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SOUTH AFRICAN REAL ESTATE INVESTOR

PROPE R T Y

K N OW L E D GE

W E A LT H

Take Action In 2013 Insiders Guide To Making Money!

COMMERCIAL FINANCE

How to compile a bankable business plan WEALTH MONITOR

SA’s Top 10 Rich List www.reimag.co.za

ADVICE FROM A TYCOON

5 Steps to Success

JANUARY 2013

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9 771995 655001

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MASTER INVESTOR JOHN RABIE


Contents

EDITORIAL EDITOR-IN-CHIEF Neale Petersen ASSISTANT EDITOR Angelique Redmond

JANUARY

Take Action In 2013 Insiders Guide To Making Money!

Cover Guide

commercial finance

How to complete a bankable business plan WealTH moniTor

DESIGN STUDIO Michelle Alexander, James Clark & Brent Fisher CONTRIBUTORS Monique Terrazas, Jonathan Courtwell, Koos du Toit, Angie Redmond, John Roberts, Meyer de Waal, Mike Smuts, Gary Palmer PHOTOGRAPHY Stock Exchange, Dreamstime TRAFFIC Juanita Heilbron

write to us:

editorial@reimag.co.za

Page 14

Take Action In 2013

Page 36

Compile A Bankable Business Plan

Page 56

SA’s Top Ten Rich List

Page 66

5 Steps To Success

Page 10

Master Investor John Rable

Page 13

Master Investor Competition

SA’s Top 10 Rich List aDVice from a TYcoon

5 Steps to success

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MASTER INVESTOR JOHN RABIE

FINANCIAL MANAGER Marisa George WEBSITE Diamatrix WEB ADMINISTRATOR Russell Bennett

ADVERTISING National Paul Stubbs paul@reimag.co.za Roy Lategan roy@reimag.co.za Andre Evans andre@reimag.co.za Material & Traffic Juanita Heilbron juanita@reimag.co.za

to advertise: 021 674 5026

CIRCULATION DISTRIBUTION RNA Distribution PRINTING SED Printing Solutions

to subscribe: 0861 228 669 subs@reimag.co.za

SUBSCRIPTION RATES: R 360 - 1 year ; R 720 - 2 years

PUBLISHED BY

FEATURES 5

INVESTOR TALK Take Action And Beat Dreaming Inspiration for 2013

6 ONLINE What’s New On The REIMWebsite

New on REIM TV, Events & Resources

8 INBOX Ask The Property Experts The legal implications of buying off-plan 10

MASTER INVESTOR JOHN RABIE The Legend Of A Visionary Developer

14

COVER STORY And...Action The ultimate key to success

20

CASE STUDIES The Good, Bad & Ugly

REAL|E MEDIA Neale Petersen (CEO), B.Taylor

RESIDENTIAL

ALSO PUBLISHED BY REIM SOUTH AFRICAN REAL ESTATE INVESTOR MAGAZINE

Where is South Africa heading?

www.reimag.co.za

Your Tenant Could Sue You!

LISTED PROPERTY Are You Missing The Fireworks? 7 Deadly Sins Of Property Investment

JULY 2012

25 ACQUIRING Buy-To-Let Property Investment

July 2012 R39.95 (Incl. VAT)

R35.04 (Exclu. VAT) Other countries

The New Land Rover Evoque Reviewed www.reimag.co.za

MASTER INVESTOR DOLF DE ROOS

JUST PROPERTY MAGAZINE

Autumn 2012

PROPERTY

OFFSHORE

MAGAZINE

2012

26 FINANCING Up Your Investment Game

your absolute look into the world of real estate

PROPERTY HANDBOOK

Rental Income Security Challenges can be overcome www.justpropertygroup.co.za

The Commercial Property Market Where to this year?

Holiday Homes

A wise financial decision?

R 99.95 (EXL VAT)

ISSUE

EDITION 3• 2012

2

Autumn 2012

BROUGHT TO YOU BY:

GETTING STARTED Looking At Location

24 FINDING Direct Property Investment

Feel The Pulse Of The Property Industry

Z

22

www.justpropertygroup.co.za

www.reimag.co.za All rights reserved. No portion of this publication may be reproduced or used in any form without prior written consent and permission from Real Estate Media. The publisher gives no written guarantees or assurances and makes no representation regarding any goods or services written or advertised within this edition. Prospective investors should always consult their attorneys, advisors or accountants. Copyright © Real Estate Media cc

www.reimag.co.za

28

PROPERTY DEVELOPMENT Eco-Estate Development The future face of property

30 MANAGING Collecting Sectional Title Levies When payment is past due

January 2013 SA Real Estate INVESTOR

1


INDEX

COMMERCIAL 35

ABC BUSINESS STRIPPED BARE............................................64 CYPRUS...............................................................................53 CATHKIN ESTATES DEVELOPMENT.............................29 CCID......................................................................................35 COURTWELL CONSULTING...........................................37 CASHFLOW........................................................................44 CATHKIN ESTATES DEVELOPMENT.............................29 CCID......................................................................................35

COMMERCIAL INVESTOR News And Industry Update Updates and property hear say

36 FINANCE Before You Apply For A Loan Compile a bankable business plan 38

DEF DIPULA INCOME FUND..................................................35 FORBES................................................................................57 ELAN.....................................................................................64

COMMERCIAL OVERVIEW Where Will The Upswing Be In 2013

40 HOSPITALITY Find The Perfect Location For Your B&B 42

GHI GROWTHPOINT PROPERTIES.......................................... 35 GROWTHPOINT PROPERTIES.......................................... 40 GROWTHPOINT PROPERTIES.......................................... 42 GOBAIN.................................................................................. 33 IPS............................................................................................ 45 IVAN ZARTZ ATTORNEYS.................................................. 31 I SOVER SAINT GOBAIN.................................................... 33 HEARTLAND......................................................................... 65

LISTED FUNDS Performance And Investing

OFFSHORE 45

JKL JUST PROPERTY GROUP................................................26 JUST PROPERTY GROUP................................................27 LIGHTSTONE......................................................................20 LICENSEE SEEFF................................................................21 LIGHTSTONE......................................................................22

OFFSHORE INVESTOR News And Industry Update Updates and property hear say

46 LONDON London’s New Blue Print

MNO NATIONWIDE.....................................................................IFC MASTER INVESTOR.......................................................... 9 MASTER INVESTOR..........................................................13 MD SPIRE............................................................................35 MD SMUTS & TAYLOR.....................................................45

50 AFRICA From Cape To Cairo 52

OFFSHORE INVESTMENT Top Ten Places To Invest In

PQR 360 PRODUCTIONS.........................................................61 RABIE PROPERTY GROUP..............................................12 PARAGON LENDING SOLUTIONS...............................39 REMAX.................................................................................21 RAWSON PROPERTY GROUP.......................................21 RAWSON PROPERTY GROUP.......................................45 P3 INVESTMENT GROUP................................................23 P3 PROPERTY GROUP....................................................24 P3 PROPERTY GROUP....................................................25 P3 INVESTMENT GROUP................................................27 PROPWEALTH....................................................................47 PIC.........................................................................................35 PAM GOLDING PROPERTIES.........................................45 PAM GOLDING PROPERTIES.........................................45

LIFESTYLE 56

WEALTH MONITOR Wealthiest Men In SA

58 INTERIORS Sweet Suites 60

PROPERTY INNOVATION Take A Look Behind Virtual Tours

STUVWYZ STANLIB...............................................................................54 SMART VILLAGES.............................................................48 SIP PROJECT MANAGERS..............................................49 SMART VILLAGE................................................................ 3 SMART VILLAGE................................................................59 SEEFF....................................................................................21 SAINT GOBAIN..................................................................32 TPN.......................................................................................34 TPN.......................................................................................42 TELEGRAPH........................................................................52 VIRULY CONSULTING......................................................51

66 LESSONS Business Advice From A Tycoon

Contributors

Jonathan Smith is the Director of Courtwell Consulting and has ex- tensive experience in property and consulting, including educational programs

Mike Smuts is an author, and property investor, he is the owner and managing director of Smuts and Taylor, a London based investment firm

John Roberts is the CEO of The Just Property Group, a dynamic property company born from the motivation to create a property industry leader

2

January 2013 SA Real Estate Investor

Koos du Toit is the CEO of P3 Investment Group that offers hope and guidance to anyone looking to build a successful investment portfolio.

Angelique Redmond is our talented in-house copy editor. With a passion for words and music, her pink earphones are a permanent fixture.

Olga Koma is a researcher with FinMark Trust’ Centre for Affordable Housing Finance in Africa. Her interests are urban studies, urban design & African cities discourse.

Rui Marto is the Director of Marto Lafitte & Assoc, a firm specializing in Property Law Commercial Law, Foreclosures, Civil Litigation and Consumer Law.

Monique Terrazas is REIMS 2012 SAPOA award winning property investment writer, she is a treasured REIM contributor for almost five years.

www.reimag.co.za


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INVESTOR TALK

BY NEALE PETERSEN

Take Action And Beat Dreaming

Inspiration to get you into action for 2013

W

elcome to our action issue - created to inspire you to take action at the start of a new year. Our cover story provides practical steps for taking action as the foundation of success, focusing less on investment advice and more on getting you fired up for 2013. Property investment and business are about learning and growing, yes, but more importantly, it is about moving forward.

look at themselves first in terms of what they are doing: is it working and how are they contributing to making the world a better place?

Dream big! Many of us dream about our own business, but we dream too small. John Rabie, a living legend in the property development arena, is one of South Africa’s big dreamers and big doers. Read about this fascinating Master of Property on page 12, not only to learn from his extensive experience and expertise, but to be inspired by his positivity about both property as an investment class and South Africa as a country. Investment in 2013 I have a lways steered clear of mak ing predictions about the property market or the economy. Instead, I believe investors should

However, Ma r ius Fenw ick , COO of Mazars Financial Services, shares some very interesting observations about 2013. Accepting that consistently high returns are probably in the past is his most important investment tip for 2013. “Don’t expect the returns we’ve seen, especially not from the same asset classes,” he says. “And if you want higher returns, be prepared to take on more risk.” He adds that listed property, which has delivered excellent returns of late, is likely to disappoint over the next few years with lower returns and a possibility of capital loss.

The key to investing, however, is really to look forward and focus on the long term. “Returns do eventually come through and even though we cannot rely on past performance to get us through investing in 2013, we can take comfort in knowing that a long-term approach will add up favourably in the long run,” he concludes. Prosperous investing

What investors should do When it comes to investing, there is no crystal ball, but for every type of investor - from young professionals to retirees - specific asset allocation guidelines can assist in building and preserving wealth. Fenwick says investors will have to increase their risk appetite.

Neale Petersen EDITOR-IN-CHIEF

extra digital video content

Life lessons we can use in 2013 Brian Dyson, former CEO of Coca-Cola Company delivered a motivating speech for the Georgia Tech 172nd Commencement Address on 6 September 1996. Some of the highlights from his speech are particularly pertinent as we go into a new year. n Don’t undermine your worth by comparing yourself with others. It is because we are different that each of us is special. n Don’t set your goals by what other people deem important. Only you know what is best for you. n Don’t take for granted the things closest to your heart. Cling to them as you would your life, for without them, life is meaningless.

n Don’t let your life slip through your fingers

by living in the past or for the future. By living your life one day at a time, you live ALL the days of your life. n Don’t give up when you still have something to give. Nothing is really over until the moment you stop trying. n Don’t be afraid to admit that you are less than perfect. It is this fragile thread that binds us together. n Don’t be afraid to encounter risks. It is by taking chances that we learn how to be brave. n Don’t shut love out of your life by saying it’s impossible to find. The quickest way to receive love is to give; the fastest way to lose love is to

hold it too tightly; and the best way to keep love is to give it wings. n Don’t run through life so fast that you forget not only where you’ve been, but also where you are going. n Don’t forget that a person’s greatest emotional need is to feel appreciated. n Don’t be afraid to learn. Knowledge is weightless, a treasure you can always carry easily. n Don’t use time or words carelessly. Neither can be retrieved. Life is not a race, but a journey to be savored each step of the way

“We all have a hierarchy of values and we view the world through those values. If business, money and wealth are low on your values you could literally be sitting on a gold mine and you just can’t see it.” DR JOHN DEMARTINI

www.reimag.co.za

January 2013 SA Real Estate INVESTOR

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ONLINE

"REIMag digimag now iOS and Android accessible." Online Business Directory Real Estate Investor readers and reimag website visitors are always looking for property related businesses and people to help them with their investing such as estate agents, brokers, buyer's agents, property managers, at torneys, conveyancers, valuation specialists, accountants, seminars

& workshops or even property developers. We have created an Online Business Directory to help readers and website visitors find and access the products and services they need.

Real Estate Investor Digital Read the print magazine for free in a new, more visually appealing format than ever before, or install the Real Estate Investor Magazine app for iOS and Android devices for real-time updates on our content. Join us in the social media realm as well, where we're committed to building a vibrant and responsive community

"REIMag digimag now iOS and Android accessible."

using both Facebook and Twitter giving you direct access to our real estate knowledge base as well as our network of serious South African property investors.

Search For Property To Buy And Rent Real Estate Investor readers and reimag website visitors are always looking for property to buy or rent. Click on the SEARCH FOR PROPERTY banner which will take you to over 10 000 property listings nationwide.

Knowledge is money

The new BIZ MALL now offers an even wider range of property, business, inspiration and financial publications with an improved shopping experience.

books

6

January 2013 SA Real Estate Investor

CDs/DVDs Software

Games

www.reimag.co.za


BOOK REVIEWS Everyone’s Guide to the Consumer Protection Act

The Management Bible

By Clive Gibson & Geoff Hull

By Neil Flanagan & Jarvis Finger

Among other things, the CPA aims to promote and protect the economic interests of consumers; Improve access to, a nd t he quality of, information that is necessary so that consumers are able to make informed choices; protect consumers from hazards to their well-being and safety; and promote and provide for consumer education. Everyone’s Guide to the Consumer Protection Act is therefore essential reading for all South Africans – every home should have one.

What makes The Management Bible spec ia l is t hat a l l the k nowledge you need on management has b e en enc ap s u l ate d i n one comprehensive, handy volume. Covering topics such as managing yourself, staff relationships, off ice crises, inter persona l con f l ict a nd skills building, the book offers step-by-step solutions to over 30 0 common ma nagement challenges and problems.

Inside the Centre

The Stig: TheUntold Story By Ray Monk

By Top Gear

J. Robert Oppenheimer is among t he mo s t i mp or t a nt f i g u r e s of the t wentieth cent ur y. He oversaw the successful effort to develop the f irst atomic bomb – a breakthrough which was to have eternal ramif ications for mankind, and made Oppenheimer the ‘father of the Bomb’. Inside the Centre is a story of discovery, secrecy, impossible choices and unimaginable destruction, and re v e a l s t he mot iv at ions a nd complexities of this most brilliant of men.

The Stig is known to millions as Top Gear’s tame racing driver, famed for his skillful driving and his legendary reluctance to speak. Yet almost nothing is known about the man behind the visor. Where did he come from? What is his motivation? Did he really once punch a horse to the ground? These questions and many others will be answered in Simon du Marche’s landmark work, The Stig.

The Master Strategist

Execution

By Ketan Patel

By Larry Bossidy & Ram Charan

In the same way that Machiaveill, and Sun Tzu before him, exploded all existing ideas about strategy, The Master Strategist cuts across politics, economics and business to set out a new and compelling strategy for a peaceful and prosperous future. We stand at a point in history where we can have almost anything we desire and are able to manipulate technology to create wealth and launch any war we wish to fight. Learning how to create a strategy for sav ing t he f ut u re is now essential.

Larr y Bossidy is one of the world’s most acclaimed CEOs, with a track record for delivering results that has few peers. Ram Charan is a legendary advisor to senior executives and boards of directors, with unparalleled insight into why some companies are successful and others not. The result is the book people in business need today. Leaders who create execution cultures focus on five key items, which are explained in Execution.

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BOOKS AVAILABLE AT Knowledge Is Money

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January 2013 SA Real Estate INVESTOR

7


INBOXINBOX

ASK THE PROPERTY EXPERTS

Unsecured Lending

Off Plan Units

Mieke van Rensburg Norton Rose South Africa www.nortonrose.com Meyer De Waal Oosthuizen & Co Meyer de Waal Attorneys www.oostco.co.za

Q

Jane Michaleson Asks:

What is going to happen regarding unsecured lending in this country? With more and more people being granted credit will this bubble eventually burst?

A

Meyer de Waal Responds:

Unsecured debt has surpassed mortgage finance and in the second quarter of 2102 more than R16 billion was granted to people who own less than R15 000 per month, compared to R1,5 billion home loans in the same income category. Loans are granted faster. It is not uncommon that lenders advertise “loans approved in 10 minutes” The unrests at Marikana and recently the farm workers in the Western Cape can largely be attributed to such lending as higher wages are demanded – to settle debt. It is worrying the certain credit regulators still deny the existence of a credit bubble, but at least refreshing to see that the Minister of Finance and chairperson of the banking Association of South Africa reached an agreement to improve responsible lending and prevent households from being caught in a debt spiral. The accord calls for several measures to be taken, including a review of loan affordability assessments, appropriate relief measures for distressed borrowers, reviewing the use of debit orders and limiting the use of garnishee orders.

Q

Stelios Chasou Asks:

I have purchased a sectional title unit off plan. My problem is with regards to a clause that the developers have included regarding occupational rent. According to the agreement, I will be obliged to pay occupational rent on 1 December which is the completion date regardless if I actually take occupation or not. Is this legally allowed?

A

Mieke van Rensburg Replies:

“This clause is common in agreements of sale between a developer and a purchaser and is frequently the cause of headaches and disputes. There are, as almost anything in life, two sides to the story. A developer has the duty to provide a unit, which is ready for occupation and is in accordance with the specifications, which the parties have agreed on. If the developer has complied with this side of the transaction, and the agreement provides for it, the purchaser is obliged to take occupation. A purchaser, on the other hand, in entitled to receive what has been purchased. The question as to whether the unit is ready for beneficial occupation depends largely on the circumstances. It is understandable that the purchaser will find it difficult to secure a tenant, but this is unfortunately one of the issues that need to be taken into consideration when a unit is bought off plan. It cannot be expected from a developer, who has already constructed and paid for the unit, to provide a grace period during which purchasers can procure a tenant.

ROI On Property

Gordon Mackay Streetwise Millionaire www.gordonmackay.co.za

Q

Kyle Green Asks:

My question relates to ROI on property, two years ago a bought a property, say in 20 years my property is worth R1000 000, am I correct in saying my return will be 55% per annum R1000 000(value at end) – R76 500 (Initial investment, physical cash out my pocket)? Thus my return is : 1107% / 20 years = 55.35? Would you advise me if I am on the right track?

A

Gordon Mackay Replies:

What I recommend you do is Google free return on investment calculators. Please remember there are many variables to be taken into account, for example: repairs and maintenance; increase in rates; capital gains tax; agents commission, market cycles, availability of home loans etc. In addition, we cannot predict the future, so in reality these sums will be totally different when you actually sell and realize the net profit. In all probability your property will sell for at least R2,000,000. So your Return on Investment(ROI) will be 2,414% and your annualized ROI will be 120.6% Give some thought to refinancing i.e. your property has increased in value over the years so the bank will lend you more money which you can use as a down payment on another property. Remember we are in a buyer’s market - take advantage and look for “cash f low positive” investment properties. These are properties that have a surplus after expenses without any down payment.

Do you have a property question you would like answered by our experts?

If so, post it on ASK THE EXPERTS on www.reimag.co.za or email editorial@reimag.co.za 8

January 2013 SA Real Estate Investor

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MASTER INVESTOR OF THE YEAR COMPETITION

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Are you South Africa’s no.1 Property Investor? Real Estate Investor Magazine together with WEALTH MIGRATE INVESTMENTS is searching for South Africa’s leading property investor for 2013.


MASTER INVESTOR

BY NEALE PETERSEN

The Legend of a Visionary Property Developer The more you give, the more you get

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January 2013 SA Real Estate Investor

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FEATURES

J

oh n R abie is t he non-e xec ut ive Chairman and founder of the Rabie Propert y Group. He launched the business in 1978 with his partner Leon Cohen, with no money and a big dream. Today, the company is one of the leading independent property groups in South Africa. John has become something of a household name in the property development industry, particularly in his home city, Cape Town, where he has made a huge impact on the landscape and the local economy. John shared some of the successes and cha l lenges he faced on his journey of entrepreneurship in the property industry with REIM. His knowledge and expertise transcend industries and key lessons can be learned from his more than 34 years of experience in the property development business. In building the business from humble beginnings to a multi-faceted company with a turnover of more than R4 billion and in making massive contributions to the industry, John has become a legend, but he remains humble and down-to-earth about his achievements. John is a passionate Capetonian and South African. Although most of his immediate family has emigrated to Sydney, Australia, a number of years ago, he has no desire to emigrate himself, saying that Cape Town is close to his heart. Like most Capetonians, John believes that Cape Town is the most beautiful city in the world. John was educated at the South African College School (SACS) in Cape Town, and studied Quantity Surveying at UCT and Building Science at Technikon. He is excited by opportunity and his passion for the property and development business has driven him to innovate, transform and contribute to the development of new areas and nodes in Cape Town. Century City, Kenilworth Racecourse, Steenberg Golf Course and Marconi Beam are just a few of his major developments. From ‘bakkie’ builder to property magnate John started in the construction business as a construction and plot and plan expert with www.reimag.co.za

R2 000 he borrowed from his father. As his understanding of the market grew, he bought land in Kenilworth and Wynberg, and with a list of designs, he secured building contracts. John believes that owning a home is everyone’s right and most people’s single biggest asset. As such, it is the cornerstone of a growing economy. W hile today, home ownership is less affordable for the average person, in the early 80’s there were many incentives to buy property, such as f irst-time homebuyer’s subsidies. The market was ripe to build around Cape Town at the time. John offered options to landowners to choose a plan and build a house. He built two show houses in Wetton, Ottery and Plumstead and sold plot and plan options for R10 000 – R12 500. John then further developed five show houses in Table View on the same plot and plan basis. The business was growing quickly, so in late 1983 he approached Murray & Roberts. They then developed residential units in Mitchells Plain and Strandfontein in Cape Town, in Alexandra in Johannesburg and in Umlazi and Kwamashu in KwaZulu-Natal, with simultaneous commercial industrial development in Nyanga. At just 32, John listed his company. He didn’t own a suit at the time and fondly recalls buying one in a rush at Pep Stores for the listing function! The early 1990’s brought retail development opportunities. One of his first deals was the Bridge in Philippi, which he concluded with prominent businessman, KK Combi, on a township development. The turning point Following the huge government and social changes in the early 1990’s, John realised that Public Private Partnerships would be the next step, offering huge opportunities going forward. He started off with the acquisition of the Strand Golf Course at local government level, with the aim of moving the golf course and developing 500 units. This marked the beginning of Public Private Partnership (PPC).

JOHN RABIE Personal Statistics Age: 57 Experience/Qualifications: Quantity Surveying, UCT Marital status: Married with three daughters, Hayley (31) who lives in Philadelphia, Nikki (30) and Ashleigh (22) who both live in Cape Town. Hobbies: Enjoys all kind of sports from playing golf, running marathons and triathlons and going to gym to watching rugby.

Close-up Mentors: John has always surrounded himself with energetic, positive people such as his original partner Leon Cohen. He networks with people who are at the top of their game and avoids negative people. Books: John is an avid reader of biographies and sport books. Development highlights of your career? The Marconi Beam and Century City developments are special highlights. Biggest achievement? Public Private Partnerships with government to address low cost housing was a key highlight. Staying normal when there is rapid growth and chaos! Keeping the family unit together is important in tough times. What is your biggest extravagance? John says he has everything he needs. He is not a materialistic person but when he travels, he enjoys staying in nice hotels. What is the best financial advice you have been given? There are no shortcuts! You can only invest for the long term. Investing is like a five-day cricket test - you don’t win in 20 overs, but rather strategically over five days. If you were not in property, what would you be doing? John says he’d be a sports broadcaster. In sport, as in business, you need guts and determination and you should never give up.

January 2013 SA Real Estate INVESTOR

11


MASTER INVESTOR Giving back John developed partnerships for unlocking value from state-owned land and teamed up with the Cavcor Group, collectively called RabCav, to spearhead the Marconi Beam development, another big PPC project. The project entailed rehousing 10 000 squatters resident on land owned by Telkom. In 1999, Rabie initiated a R1.2 billion Westlake project in the Constantia Valley, providing housing for more than 700 squatter families and relocating t wo hospitals in exchange for rights to develop the rest of the site. More than 100 hectares of land was developed to accommodate social housing, upmarket homes, a private school as well as retail and offices. The development, with the architects, Rene Frank Habitat, was awarded a SAPOA Green Spiral Award as well as a global award for Best Slum Improvement.

The big break In 2002, Monex invited John on a tour of Century City to look at joint development opportunities. At the time John owned and controlled 30 000m 2 of commercial land around Kenilworth Racecourse, mainly earmarked for commercial development. But John saw an opportunity for more residential development.

In 1999, the company bought Atlantic Beach Golf Course and sold the property to Johnnic, who built the golf course. In 2001, Johnnic decided to disinvest and Rabie bought the property back, reselling the 900 plots to private investors.

Around the same time, he obtained a piece of land in front of Canal Walk called The Island Club. The company developed 480 units with M & R, which they launched end of 2003. Building on this success, John bought the all the development land around the area in 2004. People come from all over the world to see a new city developing. It took time, but over the last 18 months there has been a massive move to Century City.

Big Bay, Bloubergstrand, was another PPC project in which they bought the land and sold plots to private investors. They also developed a new residential suburb with a shopping centre on a 120-hectare site alongside Big Bay. They further developed five sites in Hermanus, including one along the Fernkloof Golf Estate.

In 2005, Rabie decided to take some time off and he travelled around the world. Leon Cohen, his original partner, now runs the

SUCCESS TIPS FOR INVESTING & BUSINESS

1

12

There are no shortcuts. There is no magic formula.

2

You have to be in for the long haul. There is no easy money – you make money over time.

3

Invest now for the future.

4

Stick to your area of expertise – don’t diversify too far from what you know.

January 2013 SA Real Estate Investor

5

Build a track record of delivering quality. Aim to outperform the market.

6

Property and investing is about people, not business.

7

Have a balanced portfolio with property, equities, bonds and resources.

8

Take calculated risks.

9

Never give up.

Rabie Property Group with four directors. John acts as non-executive chairman, allowing him to pursue new projects. New beginnings When his daughter recently got married in Tel Aviv, Israel, John was inspired by new ideas and trends in the urban renewal game. He launched Signatura Private Property Label in July 2012. The business is growing at a rapid pace, scooping up dilapidated buildings in and around selected suburbs in Cape Town and transforming them into modern signature properties. Signatura started with the Horizon sectional title development in Vredehoek. Currently, eight projects are in progress, with many more exciting projects planned. John’s success model John comments that property can be a diverse, complicated and intense industry. There are a host of businesses and sectors that contribute to the success of the property industry, but it all starts with ownership of land. He also believes that a f lair and feel for the market is what is needed. Propert y development has high barriers to entry, but once you are in, the opportunities flow. He says that building a quality team is a key success factor, but the developer must lead the team with vision and passion.

RESOURCES Rabie Property Group Signatura Homes www.reimag.co.za


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The first annual Master Investor of the Year award aims to find South Africa’s leading property investor and to recognize and celebrate the achievements of property investors in South Africa. All potential candidates will be invited to enter and 12 investors will be short-listed but only one person will be given the title of Master Investor of the year 2013 and the fantastic prizes that go with that title. pure on the rand value of the property or the size of the The competition will not be judged purely portfolio. We want to know the key factors that have contributed to your investment success such as discipline, entrepreneurial flair, creativity, dedication, initiative, commitment and plain hard work that have got you to where you are today.

Our all-star judging panel includes: Dolf de Roos

Gordon Mackay

Jason Lee

Neale Petersen

Professor Francois Viruly Pro

Hennie Bezuidenhout

SA author and investor

International investor, author and educator

Best-selling South African property author and investor

Expert lecturer and head of property faculty of UCT

What are you waiting for?

Publisher of REIM

Property developer and entrepreneur

Please submit your entry with your investment story to editorial@reimag.co.za or enter at www.reimag.co.za to view the details of the competition, prize packs, judge’s profiles, and contestants. Entries close 28 February 2013. Sponsored by


COVER STORY

BY MONIQUE TERRAZAS

And...Action!! The ultimate key to success T

here is only one way to become a property investor… and that is to take action and actually buy an investment property. Action is the foundational key to all success. - Pablo Picasso Many people, although they understand the concept of property investment and have a great deal of knowledge about property investment, simply never buy that first investment property. Why? It certainly is not that the system

Action is the foundational key to all success. Pablo Picasso

doesn’t work - thousands and thousands of people have created spectacular wealth with property investment. It certainly is not that it is difficult - many successful property investors started with nothing but a vision. So what is the problem? The biggest challenge, it seems, is going from being a well-informed potential property investor to an actual property investor by taking action - and that means buying that first property, and then the next and the next.

Is it a numbers game? Statistics provide ongoing confirmation that only a small percentage of people who know how to do something will actually put their knowledge into action, whether it relates to improving their health, losing weight, building relationships, improving their business, creating wealth or any other endeavour. This small percentage is, in fact, just 5%. It means that out of 100 people who know how to do something to change their lives, just 5 will actually do it. It is no wonder then that the world’s wealth is concentrated in the hands of just 5% of the global population. These people are among the 5% who actually took action to translate what they know into action. They did not simply learn how to become wealthy, they actually took the action to turn this knowledge into results by doing what they know they should be doing. The stumbling block So what is the stumbling block - the hurdle - that keeps people from taking the action they need to take to produce the results they want? Why can only 5% of people get themselves to take action? The answer is simply fear: fear of failure, fear of success, fear of the unknown. The fear of doing something unusual, starting something new or taking a risk, keeps people imprisoned in their “comfort zone”, even if this “comfort zone” has become quite uncomfortable. Ask yourself what is keeping you from buying an investment property and answer truthfully. Could it be that you don’t believe it really works? Then remind yourself of how simple and practically infallible the system is: you obtain a mortgage loan to buy an asset that produces an ongoing, monthly passive inflation linked income, as well as ongoing capital growth, for life. You use the rental the property generates from day one to pay

14

January 2013 SA Real Estate Investor

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FEATURES the mortgage bond and the other property expenses. If you choose the right property in the right area and place the right tenant, while putting in place risk management systems such as using a professional property rental management agent, obtaining rental income insurance and building up a reserve fund to cover contingencies, the system certainly will work. Re-read some of the success stories from successful property investors to remind yourself just how well it really works. Could it be that you don’t believe you can do it? Then empower yourself with knowledge available online, in countless books and DVDs, and attend seminars and workshops, and read your REI Mag. You can also get help and guidance, perhaps from a professional property investment club or from a mentor who is already a successful property investor. Could it be that you won’t get f inance? You will never know if you don’t submit an application for finance. And if you don’t send an application, you can 100% sure you won’t get finance. Could it be that you believe you don’t have time? The only way to find time to do something is to make time for it. “Action expresses priorities.” - Mahatma Gandhi If you consider creating wealth as a priority, make it a priority by making time for it. Property investment does not require much time. Allocate an hour a day to wealth creation and express the fact that it is a priority in your life by making time for it. Could it be that you are afraid of making a mistake? Indeed, you may well make some mistakes. However, if you look at the common mistakes that property investors make, you will see the same ones crop up over and over again. The great news, then, is that if you have done your research, you will know exactly where the pitfalls are and how to avoid them. No one is perfect and there is no human being

www.reimag.co.za

who will never make a mistake. Commit to avoiding the common mistakes that are so well publicised and to learn from any other mistakes you might make along the way. And, take heart in the fact that whatever mistake you might make, it won’t be the single biggest mistake you can make. The biggest mistake you can make The mistakes you might make when investing in a property are insignificant when compared to the biggest mistake of all: doing nothing. You are probably already aware just how dearly this single biggest mistake can cost you. Twenty years ago, you could buy a twobedroom flat for R30 000. If you had bought it 20 years ago, it would be paid off by now.

“Commit to avoiding the common mistakes that are so well publicised and to learn along the way.” Your flat would be worth more than R400 000 and would producing a passive rental income of R3 000 per month. And the value of the property - and the rental income - will continue to grow year after year for as long as you keep the property. Had you known this 20 years ago, would you have waited even a moment to buy that flat for R30 000, especially knowing you can get a mortgage bond to acquire it and a tenant to pay off the bond? Would you have bought 10 f lats as quickly as possible, so that today you would be earning a passive income of R30 000 in rentals and would own a property portfolio worth more than R4 million - equity you can access through refinancing? “There are risks and costs to action. But they are far less than the long range risks of comfortable inaction.” - John F. Kennedy

Twenty years from today, will you be looking back, delighted that you had taken action and invested in that first property? Or will you know that you did, in fact, make the biggest mistake by doing nothing? Stepping through the fear Knowing that the system works and that you can avoid the biggest mistakes property investors make may not in itself eliminate fear or doubt. There is only one way to step through the fear. “Inaction breeds doubt and fear. Action breeds confidence and courage. If you want to conquer fear, do not sit home and think about it. Go out and get busy.” - Dale Carnegie Taking action in the face of fear and doubt does take courage. But, considering that you know the biggest mistake you can make is to do nothing, perhaps the greatest motivator is the knowledge that creating wealth is an absolute priority - something far more important than the doubts you may still have. “Courage is not the absence of fear, but rather the judgement that something else is more important than fear.” - Ambrose Redmoon Fortunately, there are strategies that you can employ to make it a little easier to take action. Have a plan Your first - and certainly not too challenging - action should be to create a plan. And, fortunately, property investment makes it so easy to create a plan! Let’s say, for example, you want to retire in 20 years’ time at the same standard of living you can afford today with an income of R50 000. Because the rental income generated by a property asset keeps pace with inflation as the rental increases each year, it is as easy as calculating how many properties you will need in today’s terms to replace this income in 20 years’ time. For example, 10 properties each producing R5 000 in rental today will allow

January 2013 SA Real Estate INVESTOR

15


COVER STORY “Take time to deliberate, but when the time for action has arrived, stop thinking and go in.” Napoleon Bonaparte

you to hit your target of the equivalent of R50 000 in today’s terms per month in 20 years’ time. So the plan is simple: acquire and pay off 10 rental properties that generate a monthly rental of R5 000 each in today’s terms over the next 20 years to retire in 20 years’ time with an income equivalent to R50 000 today. That sounds a lot less frightening than a vague plan such as “get rich by investing in property”! “Create a definite plan for carrying out your

desire and begin at once, whether you are ready or not, to put this plan into action.” - Napoleon Hill Break it down into logical steps We’ve all heard this silly riddle: “How do you eat an elephant?”. But the answer, “One bite at a time!” reveals a surprisingly effective strategy for tackling every major task you have ahead of you: one step at a time. Once you have established what the goal is

YOUR ACTION STEPS MIGHT LOOK LIKE THIS:

1

Spend two hours reading up about trusts.

2

6

Set up an appointment with the selected trust professional.

Decide how you will select a trust professional to set up your trust.

7

Attend the meeting and clarify any questions you have.

3 that meet your criteria.

Shortlist three trust professionals

8

Get the paperwork in order.

these three trust pro4 Contact fessionals and ask for a quote,

9

Read the draft of the trust document carefully before signing the documents.

references and reasons why you should select them (keep this correspondence for future reference).

the information you 5 Consider have received from each one and make your final decision.

16

January 2013 SA Real Estate Investor

Open the trust’s bank account as

10 per the trust deed.

(in the example - acquire and pay off 10 rental properties over the next 20 years) you need to break it down into steps - single, logical steps that take you closer to the goal over time. When a big or unfamiliar task is broken down into steps like this, it seems far less overwhelming than when you have one huge and daunting task like “establish a trust” on your “to do” list. Use this system for every step you need to take - from finding the right property to getting finance to placing a tenant. Have a bias toward action - let ’s see something happen now. You can break that big plan into small steps and take the first step right away. - Indira Gandhi Take one step at a time Don’t become overwhelmed at the prospect of buying, managing and paying off 10 investment properties. We often overestimate what we can do in one day and underestimate what we can do in a year. You can’t reach your 20-year financial goal today, and you don’t even have to take two or three steps today. All you have to do today is to take the next step. Keep your final destination in sight, yes, but focus only on the next step as detailed in your plan and make it your absolute No 1 priority to take that one step today. And if you miss that one step today, don’t lose heart. If you did not complete, say, Step 6 (in our example - setting up an appointment with your selected trust professional) today, there www.reimag.co.za


FEATURES is absolutely no need to abandon your entire property investment plan. Simply pick up again tomorrow, and take the next step. Take the first step The most challenging of all the steps is the first one, because this is the step that sets the whole plan in motion. Without the all-crucial first step, nothing else can happen. You remain absolutely exactly where you are. “A real decision is measured by the fact that you’ve taken a new action. If there’s no action, you haven’t truly decided.” - Tony Robbins Don’t make your first step a challenging one. In fact, if you can, make your first step exciting and fun. Once you take that first step and cross it off your list, you have taken action, even if it is a small action. But taking action is the crucial tipping point that takes us from talking and planning to doing and proving. “Take time to deliberate, but when the time for action has arrived, stop thinking and go in.” - Napoleon Bonaparte Taking action – even small action – produces astounding results. It generates momentum, and this momentum generates more action that creates even greater results. It is like starting a snowball high up on a mountain. It takes only a small action to roll a small snowball, but that small action results in a growing snowball that gains more momentum until it becomes enormous and practically unstoppable. Then the next step Once you have taken the first step, you can be justifiably proud of yourself – most people never take the first step! But that single step – all-important as it is - is just the beginning: to reach the destination, you also need to take the next step and the next… An ounce of action is worth a ton of theory. Ralph Waldo Emerson But remember, every time you take another step on your journey, you achieve two things: you get one step closer to the destination, and you create the foundation and the momentum for the next step. Fuel the momentum Fuel the momentum you are building with each step by keeping the end in mind. Every morning, take a few minutes to look at your plan and to visualise the outcome. Think about what your life would be like once your property portfolio replaces your current income with passive income. Think about what you would www.reimag.co.za

do today if you did not have to work, because you have a property portfolio generating all the passive income you need. It will motivate and inspire you to take your next step that will bring you one step closer to the goal. Make time to work on your growing your property portfolio every day, even if it is just for a half an hour. It only takes 21 days to form a habit that will last a lifetime, so make it your habit, as from today, to take just one step closer to your goal.

“Infuse your life with action. Don’t wait for it to happen. Make your own future. - Bradley Whitford Also, do it first. Don’t schedule the things you need to do to grow your proper t y investment portfolio for the end of the day – do it first thing in the morning. What could be more important than securing your financial future? “You must take action now that will move you towards your goals. Develop a sense of urgency in your life.” - H. Jackson Brown, Jr. Just Do It At the end of the day, Nike summed it up in three powerful words: “Just do it”. Whatever needs to be done - whatever step is next in your plan - Just Do It. The 5% of the people in the world who are wealthy don’t sit around talking about how hard it is to get by these days. Facing the exact same economic conditions, the same market place, tax system, credit crunch and other challenges as everyone else, they simply get on with it. They Just Do It. Fit people do not have an armoury of excuses about limited time, expensive equipment, possible injuries and constant tiredness - they Just Do It. Healthy people don’t talk about inherited poor genes, toxins in the food, or the lack of time to have a healthy lifestyle – they Just Do It. Being stuck is a position few of us like. We want something new but cannot let go of the old - old ideas, beliefs, habits, even thoughts. We are out of contact with our own genius. Sometimes we know we are stuck; sometimes we don’t. In both cases we have to DO something. - Rush Limbaugh To put yourself in the top 5% of people who Just Do It, you have to do the same. Instead of thinking about why you can’t, thinking about

how you should, and wishing you had time, money, education or whatever – Just Do It. Now is the time There is no other time than right now. You cannot do anything yesterday, it is gone. You cannot do anything tomorrow, it may not come. Just Do It is for today. If you want to be happy, healthy or wealthy, do what needs to be done today. Make time for what is important today. Just Do It today. “The time for action is now. It’s never too late to do something.” - Antoine de Saint-Exupery It’s all up to you All this talk of action points to one very fundamental truth: it’s all up to you. It is not a matter of having money, time, opportunity, friends in the right places, good looks, education or anything else. Few of the wealthiest people in the world had these things. Many of the world’s most successful people started with nothing. Some had to f irst overcome serious challenges and disadvantages. There are plenty of inspirational stories about people who made it big despite seemingly insurmountable obstacles: John D Rockerfeller, Andrew Carnegie, Oprah Winfrey, Bill Gates, Richard Branson, Mark Shuttleworth and many more. They pointed the way: you can change your life, starting right now, where you are today. Only you can make the decision to create wealth. Only you can translate the knowledge you have into action. Only you can draw up your plan to create your property portfolio. Only you can take the steps mapped out in your plan. Just take action. Do what needs to be done today. It is the only way you can place yourself among the 5% who use their knowledge to create the results they want. Applied knowledge is real power Knowledge is only potential power. Applied knowledge is real power. Take action and apply the knowledge you have to create wealth through property. Only you can unleash the power of property to create the wealth you want. Only you can take the action. “Infuse your life with action. Don’t wait for it to happen. Make it happen. Make your own future. Make your own hope. Make your own love. And whatever your beliefs, honour your creator, not by passively waiting for grace to come down from upon high, but by doing what you can to make grace happen... yourself, right now, right down here on Earth.” - Bradley Whitford January 2013 SA Real Estate INVESTOR

17


COVER STORY KEY APPS TO GET YOU STARTED: The SA property investment market might not be teeming with applicable apps as yet like more developed regions, but already there are a few which the mobile investor really needs

to load up. Here’s the Real Estate Investor list of key apps that you absolutely need to install on your chosen mobile device if property investment is your game.

News and Info Of the local property news sites, only Media24’s Property24 has its own dedicated app, while the Howzit MSN property portal is available through a standard web browser as well as a host conventional agency websites and specialist publications such as our own, although Real Estate Investor is still the only one offering free access to the full, print-format magazine to online visitors in an appealing digimag format.

Chas Everitt app The only local estate agent with a free app, available on both Android and iOS, which gives users all the details of properties available in specified areas, live and at their fingertips. Search properties available both to buy and rent, specifying whether it’s a flat, free standing house or security complex you prefer and based on a set budget and receive a listing of matching results in seconds. You can then further ref ine your search based on included features, such as swimming pools, number of bedrooms number of bathrooms and the like. As part of each property listing you can access a Google Map directing you to the address, send the relevant agent an email, or call directly at the press of a single button. That’s about as far as the functionality goes at the moment, but we expect the company to continue to develop the platform in time adding common features like GPS-based searching. 18

January 2013 SA Real Estate Investor

BondBuddy (Also known as SA Bond Calculator). This fast little app is extremely simple to use and fast to respond without needing any back-end data connection after the first installation. It allows you to enter a purchase price and a deposit value, and then promptly calculates the exact bond

FNB Property Leader Originally launched by leading local property website privateproperty.co.za, the app which has now become a part of the burgeoning FNB app suite under the name Property Leader is an iOSonly version of the Chas Everitt listing, except with GPS functionality already built-in and working. This allows the user to search for a property within a set radius of their current location, while future versions will add Augmented Reality (AR) browsing allowing the user to simply point their device camera up the street and receive an overlay of available properties on the live camera feed. This feature is not functioning as yet, but will be fun (if not particularly useful) once it does come online. Cleverly, since F NB isn’t directly affiliated with estate agents, the financial giant is providing this platform to the large agents as a cost-effective way of getting their available stock listed in an app. Apart from Chas Everitt of course who offer their own version, several have signed-on making the FNB Property Leader listings bursting at the seams with value.

repayments including all relevant transfer and bond costs. The app immediately breaks these costs down in its output, and can also adjust the transfer costs for a developer’s perspective either including or excluding the VAT value on the transaction. Now both agents and prospective investors can quickly calculate accurate, fully-inclusive bond repayments on the go for free and without the cumbersome spreadsheets normally needed. Available for Android only.

Investment and finance Outside of specific property investment applications, there are several little mobile tools available to help you keep track of other portfolios, or even just manage your personal finances better. Sharenet is an excellent JSE tracker which updates in near-realtime and includes a watchlist function as well as built-in financial news feed, while ExpenZA is a brilliant personal financial tool which tracks activity on your bank account by interfacing w ith incoming SMS notifications from your institution and automatically entering these details into an income and expenditure report on your phone. All of the apps listed here are entirely free for you to download and try out at your leisure. Effectively ma ximising their potential undoubtedly delivers an investment upper hand to the tech-savvy mobile smartphone/tablet investor for no cost apart from some familiarisation time. That has to be worth the effort. www.reimag.co.za


CASE STUDIES

BY MONIQUE TERRAZAS

Eskom Price Hikes Will Take Their Toll The Goodagainst e-tolls Victory

The South African National Roads Agency Limited (Sanral) was ready to implement e-tolling by end of 2012, but the Transport Laws and Related Matters Amendment Bill was withdrawn from the National Assembly order paper almost at the last minute. This means that the bill would not be rushed through Parliament, and the delay will allow for amendments to be considered. The primary purpose of the bill was to legalise e-tolling and its provisions open up the possibility for e-tolling outside Gauteng. This is indeed a victory for opposition parties and the South African public, but the fight is not over. E-tolling has not been scrapped, only postponed. Deliberations on the bill will continue in 2013 after Parliament reconvenes on February 10, and will then be sent to the National Council of Provinces (NCOP). In the meantime, the Congress of South African Trade Unions (Cosatu) continues with its campaign of mass action against e-tolling and the case in the High Court in Pretoria continues, as the Opposition to Urban Tolling Alliance (Outa) argues that the implementation of the tolls was unlawful due to insufficient public consultation. Now is the time for South Africans to stand together. Join Cosatu in the legal and protected mass actions and at the planned night vigils during the opening of Parliament and legislatures in February. Get involved and support the Opposition to Urban Tolling Alliance (Outa). These organisations are fighting for your rights as a South African, but they need your support. If we all stand together, government is in for what Cosatu termed “the mother of all battles” in March 2013 as we defend our rights as South Africans.

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The Bad

pping

ages who Eskom envis eases incr

The cumulative effect of the most recent electricity price increases resulted in a total increase of 173% in the four years since 2009, a whopping 148% (average 37%) above inflation for the four-year period. Nevertheless, Eskom is now applying for a further five-year series of above-inflation increases that would take the above-inf lation increases to 405% (average 45%) over the nine years from 2009 to 2018. According to their latest MYPD 3 application: z Residential customers using over 3000kWh face a 35% increase. Projected over 5 years, the compound increase will be 348%. z Industrial and Commercial customers face increases of at least 21%. Over 5 years, the compound increase is 159%. z Municipalities face a 13% increase and, based on past experience, are likely to substantially increase the margin which they charge customers. But this will still not be enough – Eskom will require a further 25% per annum increase for another five years, which would result in a 1526% (average 109%) above-inf lation increase in the average electricity price over the fourteen years between 2009 and 2023. This is an excerpt of the comment on Eskom’s MYPD 3 revenue application submitted on behalf of the people of South Africa by the Free Market Foundation (FMF). As individual property owners, we seem powerless against the monopoly Eskom has on our country’s electricity supply, but together we can stop them. Support organisations such as the FMF, who are fighting for your rights as a South African citizen.

The Ugly

g homes in

Demolishin

Lenasia

Following a court order issued in 2010 the Gauteng Department of Local Government and Housing started early in November 2012 to demolish almost 200 houses in Lenasia that were erected on land belonging to government and intended for government housing. The stands were apparently fraudulently sold, as far back as 2002, for amounts ranging from R2 500 to R95 000 by corrupt government of f ic ia l s to p e ople who b el ie ve d t he transactions were legitimate and even received forged Deeds of Sale with the Department’s logo. After around 50 houses were demolished, The South African Human Rights Commission submitted an application to the Johannesburg High Court to halt both the demolition and the construction of houses until a solution could be found in the dispute between residents who say they were tricked into buying stands and the provincial government, which wants the land back. Gauteng Housing MEC Ntombi Mekgwe said that the Department had attempted mediation but the illegal occupiers did not cooperate, that the demolition of houses was part of the fight against corruption and that “the land belongs to us and we will do anything to make sure that it returns back to us”. He also shifted the blame to the duped landowners, saying that people needed to double check with the Deeds Office to ensure that they were legitimately buying land. Human Settlements Minister Tokyo Sexwale said that criminals both inside and outside the government were responsible. He added that squatting was no longer only what poor, desperate people did but had become both a middle-class problem and big business for syndicates. January 2013 SA Real Estate INVESTOR

19


RESIDENTIAL HOT SPOTS

PROVINCIAL PERFORMERS

Highlighting the top performing suburbs in the major provinces, based on highest rate of annual inflation and indicated for e ach value band. Mid Value : R250k – R700k

High Value : R700k – R1.5mil

Gauteng

Luxury : R1.5mil +

Gauteng

Gauteng

City & Suburb - City of Johannesburg

17.00%

Refilwe - City of Tshwane

19.38%

Victoria - City of Johannesburg

11.52%

Windmill Park - Ekurhuleni

15.39%

Meyerton Ext 6 - Midvaal

17.34%

Carlswald Estate - City of Johannesburg

10.95%

Western Cape

Western Cape

Western Cape

Summerville - City of Cape Town

26.45%

Rawsonville - Breede Valley

17.84%

Schoneberg Estate - City of Cape Town

16.73%

Brentwood Park - City of Cape Town

19.96%

Milnerton Ext 6 - City of Cape Town

12.72%

Nuwe Uitsig - Drakenstein

10.67%

Eastern Cape

Eastern Cape

Eastern Cape

Alexandria - Ndlambe

25.05%

Rosemount - Buffalo City

11.12%

Tyutyu North - Buffalo City

22.88%

Abbotsford - Buffalo City

9.94%

Kwazulu Natal

Kwazulu Natal

Shastri Park - Ethekwini

16.11%

Stanger Manor - Kwadukuza

Stonebridge - Ethekwini

15.58%

Ixopo - Ubuhlebezwe

Free State

Bonnie Doon - Buffalo City

10.58%

Vincent - Buffalo City

7.37%

Kwazulu Natal 11.07%

Zinkwazi Beach - Kwadukuza

11.03%

9.87%

Dunkirk Estate - Kwadukuza

7.91%

Free State

Free State

Merriespruit - Matjhabeng

27.47%

Panorama - Moqhaka

Phuthaditjhaba-A - Maluti A Phofung

20.48%

Universitas Ridge - Mangaung

11.97% 9.31%

Woodlands Country Estate - Mangaung

8.80%

Kwaggafontein - Mangaung

5.89%

WESTERN CAPE

Presenting the Top 5 suburbs per area value band in Western Cape based on the highest rate of inflation for a 1 and 7 year period. The median represents the current median value for the suburb. #

Suburb

1 year

Median

#

Suburb

1

Summerville - City of Cape Town

26.45%

R 570 000

1

Bergsig - Theewaterskloof

2

212.49%

R 400 000

Brentwood Park - City of Cape Town

19.96%

R 410 000

2

Bishop Lavis - City of Cape Town

212.07%

R 380 000

3

South End - City of Cape Town

19.67%

R 590 000

3

Kleinvlei - City of Cape Town

211.38%

R 410 000

4

Silvertown - City of Cape Town

14.50%

R 470 000

4

Saxonsea - City of Cape Town

198.99%

R 430 000

5

Kewtown - City of Cape Town

13.03%

R 360 000

5

Bellville South - City of Cape Town

198.41%

R 540 000

1

Rawsonville - Breede Valley

17.84%

R 820 000

1

Milnerton Ext 6 - City of Cape Town

254.46%

R 1 100 000

2

Milnerton Ext 6 - City of Cape Town

12.72%

R 1 100 000

2

Avondale - City of Cape Town

181.23%

R 810 000

3

Longacres Estate - Saldanha Bay

10.40%

R 1 300 000

3

L Agulhas - Cape Agulhas

160.98%

R 1 000 000

4

Gordon Heights - City of Cape Town

9.80%

R 1 250 000

4

De Rust - Oudtshoorn

138.76%

R 870 000

5

Pinehurst - City of Cape Town

9.52%

R 1 300 000

5

Rawsonville - Breede Valley

137.76%

R 820 000

1

Schoneberg Estate - City of Cape Town

16.73%

R 1 925 000

1

Fernkloof Golf Estate - Overstrand

129.49%

R 2 650 000

2

Nuwe Uitsig - Drakenstein

10.67%

R 1 550 000

2

De Zalze Golf Estate - Stellenbosch

126.66%

R 6 700 000

Mid Value : R250k – R700k

7 year

Median

Mid Value : R250k – R700k

High Value : R700k – R1.5mil

High Value : R700k – R1.5mil

Luxury : R1.5mil+

Luxury : R1.5mil+

Disclaimer: Lightstone applies advanced statistical methods to a comprehensive property data base - compiled from the Deeds Office, the Surveyor General and other sources - to generate property market data, insights, trends and forecasts. Despite the statistical and actuarial rigour applied, Lightstone cannot guarantee the accuracy and reliability of the data. Furthermore, any information provided does not amount to advice and may not be applicable in some cases. Lightstone does not take responsibility for any losses incurred as a result of any person acting or omitting to act as a result of the publication of this information.


REI Residential

Student Housing Vital

Ensure Your Investment Is A Evicted Never Claimed To Success Be Homeless

A midst g row ing renta l demand and a shortfall in university residency, student accommodation has become a vital component of the residential market, says Seeff. Knight Frank’s 2012 student property report says the sector outperforms other commercial property classes globally even during the economic downturn. Locally, the Department of Higher Education says there is a shortfall of around 430,000 student beds, but Seeff’s branches say that opportunity exists not only around the major university belts, but also around smaller, specialised tertiary institutions. In addition to occupancy rates and rental yields, factors such as good maintenance, security, convenience and affordability are important to students and parents, says Seeff. Accommodation within walking distance of tertiary institutions or on transport routes and within vibrant nodes with cafes, bars, clubs and gyms are most popular.

If you invest in property to rent it out, it is important, whether you manage that rental yourself or whether you have a rental agent, to follow certain guidelines so that your investment is a success and you don’t run into problems later, says Michael Bauer, general manager of IHFM, the property management company. Asked to list what he sees as important when renting out a property he says, “Screen your tenants properly. Don’t rent to anyone before checking his or her affordability (pay slips and three to six months’ bank statements), credit histor y, employment references and previous landlord references. If this is not done properly, it often results in problems later - a tenant who pays the rent late or not at all, damages a property or allows undesirable visitors might have a record of doing this repeatedly. Be sure to have a written rental application with all documents to get all of the prospective tenant’s information.”

In ordering the eviction of 2 000 residents from a block of flats, a judge refused to order the City of Johannesburg to provide alternative accommodation, arguing that the people who would be evicted had not claimed they would be homeless. This is a departure from the decision of the Constitutional Court, which stated that the City was obliged to provide accommodation to people evicted by private property owners. Judge Nigel Willis said High Courts were duty bound to have regard to the injunction of the Constitutional Court to apply their mind to the contribution municipalities could make to resolving the problems of housing. ‘In doing so, it would be intellectually-dishonest for a court not to take into account the real problem that exists at a municipal level with its capacity in terms both of finance and its administrative personnel, to solve problems,’ he said.

Valuable Input

Paul Kruger Licensee Seeff Potchefstroom “Students are no longer comfortable with dormitory-style accommodation which forces them to share facilities with fellow students. The modern student is willing to pay extra for modern comforts.”

www.reimag.co.za

Michael Bauer General Manager, IHFM

Adrian Goslett CEO, RE/MAX

“Bill Rawson, chairman of Rawson Properties, always says that you should buy one property a year. I think this is one of the best pieces of advice when it comes to investing in property.”

“In 2012 more than 25 new franchises have opened in the Southern African region - which includes South Africa, Namibia, Botswana, Mozambique and Zimbabwe, The brand is continuing to grow.”

Samuel Seeff Chairman, Seeff “There is security in bricks and mortar and home ownership is important for the country. On a microlevel, it provides stability for households and on a macrolevel, is an important contributor to the GDP and country’s wealth-base.”

Bill Rawson Chairman, Rawson Property Group “It remains true that proximity to the beach and/or a sea view are all-important, and these attributes do enable sellers to ask a huge premium for their properties.”

January 2013 SA Real Estate INVESTOR

21


GETTING STARTED

BY ANGIE REDMOND

Looking At Location

Should you buy coastal or inland?

W

hen it comes to investing in any property, there are questions of location, so which location is better, coastal property or inland property? Along the coast there is good value to be had for those looking to buy a permanent residence or leisure property for weekend or longer breaks. With the housing markets in many coastal areas having been significantly affected by the tough economic situation, there remains very good value to be found. Coastal Property Advantages The main advantage of beachfront property is that it is near the beaches and you can enjoy swimming and sunbathing during your holidays. n Beachfront properties will be more popular for holiday-goers, so you will be able to make a better income from renting out your holiday home throughout the year. n Beachfront real estate in South Africa usually sells for more, so you have the possibilit y of gaining a return on your investment later. If you wish to you can expand your beachfront property and turn it into a guesthouse. n

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January 2013 SA Real Estate Investor

Disadvantages n Beachfront property can be more expensive than other properties, so you might have to go for a smaller home or apartment. n The coastal area of Cape Town can be crowded with tourists, which will not suit you if you are looking for the peaceful and quiet experience of harbour living in the smaller coastal towns. n The cost of living in these tourist areas will be expensive, as restaurants and shops will have inflated prices for visitors. Inland Property Advantages The inland regions of South Africa, are beautiful, with hills and mountains and lush vegetation. n The prices for homes inland are much cheaper than on the coast, while it might not be by a lot, you can still get a bigger property inland than on the coast. n With most of the major cities in South Africa being major metropolitan hubs, if you are looking for city life and fast paced entertainment, then many of the non- coastal city’s are right up your alley. n

Disadvantages n The beach will always be a bigger draw card, and so you will always have holiday rentals. n You will not be able to charge as much for a inland if you are renting it out, because it does not have the attraction of being near to the beach. There are many factors that contribute to the willingness to purchase a property in either a coastal or non-coastal area, but it is rather difficult so determine whether a person buys a property for investment or residential purposes. We can however with certainty make some comments on the demand for these properties regardless of their intended use. The willingness to buy a property is reflected completely in the price of that property. Even though there are many advantages and disadvantages of staying in a coastal or noncoastal area, one thing remains - coastal properties transact at higher prices than noncoastal properties, and beachfront properties are on average worth far more than non-beach front properties.

RESOURCES Lightstone www.reimag.co.za


FINDING

BY KOOS DU TOIT

Direct Property Investment The Professional Approach

A

professional approach to a direct investment in buy-to-let property - as with any other endeavour in life - yields the best results. So what does a professional approach entail? Take responsibility Professiona l proper t y investors assume responsibility for their success and their wealth by empowering themselves with knowledge, making their own decisions while following a proven system, using the right tools and sof t wa re, a nd implement ing sol id r isk management strategies. Have a Roadmap to Wealth Professional property investors understand that success depends on a thorough business plan, essentially, a Roadmap to Wealth, which provides vision, direction and step-by-step action plans. As such, a Roadmap to Wealth is the first step for property investors who have committed to a professional approach. Create a solid foundation Professional property investors build their propert y investment portfolio on a solid foundation - a specifically drafted trust that provides superior asset protection and a host of other benefits, including tax benefits. Tap into proven systems Following a system that has proven effective and successful even under the most trying market conditions, not only signif icantly reduces the risks property investors face but also exponentially increases the probability of success. Build the right team Professional property investors assemble a team of experts, pre-screened by a professional property investment organisation, to ensure every aspect of their property investment business is managed properly and professionally. Assess the quality of investment opportunities. Professional property investors use a scientific methodology, backed up by state-of-the-art software. 24

January 2013 SA Real Estate Investor

Take a professional approach to finance Professional property investors present the banks with a well-researched, accuratelymotivated and viable proposition by tapping into the experience and expertise of specialised bond originators. Tap into the power of mentorship Professional property investors actively seek out mentors who can help them take their investment strategies to the next level. This is one of the reasons why professional property investors belong to professional property organisations. Keep those skills sharp Professional property investors keep their knowledge and skills razor-sharp through joining a professional organisation which provides credible and trustworthy information, training and resources. Master the art of networking Belonging to a professional organisation allows professional property investors to network with, share ideas with and learn from other property investment professionals. Emotional intelligence Professional property investors ensure that emotional intelligence - a key success factor is evident in every decision they make, by using a tried-and-tested system with checks and balances built in. Risk management Professional property investors implement a tried-and-tested system w ith built-in risk management strategies, such as the P3 Investment System, to manage - if not eliminate - the risks inherent in property investment. Manage tenant risks Taking a professional approach, property investors either appoint a rental management company to screen, place and manage the tenant; or acquire the tools and knowledge required to manage a tenant in a similar professional manner.

Eit her w ay, t he y a lso have a Pla n B: comprehensive rental insurance. Manage maintenance risk Professional property investors buy well, obtain a deposit from the tenant to cover damages, budget for ongoing maintenance, build up a reserve fund for unexpected repairs or major maintenance, take out the right insurance and use only reputable, reliable contractors. Manage interest rate risk Professional property investors factor a financial buffer against the risk of interest rate increases into their long-term cash flow projects to ensure that when interest rates increase, it does not place their cash flow under strain. Run a tight ship Understanding that expenses can make a signif icant difference to the return on investment, professional property investors take great care to ensure they run a tight ship, including using professional and accredited experts and tailor-made products or services to ensure maximum value for money. Manage vacancy risk Professional property investors address each possible cause of vacancy before they purchase an investment property, by doing thorough market research, factoring in a 5% vacancy rate and ensuring the property is marketed correctly at a market-related rental and that the property is maintained in a good condition. Join a professional organisation Essentially, a professional approach starts with membership of a professional property investment organisation, which offers investors exactly what they need to take a professional approach to establishing, managing and growing a property investment business including tapping into a proven system and harnessing the experience and expertise of other successful property investors.

RESOURCES P3 Property Group www.reimag.co.za


ACQUIRING

BY KOOS DU TOIT

Buy-to-Let Property Investment

The Ultimate Business Model

B

uy-to-let property investment is much more than just a static investment option. It is, in fact, a dy namic investment that allows you to establish a sustainable par t-time business vent ure, producing ongoing, inf lation-linked passive income and capital growth. But buy-to-let property investment is not just another business model, it is the ultimate business model - and for numerous reasons. Delivering success for anyone Bu y-to -let prop er t y do e s not re qu i re qualif ications or experience, much time, training, effort or money, and yet delivers virtually guaranteed success - ensuring that anyone can become a successful business owner. Creating passive income The ideal - and most efficient - business concept is one that allows the business owner to create passive income. And the most efficient way to create passive income is buy-to-let property investment: it allows the business owner complete control to generate passive income with the minimum input of money, time and energy. The ultimate product, enduring demand Everyone needs a place to live, but not everyone can - or want to - own a property. As such rental property is one “product” that will always be in demand, particularly in a country like South Africa with a massive housing backlog . From a financial perspective The buy-to-let property investment business model allows property investors to start a small, but successful and sustainable property investment business with no capital, no infrastructure, no experience, no qualifications and very little time to spare. You don’t need premises, equipment, machinery, staff, stock, marketing, sales or promotions. You don’t have to quit your job, reinvent yourself or change your lifestyle.

www.reimag.co.za

Harnessing other people’s time (OPT) The property investment business model allows business owners to harness OPT to the maximum, without directly employing a single person. Low risk, high return Property investment is a truly low-risk business because all the risks associated with property invested can be mitigated, if not eliminated, by fol low ing t r ied-and-tested systems. Nevertheless, it yields exceptional returns. In fact, if the returns are calculated correctly on the actual out-of-pocket investment, a good buy-to-let property investment can yield returns of as high as 70% per annum, and this return grows exponentially the longer the property is held. Simplicity Ingenious and practically failsafe, the property investment business model is so simple, you need little more than following a proven stepby-step system to avoid potential pitfalls and implementing the procedures and structures designed to streamline the process and fasttrack business success. A truly sustainable business There are three aspects of a property investment business that ensures its sustainabilit y continuing indef initely without becoming less: the market, the value of the property itself and the income it generates. In fact, not only do these aspects not diminish in value, due to the power of compounding these aspects are growing in value with each year that passes. A truly scaleable business The property investment business model is based on a highly eff icient and incredibly effective system, which means you can easily “scale up” from one to 200 properties, using the same system. A property investor could easily “scale up” into other residential areas, , other segments of the property sector, such as retail, industrial and office properties.

A truly saleable business Could a property investment business owner sell a portfolio of well-selected properties generat ing a n ongoing passive income and capital growth, that requires minimal experience, expertise, time, resources and management? Absolutely! But who would want to? A roadmap to wealth A business plan is a crucial success factor in a business, essentially, a roadmap to success. It defines where you are now, creates the vision of where you would like to be and plots the action steps that must be taken, with deadlines, to get there. Tax efficiency redefined Few businesses offer the opportunities buy-tolet property investment does to optimise tax liabilities - from income tax and tax incentives to transfer duty and capital gains taxes. Extreme outsourcing Every function within a buy-to-let property business can - and should - be outsourced effectively to specialists in their field. Have your cake - and eat it! A buy-to-let property investment business, operated according to a tried-and-tested system, is like owning a franchise, but without the franchise fees, royalties and restrictions. It means that property investment business owners can, in fact, have their cake and eat it! It’s fun! Some of the world’s most successful people share a surprising common trait: they believe that business should be fun. A buy-to-let property investment business is fun because, in essence, it is like playing MONOPOLY in real life - only better!

RESOURCES P3 Property Group January 2013 SA Real Estate INVESTOR

25


FINANCING

BY JOHN ROBERTS

Up Your Investment Game

F

Take your investments to the next level

inancial institutions have marginally relaxed their lending criteria, showing a greater appetite for risk than a year ago as ref lected in the high percentage of bond approvals. One of the country’s leading banks is now regularly granting 100% loans to salaried applicant seeking properties below the R1,5 million threshold.

Stricter lending The provisions are that the applicant has a favourable repayment profile; has not taken out an unsecured loan in the past year with a monthly repayment exceeding 10% of gross income and that that loan is less than R500 000. Banks have also increased their 100% loans to the affordable housing segments where monthly household income falls below R18 000. While this is good news both for first-time home buyers and property investors seeking to broaden their portfolio, the reality is these lending standards are still relatively more strict than during the boom period. It is not a situation likely to ease either in the current market or the foreseeable future - and that means investors wanting to take advantage of these opportunities may need to work on their credit fitness and credit rating scores.

Credit records Issues at hand are how prospective buyers have conducted their bank accounts and credit records for the past six months; have religiously ensured against any late payments on accounts and brought to attention any discrepancies that could potentially affect their access to credit. South African consumers have the right to obtain a free annual credit report from each of the respective credit bureaus. By exercising that right, they have on hand their credit score and more importantly, the knowledge on whether or not that credit bureau information is correct. 26

January 2013 SA Real Estate Investor

Lodging complaints against inaccurate information - late payments, collections that are not theirs or times paid on time and in full but not reflected as such - raises the credit profile. Should there be a judgment granted and the five-year data retention period has lapsed, there is an urgent need to get it rescinded as judgments have a higher weighting than other negative listings.

Reducing credit However, reducing the access to credit may also play a key role in having access to different, potentially wealth-building, credit. Banks consider every aspect credit investors have available regardless of whether or not they have accessed that amount. Specifically, owning 10 store cards despite not using them; holding on to access bonds on primary properties when that investment has be wholly paid up or allowing the bank to raise your overdraft or credit card limit at their discretion despite you not needing that revision will all play a crucial role when seeking another investment bond.

The solution The solution is eliminating those potential hurdles to credit by cancelling unused store cards; cancelling bond facilities you no longer require and reducing access to superfluous credit. Thereafter, the next move is identifying sound property investments - and logic and intensive research simplify that process. There is little doubt homeownership remains a viable investment option and the major foundation block for personal wealth.

Returns Property investment anchors on having the savvy to ask the right questions, the principle among them is location-based. It means

knowing which neighbourhoods have shown consistent growth and the reasons behind that performance. In business, return on investment is critical and for property investors, choosing between capital growth rate and rental returns depends largely on personal financial positions. There is the trade-off between watching the property appreciate over time and maybe deciding that investment will only be a fiveyear one so maximising the rental income is the key goal. The gross percentage of rental return is the calculation of the annual rent divided by the purchase price or property value. Rental payments do not compound, but assist in paying interest, rates, levies and maintenance costs and there are no guarantees that rentals will escalate.

Stepping stone Typically, investors with less cash flow or those starting out on the buy-to-let ladder, favour high rental returns over long-term growth. This is the stepping stone to a longer-term property portfolio where investments are located in better neighbourhoods. Whatever the purchase decision, there must remain the element of commitment to location and bulk appeal. In the short term that means purchasing properties that can attract tenants wanting to live in that neighbourhood, while the long term means having a property that appeals to future buyers. It means compromising on the quirky features in favour of a broader mass appeal. The property market is again offering up its opportunities to those willing to take the risks, but learning from the lessons of the past is a key element to grasping that wealth creation.

RESOURCES Just Property Group www.reimag.co.za


JUST LETTING offers more choices

Make sure you have the professionals on your side. Call 0861 JUSTLET / 5878 538 today.

www.justletting.co.za


PROPERTY DEVELOPMENT

BY ISELLE MCCALMAN

Eco-estate Development The future face of property

E

co-estate development is the latest buzzword in the real estate industry. However, the drive towards sustainable development and the responsible preservation of our natural heritage is not a new concept. A number of successful developments in South Africa have been implementing the core values of creating and maintaining real estate projects to the benefit of both the environment and the investor. Despite reservations from the industry, the concept has proven that it can be mutually inclusive. As we continue to strive towards the goals of sustainable development, it is imperative that more developments are built which are in

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harmony with their natural surroundings rather than detracting from nature. Today people are becoming increasingly aware of the Earth’s need for protection and nurturing, and our corresponding need for a healthier lifestyle - which includes getting back to nature. And as the planet becomes more crowded, the need for personal space becomes more urgent. To meet these needs, many developers are sculpting the dreams of thousands into “eco-estates”. Generally, an eco-estate is developed on lush land that is the natural environment of the flora and fauna of that particular region. Since space is one of

the major principles of any eco-estate, they are designed for properties to be few and far between. On an eco-estate you should feel the freedom and privacy of an environment that offers tranquillity and the sense of being master of your own world. Below we look at one such eco-estate.

Responsible development Cathkin Estates, situated in the picturesque and tranquil Champagne Valley in the Central Drakensberg KZN, is a great example of a successful environmental restoration project through responsible development. Cathkin Estates - originally launched in 2003 – is the result of a long-term vision and determination to transform a cattle ranch into an eco-estate. It represents the largest single package of Drakensberg property development rights granted in the region. The Stockil family have farmed in the Winterton area for over 130 years and owns the 1054ha farm that now is Cathkin Estates. In fact the history of the farm dates back to 1838 when the first of the Voortrekker families settled in the area. The Stockils initially leased the farm, but bought it in 1962 and successfully farmed in this frostfree enclave in the Drakensberg for many years. With time, the dream of establishing an www.reimag.co.za


RESIDENTIAL eco-friendly estate on the farm grew into the success story of today. Brothers Pete and Mark started the process in 1986. Despite encountering their fair share of resistance, they persisted with the project planning. On finally being granted the development rights in 2001, Cape-based private equity and property development company Kaikoura Capital (Pty) Ltd became shareholders and the Entabeni Development Company was then formed as a consortium to develop the Estate. The development to date has been funded entirely with equity capital.

Location Cathk in Estates is nestled against the uK hahlamba Drakensberg Park World Her itage Site w it h v i rg in g rassla nds, indigenous forests and clear mountain streams. It is home to an abundance of plant and animal species, including Eland, Hartebees, Reedbuck and the endangered Oribi antelope, making it the largest private game reserve in the Drakensberg. Apart from the numerous mammals resident on the property, Cathkin Estates also boasts tremendous bird life with 182 recorded species varying from the endangered bearded vulture to the threatened Ground Hornbill. The property covers the North, South and East-facing slopes of the ridges providing a variety of vegetation throughout the year, thereby sustaining the diverse game population and spreading the load on the vegetation.

Environmental consideration Environmental considerations were on the top of the agenda during the planning stages and still form the core of the entire project. The development was designed to be energy efficient and water sensitive, without impacting on the functionality of the units. All water is supplied from dams on the property through a gravity-fed system. Each unit has its own septic tank and the use of anaerobic sewage systems is encouraged. Cables run underground, so there are no unsightly overhead masts anywhere on the property. Eskom supplies electricity with each village having its own transformer. The developers bought the rights to bulk power ensuring a stable supply for the whole estate. The Estate, with its high biodiversity, is controlled by a detailed Environmental Management Plan (EMP) to protect its rich natural heritage. This grassland biome is one of Southern Africa’s www.reimag.co.za

most endangered habitats with less than 1% of the grasslands officially protected. Apart from a 100-year old oak forest, a timber plantation and some other relics of the past owners, such as an old farmhouse and a fruit orchard, the Estate consists of natural bush and veld only. All farming-related land has been rehabilitated. There are a number of waterfalls – some with at least a 100m-drop - and Village 5 looks out onto one of these spectacular falls. Divided into 5 Villages, all stands are on the western slopes of the ridges and spread out so that the villages are separated from each other’s view. Each stand has unobstructed views of the Berg. Once completed, the villages will cover less than 5% of the total estate.

Responsible design The design of homes is governed by guidelines allowing individual expression within a generic berg theme, while minimising disruption to the environment. The architectural guidelines form the basis of the environmental considerations and include specifications for exterior home f inishes to ensure all homes blend in with the natural environment. Rustic natural materials are encouraged, with sandstone, rock and roughened plaster used to blend into the surroundings. Colours are planned to harmonise with nature’s palette. Matt surfaces and recessed, shaded or tinted windows minimise ref lection, and unsightly satellite dishes are hidden from view. Homeowners can

garden around their properties, but may only use indigenous plants. They are also encouraged to install solar panels for water heating. As the population increases and the call for more housing is answered with new developments, it is imperative to look towards the future and encourage sustainability in new developments. Cathkin Estates has shown that nature and developments can merge, and that property does not need to have a negative impact on its surroundings. With sustainability a key issue of concern, this type of development is set to become the future of development.

RESOURCES Cathkin Estates Development January 2013 SA Real Estate INVESTOR

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MANAGING

BY IVAN ZARTZ

Collecting Sectional Title Levies

When payment is past due

T

he collection of levies from owners in members of sectional title units are the bane of the lives of most managing agents and trustees of bodies corporate. The most common way of collecting levies is by way of the issue of summons. In other words, the managing agent instructs an attorney, on behalf of a body corporate, once the account of the owner goes into arrears, to issue summons for the arrears outstanding on the unit. This method is still widely used in collecting outstanding arrears, but is beset with pitfalls of a practical and dilatory nature. What alternative methods of collecting levies and utility fees, particularly with regard to large outstanding arrears, are available to managing agents or trustees?

diff iculties. Managing agents and trustees should be mindful of this fact.

The practical difficulties with the summons procedure

Once a judgment is obtained, the next process is to attach the movable assets of the owner. Trustees of bodies corporate should be aware that they should, at all times, be in possession of the current address of the owner. It is no use instructing the sheriff to attach the movable goods in the unit, as often the units have been rented, and the movable property, i.e. the furniture and appliances, belong to the tenant, unless the unit is let fully furnished. It often happens that the sheriff f inds

Once a summons is served, it presently takes anything from two to three months to obtain a judgment, that is, if one is fortunate, by which time the owner has fallen further into arrears. One used to be able to obtain a judgment and execute (attach) within a month. However, particularly in the Johannesburg Magistrate’s Court, it is now becoming more difficult to obtain a judgment because of administration 30

January 2013 SA Real Estate Investor

Delaying difficulties with the summons procedure Some unscrupulous owners instruct creative attorneys to defend a summons for the purpose of delaying the payment of arrears. This incurs unnecessary legal costs. The owner really does not have a defence and by the time the matter comes to court, the levies are substantial. It should be borne in mind that presently, it could take anything up to eighteen months for a case to be heard in court. During this period, invariably no levies or utility fees are being paid but there is a way to deal with such owners.

After judgment has been granted

insufficient movable assets to attach at the owner’s residence. Many practitioners then proceed to instruct the sheriff to remove the goods attached and subsequently arrange for a sale in execution to take place. It is my view that this method wastes time and money in that, pending the sale of the assets, they are stored at the sheriff’s warehouse at considerable expense, which expense must be borne by the body corporate. The proceeds from the sale of the movable assets are often insufficient to cover the storage costs and removal costs, which increases the costs and claim even further. A suggested alternative is that the sheriff be instructed to record that there are insufficient assets to satisfy the amount of the judgment. This then would constitute an act of insolvency and would entitle the attorney to apply immediately for the sequestration or liquidation of the owner – a drastic measure indeed. After the sequestration application is served on the registered owner, the owner is put under enormous pressure in that he will be mindful of losing his property. In addition, if the owner has let the property to a tenant, he would be mindful of losing the income generated from the rental paid by the tenant. The liquidation process often forces the owner to arrive at a settlement of the arrears. To www.reimag.co.za


RESIDENTIAL oppose an application for sequestration is far more expensive to the owner than to defend a summons. The successful outcome of such an application would also put all of the owner’s other assets at risk. Many practitioners bypass the sequestration route and bring an application to sell the owner’s immovable property. This takes time and often, by the time that the court authorises the sale, there is already a judgment against the immovable property by the bondholder. Bondholders control the sale of the immovable property, in that they can dictate the price at which the property is to be sold. The body corporate has no say when the sheriff sells a property. Ultimately, when the bondholder has consented to the sale, the new owner will have to pay the arrears owed to the body corporate and the legal costs in full, as transfer of immovable property will not take place in the absence of a clearance certificate being issued by the managing agent. Accordingly, I have found the sequestration route to be far more advantageous than waiting for the sheriff to sell the immovable property. On a sequestration, the bondholder does not control the sale by the liquidator. It should be pointed out that bond arrears and levies are both preferent in nature and even if the property does not realise the full amount of the arrears, both the bondholder and the levy holder will receive a pro-rata portion from the sale.

Liquidation Where a close corporation or a company owns the immovable property, and where the arrears and utility fees are in excess of R50, 000.00, my suggestion is to apply for the liquidation of the close corporation or company owning the unit.

Liquidating a company or close corporation Inability to pay debts

A company or close corporation is deemed unable to pay its debts if after a letter of demand has been sent to the registered office of the company or close corporation, demanding payment of the debt, (which letter must be served by the sheriff ) and more than 21 days has elapsed from date that the letter has been sent and no payment or response has been received. A company is also deemed unable to pay its debts if there is a written or oral admission by a representative of the finance credit department www.reimag.co.za

of the debtor that the company is unable to pay, because it has cash flow problems. How does an inability to pay assist in the collection of levies owned by a close corporation or company? In the f irst instance, if an attorney is instr ucted to col lect debts in excess of R50,000.00 in respect of companies or close corporations which own a propert y, my suggestion is that instead of issuing a summons and wasting time in obtaining a judgment, one should proceed to send a letter of demand

“What alternative methods of collecting levies and electricity, particularly with regard to large outstanding arrears, are available to managing agents or trustees?”

particularly where the arrears are high, the oral admission by the director or member is sufficient to begin the liquidation process. The upshot of both these processes is that these are severe measures, which ultimately force the owner to come to an arrangement, or lose the property, since the liquidator steps into the shoes of the owner. Again, in liquidation, the property cannot be transferred until the new purchaser pays the arrear levies and legal costs. I have found that if one can agree a fee with one’s client for the sequestration or liquidation, one can ultimately collect the costs from the debtor, as in most cases the debtor is under pressure not to lose his property. Alternatively, if a trustee or liquidator sells the immovable property, the body corporate can furnish the conveyancer with the legal costs, which can be included in the conveyancer’s clearance certificate, and which costs the new purchaser must pay.

How to deal with a dilatory debtor to the registered off ice of the company or close corporation and wait for 21 days for a response. In my experience, most directors of companies or members of close corporations do not respond to the letter and one can then commence liquidation proceedings. Of course, one can always contact the director or member, and if the attorney is advised by the director or member that the company or corporation is unable to pay, and asks for an extension of time, then, in certain cases,

Finally, to revert to the dilatory owner who defends matters with no genuine defence, but merely in order to buy time, one should consider partially reducing his electricity, so that he can utilise basic electricity. There is a new decision in the South Gauteng High Court, which deals with reducing the owner’s electricity, but whether this will be followed is uncertain at this stage. This process is one, which should be exercised with caution.

RESOURCES

Ivan Zartz Attorneys

January 2013 SA Real Estate INVESTOR

31


SMART MOVES

BY ANGIE REDMOND

Insulate and Save On cash and consumption

S

outh Africa’s mounting energy crisis means that we all need to think of innovative ways to save electricity in our homes and of products that can help us reduce our current electricity usage. Buildings typically account for 40% of all energy consumed in South Africa and yet their potential to save energy is huge. Thermal insulation must be included in the design of all new buildings. This, in combination with energy saving techniques, makes it possible to save up to 78% of a building’s energ y consumption for space heating, cooling and hot water services. The application of this new regulation is good news for the environment and will help you save electricity. All material has an R-value, which is the ability of a product to resist the transfer of heat. Thermal insulation provides a high resistance to the flow of heat from the warm areas to the cold areas in your home, helping you maintain a comfortable living environment, keeping your house cool in summer and warm in winter. In order to help you save electricity it is important to understand how, on average, you consume electricity in your home and how your home gains and loses heat. 32

January 2013 SA Real Estate Investor

TYPICAL ELECTRICITY USAGE • • • • •

Water heating 35% Space heating and cooling 28% Food preparation 22% Lighting 10% Kettle 5%

• • • • •

Ceilings - Up to 35% Windows - Up to 10% Walls - Up to 25% (depending on the type of construction) Floors - Up to 20% Air Gaps - Up to 10%

A typical un-insulated South African home loses energy as follows:

It is important to remember that the internal environment in your home can also be affected by the following factors: 1. Orientation - Does your home face in the correct direction? 2. Shading - Roof overhang or awning to shield northern windows? 3. Air Gaps - Are your doors and windows air tight? Insulation is often considered a luxury and overlooked when building a home yet its primary purpose is to save energy and improve

your home’s comfort. To properly insulate a ceiling and geyser system in a typical home costs less than 1% of the total per square metre building costs, but it is one of the few building materials that will save you money for the lifespan of your home. A typical un-insulated home loses and gains up to 35% of its energy through the ceiling and this can be dramatically reduced by installing insulation of the correct thickness.

RESOURCES Saint-Gobain www.reimag.co.za


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REI Commercial

Deposit-Free Lease

Eskom Profits Drop

Lanseria Airport Sold

Growthpoint Properties Ltd is breaking new ground for commercial real estate globally by introducing an innovative new deposit-free lease. Reshaping business in South Africa, the Growthpoint ‘Undeposit’ means businesses no longer face the burden of large security deposits when renewing or signing new leases for offices, shops, showrooms, warehouses and factories. It also means Growthpoint could potentially release around R350 million of lease deposits it currently holds to boost South African business over the next five years. Norber t Sasse, CEO of Grow thpoint Properties Limited says the new ‘Undeposit’ is tailor-made for Growthpoint based on the excellent creditworthiness of its clients, its use of deposits over the past decade and its rentals.

State-ow ned power ut i l it y Eskom has announced that its profits for the six-month period beginning on April 1 and ending 30 September 2012 dropped to R12.6 billion from R12.8 billion a year ago. Releasing the power utility’s interim results on Tuesday, Eskom CEO Brian Dames said the seasonal nature of the business could mean an even steeper decline in profits by year-end. Dames said the past six months had been challenging. He cautioned that economic growth and the industrial unrest, particularly in the mining industry, would impact f inancial results at the end of the year. These two factors had contributed to the decline in income for the first half of 2012. Eskom committed itself to reinvesting profits in maintaining power stations and servicing debt.

In a landmark transaction for private sector infrastructure deals in South Africa, the group of private investors who have owned and developed the Lanseria International Airport over the past 21 years have sold 100% of their shares in the airport to a consortium of investors which includes Sandton-based Pan African infrastructure development fund manager Harith, a black economicempowerment consortium including the women’s empowerment company Nozala; and the Government Employee Pension Fund (GEPF), through the Public Investment Corporation (PIC). The transaction is subject to certain conditions, including regulatory approval. The airport’s management team and philosophy will remain unchanged and its capital expenditure programme for the next three years has been accepted, committed to and funded by the new owners.

Valuable Input

Marc Edwards MD Spire “Landlords must assess the building both internally and externally and, crucially, they must relook at the target market that they are trying to appeal to and take measures to ensure that their building is competitive within the market.” www.reimag.co.za

Rob Kane Chairman CCID “The extent and growth of investment in Cape Town’s central city is a testament to business confidence in the CBD as a world class place for people to work, live and play. Developments in progress are all indicators of a thriving CBD.”

Norbert Sasse, CEO, Growthpoint Properties “The global financial crisis was an awakening for companies across the world to find better ways of doing business. We listened to our clients to discover what they need to keep their businesses sustainable, and how we can help them.”

Izak Petersen, CEO Dipula Income Fund

Dr Dan Matjila, Chief investment officer, PIC

“South Africa’s property sector faces several challenges including sharp increases in the cost of rates and electricity, which are being passed on to property owners and tenants.”

“The long term infrastructural development opportunities emanating from the acquisition and expansion of Lanseria airport will create jobs and facilitate the expansion of critical infrastructure in Gauteng.”

January 2013 SA Real Estate INVESTOR

35


FINANCE

BY JONATHAN COURTWELL

Before You Apply For A Loan Compile A Bankable Business Plan

W

hen a com merc ia l prop er t y investment opportunity arises and you need to approach a bank to raise debt capital, the more detailed and accurate your presentation business plan is, the more comfortable our banks will be in advancing loans to you. Assuming that you have identified an existing building for purchase or a suitable development site, your application for debt capital will form a crucial step towards attaining your investment goals: convincing banks to provide this source of capital will require both their belief in the investment and in you, the investor. The optimal layout and content of a bankable business plan should commence with an executive summar y of the scheme under purchase or development. Such summary should include a brief description of the building, its features and benefits, its location and a summarised cash flow culminating in a current and future valuation. 36

January 2013 SA Real Estate Investor

The six steps to a bankable business Detailed description A comprehensive description of your proposed acquisition or development should include: • Address and titledeed details together with a surveyor general diagram, indicating the position of the property relative to adjacent properties and roads. • A site and layout diagram of the building under purchase or development. • A table of tenant information containing their legal and trade names, area (size) occupied, lease expiry dates, gross rental rate and annualised rental (including escalations), operating cost rate and annualised operating costs. • A deta i led income and ex pend it u re cash f low revealing all current and future (demarcated as such) income sources as well as each current and future (demarcated as such) expenditure item. • A photographic survey of the development

(or sketch plans). • Your va lue-ex traction plans for the proposed investment: these might include your strategy to revise the tenant mix or redevelop portions of the property over time so as to match the needs of the market.

Due diligence review A second component of your business plan should indicate a professionally performed due diligence review of your scheme. Such report must include five aspects: 1. A legal review of the development’s title, zoning, leases (or offers to lease and letters of intent), the ser vice contracts and any other contracts associated with the proposed transaction 2. A f inancial review, showing how the projected income and expenditure has been verif ied and correlated to the leases and permissible recoveries of the development 3. A valuation of the development using a www.reimag.co.za


COMMERCIAL discounted cash flow (the most accurate method of valuing fixed property) 4. A risk analysis of the tenants within your development, the challenges which your acquisition may face and the surrounding geographical node 5. A review of the value extraction opportunities which you (as the investor) have identified as being reason to invest in the subject property

Asset-management strategy Your bank will judge the value of your proposed investment on their perception of your investment skill as much as upon the perceived value of your building and your proposed strategy to extract additional value from your investment will show just how astute you are. Show the following in your strategy 1. Your objectives in acquiring the subject property: do you wish to grow its value or hold it for strategic purposes. 2. Your plan to be intimately involved in the implementation of your proposed strategy. 3. Your plan to revisit the tenant mix, letting strategy and renewal of existing leases. 4. Your plan to enhance the propert y ’s appearance so as to make it more attractive to tenants and visitors. 5. Your plan to research the surrounding geog raphica l node in order to identif y and manage nodal risks and exploit nodal opportunities. 6. Your medium-term plan to redevelop portions of the property in order to enhance its value and extend its life cycle. Property investments reach the end of their economic life cycle quickly if not correctly asset managed and your acquisition needs to show considerable growth throughout the loan payback period to which your bank will agree. Therefore it is important for the equity shareholders to reveal how they will enhance growth throughout the loan period by constantly seeking value extraction opportunities.

Property management plan Critical to your bank’s participation will be evidence that the seven functions of property management required of your acquisition or development will be exemplary. Show how you shall control the rent collection, administration, leasing and lease renewal function, accounts payment, maintenance co-ordination and f inancial control of your development by indicating the standards which you shall adhere to and the systems that you will use. www.reimag.co.za

Even i f you intend to outsou rce t he management of your property to an agent, recognise that your bank will want to know that you have set the management standards and that you will be in firm control of the day-today management of your investment through the setting of mandates, the establishment of policies and regular reporting.

“ Your bank will judge the value of your proposed investment on their perception of your investment skill as much as upon the perceived value of your building”

Offer your bank a summarised monthly report (in a dashboard format) to indicate your willingness to share critical information that will allay your bank’s fears: inadequate property management remains one of the main risks that banks see to mitigate when advancing loans. A valuable tip that I always give is that you should link your asset management strategy to your property management plan by showing how the two correlate. Property managers who fail to understand and implement the asset management strategy cause more harm than good to a fixed property.

Security One of the reasons that South Africa has remained economically stable relative to some European countries is that our banking sector is exceptionally cautious and your bank(s) will want to ensure that their risk is mitigated through taking reliable security. Be prepared for your bank to take the usual bond and cession of cash f lows as well as personal suretyships from your shareholders but negotiate a relaxing of any stringent conditions as your loan matures and the subject property increases in value. Show your bankers how the development’s cash flow shall correlate to their required repayment value over the years and what fat you have built in to cushion against vacancies, operating cost increases, repairs and interest rate hikes. A lways consider placing a summarised business plan before several of the banks and embarking on a road show so as to canvass the various financiers on their terms such as the

loan-to-value, rates, loan period and security requirements that they would be willing to grant: compare their confidential offers before deciding which bank to use.

The purchase or development price If you are purchasing an existing development as an ongoing concern, it is always best to show your bankers a discounted cash flow as well as how you derived the capitalisation rate which you used to determine the acquisition value. Your bank shall compile their own valuation and proving to them that you have already applied your mind to the development’s value will assist their understanding of the value that you perceive of the building. A development opportunity requires you to provide your bank with a substantiated total capital cost of development. This is compiled so as to include the following aspects.

TOTAL CAPITAL COST OF DEVELOPMENT The land acquisition costs and residual

1 land values of the development. detailed building specifications 2 The together with the construction costs. The professional fees that shall be 3 incurred during development. holding costs that you shall pay 4 The during the period from when the land is transferred into your name until the time when the developed-property becomes income-producing.

5

The financing costs of the entire development, including land acquisition costs, construction costs and holding costs.

Your cash flows should include as much detail as possible so that your banks do not have to do the spadework. Thus, indicate: the rentals that you shall achieve (benchmarked against comparable market rentals), any interim income which you may be able to obtain, complete expense projections, insurance cover and costs, an income tax analysis and a construction cash flow. Show when you intend to make drawdowns from your bank as wel l as the interest implications of your periodic drawdowns. This will provide your bank with comfort that you have considered the cash f low carefully, allowing for construction risk.

RESOURCES

Courtwell Consulting January 2013 SA Real Estate INVESTOR

37


COMMERICIAL OVERVIEW

BY GARY PALMER

Where Will The Upswing Be In 2013?

as the key component for growth. With fuel increases creating additional costs for this sector and a weakened rand affecting fuel imports, convenient access to transport nodes is in demand.

Make this year a year for success

Investors need to do their homework if they want to make the best of the upcoming year. They need to gauge and factor in what the costs for development are and the finance required, as well as determine which property sector is more likely to offer long-term and continued growth. They need to measure this against the risks they are willing to take on, all of which to ultimately make their portfolios more attractive. Property investors should consider properties with good tenants and where growing commercial developments are in demand. They should continue to speak to industry experts to advise them on potential deals, but they need to assess if they can go the distance should the economy unexpectedly turn for the worse. Another useful strategy is to find out what other investors and property professionals are talking about and what investments they are involved in.

D

espite slow recover y levels since 20 09, the commercia l propert y market has been under pressure in 2012. Although it is impossible to predict how the market will perform in 2013, investors can take advantage of what could be the beginning of an upswing for certain sectors within the commercial property market, provided they do their homework. According to the SA POA / IPD South African Biannual Property Indicator to June 2012, property investment overall delivered a total return of 5.9%, which comprised of 1.5% capital growth and a 4.4% income return for the first six months of the year. During this period inner city offices and provincial areas were most affected, where vacancy rates shifted from 12.1% in December 2011 to 15% in June 2012 and continued weak demand for office space resulted in poor rental performances. According to Rode & Associates Q2 Report on the SA Property Market, Pretoria decentralised (0.5%) saw the only growth in office rentals. Johannesburg decentralised remained the same as a year ago, while Cape Town and Durban decentralised contracted slightly down 1% and 2% respectively.

Property fund listings There has however been an increase in the number of property fund listings, and all the funds seem to be competing with each other on high value properties with blue chip tenants and long leases. There has also been strong demand in regional shopping centres (retail property topped capital growth rates of 1.7% in the first half of 2012), and petrol stations. Industrial property fared better as the year 38

January 2013 SA Real Estate Investor

progressed, as improvements in infrastructure encouraged the industry, particularly for businesses that rely on transport freight facilities. There has also been ongoing demand for better operational facilities and convenient access to key transport nodes and in the first half of 2012 this sector enjoyed positive rental growth of 4.2%. Investors shou ld f ind t hat t here a re opportunities to be had, provided the interest rate remains steady and the global economy gradually stabilises as the industry has yet to recover substantially.

“Investors with access to capital and the ability to move quickly on a transaction will be able to purchase excellent value in 2013� Office rental Jones Lang LaSalle’s third quarter 2012 Global Off ice Index indicates a stable outlook for global prime office rentals in 2013. However, South African industry professionals expect limited growth in office space locally, although international businesses are showing interest for larger rental space. If foreign business confidence picks up, South Africa could still offer international businesses an advantage to expand into the emerging local market, as well as other key sub-Saharan Africa territories.

Industrial Within the industrial property market, keeping operational costs down is widely regarded

Do your homework

Purchase value

Investors with access to capital and the ability to move quickly on a transaction will be able to purchase excellent value in 2013. The banks will continue to remain cautious, especially in the commercial lending sector, so investors should look for alternatives to the banks for funding such as insurance companies, asset managers and second-tier lenders. In order to ensure that the relevant finance is met, they should discuss their options with a lender who has expertise within the industry and who can offer them sound advice on the actual cost of a development, as well as advise investors on how to arrange the finance that is necessary. Banks can offer f inance, but the waiting periods can be lengthy (2-3 months to structure a deal) so investors should source alternatives in the interim if short-term liquidity is required to avoid missing an opportunity.Second tier lenders usually have good working relationships with the banks and brokers, and are ideally in a position to be able to structure a short-term loan, providing investors with a bank guarantee in a short space of time while they wait for the bank to secure a long-term deal.

RESOURCES

Paragon Lending Solutions www.reimag.co.za


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HOSPITALITY

BY ANGIE REDMOND

Find The Perfect Location For Your B&B

Capitalise on the upturn in hospitality

W

h i le t he sent iment in t he hospitality industry still remains cautious on the back of the global economic recession of 2008 and poor results post the Soccer World Cup in 2010, South African tourism f igures are reporting an upturn that should comfort current business owners and future investors in this industry. In October 2012, hotels in South Africa reported an average occupancy of 66% compared to the 61.4 % the previous year; the average daily rate (ADR) in the industry is also improving with hotels reporting a 7.1% growth from R846 to R905 in October 2012. With the hospitality industry reporting growth and an upturn in spending, the time to invest in the hospitality trade is now, and what better way than with a guesthouse or Bed & Breakfast? Finding the perfect location hinges on the perfect building and view. When people decide to stay in a hotel or guesthouse, they are looking for an experience, be it a breathtaking view, or a relaxing environment. It is critical that your guesthouse provides one of the two, either an experience or a view.

Areas Certain areas remain high in demand with corporate travelers and tourists. It is here where the largest concentration of guesthouses can be found and continue to trade well. What is good enough for a tourist is good enough for 40

January 2013 SA Real Estate Investor

a prospective buyer to consider. Areas like Stellenbosch, Franschhoek, Somerset West, and Cape Town – especially in or around the CBD – and aff luent suburbs of Durban, Umhlanga and Ballito in particular, show a remarkable resilience in prices, albeit that also here some small price adjustments are made.

building and rooms are just as important. In order to attract clients and guests you must have the right location and the perfect building. Rooms that are bright and clean and spacious, offer your guests a comfortable and relaxing place to stay away from home.

Getting it right

In hospitality ensure you have the 3G’s of success. Great Location Great Value Great Advice

When you look at different areas for your bed and breakfast or guesthouse, there are a few things you must consider. 1. Is it in an easy-to-find location? People don’t like having to search to f ind their accommodation. 2. Is there a lot of noise, such as a main road or train tracks nearby? This can detract from the relaxation your guests are hoping for. 3. How close is public transport? Some people will want to use the local mode of transport over hiring a car. 4. How safe is the area? There is nothing worse than feeling unsafe in the place you are holidaying in. 5. What is close by? Is there a beach or restaurants or bars close by? The more you can offer by means of entertainment and added extras, the more people will want to stay at your guesthouse/ B&B.

The building While location is very important, the actual

The three G’s

Value for money is part and parcel of what will make your venture succeed or fail. The better value for money you offer, the more people will want to return and spread the word about your business. Great advice just sweetens the deal, as the owner of a B&B or guesthouse, you must be able to direct your guests and ensure their holiday is memorable and enjoyable, and the right advice will ensure this. In hospitality, the way you treat your guests can make or break your business. Remember the best form of advertising is word-of-mouth and negative comments will sink your business faster than the Titanic.

RESOURCES Pam Golding Properties www.reimag.co.za


LISTED FUNDS

BY JAMES COLBY

Listed Property Best Performing Asset Class

Delivering Growth and Returns

F

ourteen of the top 100 companies over the past 5 years have been listed property companies. They represent some 10% of the peak performers. “These results show that South African listed property companies have performed well over both the short and long term,” says Norbert Sasse, chairman of the Property Loan Stock Association (PLSA) and CEO of Growthpoint Properties Limited. The rankings are determined by the share price performance of every company listed on the JSE, which is measured based on R10 000 invested over five years, from October 2007 to the end of September this year, calculated by I-Net Bridge. According to Catalyst

Fund Size

Fund Managers, listed property was the best performing South African asset class over the past 12 months delivering total returns of 28.3%, compared with cash at 5.61% and bonds at 13.220%. The sector’s top player in listed property was Resilient Property Income Fund. Resilient owns a portfolio of 37 retail properties, and has various development projects under construction or in the planning stages. Resilient was established and registered as a company on 15 July 2002 and listed on the JSE Limited on 6 December 2002. It was founded with the main objective of carrying on the business of a property holding company

Fund Name

33.81 Sesfikile SCI Property Fund Class A1 2 080.07 Coronation Property Equity Fund Class A 353.32 BJM Multi-Manager Property Fund Class B1 4 184.38 Investec Property Equity Fund Class A 981.92 Momentum Property Fund Class A 680.88 Catalyst SA Property Equity Fund Class A 6 111.73 STANLIB Property Income Fund Class A 2 149.31 Prudential Enhanced SA Property Tracker Fund Class A 1 943.03 Discovery Flexible Property Fund Class A 111.38 Property Index Tracker SAPY 2 052.01 STANLIB Multi-Manager Property Fund Class A 5 438.19 Old Mutual SA Quoted Property Fund Class A 69.07 Efficient Property Fund 753.47 Nedgroup Investments Property Fund Class A 4 208.24 Investment Solutions Property Equity Fund 72.20 Property Index Tracker Top Ten 98.75 MET Property Fund Class A 98.75 MET Property Fund Class A1 122.66 The X Funds MET Property Fund 458.71 Absa Property Equity Fund 2 376.48 SIM Property Fund Class A 1 765.71 STANLIB Multi-Manager Flexible Property Fund Class A 721.87 Oasis Property Equity Fund 721.87 Oasis Property Equity Fund Class D 625.80 Marriott Property Income Fund Class A 626.52 Marriott Property Equity Fund Class R Average 42

January 2013 SA Real Estate Investor

Return 39.94 38.58 38.52 37.79 37.57 37.04 36.80 36.77 36.74 36.61 36.56 36.44 35.67 35.63 35.60 35.47 34.82 33.07 32.60 32.57 32.27 29.23 29.04 28.60 19.54 13.97 33.75

directly through the ownership or lease of property or through the holding of listed and unlisted securities. Sector newcomer Investec Property Fund ranked 15th in the top 25 companies over one year, notching up compound growth of 85.88%. Redefine Properties was 12th in the top 50 companies for growth in turnover, achieving five-year compound turnover growth of 45.95%. South Africa’s largest listed property company Growthpoint Properties and the sector’s only top 40 representative f irm, ranked 14th in performance of the top 40 index companies over five years, delivering compound five-year growth of 17.82%. During the week ended 23 November, Redef ine Properties subsidiar y Redef ine International plc announced the acquisition of 60% of the issued shares of BNRI Earls Court Limited for £8.7 million. BNRI owns the 150-bedroom Holiday Inn Express Hotel in Earls Court. Annuity Properties released results for the six months ended 30 September 2012, which were in line with financial targets set at the time of listing, according to management. Annuity has recently acquired a high quality property portfolio valued at R817 million and is one of many smaller listed property companies growing aggressively through acquisitions. Vukile released results for the six months ended 30 September 2012. Distributions were 5% higher than the comparable period last year and the company also announced details of the acquisition of a 50% undivided share of East Rand Mall from Redefine Properties. Redefine Properties reached agreement with Sanlam Life to acquire East Rand Mall for R2.23 billion and Vukile exercised its preemptive right to acquire 50% of the property for R1.115 billion.

RESOURCES Growthpoint Properties www.reimag.co.za


Escape the Rat Race

Learn to manage your money well and invest wisely Also excellent for teaching kids at home and in the classroom

Cashflow101.co.za 083 554 0563

sales@cashflow101.co.za


REI Offshore

Sales In The USA Still Increasing

New Spanish Government Scheme For Property

Brazil Property Set To Skyrocket

Sales of existing homes in the US increased in October, even with some regional impact from Hurricane Sandy, while home prices continued to rise due to lower levels of inventory supply. According to the latest monthly report from the National Association of Realtors, sales rose 2.1% to a seasonally adjusted annual rate of 4.79 million in October from a downwardly revised 4.69 million in September, and are 10.9% above the 4.32 million-unit level in October 2011. However, there was some impact from Hurricane Sandy according to Lawrence Yun, NAR chief economist. ‘Home sales continue to trend up and most October transactions were completed by the time the storm hit, but the growing demand with limited inventory is pressuring home prices in much of the country,’ he explained.

Chinese and Russian investors are to be encouraged to buy property in Spain through a new governmental scheme. On November 19th, trade secretary Jaime García-Legaz stated at a conference that foreigners will be granted residency permits if they buy houses worth more than 160,000 euros (approximately £129,000). The plan is principally aimed at Chinese and Russian markets in an attempt to reduce the wealth of unsold property in Spain. Under the scheme, foreign buyers would also be able to move around the 25-nation Schengen zone freely. Thus far, it is unclear whether the permit extends to spouses and children under the age of 18. There may also be backlash if the residency permit allows buyers to get a Spanish passport, which entitles them to live and work in all EU member states.

Investors should consider property in Brazil ahead of the 2016 Olympic Games, with the country hovering on the brink of a tourist boom. Marcelo Pedroso, the director of international markets at Embratur - the Brazilian Tourist Board, explained that the world’s attention is now on the country and more and more people will undoubtedly choose to holiday there over the coming years. “The extensive work invested into improving infrastructure will ensure that Brazil is a much more attractive and accessible proposition for people considering a long-haul holiday,” he said. In 2011, there was already a marked increase in the number of people travelling to the country, with a rise of 13.47 per cent in the number of f lights to Brazil noted compared to the year previously. This number is only set to soar.

Valuable Input

Dr Andrew Golding CE, Pam Golding

Mike Smuts, MD Smuts and Taylor

Bill Rawson Chairman, Rawson

“On Eden Island in Seychelles, buyers can acquire a villa with access to their own mooring directly in front of their garden. This means you can simply step out of your front door and into your boat.”

“Wealthy South Africans are highly sensible with their investments and are looking at London property as a ‘safehaven’ amidst the weak domestic economic outlook.”

“Those who keep track of property prices will be aware that British property is often now being sold at prices that are 25 percent to 30 percent below their 2007 peaks.”

www.reimag.co.za

Peter Bruil, MD Pam Golding (L&G) “It is noticeable that buyers from overseas apparently realize that the Global Financial Crisis is hitting Europe and the USA relatively hard and is affecting South Africa to a much lesser extent.”

Scott Picken CEO, IPS “When you are investing overseas you need to change your strategy and if you don’t you will be part of the 80% of South Africans who lose money when they invest overseas. ”

January 2013 SA Real Estate INVESTOR

45


LONDON

BY MIKE SMUTS

London’s New Blue Print

A strategic plan for your financial future

D

espite the volatility of the last few years, the UK firmly remains a place to generate and hold wealth, and London has retained its crown and credibility as the world’s financial centre. But what does the future hold for London and what will the world’s capital look like in years to come? The London Plan is the overall strategic plan for London, and it sets out a fully integrated economic, environmental, transport and social blueprint for the development of the UK’s capital to 2031. Since it first came into force in July 2011 there have been extensive drafts, revisions and of course a mixed response from commentators. Some have welcomed its allinclusive approach, while others have criticized it for already being out of date.

Greater London One thing the key players all agree on is the fundamental need for an overall strategic plan for Greater London, consisting of 32 individual boroughs or municipalities. The Mayor’s London Plan definitely delivers on this front with 122 policies that form the basis of London’s planning regulations context within which the local boroughs will need to set their own local planning agendas. It forms part of the development plan for Greater London. London boroughs’ local plans need to be in general conformity with the London Plan, and its policies guide decisions on planning applications by councils and the Mayor. It divides London into planning zones: Inner London and Outer London; as well as the ‘Central Activities Zone’, ‘Opportunity Areas’, ‘Regeneration Areas’, Areas of Intensification’ and ‘Town Centres’, ‘Strategic Industrial 46

January 2013 SA Real Estate Investor

Locations’, a strategic network of open spaces etc. These zones have their own planning policies and redevelopment goals. For example, ‘Town Centres’ will expand in all parts of London and major development will expand into the Outer London boroughs. It also anticipates a change in age of the population (more younger and older people); persistent problems of poverty and polarization; a changing climate. It intends London to continue being a ‘global city’, or business capital, while also improving Londoners’ standard of living and the places where they live.

closer to meeting demand. The first London Plan (2004) set a target for 30 000 new homes per year, a target that many commentators considered unrea l istic. T he ta rget was updated to 30 500 in the 2006 plan. The draft replacement London Plan (2009) raised the target even further to 33400 new London homes per year. All pretty pointless political maneuvering, really, when you consider that the best output that London’s builders have managed in the past decade was a meager 24 190 new homes, completed in 2004.

The London plan, more homes

London’s house building target for 2008/09 was 30 000 homes. Only 19 000 were built, missing the target by 36 per cent. And it seems there will be no let-up in the severe supply/demand imbalance that has plagued the London housing market for at least half a century.

A major element of the London Plan is to try and address the lack of good quality housing an issue that has plagued the UK market for at least half a century. New homes in the UK are built at a much lower rate per household than is common for other parts of the developed world. In total, Britain has built 13 million houses over the past 50 years, according to Halifax, but the housing supply in the UK has slowed to its lowest level since the Second World War. Both Ken Livingstone and Boris Johnson, recent mayors of London, have tried, and failed, to build more homes so that supply comes

Target

Backlog will lead to shortfall In the wake of the credit crunch, and with fewer people looking to buy – because of uncertainty about the economy or a lack of mortgage finance – developers have downed tools and mothballed developments. The total number of new home registrations in the second quarter of 2010 in

www.reimag.co.za


PROPWEALTH

ADVERTORIAL

North South Divide

Investing in the United Kingdon – where to invest ?

S

outh Africans are using the relaxed exchange control regulations, coupled with a stronger Rand, to invest in buy to let properties in the United Kingdom. However,

a frequent question asked by many investors is “where does one start when investing in real estate in the United Kingdom?” The property market at the current time is divided into two distinct areas; Greater London and then everything outside London. There are also areas outside London that are as expensive as London but overall London is almost its own market. Greater London, which is usually defined as within the M25 ring road, an investor can expect yields of anything between 2-5% and capital growth is very in good in this area. The negative is that investment entry prices are high, often driven by emotional home buyers, other investors and now even more so, by Russian and Eastern European investor ploughing cash into

“For those investors who are looking for great cash returns

“ Its where the yields makes sense” says Craig Illman, fellow

UK bricks and mortar.

Propwealth offers some hand picked properties in Liverpool,”

director.” We are non emotional investors and we do not touch

In other areas of the UK, the capital growth is low or even

continues Doyle. “They generally cost from £39 000 to £ 150 000

anything that has gross yields of less than 5% in London meaning

static, but cash flows are excellent. The professional buy to let

and enjoy net cash returns of around 8-10% after all expenses.

that after all expenses like agents fees, levies and more, the

investors are pumping money into these areas as they are after

Although these properties don’t have massive capital growth as

property should not cost the investor anything each month”

cash flow with capital growth forecast for the medium future.

yet, they enjoy phenomenal cash returns and by far beat the cash

Propwealth works with large banks to secure their South African

PROPWEALTH, a UK based investment company run by South

returns from many investment vehicles. More importantly the

investors excellent offshore mortgages normally at 70% to

Africans has identified two types of property investments, each

investor owns the property outright and does not have to rely on

property value and at interest rates of 3.99%

catering to the requirements of their clients, be they looking for

third parties looking after their money.”

An excellent example of this type of investment is Stanmore Place

capital growth or cash flows.

He continues “A good example of a recent investment in

situated on the Jubilee Line, and in a residential and leafy area

One type offers good capital returns and yields, which will cover

Liverpool, in a blue collar area which is currently being re

of North London. It offers returns of over 5.5% and one-bed units

the running cost of the investment, and the other offers cash

generated, was bought by a Cape Town investor for £ 86 000.

are selling from £ 220000 upwards. Capital growth has been

returns on the back of full property ownership. All investments

The market price after refurbishment is close to £ 115 000 and the

excellent there and anticipated growth exceeds 10% per annum.

are fully managed so they make ideal armchair investments for

net returns on the property are 10%. This stacks up to a fantastic

“ This development is appealing to professional tenants who like

South Africans,

currency hedge as well as the fact that our investor owns the

a quieter environment in the rush of London” confirms Anthony

“The formula is simple, “ says Anthony Doyle, a director of

freehold completely.”

Doyle. “ The units are fitted out to extremely high standard and

Propwealth. “ We invest in below market properties, get the

Propwealth has also recently sourced a mix-use property in

our investors get a furniture pack plus a parking space as part our

best yields possible, buy in up-and-coming areas with full

Liverpool consisting of a commercial tenant with a further 4 flats

negotiated deal, valued at around £ 30 000”

management in place. This guarantees a strong tenant base and

on the first floor. “This particular property is a great investment as

One of the most exciting developments happening in London

no headaches for the investor as the property is fully managed.

it is returning 10% yields and comes in at just under R 3 million,”

right now is Royal Arsenal in Woolwich. It is on the Thames and

Best of all our South African investors own a piece of real estate

says Doyle. “ It offers a great Rand hedge and a tenant with a 17

is geared for lifestyle living. The most exciting part is that a new

in the UK. Its all safe and secure”

year lease. It’s a low risk investment”

Crossrail station is been built in the development. The Crossrail

Liverpool is fast becoming a new epicentre for growth in the

Fur thermore Propwealth has identif ied new builds in

will get commuters into central London in 15 minutes. These start

North West. It is spending millions of pounds on regeneration

Greater London as the best investment strategy for buy to

at around £230 000 for a large one bedroom.

and development and many head offices have located to the

let. Propwealth has strong relationships with London Stock

“In conclusion, we have definitely seen a massive shift in

city. Its favourable lifestyle and transport links make it an ideal

Exchange listed developers who discount a small portion of

investors wanting returns on their cash. Investors are not happy

investment area.

their properties to the company.

with cash in the bank,” says Doyle. What could be better than a high yielding property that you own!

Craig and Anthony will be visiting Johannesburg, Cape Town, Durban and East London in late January 2013. If you would like to have a one on one chat then mail them on info@propwealth.co.uk or phone /text them on +447500166982. Visit the web site on www.propwealth.co.uk

www.reimag.co.za

January 2013 SA Real Estate INVESTOR

47


LONDON

Greater London was a mere 4 101, an average of just 1 367 homes per month. House building in London has picked up sharply since the financial crisis, but there is still a huge backlog of development projects that have yet to start. Around two-thirds of pipeline developments with planning permission have stalled, in many cases because of further wrangling over planning or because of a lack of finance. Even if these projects get off the ground, there will still be a signif icant shortfall in housing. Across London, planning has been granted for 214 825 units, but it is estimated that 374 111 households will have been created or moved into the capital by 2020. Even if there is a sharp pick up in planning schemes granted, and a surge in building activity, developers will struggle to eradicate the current shortfall in housing. If you look at the number of developments that are actually under construction, the picture is even more stark. Around 43 000 units are being built at present, less than a quarter of the total number of units which have planning permission. Stripping out social housing, the number of private residential units under construction is even smaller. Even if builders could increase their output, the recent London Housing Capacity Study shows that there is only enough land available in the capital to deliver close to 31 000 homes a year – still a whopping 3 000 homes short of the minimum target. The Institute for Public Policy Research expects a shortfall of 750 000 homes in England by 2025, with a 325 000 deficit in London. London’s population is expected to grow by 1.3 million by 2031, from seven million at present, while the number of households will increase by 900 000 in the same period. 48

January 2013 SA Real Estate Investor

Population increase With London’s population forecasted to increase so rapidly over the next 20 years, housing will become more, not less, of an issue. The independent Examination in Public Panel on the Plan concluded that London’s annual housing requirement stands at between 34 900 and 37 400 units, somewhat above the original estimate of 32 210. At the same time, the housing market is facing a lack of rental stock, unavailability of mortgages and a residential pipeline that has stalled as developers struggle to access bank finance. This severe lack of good quality housing means that London has historically been the first market in the UK to show a price increase, and the last to fall in a downturn.

Transport for London Transport is also a major part of the Mayor’s blueprint for London and in particular the £15.9 billion new Crossrail project. Due to open in 2018, The Crossrail will make a significant contribution to the transport needs and economic development of London and the South East region. The project comprises new tunnels running west-east through

central London connecting directly with existing surface rail routes to Maidenhead and Heathrow in the west, and to Shenfield and Abbey Wood in the east. By connecting the major London rail terminals of Paddington, Liverpool Street and Canary Wharf, Crossrail will also enable interconnecting mainline sized train services to cross the center of London via a number of new purpose-built stations. This 37-station stretch of railway will seamlessly join up west and east London and have a profound impact on London. Travelers will be able to travel direct from Paddington to Canary Wharf, through stations at Bond Street, Tottenham Court Road, Farringdon and Liverpool Street, in just 16 minutes. Busy stations like Bond Street will see an estimated 40% increase in the number of people passing through – rising from 155 000 to 220 000 a day.

The opportunities Crossrail will also bring an extra 1.5 million people within 45 minutes’ commuting distance of London’s key business districts. This will have a direct impact on the capital’s economy, enabling employers to draw from a deeper pool of talent. The Crossrail project also offers significant opportunities to property investors as a number of key areas will see values boosted by the new travel links provided by the Crossrail line. Such trends have been evident in the past - residential prices in Canary Wharf and Tower Hamlets around the time of the Jubilee line extension in 1999 rose by more than 60% in the four years running up to the opening of the extension. Daniel Burnham, the famous American architect and urban planner, once said: “Make no little plans. They have no magic to stir men’s blood and probably themselves will not be realized. Make big plans; aim high in hope and work, remembering that a noble, logical diagram once recorded will never die, but long after we are gone will be a living thing, asserting itself with ever-growing insistency. Remember that our sons and grandsons are going to do things that would stagger us. Let your watchword be order and your beacon beauty. Think big.” And while not all critiques and commentators may like the Majors 20-year blueprint for London’s future development – they certainly cannot accuse him or the City of London of making little plans.

RESOURCES Smuts & Taylor www.reimag.co.za


For more information, including details of our Dubai, Mauritius and Vietnam branches please visit our website:

www.sippm.co.za

SIP Project Managers is the largest project management company on the continent and delivers both local and international projects.

With 34 years of experience and a portfolio of high-profile projects, SIP has become highly sought-after by consistently delivering high-quality projects on time.

Sip Project Managers (Pty) Ltd. Reg no: 1984/006110/07 Head Office: 10 Woodmead Estate, 1 Woodmead Drive, Woodmead, Sandton. Tel: +27 (11) 233 6800, Fax: +27 (11) 233 6801, Email: sipjhb@sippm.co.za


AFRICA

BY FRANCOIS VIRULY

Cape To Cairo

From

Opportunities across the border

A

week does not go by without a South African company indicating that it will be pursuing opportunities across its borders. This growing interest in African business ventures is largely a response to strong economic growth prospects and an underdeveloped retail environment. Recent figures published by the International Monetary Fund suggest that the Sub-Saharan economy will continue to grow at an average annual rate of approximately 5.0%. Certain countries are expected to show growth rates that mirror the performance of many Asian countries. While these strong macro economic fundamentals are being driven by a boom in oil and commodity prices, there is growing evidence that African economies are rapidly diversifying. South African investors, who in the past focused on opportunities in Southern Africa, have in recent years gained an appetite for the rapidly growing economies of East and West Africa. South African developers have completed projects in Accra, Lagos, and developments have been initiated in Angola, the DRC and Kenya.

The opportunities South African and international retailers are also capturing opportunities arising from the rapidly accelerating buying power of a growing middle class across the continent. McKinsey, the international consulting firm suggests that apart from rapid urbanization, the discretionary expenditure (expenditure beyond critical food requirements) in Africa will rise by as much as 50% by 2020. The real estate opportunity becomes evident when one considers that until recently a city such as Lagos did not have a single world-class regional shopping centre. 50

January 2013 SA Real Estate Investor

www.reimag.co.za


OFFSHORE However, it is equally important not to see Africa as a single market but as an array of markets with their own characteristics. L a n g u a g e s , c u lt u r a l nor ms a nd leg a l frameworks result in investment nuances that are sometimes difficult to identify. However, the important point is that many African countries are starting to offer an investment climate that has becoming more attractive to investors. This also includes an improvement in telecommunication, the availability of debt funding, and land ownership arrangements. The type of investor entering the Sub-Saharan African market is also changing. While the first pioneers were private equity funds and individuals, the players now include large pension and listed property funds. For instance, Stanlib has recently announced its Africa Direct Property Development Fund that makes it possible for investors to indirectly enter the African real estate sector. The fund will be US$ denominated and will target a return of 25%. The banking sector is also showing a growing appetite with a number of South African banks competing for funding opportunities across the continent. However, funding projects across the African continent remains expensive and it occurs at relatively low loan-to-value ratios. This factor inf luences the size and type of developments undertaken.

Levels of risk Although investors initially focused on retail shopping centres, often driven by South African retailers, new sectors such as hotels, warehousing office and residential development are receiving greater attention. But no matter

what sector is chosen, investors need to ensure that the returns compensate for the relatively high levels of risk that are taken. In attempting to understand property related risks across Africa it is important to distinguish between country risk and risks associated with specific property sectors and developments.

RANKING

PERCEIVED RISK

Infrastructure considerations

1 2 Ownership Issues incentives , Barriers and 3 Tax Agreements 4 Geographic proximity 5 Economic Environment 6 Political Stability

While controlling country risks can be difficult, the control of project and sectoral risks is often a function of experience. To some degree, South African developers have reduced project related risks by appointing South African professional teams and focusing on projects that are supported by South African tenants. Recent research undertaken by the Department of Construction Economics and Management at the University of Cape Town concludes that investors often enter African markets with perceived risks that are higher than actual risks they encounter. The UCT study concludes that over 66% of the developers interviewed felt that the actual risks of entering these markets were lower

than the perceived risks before entering these markets. In entering African property markets the top five most significant perceived risks were ranked as follows. It is worth highlighting that political stability is considered a relatively low risk compared to say issues such as the availability of infrastructure and land related ownership issues.

Investors should enter the market for the following reasons 1. Opportunities across the African continent offer opportunities for greater returns than being secured in South Africa. 2. The demand and supply gap in many African countries remains considerable offering opportunities. 3. E n t e r i n g A f r i c a o f f e r s p o r t f o l i o diversification opportunities. 4. There are opportunities to target a growing middle-class. 5. The African property market is untapped, unexploited , unsupported and unsaturated. The investors interviewed were of the view that adopting certain strategies can mitigate a number of the identified risks.

Strategies to adopt to mitigate risk • Make sure that you have a local partner. • It is i mp or t a nt to hed ge c u r renc y depreciation risks as local currencies can be volatile. • Understand the trading restrictions that could impact on the viability of the project. • Make sure that you have adequate access to electricity and other municipal services. • A p p oi nt a profe s s ion a l te a m t h at understands local conditions and expected outcomes of the project. • When acquiring or leasing land, make sure you understand the rights that you have secured. • Pay careful attention to logistical difficulties and cost over- runs. • U n d e r s t a n d t h e c o m p l e x l o c a l characteristics of African property markets. Over the past few years, South African developers and investors have acquired valuable experience in the Sub-Saharan property market and this has improved their abilit y to identif y projects and mitigate perceived risks. In addition a growing number of investment avenues and products are being developed that will allow investors in future to indirectly invest in this new frontier of the global real estate sector.

RESOURCES

Viruly Consulting www.reimag.co.za

January 2013 SA Real Estate INVESTOR

51


OFFSHORE INVESTMENT

BY JIM CURRANT

Top Ten Places To Invest In across the world 7 The Alps

1 United States

The big beast is finally waking from its slumber. House prices have enjoyed six straight months of rises after seven years of falls. HSBC says the US now offers Britons buying abroad the world’s best value for money. Lawrence Yun of the National Association of Realtors, agrees. “The market is recovering, with consistent increases in sales and prices,” he explains. Experts predict the largest increases will be in known areas such as California, Florida and New York.

2 Victoria, London An opport unit y is brew ing right under Londoners’ noses. A predicted building boom is likely to deliver around 300 new homes, new shops (including a Jimmy Choo store) and the expansion of Victoria station by 50 per cent. “Prices are a lot cheaper than in other parts of central London,” says Jo Eccles of Sourcing Property. Flats are still available, but houses are rare. The lettings market is red hot, with rents up by about six per cent in the past year. A boost for any pension.

3 Brazil The 2014 World Cup, the 2016 Olympics and a roaring economy that has just overtaken Britain’s; the next decade is set to be party time in Brazil. Its average 23 per cent house price rise in the past year is the world’s largest. There are four major hot spots. Rio de Janeiro; São Paulo, where the population will rise 15 per cent to 23 million by 2025; Natal in the north east, which has brilliant beaches; 52

January 2013 SA Real Estate Investor

and Florianópolis, off the southern coast, nicknamed “Brazil’s Ibiza”.

Skiing is the ideal retirement sport, with good views, exercise and delicious mountain meals. Sale and leaseback (S & L) is an unusual investment idea for a retiree who wants to ski for three weeks, then have their lodge or flat let out for the rest of the year. A new S & L scheme 20m (65ft) from the slopes at St Martin de Belleville in the French Alps does just this. It sold out within months so demand is clearly high. Developers get tax breaks to build S & L schemes in off-thebeaten-track Alpine locations, so always check accessibility.

4 Maidenhead, Berkshire

8 Plymouth, Devon

Berkshire might not be the f irst name on everyone’s lips for a dream retirement, but take a closer look. Crossrail’s high-speed train service will kick-start many local markets. None more than Maidenhead, where the 70-mile route begins. “There have been new developments springing up around the station, which have sold well to investors, first-time buyers and professionals, who are aware of the future effect,” says Helen Rhodes of buying agency Property Vision.

Great sailing, the classic British seaside and good connections with the rest of Britain. For ocean-loving retirees, Plymouth could be ideal. “The town is undergoing a major period of regeneration,” says Owen McLaughlin of Countrywide, which has four sites in the city.

5 Estonia Dismiss any thoughts that this is a Baltic backwater. The capital, Tallinn, in particular, is smart, chic and hi-tech. Unemployment is low by regional standards. House prices in the city rose 13.9 per cent in the year to summer 2012, says Knight Frank. Golf is also taking off in a big way, with a large new resort, the Estonia Golf & Country Club, providing 125 new homes close to the capital.

6 Edinburgh Boom time will resume when the tram project to the airport – years behind schedule and double its original cost – opens in 2014. “It will reduce congestion in a busy area,” says Strutt & Parker agent Blair Stewart. “We’re experiencing increased interest along the route, especially in the West End.”

9 Sardinia, Italy As sunny as Majorca or Cyprus, but much quieter, this island is a perfect retirement spot. The island has many sandy unspoilt coasts, but prices are most likely to soar in Cagliari, where old mansions are being converted into stylish apartments.

10 Cambridge, Cambs With its stream of top graduates, hi-tech industr y and excellent links to London, Cambridge has always been an attractive prospect. A £750m redevelopment around the station is under way. The architect Richard Rogers is master planning 1,000 new homes, a hotel and conference centre. “It will appeal to investor buyers who will want to capitalise on the student rental market,” says Toby Greenhow of Savills. And with student housing booming this will be a lucrative market to invest in.

RESOURCES Telegraph

www.reimag.co.za


STANLIB

ADVERTORIAL

The case for investing in real estate developments in Africa has come

I

Where investment and excellence meet STANLIB Direct Property Investments

nvestors have historically shied away from investing into Africa as a result of political risk, corruption and the lack of infrastructure, to name a few. Twenty years ago, investment opportunities were few and far between. Recent changes to South African retirement regulations (Regulation 28) now allow investors in retirement funds to invest an additional 5% into Africa. This represents an opportunity for investors to take advantage of Africa’s long term growth prospects.

the rising income, from an increasing number of people entering the workforce, will drive the consumer spending required for sustainable retail environments. Patience will have to be part of every investment manager’s investment thesis as it is non-negotioble to be entrenched in the economic society of these countries to drive sustainable returns for investors.

and political unrest in the Middle East and North Africa (MENA), stagnant growth in Latin America and East Asia, Sub Saharan Africa (SSA) continued to show solid growth. SSA expanded by approximately 5% in 2011 compared to a global average of 1.9%.

She said that this process mitigates the concern of many investors that African countries do not have access to key resources needed in property development.

Responsible investing

“We are seeing rapid urbanisation, a population that has higher levels of disposable income, governments which are investing in their economies and driving infrastructure spend, and a continent that has been more resilient than most to the recession,” Beattie said. “That is attractive to investors and multinational retailers, who see a ready market and, in turn, drive the development of new shopping centres.”

STANLIB Direct Property Investments manages the Liberty Beattie says that many of the perceived investment risks of thewhich past can owns now be mitigated through Shopping Centre Property Portfolio the Eastgate astute investment methodologies and techniques. and is the majority shareholder of Sandton City. We are in Strong Investment Returns in Africa Management of Risk The development the process of registering and launching the STANLIB African of these projects acts as a catalyst of economic growth in a sustainable In the midst of a bleak global economic “Through our modular approach to property manner.real Construction workers are employed Direct Fund we which aimsof to in retail-led outlook, the investment case for Africa is Property development, take control the invest whole value in the construction phase, so employment is stronger than ever. chain involved in the development process, from estate developments with a focus on opportunities in Nigeria created on a primary and secondary basis start to finish.” through these developments. These are all Despite the fiscal crisis in Europe,and the social Kenya. pillars of responsible investing which is in

Retail property development is set to boom on the back of the continent’s growing population, increased infrastructure spending and a rising middle class seeking greater access to consumer goods. The GDP growth for the next 10 years is forecasted at an average of 6.3%. This growth is as a result of the rich resource economy on the Continent which drives wealth and in return drives consumer disposable income.

“Through our partnership with some of the major players in the industry, we are able to achieve economies of scale to manage development costs” STANLIB Direct Property Investments partners with owners of land within African regions as to “ring fence” their rights to land ownership. These partnerships provide a platform through which to build sustainable relationships with local authorities.

line with principles of investors across the continent.

“Other than the strong investment case for the African continent, physical property provides investors access to a tangible asset. Never forget the real in real estate,” Beattie said. STANLIB Direct Property Investment is soon to launch its first Africa Direct Property Development Fund. Focused on Nigeria and Kenya, it aims to invest in developments in Nigeria and Kenya.

“While spending power is still relatively low compared to South Africa, and a large percentage Some of the markets likely to see notable of the African population remains poor, there are expansion of retail-led real estate environnow enough ‘feet’ for multinational retailers and ments are Nigeria and Kenya, according to property developers to build a business case for inwww.stanlib.com Amelia Beattie, Chief Investment Officer: vesting,” she said, adding that several other African Direct Property Investment, at asset manager nations were also on the radar for increased retail STANLIB. Beattie said in these countries development, although mostly in the longer term.

54

January 2013 SA Real Estate Investor

www.reimag.co.za


REI Lifestyle

Hot New Holiday Spot Influenced by some of the world’s most glamorous and fabulous entertainment venues, the Shimmy Beach Club, along with a spectacular location, private beach and expansive outside deck, is approachable by car, helicopter or boat. The club features a containershipinspired bar, illuminated champagne bar, wine cooler room, as well as a glass rim flow infinity swimming pool, lounge and main restaurant. The Shimmy Beach Club vision is to create a clean palette with a sophisticated edge. It is located at the south arm of the harbour in Cape Town’s V&A Waterfront and opened on the 7th of December 2012. It will prove to set new standards in luxury entertainment.

Restaurant Of The Year Eat Out Award 2012

Physical address: Unit 104A, Old Biscuit Mill, 375 Albert Road, Woodstock, Cape Town Cuisine: Tapas, Contemporary, Fusion Ambience: Contemporary Cool Lunch: 12.30pm - 2.30pm Dinner: 7pm - 10pm, Tuesday to Saturday

It is official: Table Mountain is one of the Seven Natural Wonders of the World. Capetonians will be quick to point out that they’ve always known that the mountain is very special, now however more than a 100 million people from across 220 countries have indicated that they agree. On the 1st and the 2nd of December 2012 the official inauguration was held at the foot of Table Mountain with guests from the 7 Wonders Foundation and delegates from the six other sites: Amazon, South America; Halong Bay, Vietnam; Iguazu Falls, Argentina; Jeju Island, South Korea; Komodo, Indonesia, and the Puerto Princesa Underground River, Philippines.

A Must Read By Julian Rademeyer

Find your inner chef with Hein Scholtz

Body Worlds and the Cycle of Life Exhibition

If you read only one book this year, you want it to be this one. Rhino horn is worth more than cocaine, heroin or even gold on the black markets of Southeast Asia. Now, Killing for Profit brings you the story of one man’s journey into a violent underworld where ruthless criminal syndicates will stop at nothing to attain their prize. It is a tale of greed and corruption, and of an increasingly desperate battle to save from extinction an animal that has existed for over 50 million years. Journalist Julian Rademeyer follows the bloody trail of the syndicates, poachers, smugglers, hunters and hustlers from the frontlines of the rhino wars.

After suffering through a year of ‘res’ food at university, Hein Scholtz was more than happy to dust off his apron and put his lifelong passion for food and cooking to good use when he moved into his first apartment. Now, after years of cooking healthy and inexpensive, yet satisfying meals for himself and friends, he presents Munch, an eclectic collection of recipes for students, young professionals and first-time cooks. Although it contains some classic ‘home’ cooking, Munch’s primary aim is to introduce the novice cook to an independent style of cooking that will have him/her producing meals that not only appeal to the palate (and the pocket), but also to the inner grown-up.

The African premiere of the innovative anatomical exhibition Body Worlds and the Cycle of Life is in Cape Town for a three-month long showing at the Future Exotics Showroom (next to Toy Kingdom) at the V&A Waterfront in Cape Town till Thursday, 31 January 2013. Developed by acclaimed, albeit controversial, anatomist Dr Gunther von Hagens, the groundbreaking showcase displays real human bodies, individual organs, organ configurations and transparent body slices flawlessly preserved thanks to a revolutionary method known as plastination. Whether you’re a doctor, student of anatomy or just curious, one thing is certain, this exhibition is one you don’t want to miss.

www.reimag.co.za

There’s always something new on the menu at The Test Kitchen, the global gastronomic destination ruled by chef-patron Luke DaleRoberts. Expect tender slow-cooked or sous vide meats and poultry contrasting with the purity of flavours in yellowtail tataki or trout tartare. Luke takes the pretension out of fine dining.

Table Mountain A Natural Wonder Of The World

January 2013 SA Real Estate INVESTOR

55


WEALTH MONITOR

BY ANGIE REDMOND

Wealthiest MEN In SA The top ten local men who make up the rich list

Patrice Motsepe

Ivan Glasenberg

Nicky Oppenheimer

Johann Rupert

Christoffel Wiese

Desmond Sacco

Stephen Saad 56

January 2013 SA Real Estate Investor

Sir Donald Gordon

Koos Bekker

Raymond Ackerman www.reimag.co.za


LIFESTYLE

1

5 8 2 6 9 3 7 10 4 1. Ivan Glasenberg

Net Worth: R61,48 billion Source of wealth: Glencore international Age: 55 , Citizenship: Australia Residence: Switzerland Born in Johannesburg South Africa, Ivan Glasenberg is Chief Executive Off icer of Glencore, a large international commodity trading company. Glasenberg joined Glencore in 1984, working in the coal department. He managed Glencore’s Hong Kong and Beijing offices from 1989 to 1990, before becoming head of the company’s coal department in 1991. He was named CEO in 2002.

2. Nicky Oppenheimer & family

Net Worth: R50, 44 billion Source of wealth: De Beers, inherited Age: 66 , Citizenship: Sout h A f r ica , Residence: Johannesburg, South Africa Nicky Oppenheimer is worth $6.8 billion. He is the richest person in South Africa and is the 139th richest person in the world. How did he get rich? He is the chairman of De Beers diamonds, of course, and also has a significant interest in Anglo-American plc, the gold mining company.

3.Patrice Motsepe

Net Worth: R26, 68 billion Source: Mining, African Rainbow Minerals Age: 50, Citizenship: South Africa , Residence: Johannesburg, South Africa Patrice Motsepe is South Africa’s third-richest person, worth $2.7 billion. He made his money in mining and is the 442nd richest person in the world. His money is the result of the purchasing of low-producing gold mine shafts in 1994, which he made profitable. Since then, he has built African Rainbow Minerals, benefiting as a result of South Africa’s Black Economic Empowerment (BEE) laws. He also owns a stake in Sanlam.

4. Johann Rupert & family

Net Worth: R23,42 billion Source: Luxury goods, inherited and growing Age: 61 , Citizenship: South Africa, Residence: Stellenbosch, South Africa Johann Rupert is worth $5.1 billion. He is the 199th richest person in the world, and made his money from Richemont, the Swiss luxury group that owns Cartier, Dunhill, Chloe bags www.reimag.co.za

and MontBlanc pens. The company purchased online fashion portal Net-a-Porter.

5. Christoffel Wiese

Net Worth: R13,93 billion Source: Consumer retail, shoprite, self-made Age: 70 , Citizenship: South Africa Christoffel, or Christo as he’s more commonly known, is the fourth-richest person in South Africa. He is worth $2.7 billion and made his money as CEO of Shoprite. He also owns a stake in Pepkor, a discount clothes, shoes and textiles store in South Africa, and is known for restoring a South African farm estate and remodelling it into a five-star hotel. He is the 782nd richest person in the world.

6. Desmond Sacco

Net Worth: R6,99 billion Source: Assore Age: 70, Citizenship: South Africa Desmond Sacco traces his stake in the company back to 1928, when his father, Guido Sacco, established Gloucester Manganese Mines. Guido went on to acquire other mining interests and later formed Assore Group, which listed its shares on the Johannesburg Stock Exchange more than 60 years ago. Desmond, a geologist, joined the Assore Group in 1968, was appointed to the group’s board in 1974 and, upon Guido’s 1992 retirement, was appointed Chairman and Managing Director. He is also a mineral collector, and has published “The Desmond Sacco Collection.”

7. Sir Donald Gordon

Net Worth: R5,71 billion Source: Former Liberty International Age: 77, Citizenship: South Africa Residence: UK In 1957 Sir Donald Gordon, a Chartered Accountant by profession, founded Liberty Life Association of Africa with initial capital of R100,000. By the time he retired as Chairman of Liberty Life in 1999 after 42 years in that role, the company had a stock market valuation on the Johannesburg Stock Exchange of over R40 billion (£6 billion). At the time Liberty Life was the largest listed Life Company and the third largest life insurance company in South Africa. Liberty Life was also listed on the London Stock Exchange. Sir Donald co-founded the British company Abbey Life Insurance (Abbey

Life), which has since grown into one of the largest life companies in the UK and is now a major subsidiary of Lloyds Bank.

8. Stephen Saad

Net Worth: R5,09 billion Source: Aspen Age: 48, Citizenship: South Africa Residence: South Africa Stephen Saad cofounded Aspen Pharmacare in 1997 with $6.3 million; it’s now the largest publicly traded drug manufacturer on the Johannesburg Stock Exchange, with revenues expected to reach US$2 billion this year. He became a millionaire at age 29 after he sold his share in the drug business Covan Zurich for $3 million. Last year Aspen purchased the global rights to manufacture some of GlaxoSmithKline’s smaller brands. Saad spends free time at Exeter, his private game reserve at Sabi Sands, adjacent to Kruger National Park, the largest national park in South Africa.

9. Koos Bekker

Net Worth: R4,93 billion Source: Naspers Age: 60, Citizenship: South Africa Residence: Cape Town Koos Bekker is CEO of Naspers, the emerging markets media group operating in 129 countries. He led the founding team of M-Net in 1985, which resulted in pay TV operations today spanning 48 countries in Africa. In the early 1990’s MTN was launched together with partners. Koos served as CEO of the MIH group until 1997, when he took over at Naspers. Since then the group moved strongly into the Internet.

10. Raymond Ackerman Net Worth: R4,38 billion Source: Pick n Pay Age: 81, Citizenship: South Africa Residence: Cape Town Raymond Ackerman is a South African businessman. In 1967 he bought a Cape Townbased group comprising four small supermarkets. He built it into South Africa’s major retailer, Pick ‘n Pay, which has featured among the Top 100 Companies since 1973. In 2010 he handed over his legacy to his son Gareth Ackerman who took over as Chairman of the company.

RESOURCES

January 2013 SA Real Estate INVESTOR

Forbes 57


INTERIORS

Sweet Suites Rooms that make travelling an adventure

BY ANGIE REDMOND

Nautilus Suite

H

Chocolate Room

ave you ever dreamed of staying in a room made entirely of chocolate or one that’s underwater? From the weird to the just plain wonderful, we show you the four most exclusive hotel bedrooms in the world. They are a one of a kind experience.

Chocolate Room by Karl Lagerfeld at La Reserve – Paris, France Created out of 10.5 tons of chocolate, this sweet suite was created by Karl Lagerfeld as part of a magnum promotion campaign and comes complete with a chocolate barely clothed lifesized statue of French model Baptiste Giabicon, reclining on the bed eating a magnum. So if you have ever dreamt of your own chocolate room, this is one hotel suite not to be missed.

Ice Suite at the Hôtel de Glace – Québec, Canada Located only 10 minutes from downtown Quebec City, Canada, the Hotel de Glace is America’s only ice hotel entirely made of ice 58

Ice Suite

January 2013 SA Real Estate Investor

Tsala Treetop Lodge

and snow. Using over 500 tons of ice and 15,000 tons of snow, the 32,000 square foot (2,973 sq m) ice hotel is a truly unique experience. The hotel features 36 rooms and theme suites along with an incredible ice bar, cafe, wedding chapel and of course a giant ice slide! Construction begins in early December once the temperature drops below zero. Over a six-week period, approximately 50 people work tirelessly to erect the annual hotel. About 30 of the workers focus on production while fifteen sculptors work to decorate the hotel and bring it to life. It runs from January 5th until March 24th, 2013.

The Nautilus Suite at the Poseidon Undersea Resort – Poseidon Mystery Island, Fiji Named after the Greek God of the sea, The Poseidon Resort is an underwater hotel in the cerulean crystal clear waters of a spectacular Fijian lagoon. A short elevator ride is all it takes to transport guests at the resort 40 feet under the sea, where they can experience a holiday like no other.

The Resort is made up of two forms of accommodation; The Poseidon Mystery Island consists of 48 villas on the stunning beach of the Fijian Lagoon, and the underwater suites below. If you are feeling very adventurous why not stay in the Nautilus suite, it’s a 1,000 square foot space fashioned in the image of the Jules Verne submarine and is the largest underwater dwelling ever built.

Tsala Treetop Lodge Tucked into the forest canopy, 10 luxury hideaway suites are the epitome of opulent indulgence and romanticism. Constructed of stone, wood and glass these ultimate abodes comprise a sumptuous bedroom, an elegant sitting room with fireplace, and a spacious bathroom fit for royalty high above the forest floor, taking the concept of a ‘tree house’ to a whole new level. Each suite has its own infinity pool, seemingly suspended by the very air itself.

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PROPERTY NEWS

BY COLLEEN MAY

Clifton Gets Fibre Optic High speed broadband boosts property prices

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ultichoice-owned Smart Village, specialising in large-scale deploy ments of h igh-capac it y “Fibre-to-the-Home” multi-service networks, has announced the successful installation of an optical fibre network along Victoria road, Clifton. Not only will residents in one of South Africa’s most beautiful and opulent areas on the Atlantic Seaboard now enjoy clear DSTV, but also a range of value added services, such as telco-grade VOIP telephony services, high speed broadband access, and the ability to carry any IP signal, including CCTV and access control services. According to Smart Village MD, Chris van der Walt, Clifton was one of the only urban suburbs in South Africa where residents have experienced poor satellite reception. “Due to the suburb’s location and the influence of the mountain, the DStv satellite signal strength to many homes in this area was varied and certainly not at the quality that Multichoice strives to maintain. As a result, the decision was taken to install a centralised satellite head end to distribute digital signal over fibre to homes connected to our Clifton network”, Van der Walt says. Smart Village has been assisting home owners in residential estates as well as businesses in corporate office parks to future proof their homes and companies, through consultation,

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recommendation and installation of the latest in F TTx technology. “The technology we have developed and deployed to create truly integrated and connected homes around the country has helped us present a much needed and long awaited solution to Clifton residents”, Van der Walt says. Reacting to this announcement, said Clifton building manager Mike Miller, “We are very pleased that we are now finally able to receive satellite television as well as the host of other services thanks to the world leading technology installed. We have been hoping that a solution will be offered for a long time now and applaud DStv’s initiative. Allowing us to now also enjoy improved security and internet access to boot makes up for the many years of frustration we’ve had to endure and adds even more value to our properties and is a welcome and much appreciated early Christmas present”.

Added advantages of high speed Internet As technology rapidly evolves and develops, people have become more reliant on technology in everyday life and one facet of this is the need for faster internet. Studies have shown that property which can offer high speed internet and better signal are more likely to be rented that their slower counterparts. Tenants today are tech savvy and require the broadband and internet speed to keep up with their lifestyles. It is worth the cost of upgrading to ensure your property offers prospective tenants improved security and internet access.

6 FAST FACTS ON SA

1

The number of Internet users in South Africa will more than double by 2016 to 29.8-million, from 12.6-million users currently

2

Mobile broadband users will account for 23.1-million and fixed broadband users 6.6-million of the Internet users in 2016.

3

Wired broadband will grow faster than mobile broadband on the back of the increased capacity supplied by undersea cables.

4

Dial-up Internet users will decrease from the current 900 000, to 100 000 in 2016.

5

SA has 66 colour TV’s per 100 households, 9 telephone lines per 100 population and 90 mobile telephone subscribers per 100 population.

6

SA ranks 31st in terms of Internet users per 1000 population

RESOURCES

Smart Villages

January 2013 SA Real Estate INVESTOR

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PROPERTY INNOVATION

BY ANGIE REDMOND

Take A Look Behind virtual tours A

picture is worth a thousand words, so then a virtual tour is surely worth more. Virtual tours are interactive environments, and have a much greater impact than static images. Properties that contain interactive virtual tours get clicked on 40% more than properties without them according to realtor.com. With the Internet becoming a vital tool for marketing in the technological age, it is becoming more and more important to keep ahead of the technology, which is changing at a rapid pace. People today are more visual than ever, with iPads, 3D, and the Internet becoming faster and faster, making it essential to draw them in with more visually appealing marketing.

Filter perspective buyers Meeting each perspective buyer, and taking them to the property for a physical walkthrough tour of the property, may soon be a thing of the past. Would it not be great if prospective buyers were filtered beforehand, and if agents only needed to take a handful of pre-qualified buyers to the property to land a sale? Technology is helping us get to that point. Using virtual tours, videos and walkthroughs, potential buyers are now able to visit properties for sale virtually, from any where in the world, at any time convenient to them. Sitting at home, laptop or tablet in hand, buyers can browse through property databases, view the properties, and take a virtual tour of each room of the home.

Photographic virtual tours A virtual tour is a simulation of an existing location, composed of a sequence of video or 60

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photography-based media. In layman’s terms, it provides the viewer with the sensation of seeing a place that they have never been, giving them a panoramic view of a location. The virtual tour or viewing is made up from a number of shots taken from one vantage point. A 360-degree scene (a single 360-degree photo of an area) is created using an SLR stills camera, and y a very wide lens usually a fisheye. A number of images are photographed, in each direction needed, as the camera is rotated around a specific point found within the lens (the point of no parallax). The no parallax point is critical to the success of the next step of the process, which is to stitch all the captured stills photos together to form a seamless 360-degree horizontal field of view, as well as a seamless vertical field of view looking all the way up and down. This image is known as a full sphere, a full 360 x 180-degree field of view, or in the industry, as an equirectangular image. While a professional can do stitching, it is also possible to do it yourself with the help of specialized software or web-based software. While programs such as Adobe Photoshop have new features that allow users to stitch images together they only support “rectilinear,” types of stitching and Photoshop cannot produce them as fast or as accurately as stitching software programs such as Autodesk Stitcher. This is because sophisticated math and cameralens profiles are needed to create the desired panorama image which is based on your camera’s depth of field (FOV) and the type of lens you used. Cameras such as the Nikon D3 or D700 have a full full frame digital SLR cameras, whereas the Nikon D90 or Canon T2i (Rebel

line of Digital EOS cameras) have a smaller sensor. When full frame digital SLR cameras are used with a fisheye lens such as a Sigma 8mm F/3.5, you will see a full circular image. This allows you to shoot 2 or 3 shots per view to create the 360 X 360 stitched panoramic images. When used with a non-full frame digital SLR camera like the Nikon D90 or Canon digital Rebel and similar cameras, typically 4 shots are required and the camera is in the portrait position. You will see the left and right sides cropped off each of the 4 images and in each of the four corners, the image is rounded.

Do it yourself or leave it to a professional? Everyone can create a panorama now, with apps available for various platforms. For iPhone there is an excellent app focused on exploring the world around us in panoramic views, which also includes a tool for creating panoramas yourself, using your iPhone or iPad. Rea l estate compa n ies ca n look into purchasing DIY kits, which make it quick and easy to shoot 360-degree virtual tours of the properties in their database. This is ideal for agents who are already able to shoot their own stills images, and who can now also shoot 360-degree virtual tours by just spending a few more minutes at each property. However using an experienced professional 360-degree virtual tour company is particularly advantageous for top end properties, selling for millions. Estate agents have been known to successfully use the hook of a professional virtual tour to seal a sole mandate, or higher commissions. The cost www.reimag.co.za


of a professional virtual tour is often too high for run-of-the-mill properties, but for highend properties, the cost is a small percentage of the profits to be realised, and so often makes business sense for the agent.

Video-based tours With the expansion of video on the Internet, video-based virtual tours are growing in popularity. Video cameras are used to pan and walk-through subject properties. The benef it of this method is that the point of view is constantly changing throughout a pan. However, capturing high-quality video requires significantly more technical skill and equipment than taking digital still pictures. Video also eliminates viewer control of the tour. Therefore the tour is the same for all viewers and the subject matter is chosen by the videographer. Editing digital video requires proficiency with video editing software and has higher computer hardware requirements. Due to these difficulties, the task of creating videobased tours is best left to professionals.

BELOW:

Images used for equirectangular 360-degree images

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Quality requirements Virtual tours are not new. First becoming popular in the mid 90’s, interactive 360-degree images were f irst realised as QTVR, and followed by iPix, later Java technology took over, and then Flash. Today, virtual tours are published in HTML5 and Flash for seamless compatibility on most computers and mobile devices. But as the years passed, and the quality that was possible with a digital camera, the file sizes have increased faster than the bandwidth speeds needed to load the images at a reasonable speed. Over the last few months, Internet speed in South Africa has been upgraded. The slowest typical home ADSL line is now 1mbps, which is fast enough to load a single 360-degree image in seconds. Although 360-degree images still need to be downscaled and downsized to achieve a balance between fast load times and good image quality, the viewer is now able to have a much better experience than previously possible. Soon buyers are going to expect all properties to have 360-degree virtual tours as standard. This is already the case for a number of years in countries with fast Internet, such as the UK and USA, where just about every single property on the market offers an online virtual

tour. Property shopping is done in the comfort of the home, and buyers only visit (in person) the top few properties of their choosing.

Why virtual tours? The use of virtual tours extends far beyond just showing property. Hospitality is another industry that has embraced the art of virtual tours and the benefits it offers. More than 75% of all tours are researched online today before being booked, and when people are looking for accommodation or attractions, a picture is good but a virtual tour will give you the experience of being there. In much the same way that travel agents are increasingly being passed up for online bookings, will the property industry in South Africa see online marketing replace estate agents or become a tool to better their business? In today’s real estate industry, technology is playing a more vital role than ever. Utilizing the power of the Internet, virtual tours can give you the edge you need to stay ahead in this fast paced industry. With tours your property can be shown 24/7/365 to an unlimited number of prospective buyers.

RESOURCES 360 Productions

January 2013 SA Real Estate INVESTOR

61


TECH REVIEW

BY RUSSELL BENNETT

2012 Technology

The year of redefining mobility

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hatever your take on the year cur rent ly d raw ing to a close, whether you’ve continued to struggle under mounting financial pressures or grabbed on to the opportunities this cycle has presented with both hands, there have certainly been no shortage of key events both locally and abroad. We had the game-changing Marikana massacre, the associated fallout of which we’re still dealing with today and are likely to continue to feel for many months to come, a never-ending landslide of corruption scandals perpetrated by our government structures, the ups and downs of will-they won’t-they e-tolling saga, and some nutty weather wreaking havoc up and down the land. Which is perhaps why the technological developments hitting our retail shelves have largely taken a back seat over the last 12 months. Well, fortunately we’re here to give you a very quick run down of the 5 most important tech developments of 2012, at least in our opinion. And unsurprisingly, most of them have to do with mobility. 62

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Powering up the tabs In their quest to catch the definitive leader of the tablet space, manufacturers have packed more and more processing power into their own tablet and mobile phone offerings through the course of this year, quickly morphing through 1.2GHz dual-core chips into 1.5GHz quadcore CPUs supported by quad-core dedicated graphics processing. This extra oomph has really driven tablet usage scena rios to new heights – w ith more processing power allowing improved multitasking, enhanced useability and serious gaming potential. Meanwhile Apple, always being different, actually neglected the processing power of the new iPad when it launched the insanely highres Retina display, and found that even the uprated quad-core graphics of its A5X chipset wasn’t quite enough to push the number of pixels the device was now lighting up.

to mimic, Apple threw a bit of an unexpected right-turn into the chase this year, when it unveiled the not-so-secret 7” iPad Mini after dismissing this format when it originally revealed the iPad as irrelevant. Although the Mini is a great-looking machine, it enters a market which is already quite active so it’s not the pioneering stroke the company has become known for. Quite apart from the existing 7” tablet offerings, mobile phones these days are experiencing their own display-size boom, with the latest flagships stretching all the way up to the 5.5” mark, which isn’t very far off the 7” format for viewable area. And this questionable move was revealed just after the company had failed to deliver the one thing that customers had been literally crying out for on the iPhone 5– a larger screen. Is Apple’s innovation engine f lagging with the tragic loss of Jobs?

Is smaller the new bigger?

SA broadband wows and woes

Speaking of the company... that everyone loves

With the Digital Divide continuing to play an www.reimag.co.za


LIFESTYLE increasingly powerful role in the global economy, the time has finally come for Africa in particular to pay close attention to closing the gap. In the mobile space, we’ve had the introduction of lightning-fast 4G (LTE) connectivity in extremely limited roll outs in the major metros, but there remains a huge price to pay for this service. In fact price is the one barrier still in the way of mobile broadband entirely overwhelming fixed-line connectivity, as mobile voice did to cabled telephony over the last five years. Not that our fixed-line provider is really much better on this front, as evidenced by the massive fine levied against the monopolistic Telkom by the Competition Commission – a judgement which has been almost a decade in waiting at this stage. And at the time of writing, this R449 million penalty could still rise dramatically, up to the R3.5-billion originally mooted by the Commission itself. This tranche is basically a direct result of this monolith applying anticompetitive pricing to the market it unfairly dominates thanks to its government-owned and –funded history. Although it’s more likely that the company will simply pass the increased costs on to the consumer, as it still sits in an entirely monopolistic position, stringent application of the Competition Commission ruling could see fixed-line broadband pricing being forced further down, and if that happens the mobile players will have little choice but to follow suit. And that would be fabulous news for economic growth in the region, which for more than a decade has been stifled by a telecommunications industry driven solely by profit.

And then there were three Zooming straight back into the tablet space, the arena which until now has been dominated by Google and Apple finally has a third big player – in fact they come no bigger as powerhouse Microsoft wades into the fray with Windows 8 and Surface. As you’d expect, this enormous company hasn’t gone to half measures with the latest release, and already has hardware partners producing both cell phones and a variety of tablet options on the new platform, while at the same time of course launching the desktop version of the same OS to a typically www.reimag.co.za

disinterested market segment. With a huge groundswell of marketing and hype driving it, the latest platform has every chance of grabbing some serious market share from the two giants currently dominating, expect the Microsoft logo to literally explode onto a slew of mobile devices over the course of the next few months. What a third force means to the consumer of course, is the advantage of a properly competitive arena. A more intense fight for the available pie as it were will force these platform providers to ensure that they provide the very best for the most appealing pricing, which will drive down the cost of devices across the board while rapidly improving the killer app feature sets.

Death of the desktop With mobile devices becoming ever more powerful computers in their own rights, the desktop and even laptop formats have completely stagnated in their development. Shrink ing numbers of buyers mean that the Intel, AMD, and Nvidia product lines which used to burst at the seams w ith highly competitive innovation trying to lure buyers into their camps, have all but ceased development. Processors remain stuck to quad cores in the mainstream (Intel) while the high-end AMD chips remain hexa- or octacore designs, with high-end clock speeds still limited to around the 3 – 4 GHz spectrum. The reason for this stagnation isn’t necessarily the slump of sales, but instead the explosion of interest in mobile platforms. NVidia, AMD, Intel, and now AR M have moved their competitive innovation into this sphere, all vying for leadership positions in the new form factor. What this ref lects, of course, is that pretty much all the biggest players in tech are now competing on mobile products having all but abandoned their traditional markets. Proof

positive that the stage is now set for mobile computing to become the only client-side computing platforms of the future, while big storage and even number-crunching operations are moved into the cloud.

What? Where? Who? What about technologies which were expected to make a big splash, but never quite got off the ground? There have been a couple of those this year, the biggest and most obvious fatality being 3D displays. Sure you can still buy plenty of 3D TVs in retail outlets, but the buzz around the technology has largely died off (once again), and it continues to be a bit player despite garnering significant support from filmmakers in Hollywood. The metropolitan area network (MAN) which was to be largely based on WiMAX technology (a kind of Super-WiFi) is still being developed, but the introduction of LTE networks by mobile carriers makes this high-speed overthe-air link largely redundant. Once the costs of LTE data become reasonable, the massive performance potential can begin being tapped straight away, and no mobile network operator will be investing in alternative over-the-air data transmission technologies with LTE networks already built. Although Blackberry with its unique services model continues to be very appealing in South Africa, thanks to unlimited data for social messaging at a single monthly flat rate, the manufacturer is in serious trouble in mature markets where data costs aren’t such a concern. The handsets are based on outdated technology, which the company is banking on fixing at the same time as it launches the Blackberry 10 platform within the next couple of months. Not dead yet, but certainly circling the drain in a worrying manner. Finally, the revered Internet markup language HTML in conjunction with the glitzy Flash are almost certain to be wiped away by the rapid adoption of HTML 5, which is far better suited to mobile devices thanks to the ability to generate responsive layouts capable of adapting to any display. HTML 5 is also natively capable of many of the animated goodness that developers have previously turned to Flash for, so this ubiquitous Adobe standard (which still isn’t supported by Apple anyway) could well be a thing of the past as the new markup language proliferates across the Web. January 2013 SA Real Estate INVESTOR

63


LESSONS

BY ANGIE REDMOND

Business Advice From A Tycoon Richard Branson tells you how to succeed

1. Don’t do it if you don’t enjoy it Running a business takes a lot of blood, sweat, and tears (and caffeine). But at the end of the day, you should be building something you will be proud of. Branson says: “When I started Virgin from a basement in west London, there was no great plan or strategy. I didn’t set out to build a business empire. For me, building a business is all about doing something to be proud of, bringing talented people together and creating something that’s going to make a real difference to other people’s lives.”

2. Be visible Branson received some timeless advice when building Virgin Airlines from Sir Freddie Laker, a British airline “tycoon.” “Make sure you appear on the front page and not the back pages,” said Laker. “You are going to have to get out there and sell yourself. Make a fool of yourself, whatever it takes. Otherwise you won’t survive.” Branson always makes a point of meeting as many people as he can. This, he says, is how he came by some of the best suggestions and ideas for his business. 66

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3. Choose your name wisely The unique name and brand that Virgin employs is one of the things that has made the company a success. Branson makes sure that the name ‘Virgin’ represents added value, improved service, and a fresh, sexy approach. Branson says that he is asked all the time about the origin of the Virgin name, back when Virgin was just starting. “One night, I was chatting with a group of sixteen-year-old girls over a few drinks about a name for the record store,” he says. “A bunch of ideas were bounced around, then, as we were all new to business, someone suggested Virgin. It smacked of new and fresh and at the time the word was still slightly risqué, so, thinking it would be an attention-grabber, we went with it.”

4. You can’t run a business without taking risks Branson thinks of one of his favorite sayings when advising about taking business risks: “‘The

brave may not live forever—but the cautious do not live at all!’” Every business involves risks. Be prepared to get knocked down, says Branson, but success rarely comes from playing it safe. You may fail, but Branson also dares to point out that “there’s no such thing as a total failure.”

5. The first impression is everything so is the second The first impression you make on customers will probably be when you acquire them. The first impression is extremely important, says Branson, but the second is equally as important. The second time a customer usually contacts Virgin, it’s because he or she is having problems with the product or service. How you present yourself and your brand in these situations says a lot about how your brand maintains good customer relationships and handles obstacles.

RESOURCES

Business Stripped Bare

www.reimag.co.za


Where investment and excellence meet STANLIB Direct Property Investments STANLIB Direct Property Investments manages the Liberty Property Portfolio which owns the Eastgate Shopping Centre and is the majority shareholder of Sandton City. We are in the process of registering and launching the STANLIB African Direct Property Fund which aims to invest in retail-led real estate developments with a focus on opportunities in Nigeria and Kenya.

www.stanlib.com


Real Estate Investor Magazine January 2013