City, will be completed in November 2017. The contemporary building has a gross lettable area (GLA) of 13,891m2. The Gateway West building will be the first of two iconic identical buildings in line with the modern
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architecture of Waterfall City. The buildings are located adjacent to the Mall of Africa, and office workers will be able to take a short stroll to the Mall of Africa and all it has to offer. Waterfall Point, opposite the Waterfall Polo Fields, is a unique offering not currently available elsewhere in the city. Waterfall Point is a contemporary sectional title office development that is being offered for sale.
Sustainable development Waterfall is also set to become a sustainability change agent in Gauteng. “Environmental sustainability is an important focus for the Waterfall development team. The intention is for the Gateway West building to achieve a Silver Leadership in Energy and Environmental Design (LEED) green rating by design,” explains Wilken. “Attacq is testing business cases for sustainable technologies across waste, water, carbon, and energy, as well as piloting behaviour change programmes with tenants. Energy and water ratings of all our buildings is an ongoing process as these are not only good practice in transparency, but also shed light on where we can improve most efficiently.”
Visionary development in Gauteng’s growth node On its strategic journey to invest, develop and grow, Attacq has made significant strides. Attacq’s partnerships with Sanlam, Equites,
PwC Tower and Annex
Zenprop and Barrow are taking shape, to deliver exciting development opportunities across Waterfall and beyond. It is important to note that all joint ventures are entered into for strategic value and not only for the sharing of the financial burden. In addition to being a sound investment decision, Attacq was appointed developer and asset manager for most of these joint ventures.
Wilken stresses that an investment in Attacq is a good one because of the high quality, long-term investment proposition of the Attacq portfolio. “The Waterfall development pipeline for the next 10-15 years holds significant investment promise. The diversification of the Attacq portfolio in South Africa and further afield ensures sound risk management,” concludes Wilken.
Gateway West building
SOUTH AFRICAN PROPERTY REVIEW
37
developments
Table Bay Mall
Beautiful West Coast landmark Inspired by the curved, flowing lines of the world’s most elegant power yachts, this new regional super mall with its sophisticated maritime design promises an excellent fit in a West Coast milieu, an apt climax to a seven‑year creation. As D-Day approaches, design architect Imraan Ho‑Yee, Partner at Vivid Architects, shares with South African Property Review’s Mark Pettipher some exciting challenges he overcame with rigorous, innovative design. Words by Marguerite Lithgow
W
Imraan Ho‑Yee, Partner at Vivid Architects
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SOUTH AFRICAN PROPERTY REVIEW
ell sited at the heart of the Big Bay, Bloubergstrand and West Beach area, home of the middle‑ to upper‑income group, and lying within the residential expansion corridor of Cape Town, Table Bay Mall supplies the full tenant mix of local and international retailers, and presents a plentiful spread of family and up‑market restaurants and food outlets. This world-class mall is well positioned to bring together this area’s fractured retail offering, and it draws in a host of new stores to the area including the new H&M, a welcome addition. Parking, devised primarily to streamline the shopper’s life, provides 1,000 above ground parking bays in front of the mall, and 2,000 undercover bays directly beneath the retail plate. Thanks to its canny design, shoppers will be pleasantly surprised to find themselves equidistant from their cars regardless of which mall exit they use, making the return to the car easier for anyone carrying parcels. Pioneering designer and driving force behind the project, Imraan Ho‑Yee, with an
impressive ten regional shopping malls under his belt, remarked, “Large shopping centres are really very interesting and, sadly, this might be the last super mall of its type constructed within the Cape Town metropole for the next five years because, at this point, there is probably nowhere else to put one.” Recalling earlier times, he continued, “All those years ago there was very little housing in close proximity to the site, where now the houses have reached our site boundary. Opportunely, the original owners, Garden Cities earmarked this site for some retail in their early planning, and we were fortunate to be involved at the land allocation phase; they allowed us to parcel the site to suit our own requirements. The result was a good, rectangular site, all rights in place, great frontage on the main road and sea front, allowing incredibly efficient use of site—fantastic at all counts, one of the best sites I’ve worked on.” With the Canal Walk and Tyger Valley shopping malls being more than 12.5 km
developments away and difficult to reach because of the traffic, Imraan’s client was successful in securing the mall’s main anchor tenants such as Pick ’n Pay, Woolworths, and Checkers, which encouraged the smaller retailers to sign up as well.
De-risking and future proofing “The notions of convenience, easy-in access, easy-to-find parking, and easy-to-find destinations are very big selling points; and crossing out every negative of the shopping experience is our stance. There’s no throwing money at a problem to solve it. Our foundational principal is that the more de-risking you do the less likely the centre is to fail. It’s all about meeting every development problem with clever design and value engineering if you wish to safeguard an excellent rate of return on your investment,” explains Imraan. “The parking arrangement with two-thirds of the parking below the retail level is incredibly convenient for shoppers. The initial parking area is optimised for the first phase of 68,000 square metres of retail space, but provision has been made to provide for parking requirements for future phasing of up to 90,000 square metres of retail space. The building sits slightly above ground with gentle ramps to the lower level parking, so the approach leads straight into the structured bays. Lifts and stairs at each of the three main lobbies are well positioned for direct access to the retail level. A lot of planning has gone into accommodating future growth. One example of this is the roof design, which allows for easy extension. If anchor tenants trade unbelievably well, their turnover per square metre reaches a point at which they are over trading. If we ease that by allowing them to organically grow there’s a good chance of keeping them in the long-term, effectively future-proofing the investment.”
MAJORS G002 G026 G050 G053 G142 FASHION G006 G008 G009 G010 G016 G028 G032 G038 G042 G044 G045 G046 G206
The green approach and sustainability “Currently, in Green Star terms it is difficult for a developer to get a Green Star rating for a retail shopping centre because generally the landlord is in control of about only 17% of the overall built area (the public areas and common areas). The individual tenancies have control of their specifications for fit-out and services, and all are unique. However, where possible the developer has driven sustainable solutions. These include natural day lighting via a central mall skylight. This greatly reduces the need for lighting in daylight hours in the public
G028
G026
G004
G206
G202 G204
G002
G009
G008
G006
G003
G013 G010 G012
G212
G208
G016
G014
G214 G216
G222 G218 G220
G017
G228
G226
Liquor G142
G120
G141
G502
G122
G140
G254
G118
G040
G316
G314
G312
G042
G043
G311
G309
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G252
G116
G250
G112
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G106
G246
G108
G100
G242 G240 G238
G099
G128
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G097
G336 G332 G333 G334
G086 G083
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G088
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G090
G338
G080 G082 G081
G342
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G084
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G348 G350
G078
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G352
G076
G075
G094 G402
G404
G405
G407 G408
296 m² 215 m² 100 m² 180 m² 750 m² 2468 m² 703 m² 967 m² 700 m² 800 m² 300 m² 100 m² 159 m²
Pick ‘n Pay
Woolworths Checkers
Checkers Liquor
Pick n Pay Liquor Trappers Shop
Green Cross Old Khaki
Cotton On H&M
International Retailer Mr Price
Ackermans Pep
Shoe City Shop
Relay Jeans
G214 G216 G218 G220 G222 G224 G226 G228 G304 G306 G308 G311 G312 G314 G316 G318 G320 G322 G324 G326
120 m² 121 m² 118 m² 121 m² 209 m² 335 m² 306 m² 1088 m² 46 m² 252 m² 223 m² 416 m² 533 m² 183 m² 200 m² 250 m² 997 m² 153 m² 155 m² 121 m²
Frasers
Call It Spring Aldo
Guess
Forever New Markham Identity
Truworths Shop
Exact!
The Fix Shop
PnP Clothing Refinery Shop
Miladys
Foschini Shop
Poetry
Tread & Miller
Shop G327 53 m² Shop G329 42 m² RESTAURANT / FAST FOOD Shop G054 48 m² Famous Brands G055 365 m² Shop G056 100 m² Burger King G058 196 m² Shop G059 133 m² KFC G060 167 m² Romans Pizza G061 132 m² Shop G062 61 m² Shop G064 57 m² King Pie G065 51 m² Shop G066 50 m² Dunkin’ Donuts G069 83 m² Baskin Robbins G070 80 m² Melissa’s G088 301 m² Lupa G090 269 m² Mythos G092 497 m² Catch G094 476 m²
G357 G358 G356
G049
G048 G050
G359
G053
G070
G072
G074
G069
G061
G411
G412
G413
G414
G416
G063
G051
G068 G067
G052
G066
G060 G410
G406
Turn ‘n Tender G096 346 m² Mugg & Bean G098 303 m² Wimpy G124 272 m² Ocean Basket G126 239 m² Shop G128 135 m² John Dory G132 400 m² Spur G136 548 m² Panarottis G138 400 m² Restaurant G139 165 m² Shop G140 272 m² SPORTSWEAR & LEISURE Shop G106 147 m² Mr Price Sport G108 649 m² Shop G112 768 m² Sportscene G208 436 m² Due South Escapes G212 112 m² Shop G238 176 m² Shop G240 175 m² Archive G242 150 m² Total Sport G244 346 m²
G047
G360 G362
G065 G054
G064
G092
spaces, offering a huge saving on energy usage. Where lighting is required, energy efficient systems, lamps and fittings are used throughout the project, incorporating LED technology. We’ve provided for the retro fitting of solar panels on the roof so that the correct and latest technology can be installed at the appropriate time. All services such as air-conditioning, ventilation, and water usage are selected with sustainability and on-going running costs in mind. The centre has an intelligent parking system (number plate recognition) with app-based payment, provision for good public transport links, coach facilities, taxi areas, bicycle parking, and signage for ‘Uber’ pick-up locations have been considered. Waste management and storm water detention for irrigation are routine, and from here on, using a grey water system will be standard for us in every project, using the extensive roof space for collection. A project like this is a massive generator of local employment, creating jobs for four to five thousand people in terms of the construction phases, as well as the ongoing staffing. This project’s total capex sits at around 1.4-1.5 billion, thus a significant investment in the community.”
3488 m² 6733 m² 3500 m² 176 m² 241 m²
G046
G304 G302
G056
G062
G136 G132
G045
G306
G324
G329
G236
G044
G308 The Fix
G327 G244
G126 G138
G038
G318
G326
G253
G124
G139
G032
G320
G234 G258 G256
G030
G018
G224
G055
G058
G059
G417
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Cape Union Mart G246 309 m² New Balance G248 205 m² Cross Trainer G250 182 m² Due South G252 220 m² HOME DECOR & FURNITURE G014 1506 m² @home G040 1677 m² Mr Price Home Shop G059 133 m² Pep Home G072 270 m² Shop G080 101 m² Shop G081 95 m² Shop G082 88 m² G084 1613 m² Coricraft Shop G086 46 m² Shop G332 150 m² Shop G333 150 m² Shop G334 60 m² Shop G336 212 m² Shop G338 40 m² Shop G340 342 m²
Shop G342 50 m² Sheet Street G354 204 m² SERVICES & CELLULAR Shop G051 17 m² Shop G052 39 m² Shop G067 21 m² Shop G068 21 m² Vodacom G122 110 m² Shop G141 136 m² Cell C G302 52 m² Shop G356 39 m² Shop G357 33 m² Shop G358 60 m² MTN G360 99 m² Shop G362 51 m² Shop G405 81 m² Shop G407 69 m² Shop G140 139 m² Jawitz Offices G412 279 m² Century 21 G413 137 m²
G414 223 m² SPECIALITY G003 75 m² G004 780 m² G013 100 m² G017 110 m² G047 115 m² G048 70 m² G049 237 m² G074 550 m² G075 764 m² G076 62 m² G083 49 m² G097 300 m² G099 400 m² G234 184 m² G236 544 m² G309 80 m² G350 119 m² G417 68 m²
Shop Execuspec Shop Shop Typo Bargain Books Shop Shop Shop Shop Shop Shop Musica Incredible Connection Shop Exclusive Books Torga Spec Savers Shop
HEALTH AND BEAUTY G078 1353 m² Clicks G100 1200 m² Dischem Wellness Warehouse G328 151 m² Shop G344 77 m² Shylocks G346 77 m² Revona G348 100 m² Tosca G352 107 m² KIDS G063 1001 m² Jump 21 - Ground Toys R Us G116 860 m² Shop G118 105 m² Shop G120 126 m² Keedo G253 69 m² Shop G254 90 m² Shop G256 98 m² Galaxy G258 51 m² JEWELLERY Shop G012 48 m² A Swiss G018 60 m²
G030 G043 G202 G204 BANKS G402 G404 G406 G408 G410 G411 G416 GYM G502
50 m² 37 m² 51 m² 50 m²
Sterns
422 m² 282 m² 457 m² 90 m² 388 m² 142 m² 420m²
Standard Bank
1823 m²
Virgin Active Ground
In this type of typical rezoning phase, whereas any local City Council would not impose pre-requisite conditions on developers to employ or up-skill local labour, a project like this is a massive generator of local employment, creating jobs for four to five thousand people in terms of the construction phases, as well as the ongoing staffing. SOUTH AFRICAN PROPERTY REVIEW
39
Shop Shop Prime Time
Shop ABSA Old Mutual FNB African Bank Nedbank
developments
We’ve engineered a truly Active façade “The building’s unusually long façade, beautiful roof design, cost measuring 560 metres facing directly on to effective and simple. the forecourt parking area is an active façade operating as a busy high street. Working with a wide Consequently, tenanted by lively, building and a minimum interesting, glass‑fronted shop fronts, it has tremendous pedestrian edge! pitch of three degrees, we The active frontage works extremely were challenged to avoid well for the banks, Virgin Active took a fantastic corner location overlooking the internal walls reaching R27, and we’ve placed along it some 15 metres when five outwardly facing feature restaurants with external entrances and seating which are metres was quite backed by the picture postcard view of sufficient. Table Mountain. We’ve engineered a truly beautiful roof design, cost effective and simple. Working with a wide building and a minimum pitch of three degrees, we were challenged to avoid internal walls reaching 15 metres when five metres was quite sufficient. After some very creative engineering we dropped the roof in the central zone and maintained a low overall mean for all internal walls, thereby saving considerable building costs. For retail reasons we incorporated two subtle but essential mall features that work
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SOUTH AFRICAN PROPERTY REVIEW
incredibly well. First, we have designed very short entrance lead‑ins (statistics show the first twenty metres don’t receive good customer attention) with all entrances slightly angled towards the parking, so wherever you come out you are not far from your car. Second, by designing the four main malls along a slight curve, we have achieved excellent view lines to every anchor no matter where you are in the mall. Future‑proofing is an integral part of our design philosophy. A key aim was longevity of design rather than a fashionable finish. This required a slightly different architectural approach for the interior, striking a fine balance between choice of material for look and feel, and capital outlay. For the floor tiles we moved away from traditional porcelain or ceramic options and instead chose a conglomerate marble in a tile; in five years the floor can be re‑polished to renew its finish and appearance. Another exciting material we used extensively is off shutter concrete, which we are hand polishing and sealing. Amazingly, it’s beautiful once hand polished, becoming incredibly hardwearing and scuff proof. For the interior we’ve used natural timbers, stone, polished concrete and marble contrasted against glass, and polished stainless steel. In the parking areas we’ve been particular about the roadway, which has a sandstone aggregate paver finish to it. It is all the small subtle details that have given a warmth and texture to the finished look while still maintaining our contemporary design approach.” Roll on 27 September — the West Coast awaits….
REITs
SA REITs a sound investment platform Real Estate Investment Trusts (REITs) as a sector dates back to 1969 when the first two property funds were listed on the JSE, and it was established for individual and institutional investors to invest in a diversified portfolio of investment grade properties, allowing this on the same basis as if buying the properties directly. The South African listed property sector has seen market capitalisation rise from below R5 billion in the early 1990s to approximately R6 billion in 2000, then soar to R24 billion in 2004, R200 billion in 2012 and R380 billion at the end of 2016. In addition, volume traded in this sector has risen from about R600 million in 1995 to about R6 billion in 2004 and R165 billion in 2016. Today there are 27 SA REITs for investors to choose from, and, an increasing number of these have diversified into property holdings Laurence Rapp, SA REIT Association Chairman (CEO of Vukile Properties)
T
he growing South African listed property sector was represented by two associations – first, from 1984 the Association of Property Unit Trusts (APUT). Then, joining it, from 2004 the Property Loan Stock Association (PLSA). These two representative bodies worked together, and spearheaded the drive to introduce a best-of-breed REIT dispensation for South Africa. To formulate and steer the process, a working group was formed comprising representatives of the PLSA, invited participants from unlisted property loan stock companies, the South African Property Owners Association (SAPOA) and the Association of Property Unit Trusts (APUT). It engaged stakeholders such as National Treasury and SARS, the JSE and FSB as vital contributors in aligning the new structure with easily recognisable and understandable existing global standards. Instrumental in making the SA REIT sector what it is today – one of the most active and innovative sectors on the JSE – the two associations joined to become the SA REIT Association with the introduction of the SA REIT in May 2013, which placed the listed property sector on a par with similar investments around the globe. The SA REIT ensures that the vehicle for the monetising and listing of property assets in South Africa is consistent with REIT structures internationally, making the sector more attractive for international investors.
in international markets. Continuing its impressive track record of driving best practice for the sector, the first edition of the SA REIT Best Practice Recommendations for the sector were published by the SA REIT Association making it even easier for analysis and comparison of different SA REIT counters, and providing investors with greater transparency, consistency and comparability. This also plays an important role in attracting global flows of capital into the South African listed property sector.
Types of SA REITs:
Trust REIT:
All SA REITs own income-producing property. Prior to SA REIT legislation there were historically two forms of listed property investment entities in South Africa: property loan stocks companies (PLSs) and property unit trusts (PUTs). Both were able to adopt the REIT regulatory framework set out by the Johannesburg Stock Exchange (JSE). The structure is flexible and allows SA REITs to be managed internally or externally, and caters for different equity structures that may exist, such as A- and B‑linked units that have different rights that existed in some property loan stock companies.
●● An existing PUT will become a SA REIT upon application to the JSE and after providing evidence of its compliance with the JSE Listing Requirements and that it is registered with the Registrar of Collective Investment Schemes. ●● Investors’ interests are protected by a trust deed and the trustee, whose role it is to ensure compliance with the Collective Investment Schemes Control Act and to safeguard investors’ assets. ●● The Trust REIT needs to meet all JSE listing requirements but are not subject to the Takeovers Regulations. ●● Trustees report to the Registrar and must meet all the requirements of the Collective Investment Schemes Control Act. ●● Must have an external asset and property manager in terms of the Collective Investment Schemes Control Act.
Company REIT: ●● In a Company REIT shareholders are active participants. They enjoy the full protection of the Companies Act and the Takeovers Regulations Panel. They can vote on specific issues in a general meeting. Shareholders vote for the company to be a REIT. ●● The company has the REIT structure recorded in its memorandum of incorporation. ●● Company directors are responsible for its ongoing compliance with the JSE’s listing requirements and the Companies Act. ●● Companies can have external or internal management and/or property administration.
SA REITs invest in all types of property: Most SA REITs own several kinds of commercial properties like shopping centres, office buildings, factories, warehouses, hotels, hospitals and even, to a lesser extent, residential properties, in cities and towns across the country. Some even invest in properties in other countries. SOUTH AFRICAN PROPERTY REVIEW
41
CTCC investments
Investment confidence in Cape Town Central City Conservatively, approximately R16.232 billion of investment has been committed to the Cape Town Central City since 2012, spanning from that year to 2019. This is according to the latest edition of The State of Cape Town Central City Report: 2016—A year in review. By Samantha Bartlett
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Rob Kane, Chairperson of Cape Town Central City Improvement District
With the City of Cape Town’s official property valuation in the CCID footprint having reflected a nominal value of just under R23.725 billion in 2014/15, the most recent valuations (2016/17) revealed that these now stood at just over R30.628 billion. 42
SOUTH AFRICAN PROPERTY REVIEW
ublished for the fifth consecutive year by the Cape Town Central City Improvement District (CCID), the report (which annually reflects on the economic climate in the CBD across the previous year) details that between 2012 and the end of 2016 just under R4.486 billion in property investment was completed. There is also currently R4.32 billion under construction, and another R7.426 billion is either in planning or in proposal development phase. Says Rob Kane, chairperson of the CCID: “We use the term ‘conservatively’ as we base our calculations only on developments for which we have been able to confirm investment values. Sometimes the costs of developments announced have not yet been revealed by developers, and thus the numbers we publish in the report are only those that have appeared somewhere in the public domain.” With the City of Cape Town’s official property valuation in the CCID footprint having reflected a nominal value of just under R23.725 billion in 2014/15, the most recent valuations (2016/17) revealed that these now stood at just over R30.628 billion. This, notes Kane, could take values well beyond R42 billion by 2019, taking all current construction and proposed projects into account—a 77% increase in property values in the CCID footprint within just a four-year period. “We are, however, quite humbled to see the enormous confidence in the Central City that has been reflected in these reports since we published the first one five years ago. And, of course, there are numerous other developments that are happening just on the boundaries of the Central City—in areas neighbouring directly onto the CBD—from the Culemborg area in the south east to the V&A Waterfront in the north west that also reflect the overall confidence in the development of the downtown region.” There was also enormous anticipation around the City of Cape Town’s proposed Foreshore Freeway Precinct Project, in which it
is hoped successful public-private partnerships will be formed to bring much needed affordable housing to the Central City. Notes Kane: “We have a substantial CBD workforce that commutes many hours a day to get to work and spends up to 40% of their income just on transportation. The values of private property in the CBD, even of under-utilised commercial buildings, are now such that it has become difficult for private developers to construct affordable housing, but a public-private partnership could very successfully enable this to finally occur.” Adds Carola Koblitz, CCID communications manager and the editor of the report over the past five years: “We are very aware that for a downtown to succeed as both a business and residential node, it must be accessible to all economic groups if you are to create a truly vibrant downtown community. Because of this, we have also included in this year’s report extensive analysis on the four different ‘nodes’ or precincts that exist within the Central City footprint. We’ve researched everything from the value of developments since 2012, the breakdown of business sectors and the type and volume of retail that exists in each precinct to where educational institutes and residential complexes are located—and in terms of the latter, who’s living where and what their lifestyle preferences are.” This has also been done to outline where new business or development opportunities may lie, says Koblitz: “For example, the night time or ‘after hours’ economy of the Central City now has more to cater for than just the late night club goers. We estimate there is currently a residential population nearing 7,000 which could well grow to a community of around 12,000 by 2019. There is also growing interest from call centres in the area—we currently have 37 just in the Central City alone. These are all people who could benefit enormously from expanded retail offerings and extended retail opening hours beyond 17h00 on a weekday.
COMMERCIAL PROPERTY TRENDS AVERAGE PRECIPITATION (MM)
20
20
30
50
70
90
100
70
50
40
20
20
The Cape Town CBD is the only major T H E S TAT E O F C A P E T OW N C E NT R A L C I T Y R E P O R T 2 0 16TH E STATE O F CAPE TOW N C E NTR AL C IT Y R E PO R T 2016 inner-city area in South D O I NAfrica G B U S Ibucking N E SS I N TH E C E NT R A L C I T Y D O I N G B U S I N E S S I N T H E C E NT R A L C I T Y the trend of office vacancies remaining The Cape Town Central City (an area covering 1.62km²) is the traditional downtown high. While national inner-city office of the metropole of Cape Town, which itself is situated in the Western Cape province of South Africa. The following gives some background to the context vacancies year on year were up in which each of these destinations find themselves, and provides a deeper 40bps to 15.5%, the Cape Town CBD’s understanding towards the Central City. vacancies have continued to drop, the latest year on year from 10% to 9.4%.
CAPE TOWN IN CONTEXT
CTCC investments
Commercial property in the Cape Town CBD continues to grow overall from strength-toTown’s gross geographic product strength against the previous year underCapereview. R424.377 R3 069.817
9.9%
SOURCES: City of Cape Town Economic Performance Indicators for Cape Town report, Quarter 2 (April – June) 2016; www.weatherbase.com and www.cape-town.climatemps.com
ERCIAL COMMERCIAL PROPERTY TRENDS RTY TRENDS billion
billion
35.5%
17.2%
(GGP) as a percentage of the National GDP (the second-highest metro in the Johannesburg “It wouldcountry, appearwiththat much of 15.39% the world’s economy, including South Africa, has and eThekwini 9.2%)
Western South Africa’shigher than Although slightly at Cape’s the GDPthe City of CapeGDP end of 2015, Town taken on a holding pattern and this is further portrayed in the country’s GDP overall continues to have the lowest growth figures. However, Cape Town seems to have escaped the downturn and 1 officeCAPE vacancy rate of all GROSS SouthVALUE-ADDED African TOWN’S HIGHEST (GVA) SECTORS ITS ECONOMY Theto Cape Townthe CBD is theeconomy. only majorWe continue construction activity here continues boost local The Cape Town CBD is theINonly major municipalities (as at Q3 2016), at 7.6%. inner-city area in South Africa bucking inner-city area in South Africa bucking to see high levels of activity in and around the Cape Town CBD, the V&A Focusing on the Cape Town Central the trend of office vacancies remaining vacanciesasremaining Waterfront well as the Atlantichigh. Seaboard. These activities certainly indicate City, the fourth quarter of 2016 sawthe trend of office While national inner-city office national inner-city office Community Transport still vacanciesFinance sit at 9.4% overall, downhigh. WhileTrade the level ofManufacturing confidence that investors have inyear thewere future vacancies year on up of our city.” on year were up services vacancies yearJOHN from 10% in December 2015. MATTHEWS, president of the Master Association the Western Cape 40bps toBuilders 15.5%, the Cape TownofCBD’s 40bps to 15.5%, the Cape Town CBD’s Commercial property trends outlined in the The most significant drop in vacancy vacancies have continued to drop, the (MBAWC), www.netwerk24.com, 11 October 2016 vacancies have continued to drop, the 2015)in premium report also demonstrate confidence in the rates POPULATION in the CBD(AS hasATbeen latest year on year from 10% to 9.4%. latest year on year from 10% to 9.4%. Central City. According to figures supplied by (P) grade, which has declined significantly year on year from 25% in 2015 to the South African Property Owners Association Cape Town 13.8% in South 2016.Africa There have alsoWestern been Cape (SAPOA), commercial vacancy rates are down Available for leasing Vacancy rate (%) Average gross asking GRADE Total rentable notable drops in A grade (from 9.1% to 9.4% overall, from 10% in 22015, with the Although higher than at the rentals (R/m )has area (m2) that much of the world’s economy, including South “It would appear Africa, to “It 6.7%) andslightly C grade (from 16.4% to world’s economy, UNEMPLOYMENT would appear that much of the including South Africa, has most significant drop occurring in the Premium end of 2015, City taken on2015 a holding2016 pattern and this is further portrayed in the country’s GDP 11.9%), the latterthe due in of noCape smallTown part 2015 2016 2015 2016 2015 2016 taken oncontinues a holding pattern and thisofisthefurther portrayedLITERACY in the country’s GDP grade where year-on-year vacancies have Expanded unemployment: 8 879 779 overall have the lowest to the conversion of to C1 grade space into growth figures. However, Cape Town seems to have escaped the downturn and Premium 52 000 52 000 13 000 7 200 25% 13.8% 185 185 unemployed people in South Africa during fallen from 25% (in 2015) to 13.8% (in 2016). office vacancy rate of all South African growth figures. However, Cape Town seems to have escaped the downturn and residential and hotel accommodation construction activity here continues to boost the local economy. We continue also held municipalitiesactivity (as at Q3 2016), at .6%. quarter of 72016, 462boost 442 lived inlocal349economy. occupancy130rates have A the grade 883 361We 883 continue 31 819 24 310 9.1%Retail 6.7% 133 construction here continues over the course ofthe thesecond last 18 months – to to see high levels of activity in and around the Cape Town CBD, the V&Adecline overall on the Town Central CapeCape While the official unemployment relatively fi rm, with a marginal to Focusing seesethigh levels ofTown. activity and around the Cape501 Town CBD, the V&A a trend to continue into 2017.in B grade 612 509 362 36 865 52 555 7.3% 10.3% 95 105 Cape Town’s Seaboard. These activities certainly indicate Waterfront National as well as the Atlantic City, the fourth rate quarter of 2016 saw forasSouth Africa duringSeaboard. 2016 averaged from 95% in 2015 to 94% in 2016. Residential The only category in which vacancies Waterfront as well the Atlantic These activities certainly indicate literacy rate literacy rate C the gradelevel133 106 363that 21 808 12 679 have16.4% 11.9%of our75city.” 75 vacancies sit at around 9.4% overall, down of 317 confidence investors still in the future to 27%, inyearCape Town figure rose was B grade, which26showed continues to do extremely well, says Koblitz, the level that investors stillthis have in the 1future of 1our city.” from 10%ofinconfidence December 2015. TOTALS 96 744 10.0% 036 812 029 608 103 492 9.4% JOHN MATTHEWS, president of the Master Builderswith Association of theunit Western at 7an.3% average ofMaster around 21%. on-year movementstood from to 10.3%. the average priceCape across the Central JOHN president Builders Association of the Western Cape TheMATTHEWS, most significant drop of in the vacancy (MBAWC), www.netwerk24.com, 11 October 2016 City having increased from R2.031 million in SOURCES: City of Cape Town Economic Performance Indicators for Cape Town report, Quarter 2 (April – June) (MBAWC), www.netwerk24.com, 11 October 2016 rates in the CBD has been in premium 2016; www.weatherbase.com and www.cape-town.climatemps.com 2015 to R2.337million in 2016, an increase of (P) grade, which has declined significantly COMPARATIVE OFFICE RENTAL RATES 2012 TO 2016 COMPARATIVE15.06% OFFICE VACANCY RATES 2012 TO 2016 year on year. year on year from 25% in 2015 to 13.8% in 2016. There have also been Koblitz, Rentals March 2012 to December 2016 Vacancies“However, March 2012” tonotes December 2016 “we are also Available for leasing starting Vacancyto ratesee (%) a healthy Averagesteadying gross askingof the GRADE Total rentable 40 200 notable drops in A grade (from 9.1% Available for leasing Vacancy rate Average gross asking GRADE Total rentable rentals (R/m2) area(%) (m2) (from 16.4% to 180 to 6.7%) and C grade market: the year-on-year increase between 35 rentals (R/m2) area (m2) 2015 2016 2015 2016 2015 and 2015 2016 stood2015 160 11.9%), the latter due in no small part 2014 as high as2016 30.86%, but 30 2015 2016 2015 2016 2015 2016 2015 2016 140 to the conversion of C grade space into Premium 52 000 52 000 13 000 7 200 25% 13.8% 185 this also came off a very low185base as the 25 and accommodation Premium 52 000hotel 52 000 13 000 7 200 25% 13.8% 185 185 120 residential a residential A grade 349 883 361 883 31 819 24 310 interest 9.1% in the 6.7%CBD as130 133 node was the course of the last 18 months – 20 100 over A grade 349 883 361 883 31 819 24 310 9.1% 6.7% 130 133 really only revived from around 2014 a trend set to continue into 2017 . B grade 501 612 509 362 36 865 52 555 7.3% 10.3% 95 105 onwards, 80 15 B grade 501 612 in 509 362 vacancies 36 865 52 555 7.3% 10.3% 95 105 following the burst of the financial market The only category which 60 C grade 133 317 106 363 21 808 12 679 16.4% 11.9% 75 75 10 (and property with it) globally at the end rose was B133 grade, year- 12 679 317 which 106 363showed 21 808 16.4% 11.9% 75 75 40 C grade TOTALS 1 036 812 1 029 608 103 492 96 744 10.0% 9.4% 5 on-year movement from 7.3% to 10.3%. of the 2000s.” 20 TOTALS 96 744 10.0% 1 036 812 1 029 608 103 492 9.4%
16.9%
13.3%
11.1%
perty in the Cape Commercial Town CBD property in the Cape Town CBD continues to grow overall from strength-tow overall from strength-toagainst previous review. 54 956review. 920 the6 200 098 year 3under 957 798 the previous yearstrength under SUMMARY OF RENTAL OFFICE SPACE IN THE CBD (as at Q4 2016)
462 442
83.3% 92.5%
De 013 c2 M 013 ar Ju 201 ne 4 Se 2014 pt De 201 SOURCES: Western Cape construction activity continues despite c2 4 01 economic conditions, Cape Business News; 8 September 2016 SOURCES:MWestern ar 4 Cape construction activity continues despite 2 economicJconditions, Cape Business News; 8 September 2016 un 015 e2 Se 015 M pt ar Ju 201 De 20M1 ne 2 c 2 5ar M J0u1n5 201 Se 2012 ar e 2 pt 20 Ju 20S1 201 ne e6p 2 De 12 t 2 c2 Se 016 201 M 01 pt De 2 a 2 c De 20M16 20 Ju r 201 c 2 a 12 ne 3 0J 1 r 20 2 un6 13 Se 013 e2 pt 20 Se 013 D ec 13 pt 2 De 2013 M 013 c ar M M 20 2 J 13 ar un 014 e Ju 2J01 ar 2 ne un2 01 Se 2014 4 e pt Se 20S12 20 De 201 pt ep 14 20 t c2 4 01 De D1e2 2014 M c2 c2 ar 4 M 0M1 014 Ju 201 ar 2ar ne 5 Ju 2J0u1 20 2 ne n3e 15 Se 015 pt 20 20 Se S1e3 1 2 De 01 pt pt 5 c2 5 De 20D1e3 201 M 015 c2 c 5 a 2 r M 0M13 015 Ju 201 ar ar ne 6 Ju 2J0u1 201 Se 2016 ne n4e 6 pt 2 Se 20S1e4 016 De 2016 pt pt c2 2 2 De 0D1e 01 01 c 2 4c 6 6 20 0 M 14 16 ar Ju 201 ne 5 2 Se 015 M pt ar Ju 201 De 20M1 a ne 2 c 2J 5 r 20 u M 01n5e 12 Se 2012 ar 2 pt 20 Ju 20S1ep 012 ne 6 t 2 De 12 0 c2 Se 20D1e6 12 M 01 pt c a 2 2 De 20M16a 012 Ju r 201 r c 2J 2 ne 3 0u1n 013 2 Se 013 6e 2 pt Se 013 2 pt De 013 c2 De 2013 c2 M 013 ar M 013 Ju 201 ar ne 4 Ju 201 ne 4 Se 2014 pt Se 2014 pt De 201 c2 4 De 201 c2 4 M 014 ar M 014 ar Ju 201 ne 5 Ju 201 2 ne 5 Se 015 20 pt Se 15 2 pt De 01 c2 5 De 201 c2 5 M 015 ar M 015 ar Ju 201 ne 6 Ju 201 ne 6 Se 2016 pt Se 2016 pt De 2016 De 2016 c2 c2 01 6 01 6 HIGH
LOW
May June
8
17
23
Dec
111
Nov
8.7hrs
Oct
Annual number of rainy days
Sept
Daily sunlight
Aug
16
July
14
22
12
20
10
18
8
17
8
16
20
5
5
0
20
10
40
20
15
50
10
20
70
15
25
P GRADE A GRADE B GRADE C GRADE Vacancies March 2012 to December 2016 100
20
30
90
25
35
48.33mm
Apr
475mm
Mar
Monthly precipitation
Feb
Annual precipitation
Jan
19
11
22
13
24
15
25
17
70
25
17
50
30
Transport
40
35
11.1%
60
Cape Town’s literacy rate
80
30
120 100
20
9.9%
140
20
R424.377 billion
13.3%
Manufacturing
LITERACY
Vacancies March 2012 to December 40 2016
1 All180 information on this page is as per40the SAPOA quarterly reports, www.sapoa.org.za 160
Cape Town’s gross geographic product (GGP) as a percentage of the National GDP (the second-highest metro in the country, with Johannesburg 15.39% and eThekwini 9.2%)
Cape Town
P GRADE Rentals A GRADE B GRADE C GRADE 2016 March 2012 to December
83.3% 92.5%
National literacy rate
tals March 2012 to December 2016 200
0
COMPARATIVE OFFICE RENTAL RATES 2012 TO 2016 COMPARATIVE OFFICE VACANCY RATES 2012 TO 2016 COMPARATIVE OFFICE VACANCY RATES 2012 TO 2016
3 957 798
E OFFICE RENTAL RATES 2012 TO 2016
Western Cape’s GDP
Expanded unemployment: of the 8 879 779 unemployed people in South Africa during the second quarter of 2016, 462 442 lived in Cape Town. While the official unemployment rate for South Africa during 2016 averaged around 26- to 27%, in Cape Town this figure stood at an average of around 21%.
0
0
0
P GRADE
A GRADE
B GRADE
C GRADE
A GRADE
B GRADE
C GRADE
P GRADE
P GRADE
A GRADE
B GRADE
A GRADE
B GRADE
C GRADE
C GRADE
1 All information on this page is as per the SAPOA quarterly reports, www.sapoa.org.za
as per the SAPOA quarterly reports, www.sapoa.org.za
SOUTH AFRICAN PROPERTY REVIEW
43
CAPE TOWN’S WEATHER | AVERAGES
17°C
Temperature
AVERAGE TEMPERATURE (°C)
AVERAGE PRECIPITATION (MM)
CAPE TOWN IN CONTEXT
The Cape Town Central City (an area covering 1.62km²) is the traditional downtown of the metropole of Cape Town, which itself is situated in the Western Cape province of South Africa. The following gives some background to the context in which each of these destinations find themselves, and provides a deeper understanding towards the Central City.
Trade
16.9%
R3 069.817 billion
17.2%
South Africa’s GDP
35.5%
Community services
CAPE TOWN’S HIGHEST GROSS VALUE-ADDED (GVA) SECTORS IN ITS ECONOMY
Finance
Western Cape
6 200 098
POPULATION (AS AT 2015)
South Africa
54 956 920
UNEMPLOYMENT
SUMMARY OF RENTAL OFFICE SPACE IN THE CBD (as at Q4 2016) SUMMARY OF RENTAL OFFICE SPACE IN THE CBD (as at Q4 2016)
462 442
than at the Cape Town e the lowest all South African 2016), at 7.6%. Town Central of 2016 saw verall, down r 2015. drop in vacancy een in premium clined significantly in 2015 to ave also been e (from 9.1% rom 16.4% to no small part grade space into commodation ast 18 months – into 2017. hich vacancies h showed yearm 7.3% to 10.3%.
CTCC investments
CAPE TOWN CENTRAL CITY
IN NUMBERS
The following figures give an overall viewpoint of private and public enterprise across the entire Central City as these stood in December 2016 when research undertaken.
40
EMPLOYMENT & RECRUITMENT AGENCIES
97
EDUCATIONAL INSTITUTES & RESOURCES
82
R30 628 149 724
BUSINESSES IN THE CBD The following indicate in which categories and subcategories the 3 061 entities doing business in the Central City operate. These exclude government facilities, which are listed elsewhere on these pages.
THE VALUE OF CENTRAL CITY PROPERTY The City of Cape Town’s most recent official property valuations report (as at 2016-17) shows the overall nominal value of all property in the CBD to be R30 628 149 724.
92
30
Accountants
53
25
Business development
297
11 69
Adult Bars & entertainment clubs
54
There are 209 eateries whose primary function is to serve food.
44
OF THESE:
131 45 33
SOUTH AFRICAN PROPERTY REVIEW
Museums
ARCHITECTURE, ENGINEERING & SURVEYING
Architecture
ENTERTAINMENT (INCLUDING CLUBS, THEATRES, BARS & EATERIES)
EATERIES
12
Libraries
32
7
Engineering
Surveying
INVESTMENT, 217 FINANCE, INSURANCE & BANKING
In addition, to this, there is currently (conservatively) R12.086 billion of property currently under construction, planned or proposed for the Central City, to be completed by 2020 (and including those that were completed late in 2016).
1 The external and independent resources that have been used throughout this publication are sited in Sections 2 and 3, as well as in the acknowledgements at the end.
3
Education
209
Eateries (see more below)
FREIGHT, CUSTOMS BROKERING, SHIPPING & IMPORT/EXPORT
12
Freight forwarding & customs brokering
or 62% are RESTAURANTS, of which 11 (8%) also function as bars/clubs or 22% are FAST FOOD/TAKEAWAY OUTLETS or 16% are COFFEE SHOPS
4
Conference venues inside complexes
12
Import & export
OF THESE:
103 36
Financial services & banking
23
Investment companies
172 ACCOMMODATION & TRAVEL 65 4 21 86 Accommodation venues (including student hostels)
Theatres or places of performance
30
Shipping companies
69 16
Insurance brokers
or 33% are open after 18h00 or 8% are open seven days a week
Embassies
Travel services
37
ART & DESIGN STUDIOS
CTCC investments RETAIL
GOVERNMENT FACILITIES
Of the 627 retail outlets, the top 20 retail types are (by numbers of venues):
THERE IS A TOTAL OF 182 GOVERNMENT FACILITIES, BROKEN UP INTO: NATIONAL
PROVINCIAL
LOCAL
60%
21%
19%
109
38
Communications & advertising
678
189 5
Media companies
40
HEALTH & BEAUTY (INCLUDING SPAS & GYMNASIUMS)
Non-profit organisations
Parastatals
SPECIALIST SERVICES
Courier services
INDUSTRIAL 102 NPOS, COUNCILS & PARASTATALS 22 39 6 10
Political parties
184
131
Call centres
627
Retail (see top right)
8
Other specialist services companies
25
Religious services/ places of worship
COMMERCIAL & RETAIL SPACE
1 042 605m²
Retail administration
total rentable commercial space available in the CBD, of which 105 319 was available at December 2016
ICT & TELECOMMUNICATIONS (INCLUDING CALL CENTRES)
71 ICT
137 75 56 49 47 31 27 26 22 20 19 17 16 12 12 11 10 10 7 6
The balance of 17 outlets include those dealing in adult entertainment, plumbing & bathroom fittings, postage & courier, fabrics & haberdashery, auctioneers, DVD rentals, floristry, and educational toys.
RETAIL SALES, ADMINISTRATION, MANUFACTURING & DISTRIBUTION
Clothing manufacturers & distributors
37
Film & TV companies
Corporate Energy Food Mining head offices companies companies companies
MEDICAL PRACTICES
654 19
Clothing Jewellery Furniture, lighting & decor Motor & related Hair salons Galleries Cellphones & accessories Specialty Superettes (independent) Electronic, photography & music Health & beauty Curios Sports & outdoors Books, cards & stationery Liquor Hardware & locksmiths Department stores (national chains) Printing, copying & lamination Tailors Eyewear/opticians
29 317
CORPORATE OFFICES 28 GENERAL (INCLUDING HEAD OFFICES) 7 10 8 3
LEGAL SERVICES (FROM ADVOCATE OFFICES TO LAW FIRMS)
Industrial councils
22 638
35
58
Total number of general public using these facilities daily:
79 COMMUNICATIONS, MEDIA & ADVERTISING 32 29 18
PROPERTY & REAL ESTATE
96
Total number of government employees:
91%
the average occupancy rate across all grades of commercial property in Q4 2016 (up from 90% Q4 2015)
23
Telecommunications
279 579m²
total rentable retail space available in the CBD, of which it was estimated 95% was occupied as at Dec 2016
LIVING IN THE CENTRAL CITY There is currently a total of 57 RESIDENTIAL COMPLEXES, including those under construction as of 31 December 2016.
During 2016, a total number of 228 units were sold against a total value of R533m.
Average price per unit
R2.337m
Average size per unit
71m²
Average price per m²
R33 921
In December 2016, there were 116 units available to rent, against the following average rentals per month: STUDIO/ BACHELOR
R10 608
ONE BEDROOM
R15 081
TWO BEDROOM
R22 290
SOUTH AFRICAN PROPERTY REVIEW
THREE BEDROOM
R27 500
45
investment overview
Property, a robust investment Commercial real estate has the potential to offer more stable, higher-yield returns over the long term. Its fundamentals remain strong as commercial real estate continues to provide attractive, risk-adjusted returns in a low-interest rate, low-return environment, leading to a sustainable, predictable yield. By Remi Kuti
W
here are the best opportunities to invest in commercial property?
United Kingdom
Remi Kuti, Senior Managing Partner at Worldwide Property Partners
It’s very important to understand your motivation for buying or investing, then to make sure you buy in the right location. It is highly advisable to carry out due diligence in all aspects of the property prior to exchanging contracts because, from that stage, the parties are obligated to complete.
The UK has a diverse and extensive property market which is experiencing a long period of growth in both size and value. There is a consistently high demand for property and, because of this, there are almost always new opportunities for investors. There is also an ever-increasing number of people looking to rent in the UK. Getting involved in commercial property investment will more than likely yield some solid returns over the next few years for investors. The United Kingdom is one of the top overseas destinations that has attracted property investors since the turn of the century. Chinese real estate investment in London has been phenomenally high, at $2.8 billion. Minister David Cameron, the UK’s former prime minister, made a concerted effort to encourage more Chinese to invest in the UK and to strengthen ties between the two countries. The most attractive aspect of the UK for investors is the city of London. Owning an apartment in an upmarket London neighbourhood such as Brentford, Belsize Park or Wimbledon is considered to be a status symbol among the well healed. But it’s not just about London, there are many investment opportunities in much smaller cities such as Manchester and Newcastle.
New Zealand New Zealand ranks number two in the world on the International Property Rights Index. Property prices are not especially low, but the overall population of this island nation is relatively low. This has made for an uncrowded market with lots of room to grow.
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SOUTH AFRICAN PROPERTY REVIEW
Spain Demand for Spanish property has shot up over the last 12 months, buyers being attracted by Spain’s Golden Visa scheme, which guarantees residency permits in Spain to non‑EU investors who buy Spanish properties worth 500,000 Euros or more. Spanish costs are a lot less than those in London or Paris. Barcelona is the favourite destination in Spain, while Valencia remains popular too. At the moment, Spain is an excellent choice for anyone wishing to invest in value‑added projects. The country’s housing market was hit hard by the global financial crisis but, after seven years in free fall, housing prices took a turn in 2014 and have been on the rise ever since.
Singapore Singapore is said by many to be the best place to live in Asia. Singapore has always been one of the most popular countries with property hunters, but this year it falls out of the top five because of measures introduced by the Singapore government to curb property purchases by investors.
Canada Investors like the fact that Canada offers one of the highest standards of living in the world. One can buy a 4‑bedroom home in Canada for around CAD$1.3 million. Although the property market in Canadian cities such as Vancouver and Toronto is hot, this is nowhere close to the property prices seen in New York or London.
Australia Australia has always been popular, many investors finding Australia attractive because of its weak dollar. Like Canada,
112X277 WOMENS BREAKFAST-2.pdf
investment overview industry news
1
2/22/17
6:15 PM
industrial news
Australia has one corruption of the best standards of Prevent living in the world, a great lifestyle, high on qualitygovernment education, a love for the outdoors and an encouraging environment for projects through entrepreneurs and business owners. All of these factors to make the usehave of combined quantity Australia every investor’s dream destination. surveyors
United States of America
The United States competes as a destination with property buyers. Focusing on places such as Manhattan in particular, and New York, San Francisco and Los Angeles in general, investors like commercial real estate, spending over $17 billion between 2010 and 2015 on office towers and hotels. The United States is the richest country in the world and offers the highest quality of living that you will get anywhere in the world. America is also considered to be one of the best places in the world to do Larry Feinberg, Executiverights Directorin at the business. Property the States are Association of South African Quantity Surveyors very strong.
G
What overnment are thewill pitfalls spend more than R50when buying abroad? billion to fund national and provincial
C
M
As a foreign investor you are much moreY economic infrastructure requirements, likely to become a victimBudget of fraud2017 no matterCM according to the National where you’re planning to buy, and notMY announced by Finance Minister Pravin knowing the language, culture and local Gordhan. Noticeably, however, according CY laws risk. My best of advice to theincreases Auditor-General’s reportpiece on local is always to hire a good solicitor, ideally government audit outcomes for the 2014-oneCMY that inwas local 2015, specialises infrastructure onecommercial of the items realK estate. But don’t just sit back and let your that municipalities struggled with most solicitor getmeasure on withand it. You needintothe ask him to correctly disclose some basic questions from financial statements over thethe pastget-go. five years. It’s very important understand your Auditor-General Kimito Makwetu has also motive for buying investing, then to recently released threeorperformance-audit make youwith buypharmaceuticals, in the right location. reportssure dealing water It is highly and advisable to carryprojects. out due infrastructure urban-renewal diligence on all aspects of that the inproperty, The Auditor-General reported some prior to the exchanging contracts because instances required skilled personnel from thatappointed stage the were not at parties the startare of aobligated project. to complete. The Association of South African Your solicitor undertake various Quantity Surveyorsshould (ASAQS) says quantity searches with local andtostatutory bodies. surveyors are best placed stem corruption Always have ainfrastructure title investigation, which in government projects. “The will include review of the planning first step is foraboth government officials and ensure that taxpayers all necessary permissions are and ordinary to understand in place. A physical inspection should be what the role of a professional quantity undertaken to Larry ascertain itsExecutive state and surveyor is,” says Feinberg, condition. Director of ASAQS. “Globally, construction Everyare country has its owntosystem, and projects highly susceptible cost although some toare based of onfactors. British law, overruns, owing a number it is vital that Africa, your local lawyer other has a good Here in South as in certain command ofhave English—not to mention countries, we the additional problem of the languagewhere of due the process countryis flouted you are of corruption, buying in.benefit This is connected probably the single most in order to individuals or important of advice that anyone companies –piece often during the construction can receive. process itself.” SOUTH AFRICAN PROPERTY REVIEW
47 11
investment overview
Governments everywhere are considering the imposition of higher taxes on foreign buyers From Ontario to New South Wales and Portugal, governments are considering introducing additional property taxes predominantly on foreign purchases to protect local property buyers and keep price increases in check. Reacting to an increase in property prices in Toronto over the past year, the Ontario government is reconsidering a tax it rejected only a year ago. New South Wales imposed a 4% foreign investor stamp duty charge last year, with further increases expected this year as more and more foreigners are investing in property—to the extent that there are more foreign than local first-time buyers.
George Radford, Director of Africa at IP Global
V
ancouver, Hong Kong and Singapore have all introduced higher taxes in recent years. Portugal, which has attracted huge inflows of foreign investment on its ‘golden visa’ scheme, is now proposing higher taxes and duties on property. “These are just some examples of tax changes which apply to foreign buyers and which could affect your investment decisions”, says George Radford, Director of Africa for global property investment firm IP Global. There are a number of property taxes to take into account, including stamp duty (relating to transfers), property tax (ongoing taxes or rates based on the value of your property), capital gains tax and inheritance tax. “A number of governments are considering the imposition of higher taxes on foreign buyers,” says Radford. “With the Rand being relatively strong, this is a perfect time to invest in property offshore, but investors must be aware of any additional taxes that could be imposed.”
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SOUTH AFRICAN PROPERTY REVIEW
“This should not, however, be a deterrent to investment because the proposed taxes are a reaction to booming property markets which, in turn, mean a greater potential for growth in the value of your property asset,” he says. “Taxation on foreign or buy‑to‑let investors reflects governments’ expectations of continued growth in their property market. Government regulation and taxation can also play a role in creating a more sustainable, locally-driven property market which is good news for investors looking for steady capital gains and yield growth.” “Proposed taxes also indicate you can expect good rental income, first because the demand by foreign investors which has driven the tax changes has led to supply shortages in some areas, forcing more people to rent, and second, because some potential buyers are opting to rent to avoid taxes, thereby pushing up rental demand.” However, Radford says it is important to know exactly which taxes apply to your investment. For example, if you buy a property in the UK via a trust or offshore company, where there is already a stamp duty of 12% on properties valued over £1.5million, you have previously been exempt from inheritance tax. But, next month this will change, and a tax of 40% will be imposed on your death. “Company structures and trust structures, which have been targeted in some countries for increased taxes, are becoming less and less effective and this requires careful consideration from purchasers before proceeding with the sale,” says Radford. “For people looking for a short term profit, these taxes may be a deterrent”, says Radford, “but in our experience they make little
difference in the longer term, and property is without doubt a long term investment.” “It is also worth mentioning that in South Africa there are relatively onerous capital gains taxes on second homes and our transfer duties and municipal rates are not low. If one looks at Germany, for example, there is zero capital gains tax after 10 years, illustrating how important it is to make sure you are aware of tax rates in areas in which you are planning to invest”, he adds. Radford says that global diversification can often help you limit your tax exposure in any one country. Greater London, Birmingham, Manchester and Liverpool in the United Kingdom, Chicago in the United States and Berlin in Germany offer some of the best property investment opportunities at the moment, irrespective of their tax charges. “Tax is a very important consideration for any investment. Therefore, it is important that you ensure that you are working with a partner with a proven track record, and global expertise in navigating foreign markets,” concludes Radford.
“With the Rand being relatively strong, this is a perfect time to invest in property offshore, but investors must be aware of any additional taxes that could be imposed.”
REITs
Emira’s intelligent strategies drive the phased redevelopment of Knightsbridge REITs in South Africa are required to pay at least 75% of their taxable earnings available for distribution to their investors each year. Many pay out even more. So, how does a REIT fund its growth, especially when embarking on a large transaction or development? The short answer is: cleverly.
About Emira Property Fund Emira is a medium-cap, diversified, JSE‑listed REIT invested in a quality balanced portfolio of office, retail and industrial properties. Its assets comprise 142 properties valued at R13.3 billion. Emira is also internationally diversified through its direct interest in ASX‑listed GOZ valued at R940.4 million.
F
unding dictates a transaction’s yields. Managing the best sources and rates of funding is as crucial to the successful performance of a REIT as managing its property assets. Emira Property Fund continues to show its flair for intelligent funding solutions with its development roll‑out strategy for its R820 million total redevelopment of the former Knightsbridge Manor in Bryanston, Gauteng. The redevelopment will increase Knightsbridge by a massive 19,334m², tripling its size from its current 9,884m². It will be upgraded from B‑grade offices to a quality P‑grade, green‑rated office park. This sizeable project called for a low‑risk approach to its funding and development. Geoff Jennett, CEO of Emira, explains that adopting a phased approach was key to meeting this objective. “The redevelopment of Knightsbridge is taking place in three phases, which spreads letting risk. This also ensures as much of the property as possible continues to produce income throughout the development process. In fact, with the first phase under development, 64% of the original park was still generating income,” says Jennett. “A phased development approach also allows us to manage future phases based on market conditions.” In addition, a suitable level of pre‑letting is required prior to commencing each phase, adding to Emira’s prudent development strategy. Jennett adds that the initial development has been financed through
Emira’s existing debt capacity and that these un‑utilised debt facilities are already in place. Emira enjoys excellent access to debt from a wide spread of funders, based on its good relationships with all the country’s major banks. “Future phases will be funded through a combination of debt and proceeds from the disposal of non‑core properties, as Emira continues the strategic rebalancing of our portfolio,” reports Jennett. This is in line with Emira’s astute approach to funding. Emira funds its capital investments centrally versus raising capital for specific projects. The combined impacts of the tactical, phased, redevelopment will increase Knightsbridge’s value, attractiveness and competitiveness. Originally built in the mid-1980s, Emira acquired Knightsbridge Manor in 2003. Despite cosmetic refurbishments, the park’s buildings have dated and are attracting B‑grade rentals in an area characterised by higher grade offices. Jennett explains: “Although Emira initially considered an upgrade for the park, it quickly became clear its complete demolition and redevelopment would be a much better option to boost its value and performance.” The market is responding enthusiastically to this decision and the development of the first and only P‑grade development in Bryanston, which is also designed to boast a minimum 4‑Star Green Star SA Design rating from the Green Building Council of South Africa (GBCSA). Emira has signed an agreement with WSP|Parsons Brinckerhoff for headquarters of approximately 5,800m² at Knightsbridge. WSP|Parsons Brinckerhoff’s head office was the first of the seven buildings to begin development at the park. It is part of the first phase of the development, comprising three buildings. Its construction began in January 2016, and WSP|Parsons Brinckerhoff will begin working from its smart new address from September 2017. Emira has also a concluded a transaction which will see both KFC’s and
Pizza Hut’s head offices in Africa housed in 3,150m² at Knightsbridge, which kick started the second phase of the development. Emira started work on the fourth building in Knightsbridge to undergo redevelopment earlier this year, from which KFC and Pizza Hut will start operating from June 2018.
Meet the new generation Knightsbridge business park ●● P-grade offices defined by quality design, materials and finishes ●● Shared services that support lower occupancy costs ●● A minimum 4-Star Green Star SA Design rating from the GBCSA ●● Security, access control and CCTV ●● Great position on Sloane Street, opposite The Campus, with the N1 highway quickly accessible ●● Improved access with upgrades to roads at Sloane Street intersection and a new lane to William Nicol Drive ●● Generous parking ●● Resource-efficient state-of-the-art mechanical and electrical installations ●● Extensive themed landscaping and roof gardens with inspiring views on every building ●● Rainwater harvesting for irrigation ●● Standby generators and backup water supply ●● Restaurant and central meeting facilities
The Bryanston business node Driving Emira’s decision to invest in the major redevelopment of Knightsbridge is the growing prominence of the Bryanston business node. Bryanston has become a preferred alternative hub for blue chip businesses and large, high quality office users. Within its office mix, Knightsbridge is a market leader with its stand out green P grade offices. SOUTH AFRICAN PROPERTY REVIEW
49
events
East London AGM breakfast session SAPOA East London Regional Council held its Annual General Meeting on 29 March 2017, and was pleased to have the newly appointed CEO of the Buffalo City Metropolitan Development Agency, Gcinumzi Qotywa as guest speaker.
Delegates at the East London AGM
Gcunumizi Qotywa, CEO of Buffalo City Development Agency
Qotywa spoke about the tourism and development vision for the city. Delegates raised concerns around service delivery by the Municipality, especially with regards to plan approvals and getting developments off the ground. These issues are currently being dealt with by the region’s town planning consultants, in discussion with the IDP Forum and Municipality. A meeting is currently being set up between the Director of Planning and Development at Buffalo City Metropolitan Municipality in order to discuss members’ concerns.
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SOUTH AFRICAN PROPERTY REVIEW
FROM LEFT D Taylor, G Calver, AA Efstratiou
events
FROM LEFT Kate Godfrey and Annelize Swart
FROM LEFT C de Coning, M Baxter and Charles Small
FROM LEFT Robin Knott, Johan Burger and Mick Webb
Sakhele Skenjana
Dr E Uithaler
L Durell
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UPCOMING EVENTS & TRAINING PROGRAMMES
2017
MAY 11
Gauteng
JHB Meet the Mayor Dinner
17
Port Elizabeth
Port Elizabeth Networking Event
19
KwaZulu-Natal KZN Breakfast Presentation
26
Gauteng
Tax Ombuds Workshop
29
Port Elizabeth
Port Elizabeth Breakfast Session
31
Gauteng
Gauteng Research Breakfast
TBC
Limpopo
Limpopo Breakfast Session
TBC
Gauteng
Gauteng Networking Evening
20-22
Western Cape
2017 SAPOA Convention & Property Exhibition
30
KwaZulu-Natal KZN Broker Cocktail Evening
JUNE
JULY 20
East London
East London Breakfast Presentation
21
KwaZulu-Natal KZN Breakfast Presentation
28
Gauteng
Gauteng Legal Breakfast
MAY 5
Gauteng
Occupational Health & Safety (OHS) Workshop
8-12 12
Gauteng Gauteng
16
Cape Town
22-26
Gauteng
26 292 June 30
Gauteng
Project Management (PM) Course Sectional Title Workshop Method For Measuring Floor Areas In Building Workshop (MOMFA) Property Management Programme (PMP) 2 week block session (block 1) Lease Agreement Workshop
Gauteng
Facilities Management (FM) Course
KwaZulu-Natal
Lease Agreement Workshop
2
Gauteng
SANS 10 400 Workshop
7
Cape Town
Lease Agreement Workshop
9
Gauteng
19-23
Gauteng
20-21
Gauteng
23
Gauteng
Coveyancying for Non-Conveyancers
26-30
Gauteng
Senior Manager Development on Commerical Property (SMDCP)
16-28 17-18
Gauteng Gauteng
Property Development Programme (PDP) Property Finance Programme (PFP) Basic
19
Port Elizabeth
Property Finance Workshop
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Method for Measuring Floor Areas in Buildings (MOMFA) Strategic Corporate Real Estate Management (SCREAM) Negotiation Skills Master Class Programme (NSMP)
JULY
Dates are subject to change. Please see Sapoa.org.za for regular updates.
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For SAPOA members
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EACH YEAR WE ACCEPT a large number of listings and advertisements from SAPOA professionals and service providers across the entire spectrum of property activities. Don’t miss out on this well-used, popular industry resource. SAPOA aims to provide added value by offering the basic listings free of charge to all members. In this respect, we hope that we are assisting you in your marketing endeavours to some extent. We thank you for your support in previous years. In an effort to improve the look and ease of usage, we have redesigned the directory layout to a four-column grid and have made available certain entries that will stand out from the norm.
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● 40 categories, full - and part-category page sponsorship ● Highlighted data entries ● Data entries with logos ● Affordable small advertisements (half- and quarter-page) ● Boxed columns and part columns
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Booking deadline: 21 September 2017 Material deadline: Logo entries 5 October 2017 Column entries 5 October 2017 Display adverts 2 November 2017
off the wall
Most expensive building built As our theme this edition is finance, I thought it appropriate that we should look at the most expensive building ever built, and as a starting point, if you google those words you’ll come up with a top ten list. At the top of that list is the Abraj Al Bait hotel in Mecca, Saudi Arabia, at a cost of US$15 billion. Compiled by Phil Ruimte
T
he 120‑storey Abraj Al Bait is the most expensive skyscraper in the world. The construction of the building cost US$15 billion. At a height of 601 metres, the skyscraper, which is located in the holy city of Mecca in Saudi Arabia, is the tallest hotel in the world, and also the fourth tallest building in the world. Abraj Al Bait is situated near the largest and holiest mosque, the Masjid al-Haram. The hotel’s floor spans an area of 1,500,000 square meters, accommodating 100,000 people, and can accommodate up to 2,000,000 worshippers over the course of the Hajj.
The five‑star hotel offers more than 3,200 square metres of adaptable function space across two floors, including a fully equipped business centre with secretarial service, meeting rooms with a pre-function area, and a spectacular ballroom, in addition to a video‑conferencing facility, a media room with live broadcast capabilities, and a live translation room. The hotel also features six residential towers, a prayer hall that has a capacity for 3,800 persons, a convention center, a five story shopping mall and two heliports.
SOUTH AFRICAN PROPERTY REVIEW
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off the wall This Saudi Arabian government‑owned, luxury hotel was designed by the Lebanon based Dar Al‑Handasah architectural group. Construction began in 2004, taking eight years to complete, and was officially opened in 2012. At the heart of the holiest Islamic city, the Makkah Royal Clock Tower brings an air of modernization to the bustling historic centre of Mecca. It was developed as a component of the King Abdulaziz Endowment. The clock tower stands in the centre of a high‑rise complex called Abraj Al-Bait. Six smaller high-rises surround it at varying heights, and they accommodate both residential and hotel uses. True to its name, four colossal clock faces are mounted near the top of the tower. These clocks hold the record for being both the largest and the highest in the world. At night, the clock faces are illuminated by one million LED lights that transform the tower into a green and white beacon. The spire of the tower features a spherical observation centre at its base. The spire is capped with a shining mosaic gold crescent weighing 35 metric tons. A number of cultural amenities can be found in the upper levels of the tower, including a centre for lunar observation, and a cosmology museum. Since a great many residents and guests in the tower participate in prayers five times a day, innovative solutions were provided in the elevator systems that transport people in a smooth and efficient manner. Group control systems were implemented that adapt to the travel patterns of passengers, intelligently anticipating their general location and destination. Using this technology, up to 75,000 people can exit all seven buildings without any problem.
Source: www.guardian.co.uk, www.arabianbusiness.com, wikipedia.org
Top 10 most expensive buildings built Rank
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SOUTH AFRICAN PROPERTY REVIEW
Name
Place
Cost
1
Abraj Al Bait
Mecca, Saudi Arabia
$15 Bn
2
Marina Bay Sands
Marina Bay, Singapore
$5.5 Bn
3
Resorts World Sentosa
Singapore
$4.93 Bn
4
Emirates Palace
Abu Dhabi, United Arab Emirates
$3.90 Bn
5
Cosmopolitan of Las Vegas
Las Vegas, USA
$3.9 BN
6
One World Trade Centre
New York, USA
$3.80 Bn
7
Wynn Resort
Las Vegas, USA
$2.70 Bn
8
Venetian Mecau
Macau, China
$2.40 Bn
9
City of Dreams
Macau, China
$2.4 Bn
10
Princess Tower
Dubai, United Arab Emirates
$2.17 Bn
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We’re not landlords. We’re people. SOUTH AFRICAN PROPERTY REVIEW
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1
Specialised Knowledge and Expertise 3
2
4
1 Medical facility for 200 Rivonia Road in Morningside, Johannesburg. Architects: Geyser Hahn Architects. 2 The Union office development for Eris Properties in Accra, Ghana. Architects: Boogertman + Partners. 3 & 4 Head office for Business Connexion for BCX HQ Offices Co-ownership JV in Centurion, Pretoria. Architects: Stauch Vorster International. QS services in JV.
Whilst timeously and adequately providing traditional quantity surveying services DelQS identified and developed certain services vital to the bottom line of investors • Elemental construction cost estimating • Financial viability analysis (in-house developed program : precise and logical in presentation) • Building contract expertise • Final settlement with contractors • Cost control and reporting (in-house developed program: proactive and audit trail) • Africa projects (expertise and track record) • Specialised developments (retail, hospitality, healthcare, student housing, etc)
QUANTITY SURVEYING
Nico Roos
Liza Botha
Wilco Lourens
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Corné de Leeuw
Christine Larson
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