THE REDEVELOPMENT OF CARLTON CENTER

Final report: Carlton center market analysis, development & Management Proposal

Prepared for: Transnet Investors - Carlton Centre Precinct

Prepared by: ASANDA NGIDI – 2481455

: KWANELE KHANYILE – 2416287

: SIYABULELA NDUDE – 2487121

: JOSHUA ROBUS – 25502598

: MIHLALI MQALO – 24837782

: YESHEN NARAINSAMY- 243468

June 1, 23

Main Purpose of this report

This report has an intended purpose which is to analyze and understand what is occurring within the Johannesburg market through a macro-economic dissection of the city, metropolitan growth analysis and diving to the local analysis mainly looking at the Carlton Hotel and Centre. The report also looks at developing a management and development proposal to re-establish Carlton Centre and Carlton hotel as a viable commodity in Johannesburg. This is driven through refurnishment and re-habilitating of the mentioned property and that is the essential component of the development proposal.

Metropolitan Growth Analysis for Johannesburg Introduction

In recent years, Johannesburg has seen a combination of physical, economic, and population growth. Physical growth has been characterised by the enlargement of the city's urban core and the creation of new residential communities and business districts. The city's role as South Africa's economic centre has fuelled economic growth, with the major contributors coming from the financial and business service industries. Immigration from other regions of South Africa and neighbouring nations has been a major factor in the country's population expansion.

According to the UN World Urbanisation Prospects, the City of Johannesburg metropolitan area is estimated to have a population of about 6.2 million people (6,198,016) in 2023. This is an increase of 2.19% from 2022. The growth rate has decreased slightly over the course of the past two decades, dropping from an estimated 3.24% (for each year in the 2003 -2018 period). The metropolitan population is predicted to reach 7.3 million people by the year 2033, an increase of about 17.78% from 2023. Johannesburg's expansion has been fuelled by a number of reasons, including:

1.Economic opportunities: As the centre of South Africa's economy, Johannesburg has drawn companies and people looking for employment opportunities and investment chances.

2.Gross Domestic Product: The municipal government has estimated that the city’s GDP for 2023 will be about R530 billion, an increase of 1.88% for the 2018 – 2023 period (this growth rate does not take the effects of the Covid19 pandemic into account) the biggest contributor to the local economy as of 2018 is the financial sector, which made up 28.1%

of the city’s Gross Value Added by Region and was valued at R182 billion. These next largest sectors are the community services and trade sectors, comprising 24.7% and 14.7% respectively.

3.Infrastructure development: The city has become more accessible and appealing to investors thanks to significant infrastructure initiatives like the Gautrain rapid rail system and the expansion of OR Tambo International Airport.

4.Political stability: Compared to other regions of South Africa, Johannesburg has a more stable political environment, which makes it a desirable location for commercial operations and investment. Young people living in the city and high rates of urbanisation have increased demand for housing and other services.

5.Natural resources: Johannesburg has abundant gold and other mineral resources that have historically fuelled economic expansion.

In the upcoming years, Johannesburg is anticipated to continue expanding moderately. The Gauteng City-Region Observatory has predicted that the city's population will rise from over 5.5 million in 2021 to over 6 million by 2030. The city's gross domestic product (GDP) is anticipated to increase at an average annual rate of 3.5% over the same time period, indicating that economic growth will likewise continue.

The expansion of Johannesburg is anticipated to benefit several asset sectors, including:

 Commercial real estate: Demand for office space and other commercial buildings is projected to rise as the city's business and financial services sectors expand.

 Residential property: As the city's population increases, there will likely be a further increase in housing demand, which will present opportunities for investors and developers in the residential sector.

 Infrastructure: As the city expands, there will be a greater need for the construction of roads, public transportation, and telecommunications.

 Technology: With numerous incubators and accelerators operating in the city, Johannesburg is emerging as a hub for technology start-ups, providing chances for investment in technology-focused companies.

Market Analysis on Carlton Centre, Johannesburg

According to Jones (2019), the core business sector of Johannesburg, South Africa, is home to the 50-story tower known as Carlton Centre. After it was inaugurated in 1973, the structure held the record for highest building in Africa until 1978. Today, it remains one of the most iconic

landmarks in Johannesburg, and its location in the heart of the CBD makes it an attractive investment opportunity for commercial real estate investors. In 1999, Transnet paid R32 million ($1.9 million) to Anglo American Properties to acquire the landmark to serve as its corporate headquarters. The Carlton Centre is situated in Johannesburg's central business district at the intersection of Commissioner and Anderson streets. The location is highly accessible, with easy access to major highways and public transport routes. The building is also located close to major business and commercial hubs, making it an attractive location for businesses and professionals. The commercial real estate market in Johannesburg has experienced steady growth in recent years, with demand for office space driven by the city's position as the economic hub of South Africa. According to research by JLL, the vacancy rate for office space in Johannesburg was around 12% in Q2 2021, with demand for prime office space remaining strong.

The Carlton Centre is an appealing investment opportunity for those who are interested in commercial real estate, and several variables may increase its potential value. The Carlton Centre is one of Johannesburg's most famous structures, and its prominence is a result of both its height and position. This makes it more appealing to investors and tenants alike. Other factors that influence this include:

 Accessibility: The building's position in Johannesburg's central business district makes it quite accessible, with quick access to major highways and public transportation connections. Its attractiveness to businesses and professionals is increased by this.

 Growth Potential: Due to expanding economic prospects and improved infrastructure, Johannesburg is predicted to continue experiencing moderate growth in the years to come. This leads to the he demands for office space in the city, notably at the Carlton Centre increasing.

 Investment in the CBD: Significant infrastructure and commercial development investments have transformed the Johannesburg CBD. The demand for office space in the vicinity, including the Carlton Centre, is probably going to increase as a result.

Despite ceasing operations in Nigeria, Kenya, Uganda, and Madagascar, Shoprite Holdings was the largest retailer in the area, surpassing Steinhoff in FY2020 and moving up seven spots in the Top 250 rankings. It also generated good sales in the grocery segment. Yet the biggest retailer of South Africa which is Shoprite does not reside within the premises of Carlton Centre. The increase in demand for these missing retailers and the increase in population in Johannesburg will be a great opportunity for Carlton Centre to evolve and capitalise in obtaining these retailers as they are essential for South Africans.

According to the City of Johannesburg Metropolitan GAU (2019), the yearly growth rate of the Johannesburg's Metropolitan Municipality in 2018 was 0.77%, which was lower than both South Africa's annual growth rate of 0.79% and the Gauteng Province's GDP growth rate of 1.12%. The City of Johannesburg's longer-term average growth rate of 1.50% is relatively equal to that of South Africa, reflecting the short-term growth rate of 2018. The City of Johannesburg recorded the greatest economic growth rate of 4.66% in 2008.

If the effects of COVID-19 are ignored, the City of Johannesburg Metropolitan Municipality is predicted to increase at an average annual rate of 1.88% from 2018 to 2023. The average annual growth rate of Gauteng Province and South Africa is expected to grow at 1.72% and 1.60% respectively.

According to the City of Johannesburg Metropolitan GAU (2019) the GDP in Johannesburg is predicted to reach just over R530 billion in the year 2023 which is 43.8 percent of Gauteng’s GDP. With an average annual GDP growth rate of 1.88%, Johannesburg as a Metropolitan has done better than any other regional economies between the years 2018 to 2023. It will without a doubt keep its position as the biggest and strongest municipality with the contribution of 43.8% more to Gauteng’s GDP in 2023 than in previous years.

Figure 2: Population growth in Johannesburg

The City of Johannesburg Metropolitan GAU (2019) states that the Johannesburg Metropolitan Municipality is composed of a wide range of different sectors or industries. The Gross Value Added by Region (GVA-R) illustrates an overview of sectors in which each sector is assessed according to the value added it generates for the regional economy (City of Johannesburg Metropolitan GAU 2019). Below is a graphic summary of the comparison between Johannesburg’s Metropolitan Municipal GVA to that of each region.

The primary sector is divided into two subsectors: mining and agriculture. The City of Johannesburg Metropolitan's GVA growth rates for both of these industries is depicted in the graph below from the year 2008 (City of Johannesburg Metropolitan GAU 2019).

According to the City of Johannesburg Metropolitan GAU, 2019 and according to the graphic illustration. The agriculture sector peaked in 2017 with an average growth rate of 12.6 percent. On the other hand, the mining sector peaked in 2010 at 4.2 percent.

Electricity, construction and manufacturing are broadly the sub-sectors making up the secondary sector. Johannesburg’s Metropolitan Municipality's average GVA growth rates for various sectors are shown in the graph below (City of Johannesburg Metropolitan GAU, 2019).

Figure 4: The GVA growth rates for Agriculture and Mining in the City of Johannesburg Metropolitan Municipality

Figure 5: City of Johannesburg Metropolitan Municipality's average GVA growth rates for Manufacturing, Electricity and Construction

With a growth rate of 5.0 percent, the manufacturing sub-sector peaked in the year 2010 with its greatest negative growth being in 2008 at -11.4 percent growth rate. On the other hand, the construction industry peaked in 2009 with a 10.2 percent growth rate and it experienced its greatest negative growth in 2018 at -1.6 percent. 2010 is the year of highest growth in the electricity sub-sectors (City of Johannesburg Metropolitan GAU, 2019).

The trade, transport, finance, and community sub-services sector make up the tertiary sector. The Johannesburg’s Metropolitan Municipality's average Gross Value Added growth rates for various sectors have been illustrated below.

According to the City of Johannesburg Metropolitan GAU (2019) the trade sector peaked in the year 2010 with a growth rate of 4.4 percent. In 2014 the Transportation industry peaked at 4.2 percent. The trade sector experienced it highest growth in 2010 at 4.5 percent growth rate this could be due to the world cup. The government-dominated community services industry expanded at its fastest pace of 5.5 percent in 2008 and at its slowest rate of -0.3 percent in 2015. The City of Johannesburg Metropolitan GAU (2019) further state that the informal sector contributes for between 7 and 13 percent of the City's total GDP.

Johannesburg Housing Market Report – 2020

Over 1.8 million residences are found in Johannesburg. The residential real estate market in the city comprises of rental homes, where more than one family may reside in a building with a single title deed, like a high-rise. Moreover, it is projected that 180 000 households reside in informal

Figure 6: City of Johannesburg Metropolitan Municipality's average GVA growth rates for various sectors

settlements. These are not considered by the data, which only takes formal residential premises into account.

In 2019, more than 40% of the 805 668 residential properties in Johannesburg's market had a value of less than R600 000, creating a sizeable affordable segment. Significantly, governmentsubsidised housing makes up 27% of all residential dwellings. Resale sales made up 71% of all residential transactions in 2019, which is a significant entrance point for first-time homebuyers and owners. Banks continue to issue more bonds in the higher market categories on the secondary market. In the year 2020, COVID-19 was anticipated to significantly affect the number of home transactions.

In 2019, there were 805 668 residential properties on the deeds registry in Johannesburg, making up 35% of residential properties in Gauteng.

This report separates the total residential property market into five segments, according to value:

• The entry market—properties worth R300 000 or less

• The affordable market—properties worth R300 000 - R600 000

• The conventional market —properties worth R600 000 - R900 000

• The high-end market—properties worth R900 000 - R1.2 million

•The luxury market—properties worth over R1.2 million

11

Figure 7: Number of residential properties by market segment (City of Johannesburg, 2019).

This graph shows the monthly number of properties and properties new to the market in Johannesburg, as listed for sale on Property24.com.

Site and Neighbourhood Analysis

Many people believe that the CBD, or central business district, of Johannesburg, has significantly diminished in recent years (Afroeuropeanstudies, 2021). The process has been there for around 40 years, according to a deeper look at the data that is available (Afroeuropeanstudies, 2021).

White residential growth had already started to bulge out to the north by the 1950s and in the 1960s, office space started to follow suit. Additionally, some of the significant changes that came about in the downtown area in the 1970s, which were meant to enhance the CBD's standing, accelerated the demise of downtown retailing. The neo-apartheid metropolis that we may observe now has a long history (Afroeuropeanstudies, 2021) .

The wealthiest parts of Johannesburg are primarily in the north, while the poorest parts are cantered in the south (Afroeuropeanstudies, 2021). This geographic segmentation keeps the city divided along apartheid lines, with traditionally white districts providing the finest living conditions, social amenities, and job possibilities (Afroeuropeanstudies, 2021).

1.Hillbrow upgrade programme: The Johannesburg Development Agency is carrying out the plan to improve Hillbrow, Berea, and Yeoville. Approximately 200 city blocks will get a facelift in terms of asphalt, lighting, pedestrian crossings, and various high streets, activity streets, and residential streets.

2.Retail Improvement District: The third municipal improvement district to be established in Johannesburg was the Retail Improvement District (RID). With its official enactment in 2005, the RID has been in use since 1 June 1997. It is made up of five city blocks in the

Figure 8: Monthly number of properties new to the market in Johannesburg

centre of the city's shopping district. The RID was created to improve this area of the city's safety, cleanliness, friendliness, and appeal, especially to tourists and shoppers. Edgars, Game, Foschini, and numerous other smaller retailers are present in the region.

3.The Central Improvements District: The Central Improvement District (CID), which now encompasses 25 city blocks after initially covering only eight, was created as a voluntary improvement district in August 1992. In January 2004, legislation was passed. The region includes the iconic Carlton Centre, whose 50-story office tower is home to the main Transnet office as well as the South African Revenue Services.

4.The Small Street Mall shopping centre, the Kine Centre building, which will eventually house a private clinic, the Gandhi Square bus stop, the Provincial Education and Health building at 111 Commissioner Street, two hotels, and over 300 stores are also located in the neighbourhood. In the district, more than 12,000 people work in 71,524 square meters of retail space and 238 000 square meters of offices.

5.The Braamfontein Management District: The most practical measure to stop the decline that was happening in Braamfontein in 2002 was determined to be the creation of a municipal improvement district. Nowadays, Braamfontein serves as South Africa's primary venue for live entertainment and is also the location of the City Council, four international corporations with South African headquarters. The district's regeneration program, led by the Johannesburg Development Agency and property owners, has given the region a fresh lease on life. This precinct has been converted into an attractive and secure corporate district, educational centre, and entertainment and cultural hub.

6.Newton Management District: Mary Fitzgerald Square, the Nelson Mandela Bridge, the M1 on- and off-ramps, the Metro Mall taxi rank and retail space, and the improvement of the urban environment were the first phases of Newtown's reconstruction, which began in 2001. This was supplemented by the creation of parking spaces out of abandoned railroad sidings and, more recently, the building of public restrooms on Mary Fitzgerald Plaza.

7.Jewel City: Many gem and diamond firms, the Harry Oppenheimer Training School, and Diamond Organisations are all housed in this high-tech security area. The Johannesburg Development Agency finished a substantial improvement to the public environment in 2007.

8.The Fashion District: The Fashion District is a thriving area that is home to businesses related to clothing and has a significant informal sector presence. The Johannesburg Development Agency undertook a significant street improvement project.

9.Southwestern Improvement District: Financial institutions and company headquarters make up the South-Western Improvement District (SWID). It was the second improvement district to be established in Johannesburg. It spans 24 blocks in the city's southwest and

houses the Standard Bank Super-Block Complex as well as the corporate headquarters of other companies, including the Chamber of Mines, BHP Billiton, and Zurich Insurance.

The African National Congress, located in the Walter Sisulu House and numerous other organizations are also located within the district.

Legend

Hillbrow upgrade programme

Retail Improvement District

The Central Improvements District

The Braamfontein Management District

Newton Management District Jewel City

The Fashion District

Southwestern Improvement District

Figure 10: Preferred Locations in Johannesburg CBD. Available from: https://bit.ly/42MoEbX

Figure 9: Johannesburg Central Map showing points of interests that are within close proximity to Carlton Center. Available from: https://bit.ly/3FX6o5W

When it comes to shopping in Johannesburg, the Jozi CBD takes the cake. The area boasts amazing small-scale vendors and incredible fashion boutiques. Depicted below are the different places that consumers prefer to visit around Johannesburg. However, Carlton centre was not listed as one of these places, although it is a shopping area that offers a wide range of shops. The following places are preferred by locals (Beavon, 1998):

9 - Nelson Mandela statue

20 – Collectors Treasury

23 – Bridge Books

26 - Mad Pizza 123

27 - Mall of Africa

28 - Dragon City Johannesburg

30 - China City Wholesale Centre Johannesburg

31 – Market on Main

33 – August House

34 - Fama Delicatessen Products cc36 – Work Shop New Town

37 - Five8ths

38 - 99 Juta

40 – Joburg mall

The ability to pay for the location is determined by the levels of education within the city. Levels of education influence where a person can gain employment and potentially where they are able to live. Figure below illustrate this mentioned fact.

Figure 11 and 12: Levels of unemployment rates within the different race groups.

Johannesburg. Available from: https://bit.ly/3ZpVP28

The bulk of the population in Johannesburg CBD finds employment that does not demand advanced skills due to the low levels of educated people (both men and women) (Beavon, 1998). These people work for Small, Medium, and Micro Enterprises (SMMe's). In the Johannesburg CBD, there are approximately 300 SMMEs, although only 173 testified in the information research that follows:

56% of the respondents have 1–9 employees.

 18% of the respondents have 10–19 employees

 9% of the respondents have 20–29 employees.

 8% of the respondents have 30–39 employees

 4% of the respondents have 40–49 employees and

 5% have 50 and above employees.

The spatial gap (Figure 9) emphasises even more how urgently affordable and well-located housing is needed. This has been made feasible in part by the social and affordable housing developments in the inner city, which have turned the area into a popular destination for middleclass families to dwell (Beavon, 1998). In modern days, Johannesburg has adopted affordable

Figure 13: Unemployment rates within Johannesburg CBD.

Figure 14: Residential Property price of the city of

housing projects which aim to increase adequate housing provision to the growing population. In South Africa, a monthly salary of between R1300 and R14000 is regarded as middle-income. These income levels are too high for households to qualify for government-subsidised housing (Mkhonza and Sifolo, 2022). But their income prevents them from renting a home on the open market (Beavon, 1998). Since individuals can readily access social amenities, career opportunities, and public transportation from modest, centrally placed rental apartments, social and affordable housing organisations strive to reduce the gap (Mkhonza and Sifolo, 2022). Being flexible and adaptable is necessary to handle this difficult economic climate (Beavon, 1998). Today, it's common to share and sublease apartments, dividing the monthly rent among numerous households.

Various types of shopping centres may be distinguished in relation to functional, locational and physical criteria. Carlton Centre has an underground shopping mall with over 180 stores. Carlton Centre, as per location criteria, connects to M1 which links to the N1, N3 and N12. A distinction between the different types of shopping centres from a South African perspective is done according to their size criteria and location criteria. This is done by primarily using the latest South African classification by Prinsloo (2010).

usually a provincial road linking to a national road

The role and function of centres is to satisfy the needs of a large primary and secondary catchment area. These centres also act as a catalyst for the establishment of a mixed-use node with retail facilities, office firms, hotels, residential development and entertainment. These areas

Table 1: A distinction between the different types of shopping centres in South Africa

Table 2: Shopping Centre location criteria

then develop into strong nodal areas. Visibility from approaching roadways and proximity to good road networks that connects to the catchment. The location of Carlton Centre in the central building district allows for high rental prices, even though these have reduced over the years. Businesses are also able to afford expensive rental because of the accessibility of the regional centre. Therefore, Carlton Centre retail performance and retailers ’ability to pay rent is predictable because of its macro and micro location.

Although consumer preferences have changed over time, some consumers still shop at the Carlton Centre Shopping Mall because of are unique to the centre. This allows tenants to still afford the rentals of the shopping mall. Nevertheless, shops have relocated and are reduced in size to accommodate new shops in the shopping mall. The study of the catchment, its demographics and consumption patterns are vital, as its sales and consumption will bring in rentals.

Additionally, leasing fees in centres are relatively higher than those of some free-standing- and CBD sites. Tenants in Carlton Centre can pay their rent and may be seen to have a good landlord-tenant relationship. There have been great harmony high levels of trust, namely a higher rate of lease renewal by retail tenants.

Figure 15: Average rental space price in South Africa

Refurbishment Plan for the Carlton Centre District

Refurbishment of the Carlton Centre properties will involve improving the existing structures to make the properties more modern, functional and aesthetically pleasing. Before refurbishment, the property may have been outdated, in need of repair, or lacking certain features that are desired in a modern living space. We deem the current layout to have been impractical and inefficient, and the décor to be unappealing. The property has issues with plumbing, electrical systems, and insulation.

After refurbishment, the property will have undergone significant changes that improve its overall condition and functionality. The property will have a new layout, with walls removed or added to create more open living spaces or additional rooms. The plumbing, electrical systems, and insulation will have been updated to improve energy efficiency and safety. The decor and finishes will also have been updated to modernise the property and create a more inviting atmosphere.

Before

After

Absorption and Prices

Urbanisation will happen whether it is acknowledged in government policy documents or election manifestos. The percentage of South Africans who live in cities today is about 60%. The inner city of Johannesburg has a significant need for affordable housing, as seen by the statistics above (Mail & Guardian, 2014).

Most poor and low-income households live informally because the housing provided by the private sector and social housing institutions is out of reach for them, according to recent research on the supply and demand for low-income rental housing in its inner city conducted by the Socio-Economic Rights Institute of South Africa (Seri) in November 2013 (Mail & Guardian, 2014). A room costs R1 700 per month, which is the least expensive formally offered rental housing by the private sector. In order to afford it, a household would need to make roughly R5 700 per month, yet half of the households in the inner city currently make less than R3 200 per month (Mail & Guardian, 2014).

So, families with formal employment and monthly incomes of between R3 500 and R8 000 are the target demographic for social housing (Mail & Guardian, 2014). At the time of Seri's research, just one social housing unit was being offered at the just-affordable monthly price of R1 036. (Mail & Guardian, 2014). As a result, the problem extends beyond accessibility to include scale and cost.

Due to this shortage of housing, which affects half of Johannesburg's inner-city residents, many people live haphazardly in run-down high-rise apartments, homes, rooms, an as well as in bedsharing arrangements. Some of this housing is reasonably priced; a bed in a shared room costs between R100 and R900 per month, and a portion of a shared room costs between R450 and R550 per month. However, majority of it violates local bylaws, lacks privacy, is hazardous and legally unsecured.

For households earning between R1 850 and R8 000 per month, social housing is a rental or cooperative housing alternative. The refurbished apartments will have the following:

Table 3: showing Abandoned and dilapidated Carlton Centre vs Refurbished and developed Proposal

What’s offered?

• Studio apartment: This open concept living space is perfect for a young, ambitious professional who is advancing in their career. Due to your excellent location, you may put an end to lengthy commutes. 2 Occupants max, Income: R1500- R1850, Rental: R3 000.

 One-bedroom apartment: This apartment features an open-concept living space, a separate bedroom, and a newly renovated bathroom for the young couple who needs their own place. Please note units are unfurnished. 2 Occupants max, Income: R1850R9000, Rental R5 500.

 Our two-bedroom apartment is perfect for a young family looking to enter the property market. 4 Occupants max, Income: R9000-R16000, Rental R8 000.

News24 (2021) demonstrates that “Given the large 'oversupply' trend in the three major commercial real estate markets, we remain confident that 2021 will see a continued decline in commercial property values. average, as is the case for 2020". The oversupply of commercial

Figure 16: Amenities in proposed Carlton Centre Apartments

real estate in the country should not come as a surprise considering that the economy had been stagnating for years prior to the Covid-19 outbreak.

The broker poll shows that there is, without a doubt, a negative economic scenario that is causing low demand and a big supply of real estate on the market. Because of the oversupplied market, it is anticipated that the average property value decline will continue in 2021. There was an expected a -7% fall in average capital value in 2020 and a further -9% decline in 2021.

Several organisations are re-evaluating their needs for office space in light of the results of the lockdown-related working remotely era, according to a sizeable portion of survey respondents, making the office property sector the least strong of the three main commercial property classes. According to Loos' survey report, real estate agents continue to believe that the office, retail, and industrial property markets are seriously oversupplied. In especially in the Johannesburg metropolitan area, the office market is the most oversupplied.

Per the proposed development plan, the cost to refurbish these spaces and the income they will produce monthly has been calculated by taking market averages from Johannesburg CBD and similar areas.

Figure 18: Availability of Office Types

To refurbish and redesign 663 rooms in the Carlton Centre Hotel and the Carlton Court will cost R1400 / square metre (sqm). The Carlton Centre Hotel will be refurbished and rebranded into the Carlton Centre Apartment Building whilst the Carlton Court will remain as a hotel. All 663 rooms will be refurbished, meaning the entire 43 500 metres squared of living space will be refurbished at a cost of R1400/sqm (Prompt Care, 2023). The total cost of this alone will amount to R60 900 000. The refurbishment will include paint, tiles, doors and modern fixtures being installed into the space. Once completed, the total income the Carlton Centre Apartment Building and the Carlton Court will bring in monthly correlates to the new room designs. With 250 studio apartments renting at R3000 per month, 250 one-bedroom apartments renting at R5500 per month and 163 2-bedroom apartments renting at R8000 per month, the total income at full capacity will be R3 429 000.

The refurbishment of the massive office space will see it become premium office space. Currently there is no premium office space available in Johannesburg CBD. This change will provide 68 000 metres squared containing premium office space to let for major corporates looking for a new headquarters. The cost of renovating the office space in this type of way is R3500/sqm. This will bring the total figure of the refurbishment to R238 000 000. The total rental income per month of the refurbished office space will be calculated at R175 /sqm (Rennie Property, 2023). The monthly income will equal a sum of R11 900 000.

Figure 17: Vacancy increase in Johannesburg for Office space.

Investor’s / Developers Goals and Objectives

We must select the following objectives for the Carlton Centre renovation project in order for it to be successful: Financial objectives, Development Objectives, and Operational objectives. We shall consider the following in the identified objectives:

1.Financial Objective

 How much each stakeholder is willing to commit in terms of their time, money, and any other important resource.

 The overall amount of capital that the investor is willing to invest.

 The amount of return that the project will earn.

2.Development Objective

• Are there any restrictions in or near Carlton Centre?

• Does the project's location mesh with the land uses in the area?

• Will the renovation make the Carlton Centre a uniquely distinctive structure?

3.Operational Objectives

 What type and level of management will be required to keep the project afloat?

Our analysis is as follows:

1.Financial Objective

 Investors are required for the project because the Carlton Centre renovation would cost R60 900 000 in total.

 Since 1999, Transnet has been the Carlton Centre's owner. Out of the R35 billion in financial investments, the corporation has set aside R6.5 billion (book value) exclusively for commercial and residential real estate (Transnet. Net, 2022). The company is a good candidate for investors and stakeholders due to its extensive experience in the real estate investing industry over several years.

 At full occupancy, the rental income from the apartment rooms and offices will equal R15 329 000 (R3 429 000 + R11 900 000) (see page 22 and 23). As a result, the complete amount spent on renovations will be made up within 4 months, and the project will thereafter turn a profit.

 Each stakeholder will be expected to contribute at least R100,000 in capital, with dividend payments dependent on their initial buy-in.

2.Development Objective

 Small Street, a location famed for its inexpensive apparel sales, is close to Carlton Centre. As a result, there are a lot of consumers, the most of whom are shopping near Carlton Centre. The shops that will remain on the Carlton Centre's ground level are then under pressure to stand out and be reasonably priced.

 Apartments for rent, retail establishments, and rental office space are all located close to Carlton Centre. The renovation project offers upscale yet reasonably priced residences, first-rate office spaces, and distinctive retail stores. The project will therefore blend in with the nearby land usage.

 The renovation will make Carlton Centre a standout and alluring company for more investment. We anticipate that customers looking for reasonably priced and visually

appealing living quarters as well as offices looking for A grade spaces would be lured to this area.

3.Operational Objective

 Since both commercial and residential property can be rented, multiple operational managements are needed for this project. Cleaning personnel and operating tools (lifts, generators, sensors, and generators, etc.) will be required for the building. Building operations will need to be facilitated by managers and floor directors.

SOAR Analysis

This type of analysis is key to strategic planning methodology. It involves four areas that need to be investigated which involve:

1.Strengths: Where are the project's strengths, including its competencies and successes in the past, lie?

The Carlton Centre is situated in the central business sector of Johannesburg, which is home to a variety of commercial enterprises and integrated transportation systems that give customers options.

2.Opportunities: Are their existing external factors that may potentially improve the projects returns or decline customer/user satisfaction?

The project may act as a tourist attraction being the first of its kind building in Johannesburg CBD offering affordable, aesthetically pleasing accommodation, premium office spaces with a retail ground floor that is fully operational and is mixed used. Employment will be created in the process for many individuals who do not have advanced skills (as seen with previous findings), living around the Johannesburg CBD.

3.Aspirations: What does the project intend on doing, what can it potentially be?

The project of refurbishing Carlton Centre aims to offer affordable accommodation, premium office spaces with unique retail outlets. It aims to be experienced as part of the CBD economic hub which is safe and secure for end use.

4.Results: How will the success of the project be measured? What are the measurements that will be utilised to measure goals and objectives achieved?

The project will be considered a success when there is 80% occupancy leading to the third year since operation. We estimate that there will be sufficient profit and viable capital running through the operation, more than enough to keep the project afloat.

Analysis of resources of the investor

In order to ensure that the project/business of renting out residential and high-end office space runs smoothly and can produce significant profits, it is crucial that we analyse the investor's financial resources. The following is a list of the investor's most crucial resources:

1.Funding

 The quantity of start-up funding that is accessible to the project's credit will determine its success. We are aware that there will be fees associated with renovating Carlton Centre (costs for materials, tools, and contractors), so there needs to be money available promptly (Kagan, 2022).

2.Knowledge

 The investor needs to be aware of their rivals and the sector they are in in order to make wise decisions regarding the building operation.

Prior to Investor committing to a project, they need to have considered the following factors:

1.Net Operating Income

 This is the initial step in any investors analysis.

 Net operational income = Total revenue – Incurred expenses

2.Cash Flow

 Taxable net cash flow is the amount of money that is left over after normal operating expenses and debt repayments have been deducted. Hope for a high rate of return on an investment property is raised by a positive cash flow. Thus, cash flow is a result of a variety of important inputs that are susceptible to fluctuations in the market (Kagan, 2022).

 The market economy has undergone numerous changes, but one that benefits landlords in terms of rental income is inflation.

3.Depreciation

 Depreciation is a technique used in real estate to lower the expenses of acquiring and improving a rental property until it becomes obsolete (Kagan, 2022).

 Gives some tax incentives to investors to give them a bit of flexibility.

4.Property Taxes

 Tax that either an individual or a legal body (such as a business) must pay to the property owner.

 It is possible to classify this tax as regressive because it bases its proportion on the amount of income that each person earns (Kagan, 2022).

5.Landlord Insurance

 In the event of an emergency, this insurance helps to cover the value and operations of the company. This covers damage to tenant losses brought on by fire and natural calamities (Kagan, 2022).

FINANCIAL ANALYSIS

To evaluate whether the Carlton Centre and the Carlton Hotel refurbishment projects are a secure, financially sound, or flexible entities that are profitable enough to support a monetary investment, it is crucial to look at a financial analysis (Tuovila, Brock, and Kvilhaug, 2022).

Breakdown of allocated funding:

Timeline for the development

Consultation with City of Johannesburg Municipality: Any developments or changes that are to be done in the city of Johannesburg need go through the City of Johannesburg Municipality for approval. (6 weeks).

Planning and Approving Phase: In this phase, the owner of the Carlton Centre will finalise the plans for the redevelopment and refurbishment project and seek approval from relevant authorities. The project may be announced publicly in this phase. (6-8 months).

Site Preparation Phase: In this phase, the site will be prepared for the construction and refurbishment process. This phase may involve the removal of debris and site clearance. (6 months).

Structural Works: This phase entails building brand-new partitions or walls, repairing damaged floors or walls, or adding reinforcements to the roof. (12 months).

Installation of Mechanical, Electrical and Plumbing Systems Phase: In this phase, the installation of mechanical, electrical, and plumbing systems will take place. This includes installing heating, ventilation, and air conditioning (HVAC) systems, electrical wiring, and plumbing. (12 months).

Interior Finishing and Fit-Out Phase: In this phase, the interior of the building will be completed. This will include installing finishes, such as flooring and ceiling, and fitting out the retail spaces and offices. (6-8 months).

Testing and Commissioning Phase: In this phase, the building systems will be tested and commissioned to ensure that they are functioning properly. This will include testing the HVAC systems, electrical systems, and plumbing. (1 month).

Final development plan

Figure 1: Timeline for Development

1. Mixed-Use Building: The Carlton Centre will be redeveloped as a mixed-use building that combines residential, office, and retail spaces. This will allow for a vibrant and diverse community within the building.

2. Residential Space: The upper floors of the building will be converted into residential apartments. These apartments will feature modern and luxurious amenities, such as a rooftop pool, and communal spaces.

3. Office Space: The lower floors of the building will be converted into modern office spaces with state-of-the-art technology and facilities. The office spaces will be designed to meet the needs of modern businesses and provide a comfortable and inspiring work environment.

4. Retail Space: The ground floor of the building will feature a modern and vibrant retail space. The retail space will be designed to attract a wide range of tenants, including shops, restaurants, and cafes.

5. Green Spaces: The building will feature green spaces throughout, including rooftop gardens, communal spaces, and indoor gardens. This will provide a healthy and refreshing environment for the residents, workers, and visitors.

6. Sustainable Design: The redevelopment plan will prioritise sustainable design features, such as energy-efficient systems, renewable energy sources, and water conservation measures. The building will also feature green roofs and rainwater harvesting systems to reduce its environmental impact.

7. Accessibility: The building will be designed to be accessible to all, including people with disabilities. The building will feature ramps, elevators, and other accessibility features to ensure that everyone can access and enjoy the building.

8. Safety and Security: The building will feature state-ofthe-art safety and security features, including 24-hour security, CCTV surveillance, and fire safety systems.

The final development plan for Carlton Centre will aim to create a vibrant, sustainable, and accessible building that provides high-quality residential, office, and retail spaces. The building will be designed to meet the needs of modern businesses and residents while also prioritising sustainability and environmental responsibility. Over the years there has been an increase in migration to Johannesburg in search of employment and better economic opportunities resulting to an increase in the urban population. Due to this there has been an Increase in demand for housing from the property market. Therefore, the aim of the renovation of the Carlton hotel to apartments is primarily to address this challenge in central Johannesburg.

Figure 3: Plan view of Offices

Figure 4: Plan view of proposed living space

Figure 2: Office Space

VISION STATEMENT

The proposed design of the Carlton Centre Complex is to refurbish the properties of the complex to improve overall condition and functionality. Refurbishment will also include revamping office and retail space, rebranding several rooms in the into affordable accommodation while Carton Court remains a hotel.

GOALS and MAJOR INITIATIVES

The goals of the proposed project and development aim to make use of the existing infrastructure, with major initiatives that will support the transformation of Carlton Centre.

PROPOSED MANAGEMENT

A management team will oversee coordinating and managing the Carlton Centre Complex to ensure suitable building maintenance and functionality, as well as good marketing for the proposed development. There will be key responsibilities the management team will take that will ensure effective management as development takes place.

To guarantee that the project is successfully completed, it will require a variety of management strategies that will need to be followed:

1. Project Manager: ensure the refurbishment project is planned and carried out as it should. Additionally, they will also monitor and control the project in which they will account for its failure or success.

2. Site Manager: responsibility of the preparation of the site for the refurbishment and other developments.

3. Building Management: A professional building management company will be hired to manage the day-to-day operations of the building, including maintenance, cleaning, security, and customer service. The building management company will ensure that the building is well-maintained and that all tenants and visitors are treated with professionalism and respect.

4. Tenant Management: The building management company will also be responsible for managing the tenant relationships. This includes handling lease agreements, rent collection, and tenant requests. The building management company will work closely with the tenants to ensure that their needs are met and that they are satisfied with their tenancy.

5. Retail Management: The retail spaces within the building will be managed separately by a retail management company. The retail management company will be responsible for managing the retail spaces, attracting new tenants, and promoting the retail offerings within the building. The retail management company will work closely with the building management company to ensure that the retail spaces are well-integrated into the building and that they complement the overall vision for the building.

6. Sustainability Management: A sustainability manager will be hired to oversee the sustainable design features of the building and to ensure that the building is meeting its environmental targets. The sustainability manager will work with the building management

company and the tenants to encourage sustainable practices and to promote environmental responsibility.

7. Marketing and Promotion: A marketing and promotion team will be hired to promote the building and its offerings to the public. The team will be responsible for creating a strong brand identity for the building and for promoting the building through various marketing channels, such as social media, advertising, and public relations.

8. Community Engagement: The building management company will work closely with the tenants and the local community to foster a sense of community within the building and to promote the building as a positive force within the local community. The building management company will organise community events and initiatives to engage the tenants and the local community.

9. Safety Officer: responsible for ensuring safety protocols and guidelines during refurbishment and developments are followed.

Overall, the management plan for Carlton Centre will prioritise professionalism, customer service, and sustainability. The building will be managed by a professional team that is committed to providing high-quality services to the tenants and visitors, while also promoting sustainable practices and community engagement.

Marketing

While we can manage the construction project, our ability to implement a marketing strategy to create a dynamic environment won't be a problem. The more important concern is: who will use the facilities we have built? In order to draw in our target market, we would need to develop a marketing strategy:

1. Branding and Identity: The first step in the marketing strategy for Carlton Centre will be to establish a strong brand identity for the building. This will include creating a logo, developing a tagline, and creating a visual style guide for the building. The brand identity will be used consistently across all marketing channels to ensure that the building has a strong and recognisable presence.

2. Online Presence: The building will have a strong online presence, including a website and social media accounts. The website will provide detailed information about the building, including the available spaces, amenities, and sustainability features. The social media accounts will be used to promote the building, engage with the community, and share news and updates about the building.

3. Brochures and Print Materials: Brochures and other print materials will be created to promote the building to potential tenants. These materials will be professionally designed and will highlight the unique features and benefits of the building.

4. Advertising: Advertising will be used to promote the building to a wider audience. This will include online advertising, print advertising, and outdoor advertising. The advertising will focus on the unique features and benefits of the building, such as its sustainability features, modern amenities, and central location.

5. Events and Tours: The building management company will organise events and tours to showcase the building to potential tenants. These events will be designed to provide a

comprehensive overview of the building, including its unique features and benefits. The tours will be led by knowledgeable staff who can answer any questions that potential tenants may have.

6. Tenant Referral Program: The building management company will establish a tenant referral program to encourage existing tenants to refer their friends and colleagues to the building. The program will provide incentives for referrals, such as rent discounts or other rewards.

7. Partnership with Real Estate Brokers: The building management company will establish partnerships with local real estate brokers to promote the building to potential tenants. The brokers will be provided with detailed information about the building and will be incentivised to bring tenants to the building.

The marketing strategy for Carlton Centre will focus on establishing a strong brand identity, promoting the unique features and benefits of the building, and engaging with the community to build a strong tenant base. The strategy will be implemented through a variety of channels, including online, print, and in-person events.

Lease Agreement

Lease agreements must conform with numerous issues regarding rental property, including how they must be signed and witnessed, according to the provisions of the Law of Contract and Common Law. A lease, for example, can now be signed online and considered legally enforceable under the Electronic Communications and Transactions Act, 25 of 2002. Establishing a complete lease that governs all areas of the property's rental and tenure is constantly in both landlord and tenant's best interests (Private Property, 2019). In red, the building name (Carlton Centre) and building address (Carlton Centre, 150 Commissioner St, Marshalltown, Johannesburg, 2000), as well as a description of the overall building. In blue, the lease term will be stated in ‘month/day/year’ format. The rent will be stated as one yearly fee which will be broken down into monthly instalments. Security deposits are used as a fee paid by the renter to fix anything that was damaged or stolen within the rental unit.

Figure 5: Commercial Lease Agreement

Compared to a commercial lease agreement, a residential lease agreement has a few different properties. For instance, there are different lease types. There is a fixed lease which has a commencement date and an end date. However, there is another option which is a month-tomonth lease type. The number of occupants must also be recorded on a residential lease agreement, as well as who these people are. The property information (address and mailing information) must be recorded, as well as the amount of bedrooms and bathrooms within the rental unit.

Tenant administration

Both tenant and landlord of Carlton Centre need to adhere and understand regulations and legislation in relation to the agreement of both parties to achieve a productive and comfortable usage of the building. To achieve a mutual agreement would require the following:

Adhering to Rental properties

The Rental Housing Act, 50 of 1999, and the Amended Rental Housing Act, 35 of 2014, are the principal pieces of legislation that govern rental property. They govern the actions of renters and landlords, the property, and the management of deposits. The legislation additionally establishes the Rental Housing Tribunal to assist renters and landlords resolve issues rather than resorting to costly legal action (Private Property, 2019).

Sectional title property

This sort of property, including rents, is governed by the Sectional Title Management Act, 8 of 2011. Regulations include informing the body corporate of incoming and outgoing tenants, ensuring your tenant has a copy of the Conduct laws, and ensuring they follow the complex's laws. The Act also allows a tenant to file a complaint with the Sectional Title Ombud concerning a building or unit owner, whereas before they could only file with the Rental Housing Tribunal (Private Property, 2019).

Evictions

The Prevention of Illegal Eviction from and Unlawful Occupation of Land Act, 19 of 1998 (PIE Act) - It remains a struggle for landlords when their tenants fail to pay and must be evicted since certain processes must be implemented. You are unable to kick someone off the premises, neither do you adjust the doorknobs. The procedure is rigorous and possibly expensive, making the background check as well as continuous renter and property administration process crucial (Private Property, 2019).

Capacity to enter into a rental agreement.

The Matrimonial Property Act, 88 of 1984, which governs consent and capacity to contract in relation to marriages outside of communities of property and foreign marriages, controls the signing of contracts. According to the Immigration Act, 13 of 2002, in order to rent a property, foreigners must possess a current visa issued by the Department of Home Affairs (such as a study, refugee authorisation, or long-term residence permission). A trust is governed by the Trust Property Control Act, 57 of 1988, and since a trust is not a legal entity, the trustees will enter the contract and be a party to any dispute. The ability to transact on behalf of a company is governed by the Companies Act, 61 of 1973(Private Property, 2019).

Cancellation and rental deposits

The Consumer Protection Act, 68 of 2009 (CPA) grants a tenant the ability to terminate a rental agreement without cause, subject to predetermined fines that, ideally, are specified at the time the lease is signed because renting property is a fixed-term transaction. The rental laws govern how the rental deposit is refunded (Private Property, 2019).

Tax in response to late payments

The Value-Added Tax Act, 89 of 1991, will govern any applicable VAT. The Conventional Penalties Act, 15 of 1962, governs penalties. The renter would be required to pay interest if the lease had a clause about consequences for breach, such as late payments and rental arrears. How money owed by the tenant or landlord is to be collected is governed by the Debt Collectors Act, 114 of 1998(Private Property, 2019).

Confidentiality of personal data

The Protection of Personal Information Act, 4 of 2013 (POPI), which will protect tenants' private information once it is fully operational, is currently in the works. It stipulates that personal information must be correctly handled and not shared for financial advantage (Private Property, 2019).

Usage of Carlton Centre Asset

Besides, the Municipal By-Laws also control neighbour interactions and how you can use the land, including issues like noise and encroachments. Additionally, the usage of the property and what behaviour is prohibited are typically outlined in the lease agreement. The landlord should make sure that a copy of the conduct rules is given to the tenant and that they are aware of the terms of tenancy, especially in cases where a sectional title property is involved (Private Property, 2019).

Selecting a representative

According to the Estate Agency Affairs Act, 112 of 1976, every rental agent is required to have a current Fidelity Fund Certificate. The Act also governs an agent's conduct and how they handle the deposit. It's crucial to engage solely with reliable agents, and Ms. Muller advises against sending cash or making deposits without first checking the lawfulness of the representative and the residence in question. (Private Property, 2019)

Maintenance

To rejuvenate or re-furniture Carlton Centre would require an extensive internal and external conduct of a Risk assessment to ensure everyday production of outputs is secured and priority of customer and staff safety. A priority in maintaining Carlton Centre would require the employment of an internal maintenance team to check on the daily usage of Carlton Centre. Also, consider the external maintenance team so that there are other opinions in terms of the condition of Carlton Centre. The physical upkeep tasks that are planned and required by the property management are often handled by maintenance technicians.

To start off would require the qualifications of such a maintenance team to facilitate order in Carlton Centre. For instance, the maintenance team should include the following:

Preventative maintenance planning and scheduling, financial reporting, handling tenants’ communication, ensuring regulatory compliance, ensuring the management team’s services fit in your budget, and understanding pass-through costs associated with 3rd party vendors (Limblecmms, 2020).

The maintenance team hired should consider taking priority in fulfilling these checklists to the maximum effect for the smooth operation of Carlton Centre and should be conducted at least once a year. These are meant to keep the Carlton Centre in good form and address any issues that may arise that downgrade the viability of the property.

The outlines that need to be supervised for both Carlton Centre and Carlton Hotel should be the following:

Examine any behavior that contravenes the lease agreement, Smoke and carbon monoxide detectors should be checked, to keep the water clean, flush the water heater, Repair Drywall or Ceiling Cracks, Water Leaks or Damage, Pest Control, and working of appliances and Electrical efficient usage (Avail,2022).

The recommended technician would be Fvr Property Maintenance. The obligated job of the maintenance team would be to repair the plumping, keep HVAC systems in good shape, do the painting process, do gardening, do roof adjustments, and do annual groundskeeping like shoveling snow and raking leaves are all examples of regular maintenance tasks.

Conclusion

This report poses attributes that are essential for the approval of its implementation to rehabilitate Carlton Centre and the hotel. The implementation of the proposal will address many underlying issues that were addressed in the market analysis such as lack of accommodation that is affordable and viable. It will also be an opportunity to decrease the unemployment rates. It will also address access to affordable consumer outlets and reduce the vacancy rate of office use. The proposal will better utilize Carlton Hotel which was shut down due to lack of proper and efficient management of the property. The establishment of the new and improved Carlton Centre will revolutionize South Africa’s largest skyscraper, and this will be viable also in the tourism sector and it will not be limited to residential, finance, investment and office use.

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