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South African Property Review

PROPERTY SOUTH AFRICAN

September 2013

REVIEW

Attorneys in focuos

ARROWHEAD Always on target ALL-STAR ASSET SA listed property in the lead

THE PRECINCT EFFECT The rise and rise of trendy nodes

September 2013

Inspired, innovative and independent Broll’s multi-disciplinary property services


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2013/07/17 12:48 PM


from the CEO

Medupi and Kusile: an electrifying moment ‘maimed’ by delays and talk of corruption? SAPOA CEO Neil Gopal highlights the issues relating to the Medupi and Kusile power stations, and asks whether we can really afford continued delays in their completion

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an South Africa really afford the delay in two massive power stations? The grand vision of the National Development Plan 2030 embraces the Medupi and Kusile electricity plants, which have lately hogged the media’s attention through reported labour unrest and delays against their project plans. The employment creation and the property development benefits, such as the Ledibeng Eco-Estate and the Hangklip Industrial Park, that have been a result of the construction of Medupi power plant, cannot be underestimated. The infrastructural price tag of around R340-billion is approximately what it should cost Eskom to build new power stations – this includes Medupi in Lephalale, Limpopo, and Kusile, which is located on the Hartbeesfontein and Klipfontein farms, in the Kangala district in Mpumalanga. The commercial property sector appreciates the interventions that government seeks to make in order to augment South Africa’s electricity supply. There is no argument that the 4 764MW of power that Medupi will generate is critical, especially since the load shedding of a few years back left both the commercial and residential property sector, if not all of South Africa, shaken. There is no debate that the country’s electricity supply needs to be stable, especially in view of the growth in urbanisation and urban sprawl. The property sector realises the country’s dependence on coal as its largest economically recoverable energy resource, and we support government’s vision to ensure that coal will contribute “proportionately less to primary-energy needs while gas and renewable energy resources, especially wind, solar and imported hydroelectricity, will play a much larger role”. But government needs to take alternatives to massive coal-burning stations more seriously. As Medupi gets pushed further behind

schedule, South Africa’s electricity supply margins continue to run dangerously low with taxpayers footing the increasing bill. None of South Africa’s large-scale projects seem to miss these concerning trends. Can South Africa find comfort in the oversight visit made by the Portfolio Committee on Public Enterprise in July 2013 to the Medupi Eskom Power Plant in Limpopo to ultimately identify and cause the  “arrest” of such factors as are derailing a project meant to ultimately contribute to the growth of this country’s economy? The reported replacement of the current Project Labour Agreement, which had been in place since the inception of the project, with a Partnership Agreement, which was facilitated by the committee, is said to seek to address dispute resolutions, skills development and wage-related issues. Kusile’s anticipated 11 000MW electricity generation and the fact that Nkangala’s gross domestic product is expected to increase by approximately 25% per year as a result of the construction activities, should be an impetus that ensures that unnecessary delays are avoided and that corruption, where any is festering, is stamped out in the interests

of our country, which is yet to achieve equitable social and economic benefits for its citizenry, residents and investors. But we should also be looking at alternative measures before taking on what could inevitably cripple the public purse and the taxpayer. The commercial property industry has to continue to adopt energy-efficient measures as the cost of these projects will inevitably drive operating costs to unsustainable levels. The Electricity Governance Initiative of South Africa makes a strong point when it highlights how, by 2030, South Africa can reduce electricity consumption by 16% across the residential, commercial, mining and industrial sectors – all as a result of electricity conservation, energy efficiency and deployment of renewable energy generation. South Africa has the capacity and the resources to deal with alternative technologies (such as wind and solar farms), and other renewable energy projects that can kick-start sustainable job growth. The constant delays at Medupi Power Station in Limpopo have significant implications for the country and the commercial property industry. Apart from rates, electricity is one of our biggest operating expenses. It is the sector’s hope that property development and ownership is not thwarted by delays in projects such as Medupi and Kusile, and that labour protests, serious allegations of corruption and planned killings are not allowed to “unseat” social and economic development, growth and sustainability from their “centre stage and focus”. We therefore urge the powers that be that Medupi and Kusile be allowed to pan out and to materialise without the negative headlines making their way into the media on a daily basis. Neil Gopal SOUTH AFRICAN PROPERTY REVIEW

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contents

September 2013

PROPERTY SOUTH AFRICAN

Abland

REVIEW

South African Property Review

PROPERTY SOUTH AFRICAN

REVIEW

ARROWHEAD Always on target

Attorneys in focuos

Abreal

ALL-STAR ASSET SA listed property in the lead

ON THE COVER

Broll’s headquarters in Illovo is home to one of Africa’s most innovative and respected property services companies

THE PRECINCT EFFECT The rise and rise of trendy nodes

September 2013

Oilgro

September 2013

Inspired, innovative and independent Broll’s multi-disciplinary property services

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News Education, training and development Legal update Broll rolls it all into one Consumer Protection Act 101 PROCSA and good practice Listed property: SA’s golden child The precinct effect Villa Crop On show Cradlestone on track for October trading Focus on attorneys IPD in action Game changers Statistics at a glance Social pages Off the wall Simulating city planning FOR EDITORIAL ENQUIRIES email editorial@sapoa.org.za or managingeditor@sapoa.org.za. Published by SAPOA, Paddock View, Hunt’s End Office Park, 36 Wierda Road West, Wierda Valley, Sandton PO Box 78544, Sandton 2146 t: +27 (0)11 883 0679 f: +27 (0)11 883 0684 e: sales@sapoa.org.za

Editor in chief Neil Gopal Editorial advisor Jane Padayachee Managing editor Mark Pettipher Editor Candace King Consulting editor David A Steynberg Copy editor Ania Rokita Sales Riëtte Stevens Finance Susan du Toit Contributors Advocate Portia Matsane, Martin Ferguson, Nicky Manson Photographer Michael Glenister DISCLAIMER: The publisher and editor of this magazine give no warranties, guarantees or assurances and make no representations regarding any goods or services advertised within this edition. Copyright South African Property Owners’ Association (SAPOA). All rights reserved. No portion of this publication may be reproduced in any form without prior written consent from SAPOA. The publishers are not responsible for any unsolicited material.

P R O P E R T Y

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SOUTH AFRICAN PROPERTY REVIEW

Designed, written and produced for SAPOA by MPDPS (PTY) Ltd e: mark@mpdps.com

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news

First-time award for Redefine

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SA’s first 5-Star Office Design rating

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esigned by DHK Architects in a joint venture with Louis Karol Architects, Portside in the Cape Town CBD is the first high-rise office development in South Africa to achieve a 5-Star, Green Star SA (GSSA)v1 Office Design rating, which represents  “South African Excellence”, as administered by the Green Building Council of South Africa (GBCSA). Jointly owned by Old Mutual Properties and FirstRand, Portside consists of 57 000m² GRA over 20 office floors, with retail space at street level on a lower and upper ground floor. In addition there are three basement parking levels, a further seven structured parking floors in the podium and two plant floors at roof level, making a total of 34 floors. “We are proud that Portside has achieved this rating for the Design category,” says Derick Henstra, executive chairman of DHK Architects. “The design was sensitive to both the environmental and aesthetic requirements of the building. We believe that we have successfully balanced the two imperatives; this rating is evidence of this.” Portside has focused on the environmental initiatives associated with GSSA projects, including energy reduction through an efficient air-conditioning system; the capturing, storage and reuse of rain water as well as grey water for use in toilets, thus reducing potable water use; the use of low embodied energy materials such as recycled reinforcing steel and cement replacement with industrial waste products; and the maximisation of natural light through the provision of a high-quality double-glazed façade. Portside also includes the application of LED light fittings throughout the office space. This significantly lowers the energy consumption and is a first for any office building in South Africa. Several electric-car charging vending points have also been provided, with infrastructure for additional points at a later stage, to allow for on-site recharging of electric cars while the owners are at work. In addition to the 227 bicycle racks for staff and visitors, a number of community bicycle racks have been provided on the pavement at street level, with the aim of encouraging alternative means of transport for business people, tourists and couriers in the lower CBD. This is in support of the City of Cape Town’s non-motorised transport strategy and Ride Your City initiative. +27 (0)21 421 6803, Dhk.co.za

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edefine Properties recently received the IAS Best Reporting and Communication Award for the best presentation to the society by a company with market capitalisation between R5-billion and R30-billion for the 2012 financial year. “It’s a privilege to receive this award,” says Andrew Konig, the financial director at Redefine. “We are encouraged by the recognition received to continue our regular, comprehensive and transparent disclosure, to ensure that investors are able to fairly assess Redefine’s investment story. Communicating our transformative strategy is essential for Redefine. We commissioned research to identify where our communication could be improved to ensure the market has a thorough understanding of our strategy,

and to effectively communicate our delivery thereof.” He notes that Redefine’s ongoing communication initiatives allow stakeholders to assess the quality and sustainability of Redefine’s current year’s earnings, and gain visibility of its future prospects. “We aim to tell our story to the investment community as it unfolds.” He also stresses that IAS is an important platform to reach the investor community at large, with all key analyst representatives attending Redefine’s IAS presentations. “Redefine will continue to give communicating with all its stakeholders a high priority to foster an intimate understanding of our business, from our strategy to our performance, and how we achieve both,” says Konig. +27 (0)11 283 0000, Redefine.co.za

A new face at Synergy

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ynergy Income Fund has appointed Anton Raubenheimer as the financial director, replacing co-founder Uys Meyer, who will remain on Synergy’s board as a non-executive director. Raubenheimer is a chartered accountant with about 15 years of experience. He holds a BCom from the University of Cape Town, and a postgraduate diploma in accounting. Before joining Synergy, Raubenheimer was the managing director at Retail Africa Asset Management, and prior to that, a managing director and financial director at Fountainhead Property Trust, and head of business development for Virgin Active South Africa. “We are committed to our growth strategy for Synergy, and this has necessitated significant investment in our management

operation,” says CEO of Synergy Income Fund William Brooks. “We look forward to having Anton on board to drive our growth strategy and enhance the operational capacity of our business.” “I look forward to being part of the sustainable and measured growth of this very unique listed property company,” says Raubenheimer. +27 (0)21 673 3300, Synergyincomefund.com

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news

> Corporate and Investment Banking

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MIDDELBURG MALL

JABULANI PRECINCT

Abland and Pivotal Property Fund

Flanagan and Gerard Investments (Pty) Ltd and Moolman Group

CALGRO M3 Holdings Ltd

ZAR 440 million

ZAR 300 million

ZAR 271 million

Development Finance

Development Finance

Development Finance

Our experience shows how involved we’ve been in building the real estate market. This foundation allows us to provide you with the best possible financial solutions for your real estate needs. www.standardbank.co.za/cib

Authorised financial services and registered credit provider (NCRCP15). The Standard Bank of South Africa Limited (Reg. No. 1962/000738/06). SBSA 126413/RR – 3/13 Moving Forward is a trademark of The Standard Bank of South Africa Limited

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2013/07/03 4:41 PM


news

Growthpoint’s grand green office building

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n time and on budget, Growthpoint Properties recently launched its prime, state-of-the-art, green 44 on Grand Central office development in Midrand. Situated opposite Gautrain’s Midrand station, the 7 000m² development is designed to Green Building Council of South Africa (GBCSA) 4-Star Green Star rating specifications. It used recyclable steel as well as a fly ash concrete mix in its construction. It also features daylight harvesting and daylight sensors, as well as energy-efficient lighting, inside and out. It also uses energy-efficient motors, pumps and fans. Keeping temperatures comfortable, 44 on Grand Central has external shading, roof insulation and air-conditioning zoning. It also features drought-resistant landscaping with rain-water harvesting for irrigation, low volatile organic compound (VOC) paint and carpets, as well as a waste-management plan. All this is kept finely tuned with a building management system (BMS). It even has cyclist parking and changing rooms. “This top-quality property asset progresses our green building drive,” explains Rudolf Pienaar, Growthpoint Properties’ divisional director. “Growthpoint strives to create quality office space that works best for our clients. Green building is essential to providing spaces in which businesses can thrive. Thoughtful design was applied to 44 on Grand Central, creating a stimulating working environment that reduces building utility costs by using sustainable alternatives, to the benefit of occupants.” +27 (0)11 944 6000, Growthpoint.co.za

Cape Town commercial space in demand

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ccording to Mercia Pillay, leasing and sales broker at JHI Properties in the Western Cape, commercial space in key hubs in Cape Town’s southern suburbs is in demand. A prime example is the recently concluded five-year lease with blue-chip renewableenergy company InnoWind at the A-grade up-market office park, The Oval in Newlands, which is valued at R4,2-million. “Appealing and set in tranquil, green grounds, as the name suggests, The Oval is well situated, with scenic views of Table Mountain, within walking distance of the Vineyard Hotel, close to Main Road and easily accessible from the city, airport and major routes in and around Cape Town,” says Pillay. “This makes the site very attractive

and convenient for InnoWind’s visiting colleagues from France. “Space in The Oval, which is owned by Growthpoint, is highly sought-after and is snapped up quickly. InnoWind have taken up the left wing of the first floor, comprising just under 318m² – which was formerly occupied by one user who has relocated – as well as nine parking bays.” Pillay says the demand for prime office space in the southern suburbs has boosted rental rates in the area, with A-grade space achieving rentals from R120/m² to R180/m². Many of the enquiries received for space in the Newlands area are for between 200m² and 500m², frequently from investmenttype businesses. +27 (0)21 418 1640, Jhi.co.za

Premier office vacancies remain low despite high spec development levels V

acancies in SA’s stock of premier-grade office space remain exceptionally low, despite high levels of speculative development activity, reports the latest edition of the SAPOA Office Vacancy Survey. Premier space continues to enjoy the lowest vacancies – underscoring high demand from tenants – at just 2,2%

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vacancy rate overall. Given high levels of speculative office development, this performance is particularly noteworthy. A-grade space maintains an 8,7% vacancy rate overall. Both sectors are still in line with the natural or frictional vacancy rate of between five and 10%. The SAPOA Office Vacancy Survey is the largest survey

SOUTH AFRICAN PROPERTY REVIEW

of its kind in SA, providing quarterly insight into 15,9million square metres of office space in 51 distinct offices nodes throughout the country. As at the second quarter of 2013, the national office vacancy rate across all grades of property stood at 11% – a small increase over 2012. Nevertheless, the high level of speculative development is

pushing up vacancy rates across all grades in the South African market. Current estimates suggest speculative space remains about 50% unlet. Expectations are that speculative development levels are beginning to soften, which should ease the impact on vacancies for the office sector. +27 (0)11 883 0679, Sapoa.org.za

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news

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news

Growthpoint provides interim home for blue-chip cateringequipment company

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rowthpoint Properties’ Omni Park in the industrial node of Aeroton will be the new interim home for BCE Foodservice Equipment. BCE Foodservice Equipment is currently developing its own building in order to meet its increasing business needs. However, because it has outgrown its former premises and the new building’s completion date is still undecided, the company found itself in urgent need of a suitable interim facility near to both its former and new addresses. “When Growthpoint was approached to provide space for this blue-chip business and we learned about its unique requirements, it provided the opportunity to develop a special solution for BCE Foodservice Equipment while preparing the property for long-term letting,” explains Growthpoint Properties’ industrial division director, Engelbert Binedell. “The capital investment will certainly enhance the value of the asset in the future.” Growthpoint developed a flexible lease to accommodate BCE Foodservice Equipment’s new build-completion date. It also invested R3-million and tailored an upgrade to the Omni Park facility, which comprises 775m² of offices, a 12 100m² warehouse, a 500m² showroom and a service centre. This investment included a complete upgrade of the offices for employees of BCE Foodservice Equipment as well as introducing new energy-efficient lighting to minimise utilities costs. Omni Park will be BCE’s temporary business space for at least the next two years. +27 (0)11 944 6000, Growthpoint.co.za

Emira on the up

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reat things are happening for Emira Property Fund. The JSE-listed fund recently set up its new headquarters in the Epsom Downs Office Park in Bryanston, and also won the coveted Fulton Awards Innovative Construction Award for its Podium at the Menlyn building. Emira relocated its Johannesburg offices to one of its own key commercial property assets, Epsom Downs Office Park. “Our properties are well located business addresses, so when the opportunity to move came up, we decided that it was time that we also benefited from the advantages we offer our tenants,” says James Templeton, CEO of Emira Property Fund. Of its 90plus Gauteng properties, Emira chose Epsom Downs Office Park because it is a landmark address

with superb access to major road arterials in and around Johannesburg, as well as several top retail amenities. In other Emira news, the fund was also awarded the Innovative Construction Award at the Fulton Awards, which are hosted every two years and presented by the Concrete Society of Southern Africa (CSSA). “We strive for constant innovation in our properties and developments, and it’s great to be formally acknowledged for this with a Fulton Award for Innovative Construction for The Podium at Menlyn,” says Templeton. “Improving the quality of our property portfolio is one of Emira’s goals, and our investment in the A-grade (now awardwinning) office building certainly furthers this goal.” +27 (0)11 775 1401, Emira.co.za

Nedbank funds Capstone

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edbank Corporate Property Finance recently provided R42-million to J Post Investments, fully owned by the Capstone Property Group, for the purchase of Media Mill office park, located in Braamfontein in Gauteng. Well-positioned along Quince Street in Braamfontein within walking distance of the SABC headquarters in the hub of Johannesburg’s biggest universities, the Media Mill office park is in close proximity to several key travel routes as well as blue-chip tenants.

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SOUTH AFRICAN PROPERTY REVIEW

“Brian Azizollahoff and Marcus Susman approached Nedbank Corporate Property Finance to fund the purchase of Media Mill, a landmark office complex for the creative industry,” says Ken Reynolds, the regional executive for Nedbank Corporate Property Finance in Gauteng. “This is the first funding that Nedbank is providing to the Capstone Property Group, which requires R42-million of the R56-million purchase price.” +27 (0)11 684 1719/1356, Capstoneprop.co.za


news

Securing Cape Town’s cosmopolitan playground: V&A Waterfront is a safe destination with Axis network cameras

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xis Communications recently rolled out its surveillance solution across the V&A Waterfront, the historical site that attracts a huge number of foreign visitors in the country. The safety of 23million people who visit the V&A Waterfront annually has been secured with the installation of the Axis P3364-VE and the Axis Q1604 cameras. What began as a small jetty, built in 1654 by Dutch commander Jan van Riebeeck as part of his task to establish a refreshment station at the foot of Africa, has grown immensely and today boasts more than 80 world-class restaurants, 10 international hotels and more than 450 retail outlets, offering visitors a unique blend of natural beauty and commercial indulgence. “The massive influx of visitors to our site on a daily basis means that effective, uncompromising security is an absolute necessity,” says Deon Sloane, V&A Waterfront’s senior security manager. “We were looking for a system that represented a long-term solution. The V&A Waterfront development spans a massive 300 acres; the sheer size of the site necessitates the deployment of numerous network cameras with the capacity to provide monitoring under diverse circumstances and conditions. The strong northwesterly

winds and high annual rainfall for which Cape Town is known demand robust products that are steadfast in the harshest environment.” With a combination of the AXIS P3364-VE with Axis’ Lightfinder technology and the AXIS Q1604 with Wide Dynamic Range we have ensured that these cameras provide a complete surveillance solution to the 660 000m² of property within the V&A Waterfront precinct,” says Roy Alves, business development manager (MEA) at Axis Communications SA. In addition to the numerous Axis network cameras keeping a watchful eye on the premises, the site has a number of new developments that require further monitoring. With Axis network cameras and Milestone video-management software, the expansion is a seamless and almost effortless task. V&A security management has found that the quality of the surveillance footage has improved dramatically. Maintenance of the solution is straightforward, the risk of tampering has been contained and the new system offers so much more in terms of functionality without any compromise to the aesthetical appeal of the V&A Waterfront development. +27 (0)21 551 8221, Axis.com

Compliance due date extention: Certification against NQF4 and NQF5 for estate agents registered with the Estate Agency Affairs Board (EAAB) on 15 July 2008

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n terms of the Standard of Training of Estate Agents Regulations, 2008, estate agents who were registered on 15 July 2008, the date when the Regulations came into effect, were required to be certificated against either the Further Education and Training Certificate: Real Estate (NQF Level 4) for non-principal estate agents, or the National Certificate: Real Estate (NQF Level 5) for principal estate agents by 31 December 2011. The Regulations specifically provide, however, that this time period may be extended by the Board if the grounds are reasonable. Acting under this provision the Board previously extended the certification period to 31 December 2013. It has become increasingly apparent to the Board, however, that a further extension of this period is required if the needs of the estate agency sector in general and the affected estate agents in particular are to be accommodated. Many of the affected estate agents have, unfortunately, delayed enrolling for certification against the required real estate qualifications, while other unanticipated delays have also seriously hampered the finalisation of the certification process, including the necessary de-accreditation of certain real estate education providers and recognition of prior learning assessment centres as well as the lack of performance and the due exiting of learners manifested by others. The Board has, under the circumstances, agreed to grant a further and final extension of time until 30 June 2015 for affected estate agents to be certificated against the required real estate qualifications. It is not envisaged that this time period will again be extended. It is to be underscored, therefore, that those affected estate agents who have still not been certificated by the extended date will not be issued with

fidelity fund certificates, entitling them legally to perform the functions and activities of an estate agent, for the 2016 calendar year. The Board wishes to acknowledge the significant investment in time and resources by the many dedicated and committed estate agents who complied with the previously established deadline and who were timeously certificated against the required real estate qualifications. It is emphasised that certification against the NQF real estate qualifications is an essential prerequisite to registration for the mandatory Professional Designation Examination, whether for nonprincipal or principal estate agents as the case may be. Recognition of prior learning (RPL) is an effective process that was incorporated into the Education Regulations specifically to recognise the acquired knowledge, skills and learning of estate agents who w ere already active in the real estate sector on 15 July 2008. It is anticipated that, as most of these persons are duly certificated in due course, the RPL process will be commensurately less utilised, with new entrants to the estate agency profession being required to undergo training instead. The Estate Agency Affairs Board also wishes to remind practising estate agents who are 60 years of age or older, who have held a valid fidelity fund certificate for at least five years and who currently hold a valid fidelity fund certificate, that they can apply for the special education exemption which may be granted to them in accordance with the requisite EAAB policy. This education exemption applies in respect of both the NQF real estate qualifications as well as the Professional Designation Examination. + 27 (0)11 731 5600, eab@eaab.org.za SOUTH AFRICAN PROPERTY REVIEW

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news

The Pavilion set for growth SACSC Annual Congress tackles hange is taking place at The Pavilion Shopping Centre in C Westville, Durban, as it undergoes a R228-million redevelopment the VUCA environment and welcomes a new general manager. The Pavilion recently announced the appointment of Nisha Kemraj as general manager, replacing Anton Dekker, who’d made a substantial contribution to the management team during his tenure. With more than 13 years of property management practice, Kemraj has a unique insight into retail in KwaZulu-Natal as well as hands-on experience of mall management during development and refurbishment projects. She holds a BCompt from Unisa, as well as certified qualifications from both the South African Council of Shopping Centres and the South African Property Owners Association. Prior to joining The Pavilion Shopping Centre, Kemraj was a retail portfolio manager at Old Mutual Property, where she has also gained extensive experience in different positions over the past 12 years. “Kemraj’s excellent qualifications and unmatched experience made her the standout choice for general manager of The Pavilion Shopping Centre,” says Carmen Collison, the managing director at Motseng Property Services, property managers for The Pavilion. “As one of South Africa’s largest and most respected shopping malls, The Pavilion has a rich history of retail excellence,” says Kemraj. “I’m excited to be part of continuing – and, where possible, improving – this first-rate experience for our new generations of shoppers and retailers.” +27 (0)11 282 2500, Motseng.co.za

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aking place from 11 to 13 September 2013 at the Sandton Convention Centre, the 17th annual Congress of the SA Council of Shopping Centres will unpack several burning retail topics, including how one can understand the new, volatile world of retail and how retail brands can thrive in the fast-changing global arena. Rene Carayol, the CEO of the Inspired Leaders Network in the UK, will speak to the idea of a volatile, uncertain, chaotic and ambiguous (VUCA) world. “In the good times, retailers enjoy stability, consistency and accurate forecasts of their financial performance,” he says. “But in the VUCA world, retail powerhouses such as  Tesco, Carrefour and Marks & Spencer can all post profit warnings, which indicates that retailers need to be cautious about forecasts.” He argues that in the VUCA scenario, retailers and their leaders need to rely on their

judgment and experience to make the future happen rather than trying to predict it. Local retail entrepreneur Robbie Brozin, the founder and CEO of Nando’s, will be offering his insights on how to keep a brand fresh and relevant across 1 040 restaurants in 26 countries worldwide. Other Congress highlights this year include inspirational keynote speakers, such as civil servant, writer and cleric Reverend Frank Chikane and explorer Kingsley Holgate. “The topics at this year’s congress speak to the current reality of many countries and specifically the retail sector, which are not unique to South Africa,” says Frank Berkeley, a managing executive at Nedbank Corporate Property Finance. “Looking at the calibre of speakers, I believe that great insights will be garnered by the participants to generate strategies for an economically viable sector.” +27 (0)10 003 0228, Sacsc.co.za

Muldersdrift attracts significant commercial and leisure development

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he West Rand, and more specifically Muldersdrift, is attracting significant commercial and leisure development to capitalise on residential and commercial enterprises in what is currently one of the fastest, high-income growth nodes in Gauteng. Sasol Pension Fund, Retail Africa, Tsogo Sun and Avianto are four of the largest developers in the area to date. Sasol joined forces with Retail Africa last year to begin construction on one of the largest private commercial construction projects in South Africa, a new 75 000m² regional

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shopping centre, Cradlestone Mall, in Mogale City, due for completion in October this year. Tsogo Sun recently announced a R480-million refurbishment of Silverstar Casino, which is expected to change the face of entertainment on the West Rand and is due for completion in August 2014. Cradlestone Mall is optimally located on the corner of a busy intersection – the N14 highway and Hendrik Potgieter Road – and adjacent to the planned Pinehaven Interchange. Once completed, the Pinehaven Interchange

SOUTH AFRICAN PROPERTY REVIEW

will give residents north of the N14 easy access to the mall. Retail Africa co-founder Jannie Kruger says the surrounding area is growing into a strong commercial, office and entertainment node, and believes the current developments will act as a catalyst for future development in the area. On the leisure side, Trevor D’Oliviera, CEO of Avianto Estate, confirmed that final approval has been received from Mogale City in June to unlock R3,5-billion worth of potential construction, which will furnish about 1 800 residential opportunities over

a wide selection of offerings, including the development of a new school managed by Maragon Private Schools. D’Oliviera says these developments will be a welcome addition to an area that has experienced burgeoning residential growth in recent years, driven by up-market and middle market residential developments. Kruger agrees, saying this trend is set to continue in the years ahead as expansion of outer Johannesburg to the north-west and Mogale City to the east continues.


boma

BOMA 2013 Commercial real estate was in the spotlight at the BOMA 2013 Every Building Conference & Expo

Produced by Building Owners and Managers Association (BOMA) International, the BOMA 2013 International Every Building Conference & Expo held in San Diego in the US was a great success. The conference served as the perfect platform and venue for commercial real estate professionals to gather and find ways to maximise value in today’s challenging marketplace

Not only did BOMA host this year’s conference in its military home town of San Diego, but it also celebrated its 50th birthday. To mark the occasion and continue the military theme, BOMA hosted a welcome party with music and fireworks on the USS Midway, the historical US Navy aircraft carrier that’s now a floating museum. Held from 23 to 25 June, the three-day conference presented the latest information through a comprehensive education programme. More than 400 exhibits from leading

manufacturers and suppliers of innovative products, technology solutions and service offerings were on show, as well as exciting speakers and general sessions that provided great networking opportunities. At the conference, BOMA unveiled its 2013 BOMA Global Office Tenant Survey, and hosted its first-ever Industrial Day. The International Outstanding Building of the Year (TOBY) Awards were also held, in which the market snagged three coveted honours, including the over-one-million-square-feet category.

ABOVE, FROM LEFT Estienne de Klerk, executive director at Growthpoint Properties and president of SAPOA; Joe Markling, chair of BOMA International; Richard Greninger, chair-elect of BOMA International; Neil Gopal, CEO of SAPOA; Henry Chamberlain, president and COO of BOMA International BELOW LEFT Neil Gopal with Estienne de Klerk

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education, training and development

PDP class of 2013

The Property Development Programme (PDP) for 2013 ran from 21 July until 2 August 2013. As with all previous years, this course, presented jointly by the Graduate School of Business (GSB) of the University of Cape Town and SAPOA, proved to be a huge success and was proudly sponsored by Standard Bank

Martin Ferguson, SAPOA’s HR, education, training and development manager, collaborates with thought leaders in South Africa’s property sector

The Property Development Programme is South Africa’s premier property-management programme. The selection criteria and the typical profile for delegates are as follows: l Seven to 10 years of commercial and/or industrial property ex perience l Middle-to-senior management level l It’s preferable for candidates to have a tertiary qualification. This year’s PDP was presented to a total of 70 delegates. Over the past few years the average age of the attending delegates has decreased, and the average age of the 2013 delegates was 36 (as it was in 2012). For the commercial property industry this is a good indication that we have an up-and-coming middle-to-senior management level. In addition, delegates from the designated groups at this programme represented 54,3% of attendees. This transformation of the PDP has come a year after the Minister of Trade and Industry, Rob Davies, signed the Property Sector Code in terms of the Broad Based Black Economic Empowerment Act, into law. The following table indicates the regions the delegates represented, compared to previous years: 2011

2012

2013

Gauteng

58%

64%

62%

KwaZulu-Natal

18%

6%

10%

Western Cape

15%

20%

16%

Eastern Cape

6%

1,5%

4%

Mpumalanga

0%

1,5%

1%

International

3%

7%

7%

Our International delegates were from Zimbabwe, Swaziland and Mauritius.

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The programme’s first week of intensive lectures (a full 58-hour lecture week) focused on the full property cycle. The course material included property finance, property economics, property law, contracts and tenders, property tax, investment, architecture, viability studies that include feasibility and valuation, property development, marketing, town planning, and property and asset management.

SOUTH AFRICAN PROPERTY REVIEW

The culmination of the course is the application of principles learnt during the first week to a theoretical property development project in or around Cape Town. The Provincial Government of the Western Cape provided the vacant four stands in Canterbury Street for this year’s PDP development project. The delegates were divided into six project groups to develop the land within specified guidelines. Each group had team members with the following backgrounds, skills and qualifications: l Architect l Quantity surveyor l Building engineer l Project manager l Valuer and town planner l Property developer l Property/asset manager l Broker and legal/property executive l Accounting and banking institution l Finance. On the last day, each group presented its project to a panel of judges. The winners were announced at a certification dinner held at the Clock Tower Building at the V&A Waterfront. Some excellent projects were presented and the competition this year was very close. The above would not have been possible without the following: l The executive education team at the Graduate School of Business of the University of Cape Town, with its quality assurance and administrative support of the programme. l The PDP Committee, which plans the PDP months in advance, supported by the SAPOA education department and the SAPOA marketing department. l Our sponsor Standard Bank, who has been involved with this programme since 2010. l The lecturers, who are always willing to contribute to the success of the programme, regardless of the time of their scheduled lecture slots. l The judges, who work through the night to evaluate and assess the various projects.


education, training and development

BACK

 reason Naidoo, Khulile Nzo, Sakhile Ndzimandze, Adriaan Otto, Greg Barrow, Amar Singh, Jake Hoddinott, Kiran Lalloo, K Rudi van den Heever, Otto Dreyer 5th ROW Siphiwe Morajane, Gregg Huntingford, Manfred Braune, Shaun du Plessis, Wicus Badenhorst, Yankho Chitsime, Themba Maluleke, Craig Whitson, Michael Miller, Abednego Munsanje, Jaco Swanepoel, Donovan de Lange, Zoon Jacobs 4th ROW Tanimu Baikie, Mamonei-Cecila Ndaba, Burger Bothma, Shailesh Beejadarsing, Tshepo Khambule, Ivan Plisic, Robert Crebo, Arthur Davis, Thandile Jack, SalomĂŠ Thonnard, Jacques Pienaar, Shaughn Botes, Michael Dlamini 3rd ROW Sandile Mavundla, Makhosana Msezana, Mandy Telford-Smith, Lawrence Koikoi, Victoria Lekolwane, Ben Salomon, Roxanne Dingwall-Fordyce, Debbie Macnamara, Mkhululi Gaula, Manfred Mahari, Tracy Human, Liteboho Seliane 2nd ROW Jane Downing, Pressage Nyoni, Jodi Davids-Harber, Selemeng Mokose, Patronella Telela, Liana Strydom, Karyn Southgate, Cherie Bussac, Carolyn Cookson, Erika Smith, Otsile Maseng, Mashudu Nthangeni, Athi Phila Ntshokoma, Cleo Socikwa FRONT Hopson Shezi, Glen Maboe, Ndabezinhle Mkhizie, Kumshnee West, Chele Moyo, Martin Ferguson, Professor Francois Viruly, Keabetswe Nkotswe, Shivira Bissessor, Kim Irmler, Gontse Kgosiemang

l Derek Chittenden, who spends an enormous amount of time sourcing a suitable site and preparing the brief for the development of the site, taking the delegates to the site and preparing the judging criteria for the judges. l Professor Francois Viruly, who is responsible for the academic content of the programme and for general support of the programme. SAPOA wishes to thank everybody for their support and efforts in making the PDP a success year after year. The SAPOA HRD manager will draft an extensive report on the three winning projects in the October 2013 issue of the Property Developer.

SAPOA and the Graduate School of Business are proud to have Standard Bank as the main sponsor of the PDP, a programme of the highest quality that attracts outstanding participants and supports the development of young professionals in the commercial property Industry. The experiences shared and friendships formed are the true legacies of the PDP, and the two-week programme has proved invaluable to delegates as they move forward in their careers.

SOUTH AFRICAN PROPERTY REVIEW

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legal update

Fitting the bill BILL GAUTENG PLANNING AND DEVELOPMENT Applicable mostly to property developers and property owners

SAPOA highlights issues surrounding the Gauteng Planning and Development Bill By Advocate Portia Matsane

1 The Gauteng Planning and Development Bill was published again for public comment. 2 SAPOA submitted formal comments on 1 April 2013. 3 The following are the broad legislative objectives of the Bill: l to provide for the planning and development of land use in the province; l to provide for provincial planning and the coordination of national, provincial and municipal land use and development policies; l to provide for the land use planning functions of the Province and the process of provincial planning; l to provide for land use schemes in the management of land use by municipalities; l to provide for the regulation of municipal land use and the establishment of a municipal appeal tribunal; l to provide for the process of land development, and to facilitate and expedite development procedures, including the upgrading and formalisation of settlements; l to provide for appeals and the procedures of the appeal tribunal; l to provide for the provision of engineering services in land development; l to provide for the control and enforcement of land use, and to provide for related matters. SAPOA COMMENTS (Extract) 1 SAPOA duly submitted comments to the draft Bill. The following is an extract of some of the pertinent issues that SAPOA raised.

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a

As a general comment, the Bill should be of benefit to the property industry, provided adequate regulations are passed and the municipalities continue to implement their existing development frameworks and do not start afresh with the process. No regulations have yet been proposed for the Bill, and many items in the Bill are left open for items to be prescribed by regulation. Those regulations will provide the detail to the operation of the Bill.

b

The Bill will replace a number of pieces of legislation, in particular the whole of the Town Planning and Townships Ordinance 15 of 1986, which regulated town planning within the old Transvaal. Members of SAPOA will be used to having operated within the framework of that ordinance, and it is regretted that new terms and definitions are used in the Bill.

c

The definition of a “parastatal body” is broad and not easy to apply, to the extent that it excludes bodies that are “organs of state”. The definition of an organ of state, contained in section 239 of the Constitution, provides, inter alia, that “organ of state means any functionary or institution exercising a public power or performing a public function in terms of any legislation.” A parastatal body is defined in the Bill as “an organisation, other than an organ of state, established by law to perform a function or provide a service on behalf of national, provincial or municipal government.” A body contemplated in the definition of “parastatal body” (namely, a body established by law to perform a function on behalf of government), would appear to fall squarely within the constitutional definition of   “organ of state”. In this respect the definition is ambiguous and should be clarified.

d The Bill presents provincial spatial development frameworks (SDFs) as


legal update

e

f

g

guidelines only, and not as binding documents. This means that in the event of inconsistency between a provincial and a municipal SDF, the municipal SDF prevails (in guiding and informing decisions of the municipality). This may give rise to a lot of uncertainty and inconsistency in the manner in which municipalities determine applications, and it would be preferable if the two spheres of government were instead under an obligation to ensure that their SDFs are aligned, or at least not inconsistent with each other. In terms of clause 20(1), municipalities are required to review the provisions of their land use schemes every five years. It is questionable whether the municipalities may practically comply with this limitation, and a longer period should be considered. The continual review of the land use scheme and the ability of the municipal council to amend the scheme will create great uncertainty for the property industry. The scheme should remain unless amended by way of application from land owners. Any change by the municipal council must only be done if it is in the interest of the general public and of the harmonious development of the area. The Constitution confers some planning powers on all spheres of government, by allocating legislative authority for “regional planning and development” and “urban and rural development” concurrently to the national and provincial spheres; legislative and executive authority for “provincial planning” exclusively to the provincial sphere; and executive authority over “municipal planning” exclusively to the municipal sphere. For purposes of working out where each sphere of government’s authority starts and

h

i

ends, it is self-evidently important to be able to delineate the parameters of each of those concepts (regional planning and development; urban and rural development; provincial planning; municipal planning). The national government has the power to make and execute laws on the functional areas listed in Part A of Schedule 4. This includes “regional planning and development” and “urban and rural development.” Legislative authority over matters listed in Part B of Schedule 5 (which includes “provincial planning”) vests in the provincial sphere exclusively. The national government is also empowered to regulate the exercise of municipal powers and the administration of municipal affairs, subject to section 44 of the Constitution. The national sphere cannot, by law, give itself the power to exercise executive municipal or provincial executive powers, or the right to administer municipal or provincial affairs.

without the limitations that apply to provincial involvement in matters set out in Part B of Schedules 4 and 5. It is inevitable that the exercise of those powers by national or provincial government will limit municipalities’ power over land use, and it is important for rational distinctions to be drawn between categories of decisions that should be made by national or provincial government, and those that should be made by municipal government. j

As far as we are aware, there is no useful case law in which the concepts of “regional planning and development”, and   “urban and rural development”, have been given meaning by courts, relative to concepts of provincial and municipal planning.

CURRENT STATUS AND WAY FORWARD The final approved Bill is being awaited.

A difficult issue arising in relation to the limitations of national and provincial versus municipal executive responsibility, is in respect of land use decisions that may overlap with matters within the executive authority of the national or provincial spheres, such as housing, agriculture and the environment. These are all functional areas listed in Part A of Schedule 4 to the Constitution, that are relevant to land use planning, and that would ordinarily require decision-making in respect of land areas that fall within the area of jurisdiction of a particular municipality. National or provincial government (depending on the allocation of responsibility between them in terms of national legislation) has full authority over these matters, and may legislate, implement and administer in these functional areas SOUTH AFRICAN PROPERTY REVIEW

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cover feature

Broll rolls it all into one While it may have started its life as a property management specialist, Broll has transformed itself into a complete turnkey service provider boasting impressive infrastructure, unmatched expertise and property passion that is undeniable By David A Steynberg

I

n the early 2000s, about 80% of Broll’s business focused on traditional property management. Thanks to a maturing property market, Broll has diversified its services: today, the 40-year-old company offers retail, commercial, industrial and investment property a complete turnkey solution, from leasing, corporate real estate services, brokering and valuation to facilities, asset and property management. “We realised the South African market had matured to such an extent that if we were not going to be a multidisciplinary service provider (remember, we don’t own any of our properties) and were going to be dependent on property management, we would not be able to add more value to our clients’ assets and diversify risk within Broll,” says company CEO Malcolm Horne.

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SOUTH AFRICAN PROPERTY REVIEW

“We have actually diversified into about nine service lines. If you look at our property management business in 2013, it constitutes no more than 30% of our turnover. Perceptually the market thinks we’re more involved in property management, but the R61-billion under management is only 30% of our business. It just gives you an idea of how the rest of the business has diversified. “If you go to the listed real estate sector and analyse where we interface in that sector, there is indeed strong exposure to property management. But there is also exposure to our valuation and consulting businesses, asset management business, facilities management business and leasing businesses for retail, industrial and commercial. We’re adding value in all of the core areas of property investment life cycles.”


cover feature

Malcolm Horne

SOUTH AFRICAN PROPERTY REVIEW

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cover feature

Benoni-born and raised Horne developed his love for property as a young boy thanks to his parents dabbling in buying and selling houses. This intrigued him, and while he did not know he would eventually end up in property, he pursued a degree in law. After working first for a Benoni court and then for the Rand Show’s National Exhibition Centre, which was looking for a legal adviser and someone to arrange their HR, Horne moved on to a newly founded company called Baker Street Associates and later City Properties. “They wanted to start a property management division,” he tells us from his Illovo office. “This sounded like great work to me, though I knew absolutely nothing. I ended up picking up the skills of the trade from a very talented group of people.” When Horne was approached to relocate to Durban by RMB Properties, Jonathan Broll phoned him offering him a job. “I had worked for a few municipal pension funds, and I think it must have been a calculated move on Jonathan’s side. Within three months

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the properties owned by these funds were being managed by Broll, where I was initially a portfolio executive, and I worked my way up to head of property management,” he says. As the CEO of Broll, Horne understands that the business today is operating in a tough environment, with domestic and sub-Saharan economies under pressure. But despite this, he says that Broll is doing exceptionally well as “we have attracted great people with great skills and commitment”. “In easy markets anyone thinks that they can manage property because they are less focused on quantifying what they are losing. But when markets are tough, every cent of distribution counts. An outsourced management company has fixed key performance indicators in good and bad times, and are consistent in long-term management strategies,” he says, adding why he believes there is value in outsourcing. “I don’t believe an asset manager and a property manager should be in the same stable. Unless the structures and output are clearly defined, the asset manager doesn’t do what an asset manager should do. He will default to property management and then the strategic asset management does not receive the attention it deserves. In tough times that kind of attention is vital.” Some of the reasons for Broll’s business success during difficult times, according to Horne, are the company’s invaluable infrastructure, dynamic people and a unique skills set. This provides clients with specialised and focused services. “When vacancies and arrears are up, what property owners need is the nitty-gritty of sorting and replacing,” he says. “That’s tough work and it doesn’t just happen.” One area where the industry has seen phenomenal growth and opportunity has been in the listed sector. Far from the usual dayto-day management of an asset, property managers need to consider that listed funds are tracked and rated by analysts. This makes Broll’s role both more pressured and exciting. “Track record is critical,” says Horne. “Is it consistent with what the asset manager or fund is saying? Our teams live, eat and sleep distribution and fund-performance fundamentals. On the fund level there are all kinds of dynamics at play: how the capex is expended, what is happening to the bond market and so forth. It’s nice exposure for our employees.” As a multidisciplinary service provider, Broll needs to understand the entire life cycle of any property asset. If it is mature, the company should be telling this to its clients and asking if there is a plan for it.


cover feature

“If it’s an immature asset, how do we get it to that middle state where they’re getting optimum value and actually preparing it for the exit phase?” he asks, elaborating on the other critical aspects of the business. “With our nodal analysis we bring value from our research database, and with the facilities management business we analyse and benchmark operational costs. “We’ve got a utilities business, which is such an important aspect for recoveries and under-recoveries, and how we structure leases within our legal division.” What Broll does, essentially, is it structures a business around a client. This is evident in its strategy for its latest sign-up, SA Corporate Real Estate Fund. “We’re very proud to manage the entire portfolio,” says Horne. “We’ve had two months to prepare and it has gone well. The team is up and running at the moment and we believe we can reduce current vacancy levels. We have a dedicated leasing team that just specialises in the property management space. And we’ve got a whole leasing team put together on the retail side of SA Corporate. It’s wonderful to see what they’re doing. “At tendering phase we sent our team onto the ground to actually look at the portfolio, so when it came to the presentation phase we actually had some idea of where we could add value in a constructive way. On the tenanting side we have a research division that is very active in benchmarking rentals, rental and nodal growth, and we believe we can add value in their renewal process as well, such as mitigating risk by retaining large tenants at market-related rentals. “We manage the risk profiles: arrears, legal management and legal arrears. Those are some of the top-end, immediate value adds we can provide.” Value is one area where Broll really packs a punch. Another is its commitment to helping a client meet its own and its shareholders’ expectations. “We’ve got key performance indicators and performance level agreements in place,” he says. “I love this as it’s really beneficial for all parties. It’s structured clearly and there is no place for ambiguity.” Being involved early on in a new project is another area where Broll can really muscle its expertise, vast experience and meticulous attention to detail. This is clear in its involvement with Sasol Pension Fund’s latest retail development, Cradlestone Mall on Johannesburg’s West Rand. “Sasol is a great, forward-thinking landlord and they appointed us about eight months ago, so our management team got involved from a property management point of view right upfront,” says Horne.

Looking north of our border, Horne says the game changes from an operational perspective. “Up until now a large thrust has been from developers: they have found and sourced the land, put a fund together to source the income and take on that development risk,” says Horne. “They are not normally long-term holders, so they would hold for a period of time and flip the property asset into Sanlam, for example. “There’s a whole host of things we take for granted that just happen here. There you have to make them happen – you have to create them, start from a zero base, train people about why you want to do something.” Established markets, such as Nairobi, are an even tougher nut to crack. Service providers like Broll already exist, so the challenge is to offer something of value. “We were there recently where we did three pitches. I was concerned about what would we do differently to what was already being offered because perceptually the services are already being offered,” says Horne. “And from those engagements it has been refreshing to see that if you bring a skills set to your market, then you will be able to position yourself in that market. That’s been our challenge with regards to how we differentiate ourselves in those markets. I think retail in East Africa is going be an exciting space. It’s a great market for us because we’re not coming in and teaching property fundamentals. We need to bring our real property skills. It’s exciting.” Coming back home, Horne recognises that there is a prevailing perception that Broll has focused its efforts on Africa over its business in South Africa. “The South African market is home market and it’s core,” says Horne. “Our South Africa staffing has increased by 50% over the past 18 months. We have a separate team for South Africa. Often the perception is that we have forgotten about SA and yet, if anything, our local business is growing. It’s home-grown and this is the market we need to nurture and mature. This is the market we’re going to grow – we see enormous growth opportunities in South Africa. “Our brokering teams have had the best turnover over the past three years in our 40 years of existence, with tight economies and tough markets. Our property management division has seen the same growth locally as has our facilities management division. “Our local market is healthy and growing steadily because it is a focused business for us. But in the same breath, Africa is growing, and we believe we’re well positioned on the continent to enjoy strong future growth.”

What Broll does, essentially, is it structures a business around a client. This is evident in its strategy for its latest sign up, SA Corporate Real Estate Fund

+27 (0)861 0broll, www.broll.co.za SOUTH AFRICAN PROPERTY REVIEW

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feature

Consumer Protection Act 101 What are the implications for landlords?

T

he Consumer Protection Act (CPA) was signed into law on 24 April 2009. This ground-breaking legislation has empowered the consumer and changed the way that businesses deal with their customers – including the relationship between landlords and tenants. Marlon Shevelew, director at Marlon Shevelew and Associates Inc, a firm specialising in landlord and tenant law and consumer law, among others, believes that the most important thing that landlords should be aware of when it comes to the implications of the CPA on renting property to a tenant is that the CPA will always ensure the tenant has the greatest protection, according to section 2(9) and section 4(4) of the CPA. “Section 4(4) of the CPA requires any contract or document (i.e. a lease) prepared by a supplier (i.e. a landlord) to be interpreted to the benefit of the consumer (i.e. the tenant),” comments Shevelew. “This means that tenants will be afforded far more leeway when it comes to their grievances.” He notes that both the CPA and the Rental Housing Act (RHA) are equally applicable when it comes to governing the relationship between landlords and tenants, but when an anomaly appears as to the interpretation of the lease, it is likely that the rights of the tenant will trump those of the landlord when interpreting any particular wording or section of the lease, as this is what the CPA dictates. The landlord’s obligations to the tenant are prescribed by the RHA, which states that the landlord must provide the tenant with a written receipt for all payments received. In addition, the landlord must conduct incoming and outgoing inspections of the property in the presence of the tenant in order to determine what damages there are to the property.

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Marlon Shevelew

The RHA dictates that, when the lease expires, the landlord may deduct the cost of repairing any damages from the tenant’s deposit, provided that the tenant is liable for such damages in terms of the lease. The remainder of the deposit, plus interest, must then be refunded to the tenant no later than 21 days after expiry of the lease. It’s important to note that, according to the RHA, if the landlord does not conduct the outgoing inspection in the presence of the tenant, it is deemed an acknowledgement that the property is in a proper state of repair, and the landlord will be responsible for refunding the tenant’s deposit in full, plus any interest. A recent research survey undertaken by Torus Capital looked into the common administrative tasks that landlords are faced with – some of which are prescribed by the RHA. The goal of the survey was, among other things, to gain an understanding of the challenges faced by landlords. The results of the survey indicated that incoming and outgoing inspections account for 72% of this admin, followed by maintenance (62%), vetting of potential tenants (40%), lease renewals (34%), legal procedures (31%), evictions (29%) and deposit disputes (24%)*. As a result of the time-consuming nature of these tasks, the survey results showed that 27% of landlords do not always vet potential tenants, and only 51% of landlords frequently conduct incoming and outgoing inspections.

According to Shevelew, failing to do any of the above can have serious consequences in light of the CPA – particularly as a lease will always be legally interpreted to the benefit of the tenant and will clearly be a dereliction of the duty of the landlord towards his tenant. “Vetting allows for a landlord to be fairly discriminatory as to the ability of the tenant to pay their rental,” he says. “Thorough incoming and outgoing inspections are essential actions that allow for the deposit to be utilised to cater for any damages to the property during the currency of the lease – except for fair wear and tear,” Shevelew says. As the CPA affords the tenant such comprehensive protection, it is in the best interests of the landlord not only to ensure that they fulfil their obligations to the tenant comprehensively, but also to ensure their own protection. Rentshield, a new “zero deposit” product launched by Torus Capital, not only takes care of all the legwork that comes with renting property, but also protects landlords far more than a traditional deposit would. Rentshield provides landlords and estate agents with a comprehensive online tenant vetting facility, taking care of all incoming and outgoing inspections – at no expense to the landlord or the estate agent. The unique product protects landlords against all the stresses associated with residential letting, including nonpayment by the tenant (for up to three months) and repair of the property (up to the value of one month’s rent). Rentshield will also take care of the eviction ensuring that all legal processes are followed efficiently and to the letter of the law, covering the landlord’s legal expenses up to the value of R50 000. “The legal challenges that come with renting property can prove very stressful for landlords,” comments Martin Goodman, a director at Torus Capital. “Rentshield will take care of the administrative and legal headaches that come with the residential rental market territory.” Shevelew echoes Goodman’s sentiment, saying, “Rentshield ensures that landlords are fully CPA-compliant and thus protected as far as possible.” * Where the sum of the percentages is greater than 100%, respondents were able to select more than one option in the survey.


feature LeaseAfrica set to reduce vacancy rates and assist SMEs to find space

S

outh Africa’s small and medium enterprise (SME) growth is being hindered by the difficulties many business owners face when seeking commercial property space. These difficulties are the result of an inefficient vacancy clearing system leading to the property sector in South Africa not achieving the growth it should. This is according to Anthony Holme, CEO and co-founder of LeaseAfrica, an innovative, locally developed, free-to-use online platform – the first of its kind in South Africa. The platform is set to dramatically alter the way in which South African businesses source commercial space to lease, and has the potential to transform the R1,5-billion-per-year commercial property brokering market. LeaseAfrica’s research has shown a significant disparity in vacancy rates between South Africa and countries that have effective online clearing hubs in place. “Countries with existing effective vacancy clearing systems have an average vacancy rate of 7,8%,” says Holme. “Countries which do not, including South Africa, have vacancy rates of 13,8%. These statistics highlight the urgent need for a system that will assist both commercial landlords and prospective tenants.” As a result of these inefficiencies, the local commercial property industry seems to be less attractive to both local and international investors, and this is having a negative effect on the South African economy. Holme explains that the lack of a comprehensive online “one-stop shop” for commercial property in South Africa often forces tenants to adopt a scatter-gun approach when searching for vacant property. “The prospective tenants have to engage with multiple companies, each of whom offer only a very narrow slice of the market,” he says. “This process is both time-consuming and ineffective.” The reality is that businesses are not finding office spaces to suit their needs because vacancy listings are not available to them via an open and transparent method. “The relevant information does not always reach business owners because of the way the market is structured,” says Holme. “By pooling all the correct information, we are able to offer the industry an innovative solution, which will assist both commercial landlords and businesses looking to source premises. We are essentially placing every vacancy in front of every potential tenant in the market, instantaneously.” Commenting on LeaseAfrica’s entry into the market, Estienne de Klerk, the executive director at Growthpoint Properties Limited and the president of the South African Property Owners Association, says that, in South Africa, “The commercial office property market is experiencing high vacancy rates due to various challenges, including weak economic growth resulting in poor demand for office space. Any platform that can assist in reducing vacancies and improving letting efficiencies is welcome in the marketplace.” Holme explains that the vacancy clearing system in South Africa is different from most other countries around the world. Most have a central hub where owners can market all their vacant properties, and tenants can view vacant space in one place. “It’s already difficult enough for SMEs to navigate all the red tape that exists in the market without also facing additional barriers when they’re looking for commercial space for their business.” He says a comprehensive online platform is necessary to bring South Africa in line with international commercial property best practice, and believes that this system will assist in reducing the challenges that the commercial property industry is experiencing, as well as in reducing vacancies. www.leaseafrica.co.za SOUTH AFRICAN PROPERTY REVIEW

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editorial

PROCSA and good practice PROCSA paves the way with sound professional service agreements for the property industry By Candace King

E The Professional Client/ Consultant Services Agreement committee (PROCSA) is a professional organisational body that has compiled a Client/Consultant Professional Services Agreement that consists of a suite of documents prepared to regulate the terms of engagement between the client and the consultants in the interests of standardisation and good practice in the property and construction industry, on a mandate from the constituent bodies

stablished about 10 years ago, the Property Council of South Africa (PROCSA), as it was initially called, was formed with the original intention to replace the South African Property Owners Association (SAPOA) with a more encompassing and representative body of all the participants in the property and construction industry. Due to the lack of cohesion during this time, it was felt that the voluntary associations involved should remain as previously constituted. A committee comprising key constituent members was then set up to review the standard client/consultant terms of engagement in an effort to standardise these, and to harmonise and integrate the scope of services for all of the professionals engaged in the property and construction industries. “SAPOA was going to restructure itself but decided not to – the organisation realised that what it already had in place was effectively working,” explains Charles Israelite, the chairman of PROCSA, a representative of the Association of Construction Project Managers (ACPM), and a director at SIP Project Managers. “Thereafter, we formed a committee as part of the Property Council of South Africa, to review and set up a standard of professional letters of appointment that developers and property owners could utilise

to appoint architects, engineers, quantity surveyors, project managers, and so forth.” The official signing of the PROCSA joint-venture agreement

Charles Israelite notes that, after the dissolution of the Property Council of South Africa, the acronym PROCSA was adjusted to refer to Professional Client/Consultant Services Agreement, and taken over by the seven constituent member associations: l South African Property Owners’ Association (SAPOA) l South African Black Technical and Allied Careers Organisation (SABTACO) l South African Institute of Architects (SAIA) l Consulting Engineers South Africa (CESA) l Association of Construction Project Managers (ACPM) l Association of South African Quantity Surveyors (ASAQS) l African Association of Quantity Surveyors (AAQS)

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by the constituent members took place in July 2010; the agreement has received valid recognition since. The suite of documents deals with the relationships between clients and consultants, and facilitates both simple and complex projects. “The terms of our documents have been kept as generic as possible. Any project-specific issues are designed to be dealt with in the appropriate annexure in context,” says Israelite. He adds that the documents have been constituted in such a way that they are usable internationally and not only specific to South Africa. Currently, annexures have been devised for 13 core consultants, including project managers (incorporating principal consultants and principal agents),


editorial

Archieve photo

The signing of the PROCSA joint-venture agreement. STANDING, FROM LEFT Gert Meyer (ASAQS/AAQS), Paul Kgole (SABTACO), Charles Israelite (ACPM), Kumarsen Thamburan (SAPOA), Peter Bold (JBCC), Ian Alexander (SAIA) SEATED, FROM LEFT Thabo Senyolo (ASAQS/AAQS), Graham Pirie (CESA), Neil Gopal (SAPOA), Raleigh Maesela (SAPOA), Stanley Segal (SAIA)

architects, civil engineers, structural engineers, electrical engineers, mechanical engineers, quantity surveyors and landscape architects. Israelite also notes that, currently, PROCSA is working on devising documents for fire consultants and interior designers. “PROCSA has become well established and extensively utilised,” says Israelite. “It has created a standard, generic and legally sound document, on the basis of which developers can appoint consultants from the various professions and disciplines. It represents a fair agreement between two parties. The document is technically comprehensive in terms of the integration of the services of all the parties that one can have involved

in one project.” He adds that this helps developers keep track of who is doing what on their projects, prevents any aspects of the project from falling through the cracks, and eliminates any overlaps between consultants. The PROCSA suite of documents in itself is a first for South Africa, says Israelite, as property players were previously utilising either their own devised documents or a suite of documents drafted by the International Federation of Consulting Engineers (FIDIC), the European equivalent of PROCSA. The documents have been utilised and tested since March 2006, with the first formal publication implemented in April 2008. “The documents are available online, which further helps to streamline the process.

There are no delivery or time delays, and the process is more cost-effective,” says Israelite. “Another exciting development is that the PROCSA documents are now recognised by professional degree courses at universities and are being used in the curriculum for these courses.”

PROCSA has become well established and extensively utilised. It has created a standard, generic and legally sound document, on the basis of which developers can appoint consultants from the

The documents are available online through the PROCSA website (www.procsa.co.za), using the “e-PROCSA” link, being PROCSA Electronic Services (PES).

various professions and disciplines

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Listed property: SA’s golden child In the face of economic woes and asset class uncertainty, the South African listed property sector continues to reach the finish line first, winning all the medals along the way By Candace King

“One of the biggest impacts of the recent downturn has been a marked lowering of the cost of capital. The last few years have seen the South African property market in a bit of a sweet spot, as low interest rates and strong investment flows have provided the funds with much-welcomed capital at historically low rates” Phil Barttram 24

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he latest news in the South African listed property industry is testament to the sector’s strength, buoyancy and reliability. Earlier this year, volatile bond markets caused some suffering for the sector – but opportunities for investors remained intact, thanks to higher yields and sound market fundamentals. Listed property prices dropped by 19% between 17 May and 24 June this year, something that analysts regard as a re-pricing in the face of changing global market dynamics, including US monetary-policy decisions, uninspiring economic results in South Africa, and concerns about the Chinese economy. Despite the price drop, listed property remains appealing because it provides both a steady income stream and capital growth over time. “In our view, one of the biggest impacts of the recent downturn has been a marked lowering of the cost of capital,” says newly appointed vice president of client coverage in South Africa at IPD, Phil Barttram. “The last few years have seen the South African property market in a bit of a sweet spot, as low interest rates and strong investment flows have provided the funds with muchwelcomed capital at historically low rates.” Barttram says this can be attributed to multiple factors. He notes that our banks were not exposed to the toxic assets and consequent balance-sheet stress of their overseas brethren, and while we saw an increase in distressed sales, it was nowhere near the scale experienced in many offshore markets. This meant that local commercial property held its value relatively well through the downturn. Our strong yields and lease-driven income growth provided an attractive opportunity for investors searching to avoid the historically low rates in the rest of the developed world. In addition, the quality of the management teams and the underlying assets, and the recent introduction of the REIT legislation, have provided further incentive for the substantial in-flow (debt and equity) into the listed property sector. These funds have been put to good use in growing portfolios through acquisition and/or refurbishment of assets. Stanlib’s head of listed property funds Keillen Ndlovu notes that South Africa’s listed property sector has seen this type of volatility before with a decrease of 26% between May and July 2006;

“South Africa’s listed property sector has seen volatility before with a decrease of 26% between May and July 2006; and a 37% decrease between November 2007 and June 2008” Keillen Ndlovu and a 37% decrease between November 2007 and June 2008. “Listed property markets have fallen dramatically before – in 2006 and 2008 – but they came back over time. Why? The fundamentals were in place and the income was still growing,” he says. “Income is fairly stable and capital can be volatile. So listed property prices have changed but the market fundamentals have not. It’s important to note that, in the medium- to long-term, listed property is a better bet compared to bonds because it offers growing income (and bonds do not).” According to SA REIT Regulation and Taxation Committee chairman and executive director at Growthpoint Properties, Estienne de Klerk, average yields in the sector are about 7,3%, and most listed property companies are expected to grow distributions between four percent and 12%. “All the equity raisings have been successful – and most have been oversubscribed,” says Ndlovu. Despite economic downturns, market volatility and several knocks to the sector, the listed property industry continues to bounce back, proving that it’s still on top of the game. Listed property in South Africa is more liquid and tradable than ever, at least for the larger counters. South African listed property stocks have risen by 10,6% since 24 June 2013.


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“Average yields in the sector are around 7,3%, and most listed property companies are expected to grow distributions between four percent and 12%” Estienne de Klerk So far this year, the sector has raised more than R10-billion in capital from existing companies and funds. Regarded as one of the most active sectors on the JSE in terms of capital raisings over the past 12 months, South African listed property boasts a market capitalisation of R250-billion. Over the past 10 years it has outperformed local equities, bonds and cash. It has also outperformed real estate investment trusts (REITs) in the developed world. It has been predicted that, in 2014, the sector is likely to become the eighthlargest REIT market globally, with about 26 REIT entities and potentially more to come.

A milestone for the sector occurred this year with the official launch of the SA REIT Association, a new body that is tasked with representing the listed property REIT sector. “Six years ago, the listed property sector came together in pursuit of this single, significant goal,” says the chairman of the association, Norbert Sasse. “The road to REITs for South Africa has been extraordinary. It is a success story, with the private sector, government and regulatory bodies working hand-in-hand. The South African REIT dispensation has created a foundation from which the sector can grow with tax certainty and become more internationally competitive. Now, the South African REIT Association will build on this foundation of positive partnerships and development, so that the sector remains at the forefront of good governance and international best practice.” The new REIT structure has put the listed property sector firmly on the radar of international investors. The REIT provides a simple, clear tax structure and is an internationally recognisable tax dispensation for investment property. More than 25 countries in the world – including the US, the UK, Australia, France, Hong Kong, Japan and Singapore – use a similar REIT model.

The continuing rise of listed property

“Six years ago, the listed property sector came together in pursuit of this single, significant goal. The road to REITs for South Africa has been extraordinary. It is a success story, with the private sector, government and regulatory bodies working hand-in-hand” Norbert Sasse

The listed property sector continues to outperform the other asset classes. This is a result of several factors, including good management teams, an underlying asset that provides robust yields and consistent lease-based income growth, a global investor searching for high yield, and a ready supply of assets as the changing regulatory landscape for traditional owners (such as pension funds) drives them to reconsider asset allocations to illiquid asset classes. “At IPD we see property as an asset class in its own right and firmly believe that it should coexist alongside the more traditional asset classes of cash, bonds and equities,” says Barttram. “In addition to its obvious diversification benefits, another of property’s major advantages is its ability to provide a robust income yield with stable growth (underpinned by its inherent lease structure) plus the potential of capital growth.

Given the variety of approaches that can be used to gain access to property (for example, through public or private equity and/or private or public debt), and given the correlation that each of these approaches has with equities or cash, property offers a compelling opportunity to diversify both risk and return for owners and investors.”

“Several local funds are performing exceptionally well, including Dipula Income Fund. Our fund has performed phenomenally; in fact, our B units outperformed the entire sector for the 12 months ended in December 2012, with total returns of 77%” Izak Petersen Several local funds are performing exceptionally well, including Dipula Income Fund. “Our fund has performed phenomenally; in fact, our B units outperformed the entire sector for the 12 months ended in December 2012, with total returns of 77%,” says Izak Petersen, CEO of Dipula Income Fund. “Since listing, the company’s combined market capitalisation for DIA’s and DIB’s has doubled and is currently at R3-billion. We continue with our acquisitive strategy, and that will surely result in a growing market cap because of share price acceleration and growth in the number of units in issue.” Petersen notes that the sector has seen a significant increase in new listings in the past three years, and that a few more listings of varying sizes are expected to come to market soon. SOUTH AFRICAN PROPERTY REVIEW

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“Like a lot of the listed funds, we want to acquire new properties, especially retail and industrial, as 48% of our portfolio is predominantly office. However, the acquisition market is very difficult – there is not a lot of quality stock out there and pricing is very expensive” James Templeton

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To date, investors have generally been generously rewarded for having invested in property funds. The growth in the sector can only be positive for investors as it increases their options in selecting funds to invest in. There has recently been a pull-back in the sector, driven mainly by a government bond sell-off and general investor nervousness about growth prospects. The sector income is still expected to grow at better-thaninflation rates for the coming 12 months. IPD’s database as at the end of 2012 represented 22 funds (both public and private), almost 1 700 buildings and more than R205-billion worth of capital value. Barttram says that the listed property equity market is continuing to see phenomenal growth. “Not only are existing funds steadily acquiring assets but new funds are listing all the time and even more are being touted for listing in the near future,” he says. Apart from new listings, slowly but surely more and more property funds are joining the REIT family. Recently, Emira Property Fund was granted REIT status by the JSE. “The REIT is the international standard for property investment and we are pleased to be among the first South African investments to adopt this structure, which is globally recognised by investors,” says Emira CEO James Templeton. Emira owns a diversified portfolio of office, retail and industrial properties. Its assets comprise 146 properties valued at R9,1-billion, and listed investments of R600-million. Emira has a market capitalisation of R7,7-billion. “Like a lot of the listed funds, we want to acquire new properties, especially retail and industrial, as 48% of our portfolio is predominantly office,” says Templeton. “However, the acquisition market is very difficult – there is not a lot of quality stock out there and pricing is very expensive. This is one of the reasons why we are doing a lot of our own development work and extensions – because this is where you can get better returns and create the stock yourself.” Emira has sold close on R350-million worth of stock assets in the last 10 to 24 months, which Templeton notes has been hugely successful. The year ending June 2012 was difficult for the fund because of a rise in office vacancy rates. The following 12 months have seen an improvement, however, and the next 12 are set to be even better.

“Commercial property is an illiquid investment, requiring both time and large capital sums to transfer assets” Mike Watters So why is it so important to be listed on the JSE? “Commercial property is inherently an illiquid investment, requiring both time and large capital sums to transfer assets between owners,” says Mike Watters, CEO of the Redefine International Group. “Listing is one way in which investors are able to pool their resources, thereby creating the liquidity so many require,” says Barttram. “It is important to be listed so that investors have liquidity and a daily ‘live’ price is set for their investment.” Redefine International PLC recently gained approval from the South African Reserve Bank to inward list on the Johannesburg Stock Exchange, allowing the group to restructure. The restructuring will include the internalisation of the management function and the conversion of the company to a UK REIT. “The inward listing will create a simplified, best-of-breed corporate structure with the benefit of cost savings,” explains Watters. “It removes all impediments to South African direct investment in Redefine International PLC. It’s a significant stride forward.” Speaking in general about the benefits of property funds, Watters notes that they give a diversified, sustainable, incomebased, inflation-linked investment return. “This compares with bonds where there’s no growth, cash which is not inflation-proof and equities which have a higher risk profile. For the fund manager, a pool of assets is a better way to own assets from a risk-adjusted point of view.” Redefine International PLC is a diversified, income-focused property company listed on the Main Market on the London Stock Exchange. Its geographically diverse investment portfolio is independently valued more than £1-billion and consists of real estate assets in the retail, office, industrial and hotel sectors across the UK, Europe – specifically Switzerland, Germany, the Netherlands and the Channel Islands – and Australia.


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“The outlook for share prices is largely dependent on interest-rates growth”

Watters notes that the company is constantly looking for opportunities to acquire new and better properties and to dispose of the smaller, under-performing properties. Currently, South African investors can only access the benefits of an investment in Redefine International PLC without moving money offshore by investing in JSE-listed Redefine Properties International Limited (RIN), which has a 65,81% stake in Redefine International PLC. South African listed property giant Redefine Properties is RIN’s largest shareholder, at 49%.

SA REITs Redefine Properties owns a portfolio of 244 properties: 19% in offices, 36% in retail and 19% in industrial; which by value is approximately 75% of total property assets under management.

“The South African office sector, in particular, has been affected, as vacancy levels have shown no improvement. There has also been further pressure on B-grade and lower-grade offices as a result of new A-grade and P-grade offices coming to the market” Andrew Konig The balance of Redefine’s investments is in listed securities, of which 18% of total property assets under management is local and the balance international investments.

Andrew Konig, the financial director at Redefine Properties, notes that the South African office sector, in particular, has been affected, as vacancy levels have shown no improvement. There has also been further pressure on B-grade and lower-grade offices as a result of new A-grade and P-grade offices coming to the market at very competitive rentals. Looking at REITs in South Africa, the new structure has been taken up well. “The overriding benefit of the introduction of the REIT structure is that it provides investors – domestic and international – with a common understanding of the nature of the vehicle in which they are investing, and removes some of the ambiguity that existed with the multiple structures of before,” says Barttram. Watters says that REITs are an international benchmark for property ownership in a listed environment and are widely recognised as the worldwide industry standard. They eliminate the tax risk of the property loan-stock structure and the inflexibility of the unit trust structure. Shares will gain due to an increased exposure to international investors. “REITs are internationally recognised property investment vehicles. This should lead to offshore investors feeling more certain when investing in South African property and hopefully increase their participation,” says Petersen. “Furthermore, the introduction of REITs leads to certainty of tax treatment for both investors and listed funds.” Templeton feels that, although REITs have their benefits, they’re nothing new. “I think that property loan stocks (PLSs) and property unit trusts (PUTs) are REITs. In my opinion, we’ve had REITs for years,” he says.

The future of our funds There’s no doubt about the positive status of the listed property sector in South Africa. With REITs in place ensuring further structure and benefits, more listings by the day, and a steady performing market, the future of South Africa’s property funds look bright. “At IPD, we don’t forecast returns,” says Barttram. “What our research has shown is that investors are searching for an increased opportunity set that diversifies their risk and return,

and property in its many guises is being recognised as an asset class that can meet this need.” “The future looks very bright,” notes Watters. “But forecasts will vary from country to country, depending on GDP growth going forward.” Petersen believes that investors have found relative safety in the sector. In addition to this, the global low-interest-rate environment has resulted in a scramble for yield, and property has reliably delivered growing yield for a sustained period over the past decade or so. “Furthermore, I believe that property funds will continue to grow, though at a more modest rate than before. From current levels, the sector should deliver at least 18% over the next 12 months,” he says. “Dividend growth for the next 12 months is probably going to be between six and seven percent for the sector, which is good growth,” says Templeton. “The outlook for share prices is largely dependent on interest-rates growth. There have been some changes to the industry as a result of the REITs structure coming into play, which can cause the sector to grow in terms of market cap.”

“The overriding benefit of the introduction of the REIT structure is that it provides investors – domestic and international – with a common understanding of the nature of the vehicle in which they are investing, and removes some of the ambiguity that existed with the multiple structures of before” SOUTH AFRICAN PROPERTY REVIEW

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property funds q&a

Ascencia’s ascension With the listed sector under the spotlight in South Africa, offshore property funds are shining just as brightly. We speak to Sanjiv Mihdidin, CEO of Foresite Property and non-executive director at Ascencia Property Fund, about listed property in Mauritius

Q Which properties comprise your company’s fund? Is the company acquiring any new properties or selling any? Ascencia holds a portfolio of 10 retail and commercial properties, all strategically situated in Mauritius. The two flagship shopping centres are Centre Commercial Phoenix and Riche Terre Mall. Both have considerable crowd pulling power being located in the most densely populated catchment of Mauritius. Significant redevelopment and extension projects worth US$40million are being carried out on both sites to enhance the offer, and to provide a modern environment and dynamic shopping experience to both our tenants and our customers. The company disposed of three mature commercial properties last year and is currently negotiating a deal to grow its portfolio value considerably. The deal concerns the acquisition of other major retail centres.

Q How is your fund performing? What is the company doing to grow its market cap? Since its launch in 2008, Ascencia has delivered a cumulative total return of 51% to shareholders. The property fund has broadened its shareholder base and has continuously outperformed its benchmark (which is the one year Mauritian Treasury bill). The company regularly engages in capital-raising exercises and the issuing of new shares. A share split is planned over the medium term. This will enhance the liquidity and tradability of Ascencia’s shares. In terms of asset base, redevelopment works and extension worth US$40-million are currently 28

in progress at Riche Terre Mall and Centre Commercial Phoenix. We believe that, together with the targeted acquisitions located in the central part of the island and its sound financial health, Ascencia will reinforce its position as the largest listed local property fund in Mauritius.

Q Why did it list on the Stock Exchange of Mauritius? Is it listed on any other stock exchange? Ascencia has been listed on the Development & Enterprise Market of the Stock Exchange of Mauritius since 2008. Shareholders of Ascencia may trade their shares while being exempt from direct taxes and fees as compared to direct ownership and disposal of properties. The Stock Exchange of Mauritius also provides international exposure to the property fund and improves investor confidence due to the strict codes of conduct, and frameworks such as the adherence to the Code of Corporate Governance of Mauritius. Q What are the benefits of property funds when compared with money market and equity – for the property owner as well as the fund manager? Property funds usually provide a consistent income stream, and exhibit lower volatility and correlation than that associated with equities and money market. They also provide exposure to a wide selection of properties across different sectors, locations and occupiers. During the financial crisis, property has shown resilience to adverse economic factors. Fund managers have reviewed their portfolio allocation mix and increased their investments in property.

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Pension funds in Mauritius have used Ascencia as a safe-haven investment.

Q Is it important to be listed? Why? Ascencia has been structured as a REIT and is awaiting the regulatory framework for conversion. By listing the company on the Stock Exchange of Mauritius, this vehicle will further boost the overall return to our shareholders and increase liquidity. It also provides the company with worldwide exposure to the investor community. Q What does the listed market look like at the moment? Is it growing? How many new funds are being listed? The stock market in Mauritius is a dynamic one and has shown a certain degree of resilience during the global economic downturn. It is used as a platform by global business entities to list their companies and benefit from the Mauritius tax advantages. There have been several listings of new companies over the past 18 months and this is expected to increase in the future. For instance, as part of the growth strategy at Sanlam Group, which has businesses in 11 countries across Africa, the Sanlam Africa Core Real Estate Fund was recently listed on the Stock Exchange of Mauritius. Q How has the current economic downturn played a part in the listed property sector and the funds? The global economic downturn has impacted on consumer spending and caused a decline in the retail industry. Lending rates have dropped but have positively impacted on cash flows and finance costs of property companies.

At Ascencia, we have adopted a prudent approach for our business model. The portfolio is managed by a team of high-calibre professionals who rigorously monitor the operations of all its properties and act swiftly to adapt to the ever-changing market conditions. We have a well-thoughtout strategy of market-share gain through differentiation, and maintain close long-term business relationships with our tenants. We also strongly believe that survival in difficult context can be achieved through innovation. For example, the managers of Foresite Property have pioneered the first shopping centre mobile app and the first website virtual tour, and enhanced generation of non-GLA income for the portfolio in Mauritius.

Q What type of exposure is the fund getting? How are the different sectors comparing in terms of funds and growth? Ascencia is essentially a portfolio of retail and commercial properties, which remained stable despite the slowing down of economic activities. The office property segment in Mauritius is currently stagnating because of the oversupply of offices and the decrease in economic activity in Mauritius. Similarly, there may be some interests for industrial properties as soon as the economic situation improves. Q Is your property fund attracting any interest from overseas investors/companies? There has been some interest from South African investors and local property players. Stanlib Africa Property Fund, which forms part of the Liberty Group, one of South Africa’s largest financial institutions,


property funds q&a

is one of the main shareholders at Ascencia. The company is currently seeking strategic partners as part of its regional expansion strategy.

“The African continent is increasingly becoming a land of opportunity. We believe that, with changing lifestyle and migration to cities, consumer spending patterns will change positively” Sanjiv Mihdidin

Q What is your opinion of real estate investment trusts (REITs)? What are the benefits? What will they do for local funds and listed companies? REITs are special investment vehicles allowing, under certain tax provisions, the distribution of almost all of the earnings and capital gains to go to the company’s shareholders. They do not pay taxes on earnings but the distributed earnings are taxable at the level of the shareholders. They are internationally recognised and provide the benefits of being known by global investors, who trust the REIT framework. We do not have such structures in Mauritius. Property loan stocks work like a fixed-income security – but if the company defaults, there is no guarantee of capital repayment. This is a riskier type of investment when compared to REITs, which allow for exit position readily. The regulatory framework for REITs has not yet been finalised in Mauritius. However, Ascencia is the only property fund in Mauritius that has adopted a REIT structure, so it can be easily converted when the appropriate legislations are put in place. Q Research has shown that the listed property sector continues to outperform other asset classes on the Stock Exchange of Mauritius? Why do you think this is so? Based on our experience, the listed property sector is a low-risk investment that tends to act as a hedge against inflation because of its focus and professional underlying management.

Unlike other asset classes, which do not necessarily provide a steady flow of income (especially in difficult economic times), property tends to provide a reliable source of income. Additionally, valuation is rather straightforward. We have noted that property components represent an important part of the investment portfolio allocation mix of pension funds. Ascencia has addressed this issue by providing them with an alternative asset class, capable of spreading risk across a large number of tenants and properties. Pension funds may also exit the Ascencia Property Fund by trading their shares on the stock market. There are no direct property transaction costs incurred (unlike with exit from direct property ownership).

Q. What does the future look like for property funds? What are the main overall forecasts? Property funds are a long-term investment with yield, diversification and potential for capital growth and a reliable income stream. In addition, they provide a natural hedge against inflation because most tenants’ contracts are linked to year-onyear movement in the consumer price index. The African continent is increasingly becoming a land of opportunity. We believe that, with changing lifestyle and migration to cities, consumer spending patterns will change positively. Middle-class consumption is currently fuelled by banking and a credit boom. Shopping malls and large retailers are increasing across the continent; hence the need for more top-quality retail properties. Ascencia is working towards cementing its footprint in Africa.

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Take a bow, Arrowhead! By David A Steynberg

Arrowhead’s unique business model is neither personal nor emotional in the properties it acquires. Simply focusing on risk and yield, it is able to offer shareholders 10% growth in distributions

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lmost two years ago, a somewhat controversial thing happened in the property space: Redefine began to unbundle ApexHi – after merging with it in 2009. Real-estate veteran and CEO of ApexHi Gerald Leissner had officially retired just before Redefine acquired his company, only to buy back around 10% of ApexHi’s R15-billion portfolio two years later. Returning to the listed space, Leissner roped in Mark Kaplan as his chief operating officer and Imraan Suleman as his chief financial officer, and together they set up Arrowhead Properties, which got the green light on 28 October 2011. “The big criticism was that Redefine had bought a large portfolio from ApexHi and lots of people questioned why Redefine bought it only to subsequently unbundle it,” Suleman tells us. “It wasn’t a case of Redefine merging or acquiring an entity and then dissolving it completely. They had identified that there was a tail that was not core to their operations, and that is what Arrowhead bought.” This was Arrowhead’s opportunity. Leissner’s objective was to adopt a similar strategy to that which built ApexHi through the 2000s: acquire yield-enhancing, appropriate-risk buildings at the right price. The sector in which the building falls is not a consideration. If it ticks the yield, risk and price box, then it is looked at. 30

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Gerald Leissner

“Our focus is yield and risk,” Kaplan says. “The risk factors include what area it is in, what the demand is like, if it’s over-rented, who the tenant is and how sustainable it is. We’re a higher-yielding stock. Our aim is to be the leader in distribution growth in the sector.” Arrowhead’s mantra is that it only considers an acquisition if it’s going to increase distribution, according to Suleman. “It always needs to enhance the yield,” he says, adding that as a company they have set the bar pretty high in terms of distributions to shareholders. “We pay quarterly distributions, which is more costly than biannual payouts, and we forecast 10% growth.”

Having only been in business for 18 months, Arrowhead has really stuck its head out there. But the team is confident in its abilities to recognise potential, and brave enough to stick to its guns. “We’ve been very disciplined in what we’ve bought,” says Kaplan. “There is competition that has come to the market and we’ve stuck to our strategy; we haven’t deviated. Where there’s been competition purchasing an asset, we’ve either


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Imraan Suleman

Mark Kaplan

bought it at our price of we’ve moved away. We’re not emotional about the property that we purchase.” And the proof that this strategy has worked is in the proverbial pudding. “You’re able to see that in the numbers in terms of the distribution growth: we forecast 10% distribution growth in this last financial year and, based on the second quarter of last year to the second quarter of this year, our growth was 13,6%,” he says.

“There are not too many funds with growth like that. The average for the sector is around seven percent.” With a portfolio of R3,1-billion and a market cap of R3-billion – from a R1,4-billion portfolio and an R800-million market cap at the time of listing – it’s no wonder shareholders are smiling. “We have bought R1,7-billion worth of properties in the past 18 months and the original portfolio has performed exceptionally well,” Kaplan says. SOUTH AFRICAN PROPERTY REVIEW

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“We are on track to achieve the results we forecast for 2013 and the prospects for 2014 are excellent in terms of property acquisitions. But more important is continuing to grow income per unit for our unit-holders” Gerald Leissner

you’re paying out, growing each year at a rate that is acceptable to the market.” Arrowhead has set itself a target of acquiring R10-billion worth of property by 2017, but Kaplan reiterates that they are not going to buy just for the sake of buying. The company is expected to transfer around R450-million by the end of this calendar year. But it’s a different kind of property class that may end up closing the R10-billion gap earlier than 2017. “Arrowhead has been able to extract good value out of the portfolio. It had an initial vacancy of 18%, which was upside, and slowly we’ve reduced that to 13% in the initial acquired portfolio. Our overall vacancy rate is a lot lower.” Suleman elaborates: “Our initial R1,4-billion portfolio was made up of 89 properties. Now we’re at 114 properties, which makes up the R3,1-billion. Initially the average price was around R17-million per property; it has now increased substantially to just under R30-million. We haven’t raised expectations in terms of raising our forecast but we’re well on our way to achieving our 10% target for the year, which will be a great achievement.” Still, there are murmurs of listed property’s stellar performance coming to an end, following a massive sell-off in May, which saw the sector shed around 20% of its value. Though it has since recovered to 10% to the good, has the damage to shareholder sentiment already been done? Not so, says Suleman. “One thing we must reiterate is that property fundamentals haven’t changed,” he says. “All of these companies should pay out the distributions they have forecast: their leases and income streams are still intact. The only thing that has caused this sell-off was the increase in bond yields.” But Kaplan holds a more sober view. “I think everyone knows there may be truth in it, and we all know we’re at the top end of the cycle,” he says. “Interest rates are the lowest they’re ever going to be and bond yields are going to move up, so I think that will put a challenge on capital values in the short term. At the end of the day, property will outperform as a sector in terms of long-term horizons, as long as you’ve got incomes that 32

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“One thing we must reiterate is that property fundamentals haven’t changed” Imraan Suleman

“We have entered into discussions for a residential portfolio of R500-million,” says Kaplan. “We see it as an extension of the Arrowhead model. It’s nothing different: it’s yield-enhancing and lowrisk, and it’s diversified. We believe that it fits squarely in our strategy.” And while a cautionary announcement has already been released, their Melrose office’s phone hasn’t stopped ringing since.

“We’ve come across probably R5-billion stock in terms of residential portfolios,” says Suleman. Premium and Octodec have not been as aggressive in their portfolios, effectively leaving the door open. “We feel there is space for a competitor.” Although nothing has been concluded (and although Arrowhead may not even consider buying these residential portfolios), Kaplan says knowing the market is vital. “It’s different in terms of leasing and management,” he says. “You’ve got to ensure you understand the market and ensure you buy something where there is huge demand and vacancies are low. That’s another avenue we’re exploring. Again, we wouldn’t focus on residential. We don’t focus on retail, industrial or commercial. We look at yield and risk.” “We are on track to achieve the results we forecast for 2013 and the prospects for 2014 are excellent in terms of property acquisitions,” says Leissner. “But more important is continuing to grow income per unit for our unit-holders.”

“You’ve got to ensure you understand the market and ensure you buy something where there is huge demand and vacancies are low” Mark Kaplan


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The precinct effect Precincts are putting the power back into our cities one vibrant node at a time By Candace King

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ike the popularised domino effect, a chain reaction has taken shape in our cities in the form of vibrant, successful precincts that have mushroomed across the metropolises – the birth of the precinct movement is here. In recent times, we have witnessed the rejuvenation of decaying suburbs that have ultimately evolved into trendy precincts. With the heightened redevelopment of old areas, these nodes of renewed interest are fast becoming social haunts and hubs of constant activity in the various nooks and crannies of our cities. “We are seeing a regeneration development trend,” explains David Reid, an investment sales broker at JHI Properties in Gauteng, a member of the national council for the South African Property Owners Association (SAPOA), and the chairman of the SAPOA 34

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Brokers’ Committee. “This was not just a situation where the buildings were dilapidated, but rather a case of a developer with vision regenerating old, dilapidated buildings into a thriving precinct that’s buzzing with activity and life.”

However, it’s not only old forgotten areas that are receiving new leases on life. “In my opinion Rosebank, while neither old nor dilapidated, is experiencing a rejuvenation,” says Reid. “In fact, it’s interesting that this is off the back of a major tenant (Sasol) leaving the area, which has triggered a great deal of activity to improve the area. Popular opinion among those who invested in the area is that there is a need to look at Rosebank afresh.” Reid believes that this trend is taking place across the country. “Look at Cape Town’s central city and the success achieved there with, among other initiatives, several old, formerly commercial buildings that have been converted into trendy residential apartments, thus providing a catalyst for the rejuvenation of the CBD,” he says. “Another good example is Kramerville


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THIS PICTURE Bedford Precinct OPPOSITE David Reid

in Sandton, which has evolved into a trendy and popular mixed-use decor and office node from a fairly mundane mixture of very dated offices and fabric warehouses.” Other success precinct stories include the Maboneng Precinct with its popular Arts on Main, Melrose Arch in Johannesburg, Century City in Cape Town’s northern suburbs, Gateway’s Newtown centre in Umhlanga, KwaZulu-Natal, and St George’s Mall in Cape Town’s CBD. The precinct movement has been spurred on by the fact that these areas make an important contribution towards the life and identity of our cities and act as key stimulators that help to retain people in the area, by attracting capital investment, tenants and visitors. An example of this, says Reid, is

Main Street in Johannesburg, where in 2000, landlords clubbed together for the benefit of their properties. Main Street has become a tourist attraction, with original mining gear providing key appeal. Anglo American, a major tenant invested in the area, has contributed to this, so it makes sound business sense to ensure the continued appeal of the area from an employee perspective. But what exactly is it that makes for a successful precinct, and gives it a clear and appealing identity of its own? What are the key ingredients that signal the start of a precinct? What shapes this cycle in its life? How does a precinct attain an identity or sense of community of real interest to stakeholders, and how can developers positively influence the direction or creation of a precinct?

What constitutes a successful precinct? Reid says a key factor behind a successful precinct is the willingness of all stakeholders – not just those who work in the area – to participate in sustaining its success. “It takes the initiative of a group of people, or even an individual who is invested in a precinct in a densely populated suburb or area, to trigger the development of a precinct. It could even be an area with a strong traffic flow,” he says. “A good example of this is Parkhurst in Johannesburg.” He adds that successful precincts provide positive spin-offs for further development or redevelopment and rejuvenation to occur around them. It’s interesting to note that there are different types of precincts, which spring up as a result of different factors. SOUTH AFRICAN PROPERTY REVIEW

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feature 7th Street Precinct, Johannesburg

A precinct may grow from natural town planning parameters with a combination of shops and offices, as is the case with Rosebank, Newtown and the CBD in Johannesburg. Reid says it could, in a sense, be consciously superimposed on an area, such as Melrose Arch, Canal Walk, Century City and Waterfall Estate. “Those with vision have identified a specific location and, because of its unique qualities and proximity to motorways, public transport and amenities, have decided it has the potential to become a different type of development within its hub,” he says. “It may arise from an assembling of land opportunities or the purchase of old properties and redevelopment thereof, but with a central vision and creation of its own identity.” Very often, a precinct can be initiated from the fact that there is very good value to be had. Rivonia Boulevard is a prime example of this. It has retail, including anchor shops, entertainment, residential, restaurants and offices, all of which complement each other to form an identifiable node. “For some time this area went through the doldrums, but now it appears to be re-emerging,” says Reid. “Very often, one can see that a precinct is driven by developers who recognise its potential positive aspects, and that development land is earmarked and gradually triggered by incoming trends. In addition, a precinct could be located at a mining town, such as Burgersfort, but instead of being in the town centre, it could be developed on the outskirts, with shopping facilities, residential and all the ingredients that a precinct would have, on the periphery of the town.” Old shopping centres also have the ability to spark the development of a precinct as they tend to have all the necessary services (supermarkets, banks, dry cleaners, post offices and the like) and, because they are in a densely developed and trafficked area, they continue to thrive, as is the case with Dunkeld West and the Valley Centre in Craighall. “It must be pointed out that cost structures in respect of older centres tend to be very different from cost structures 36

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of the newer or refurbished centres, and this is also a contributing factor to their success,” says Reid. A precinct may also arise as a result of a particular requirement, for example in situations where a student accommodation precinct has been created to cater for the requirements of a young population in proximity to educational facilities (Braamfontein in Johannesburg, Hatfield in Pretoria). Popular holiday destinations on the North Coast in KwaZulu-Natal have also stimulated precinct establishment and growth over the past few years. “When we reflect on the changes to the Ballito commercial landscape over the past nine years, the growth has been phenomenal,” says Louise Gibson, a principal at Comprop: Ballito, a commercial and industrial property management company. “Who remembers the picturesque drive into Ballito between rolling hills of sugar cane? It’s been replaced by an avenue of shopping centres. “The establishment of the Ballito Business Park in 2002 heralded the start of commercial development in the area. The Rencken brothers built the first – and very successful – lifestyle shopping centre. This was followed by The Junction, a second retail centre, a Hirsch’s home store and two more shopping centres, Ballito Bay Mall and Tiffany’s in Salt Rock, built to cater for the needs of the rapidly expanding local and holiday populations. A number of office blocks, a boutique retail outlet, mini factory complexes and three new hotels were completed in the next few years.”

The birth and death of a precinct So where are opportunities highlighted for the potential creation of a successful precinct? Reid says typically it would be in a high traffic zone with ageing buildings that have the potential to be redeveloped. And it would require those with the capability, drive and vision to make it happen – as was the case with Arts on Main in the Maboneng Precinct.

“Consider how Bryanston has evolved from offices, residential and a very upmarket shopping centre to almost become a CBD on its own. Randburg is also interesting because it evolved out of a transport hub, and with retail, commercial and government offices, it is becoming a key node,” says Reid. Randburg includes a strong centre for essential services needed all across the social spectrum, including a vibrant city council services centre and transport services. It has wide pavements allowing traders, thereby creating a strong market atmosphere. The demographics are diverse and it caters for commuters as well as the local community. Existing successful precincts can also reinvent themselves. “Sandton is an interesting case in point, as this area is going through another cycle in its life,” says Reid. “In the last 15 years it has seen unprecedented development by a limited number of developers on the back of strong tenant demand. Buildings here tend to have a lifespan of 10 to 15 years before they become dated and are replaced, and we are seeing an inner movement within Sandton with corporate and office tenants relocating just 500m down the road to secure more modern, prime premises.” However, precincts can also destroy themselves. Reid notes that some precincts have been out-grown because of town-planning factors. For example, Park View has now reached a point where the local community strongly resists intrusive development, so in a sense it has reached its ceiling – but it remains a vibrant and attractive node. Certainly around the Gautrain stations we can anticipate the potential for new nodes to spring up. Neighbouring seedy, crime-ridden areas may also have an impact on precincts – but Reid feels that, in some cases, the precinct may contribute to the character of the run-down area. “Yes, crime and safety are issues in today’s world,” he says. “But in terms of efficient management of a precinct, these would be taken into account and measures would be taken to


feature deal with security to the extent that the proximity of a run-down area will not be a deterrent for those who frequent the precinct.” In order for precincts to thrive and survive, it’s imperative for each of them to be financially and physically supported. “It’s all about initial funding from a developer, or someone with a unique idea or tenants with a very attractive product that would make this a special destination,” says Reid. “In most cases funds are applied to upgrade the area, but it could even be an attraction such as a bakery that is so popular that it impacts on the area to the extent that it does not necessarily require significant investment. For example, Dunkeld West shopping centre, which was last upgraded in the 1960s, has seen a parking complex attached. It still has tremendous appeal and numerous draw cards, despite being very much a 1960s-style centre.”

The developer and the precinct In various precincts across the country, developers have placed their faith in these special nodes. Apart from the developers, South Africa’s giant corporate banks have also injected their finances into precinct developments. A prime example is Nedbank Corporate Property Finance, which recently approved a R1,1billion loan to the HBW Group to restructure and finance one of the largest assets in its portfolio – the Bedford Retail and Commercial Precinct, which is made up of the Bedford Centre and Bedford Square in the heart of Bedfordview in Johannesburg. “HBW acquired the Bedford Centre in 2002, and Nedbank has been involved with the development for more than 11 years, since the time when it was just 28 000m². It is now a 92 000m² regional centre, and a great example of a mixed-use development. The precinct attracts high-LSM customers and Woolworths Foods is undertaking a substantial expansion of its store. Upscale clothing retailers such as Guess, Aldo, Forever New, Mango, Frasers and Cotton On have opened stores in the centre,” explains Ken Reynolds,

regional executive for Nedbank Corporate Property Finance in Gauteng. Since 2006, Bedford Centre has been undergoing a full restructuring. After two years of construction, a new, modern shopping, living and working precinct was unveiled. The Bedford Precinct offers 68 000m² of retail space, 24 000m² (19 floors) of 71 office tenants and 420 modern apartments and penthouses. The retail component boasts more than 180 stores, dozens of restaurants, Nu Metro and Ster-Kinekor cinema complexes, and 5 800 parking bays. A new underground mall section, under Kirby Street, conveniently links the east and west wings of the centre. The stunning piazza, an open-air courtyard surrounded by restaurants and coffee shops, caused much excitement at the launch. Anchor tenants include Pick n Pay, Woolworths Food, DionWired, Edgars, @home, Truworths, Foschini, Planet Fitness, Mr Price, Nedbank, Standard Bank, FNB, Absa and Bank of Athens. Across the road is the world-class private clinic, Bedford Gardens Hospital, and the precinct is within walking distance of other medical suites. The Bedford case study illustrates how developers and banks become engrossed in precinct developments and see them as long-term projects. In light of this, it’s crucial for developers and financial institutions to understand the nature of a precinct before they commence the planning phase. Reid says the aesthetics and the ambience of a precinct need to be considered as a whole. “Johannesburg’s Main Street precinct, between the magistrate’s court and Gandhi Square, was created out of a desire to preserve the value of the office buildings in the neighbourhood – and so the street was acquired by local landlords on a leasehold basis and converted to a pedestrian mall,” says Reid. “In St George’s Mall in Cape Town’s CBD, the landlords have similarly come together and formed a city improvement district.” He adds that there is an element of management involved in precincts, and very often management

44 Stanley Street, Johannesburg

Main Street, Johannesburg

input is inspired by local landowners. It may result in the formation of a local management or even a formal or informal landlord association, which meets regularly and would club together with a monetary contribution to employ a manager of the precinct, as in the Sandton CID (Central Improvement District) and the Umhlanga UIP (Urban Improvement Precinct). These then become well-managed areas where people like to spend time. “Architects and urban designers who understand the demographics and dynamics of such locations are employed or commissioned by developers who themselves identify the potential of an area or precinct and take the initiative to act on it,” says Reid. “In this way developers are an important catalyst – through closer ‘inspection’ and through the design factors and potential that emerges in the process, increased investment, confidence and appeal can greatly enhance an area and result in a successful precinct.”

The future of our precincts “Precincts evolve and come into being because they are where people want them to be, and my view is that the future lies with small, decentralised service/ shopping facilities,” says Reid. “There is a very bright future for these – for example, Craighall Spar in Craighall Park with four restaurants and a liquor store close by, or Palmyra Junction in Claremont in Cape Town’s southern suburbs, which includes a Woolworths Food store. People want to shop where they want to; they don’t necessarily want to go to one big shopping centre.” It can be deduced that research, time, effort, money, understanding and passion are the prerequisites for successful precincts. In order for our precincts to continue to be successful, one has to acknowledge the financial undertow that has a major influence on the life cycle of each precinct – and realise that the stakeholders or landlords within a precinct have a management role, possibly in the form of an improvement district. SOUTH AFRICAN PROPERTY REVIEW

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Sowing sustainability Villa Crop’s new green office haven

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By Nicky Manson Photographs by Michael Glenister

illa Crop Protection’s new headquarters in Kempton Park reflects the essence of the company and, more importantly, boasts being self-sustainable and energy efficient. This was the brief given by Dr Andre Schreuder and Jos Dujardin of Villa Crop Protection to Johan Marais and Francois van Aswegen of Johan Marais Architects (Pty) Ltd. The result is an organic space that provides a modern and comfortable working environment.

The building is a marriage of concrete, brick and glass. Because there were no other developments in the area, a unique opportunity arose for a fresh approach to an office environment and to set a precedent in the area. One of the most important aspects of the architectural design was to harness as much natural light as possible, thereby reducing the usage of artificial light. By utilising the atrium concept, the building allows natural light to flow into the interior. Double-volume spaces, a white colour palette, the considered placement of windows and the use of skylights have also contributed to the space being bathed in natural light. a

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on show on show a Technology has facilitated the building’s sustainability thanks to two systems by Plantech Associates, to ensure energy efficiency and thermal comfort. Solar panels, underfloor heating and an evaporative cooling system that ensures minimal electricity usage have been installed; motion sensors throughout the building guarantee lights are off while a particular space is unoccupied. Belinda Gilliers and Karen Rudd of Ruslin Interior Architects are responsible for the illuminating interiors. Their brief was to introduce “green” elements into the work environment. Simple materials such as glass and aluminium have been utilised, and lines are deliberately clean and uncluttered. The vertical garden is the obvious talking point in the lobby. Created by Lemon Décor, it stands in two columns, floating above the reception desk. Not only does this living wall provide a visual feast, it also contributes to cleaning the air and reducing noise pollution. The natural effect is further echoed by the atrium behind, housing a landscape of flora. The lobby area also boasts an interesting 3D feature wall, cleverly made from a thin layer of recycled bamboo, and covered in paint. a

A2ZTiles has a large variety of tiles, wood-look vinyl and mosaics at wholesale prices, direct to the public. A2ZTiles specialises in creating the style you dream about. We welcome you to our showroom; alternatively, we can meet you on site to discuss designs. A2ZTiles: we design it, you live it!

88 First Avenue, Dunvegan, Johannesburg +27 (0)11 453 1815, Renalde: +27 (0)79 697 1833, Angelique: +27 (0)82 337 6460, www.a2ztiles.co.za

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GROW is a specialised vertical garden system designed to create incredible landscaped artworks suitable for indoor or outdoor use. The system can be customised to fit in any environment and can also be used for large scale implementations. The light weight construction allows for retrofitting to existing buildings as well as inclusion into new build projects With space becoming more scarce and expensive, we need to find new ways to effectively bring the outdoors in. Pot plants are no longer a space efficient or cost effective way to bring plants indoors. Vertical gardens solve this problem by using the underutilised vertical real estate available in every space. GROW vertical garden systems have a number of ergonomic and environmental benefits: • They are amazing works of art designed to inspire • They are thermal insulators when used as an ex ternal cladding solution • They provide acoustic solutions as the uneven plant surfaces are effective for absorbing sound • Plants improve the wellbeing and enhance the mood of people through the feeling of being close to nature • They photosynthesise and release oxygen to clean air in indoor environments The design of these living artworks is crucial to the creation of a sustainable and inspirational garden.GROW partners with leading South Africa land scape artists and implementation specialists who work in the vertical plane. GROW is the idealsystem for both the aesthetic and technical solu tion. A GROW system comes standard with a full main tenance and warranty plan for the contracted period. The specialist skills required to keep thesesystems running optimally is embedded in the of fering. It is our responsibility to keep the system in good condition at all times giving you peace of mind that your investment will always look its best. Grow Collective +2711 262 4116 www.growcollective.co.za info@growcollective.co.za

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Circular partitions create private nooks for meetings and, alongside other glass partitions in the building, are covered in transparent vinyl, artistically representing scenes of corn and nature. Even Villa Crop Protection’s logo has been given an imaginative twist and recreated in vinyl. The flooring is also green. Designed by Ruslin and created especially for the space by Van Dyck, the carpets are made from recycled bottles. This range is very unique in the sense that it is made out of 100% recycled polyester (from post-consumer recycled plastic bottles), a

“With space becoming scarce and expensive, we need to find new ways to bring the outdoors in effectively. Pot plants are no longer a spaceefficient or a cost-effective way of bringing flora indoors. Vertical gardens solve this problem by using the underutilised vertical real estate in every space. Seeing a garden grow vertically is always unexpected. Add in some scale with an amazing plant design and you end up with a living artwork that will be admired by all. It was a great pleasure working with Ruslin Interior Architects and Villa Crop on this project.” Kevin Frankental, Lemon Decor | Grow Collective +27 (0)11 262 4116, www.growcollective.co.za, info@growcollective.co.za

Mechanical & Electrical Consulting Engineers

Pretoria Head Office: Tel: (012) 349-2253

Stellenbosch Office: Tel: (021) 880-1280

Satisfying our client’s expectations by providing integrated building electrical, mechanical and electronic system designs and solutions. Whether it entails corporate, commercial, institutional or residential developments, consideration of the latest available technologies, energy efficiency, flexibility and maintainability ensure that client’s investments deliver attractive returns over the long term.

Proud to be associated with the VillaCrop Head Office Building

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it has a very flat and dense felt structure in a grey base colour (making it very durable and easy to clean and maintain), and the overprints offer almost unlimited design flexibility. The Oxygen range has a  “heavy commercial” rating because of its unique construction, and a very good dimensional stability thanks to the inclusion of a glass scrim in the backing. An important design element of the space was to take into account business and staff expansion. While the building currently houses only 75 employees, the space can accommodate up to three times that number, thanks to the use of modular dividers and furniture that allows areas to shrink or expand. And to complete the space? An ecofriendly Astro turf, and two golf holes. a

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Tel: 0861 122 122 SOUTH AFRICAN PROPERTY REVIEW

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on show Sustainable design specifications: l Heat pumps l Solar panels l Harvesting natural light l Double glazing l EPS insulation layer within all external walls, keeping heat out in summer and keeping heat in during winter l Evaporative cooling system in lieu of air conditioners l Occupancy sensors l Rainwater harvesting for irrigation

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THE TEAM Client Villa Crop Protection Architect Johan Marais Architects Main contractor Capital Construction Mechanical engineers Plantech Interior Ruslin Interior Architects Installers Kevin Bates Oxygen carpet tiles Van Dyck Walling solutions Ergosystem Specialised screens Out The Box Technology Tiles A2Z Tiles Furniture Office Furniture Direct Vertical garden Lemon DĂŠcor Landscaper David Viljoen Mercury Designs

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retail

Cradlestone on track for October trading Regional shopping centre Cradlestone Mall looks set to establish itself as a must-be-seen-at retail destination By David A Steynberg

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radlestone Mall is on track to open its doors on 29 October. Although it has been criticised for causing much traffic congestion during construction, the benefits for the Johannesburg West Rand are many. Located in an area that has experienced a residential boom over the past few years, the 75 000m² regional shopping centre will go a long way to meeting the leisure desires of the local moneyed public, as well as the tenants who set up shop beneath its roof. Retail Africa’s executive director, Richard O’Sullivan, who’s responsible for coordinating the leasing, says that because South Africa is not blessed with much depth in its retail offerings, the developer has had to look at other ways to make Cradlestone both unique and in demand. “Jo’burg doesn’t have mountains or the sea,” he says. “So what is there for Joe Public to do in the city? Retail is therapy; there is social interaction and entertainment. People are cocooned by crime. But where do they want to meet?”

Retail fulfils that need and desire to interact, says O’Sullivan, which is why the space needs to reflect the people and the culture of the area. “Fundamentally, what we do as a business at Retail Africa is facilitate this meeting point. We believe we do it well,” he says.  “We do people spaces particularly well. It is a signature of our work.” Cradlestone’s design has taken inspiration from the nearby Cradle of Humankind precinct. The architecture, materials and interior have been designed to mimic the rich and fascinating genesis of the human species. But that’s where the history lesson stops. The mall, according to O’Sullivan, will be replete with the latest cuttingedge retail concepts, technology and entertainment offerings. “There is an aspirational market in the area and our environment is accommodating to that market,” he says. “We do it via the brands, architecture and fundamentally through accessibility.

“We’re going to entice the ‘ Y generation’ with the latest technology and unlimited Wi-Fi. The food court is sexy, and has the latest, never-been-done-before video screen – a cylindrical video wall that can be zoned.” With space selling for between R85/m² and R500/m², and located on the busy N14 interchange, Cradlestone is sure to anchor itself as a successful retail destination for the West Rand and beyond.

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Leading lights of industry

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ounded in 1990 by Don Jowell, Richard Glyn and Francois Marais, Glyn Marais Incorporated is a specialist corporate practice, which follows the simple business principle of “there is no such thing as one size fits all”. The company enjoys devising innovative solutions to complex problems, and fully understands that modern-day commerce requires speedy solutions and implementation without compromising quality. It has a solid reputation for executing more complex work where it can add value, and is particularly strong in the listed property environment and regarded as one of the key players, thanks to in-depth knowledge and much practical experience. Glyn Marais Incorporated also has a keen understanding of the legal risk their clients may encounter in transactions in which they are involved. This means the company can identify these risks and provide clients with a legal solution or a methodology for mitigating these risks. Glyn Marais Incorporated intrinsically understands the importance of clearly understanding the client’s mandate, the transaction in question, and the legal steps to be taken, in order to comprehensively address the issues at hand in a timeous and focused manner. There are continuous legal changes in the industry. The most notable are the introduction of the Companies Act No 71 of 2008 and the amendment to tax legislation to introduce the REIT structure. This has an impact on Glyn Marais Incorporated’s clients listed on the JSE, who have instructed the company to convert their property loan stock companies into REIT structures in order to benefit from the tax regime offered by the REIT structure.

Today Glyn Marais Incorporated has offices in Johannesburg and Cape Town, to ensure it can attend to all its clients. Furthermore, the company entered into a nonexclusive association with Dentons in 2009, which gives it the ability to work in 20 countries across Africa and makes it an exclusive South African member of the largest network of African firms

Over the years, Glyn Marais Incorporated has been responsible for a number of achievements. Some of these transactions include having represented a purchaser in the acquisition of the V&A Waterfront to the value of approximately R10billion; attending to the listing of a number of property loan stock companies on the JSE and the transfer of property letting enterprise portfolios for these listings; advising on various major property developments; advising a leading hotel operator on the acquisition of casinos and hotel units, and the structuring of a horizontal property regime in South America; attending to the development of a major hotel in the V&A Waterfront to the value of R1,3-billion, and the establishment of a rental pool arrangement in respect of penthouses in such a hotel; and advising a major bank on large-scale residential developments, structuring land availability agreements and development agreements.

Glyn Marais Incorporated, +27 (0)11 286 3700, www.glynmarais.co.za

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One of the founding partners, Francois Marais, is a senior director and the practice leader. He specialises in corporate finance, with a particular emphasis on mergers and acquisitions, listings, private equity, leveraged buyouts, equity and debt offerings, joint ventures, privatisations, stock exchange, and takeover panel issues. After qualifying in 1981, Francois worked in a merchant-banking environment, and was formerly a senior manager at Central Merchant Bank’s corporate finance division. Highlights of his career comprise a number of recommendations, including one by the PLC in the areas of banking and finance, corporate, and mergers and acquisitions; by IFLR1000 as a leading lawyer in the areas of capital markets and mergers and acquisitions; by the Legal 500 in the areas of banking and finance, corporate, and mergers and acquisitions; and by Chambers and Partners in the areas of corporate and mergers and acquisitions.


focus on attorneys A trailblazer in the world of corporate finance and corporate property law, Glyn Marais Incorporated is celebrating 23 years in the business By Nicky Manson

Ashleigh Dawson is a senior associate, who originally joined the company in 2012 as a junior associate. She specialises in general commercial law, acquisition of property and letting enterprises, large-scale development of properties, arbitrations, commercial and general litigation, and dispute resolution. This year she was admitted as a conveyancer and a notary public. Brian Frank is a senior director and heads up the property department. His core competency and focus is the corporate property sector, large-scale property, and leisure and hotel developments. He has been instrumental in preparing the legal structures for big resorts and nature reserves. He has been in practice since 1982 and was initially the founding partner of Attorneys Frank-Tanner, which in 2001 successfully merged with Glyn Marais Incorporated. Previously he was a director at Anglo Vaal Limited and the South African government diamond valuator DVIC Proprietary Limited for a number of years. Highlights in Frank’s career include being recommended by the PLC in the area of real estate and being recommended by the Legal 500 in the area of mining.

Elize Ganswyk is a senior associate who joined the team last year. Admitted as an attorney, conveyancer and notary public, she specialises in antenuptial agreements, commercial property, consolidations, conveyancing, developments, mortgage bonds, notarial bonds, opening of townships, sectional title registers, servitudes, subdivisions and transfers.

Areas of expertise l Corporate finance, mergers and acquisitions, general commercial l Finance and banking l Private equity l Equity capital markets l Legal due diligence l Regulatory and competition l Property, conveyancing and construction l Employment l Business rescue and company turnarounds l Dispute solution, insolvency, liquidation l Environmental, mining and natural resources l Tax

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Michael Collins, Cliffe Dekker Hofmeyr

Andrew Heiberg, Cliffe Dekker Hofmeyr

Attie Pretorius, Cliffe Dekker Hofmeyr

Michael Collins has more than 25 years of experience in property law and specialises in commercial property transactions. He has assisted various listed funds and numerous major corporations in nationwide property acquisition or disposition transactions. He also assists the leading commercial banks with the registration of mortgage bonds to secure large commercial loans. Collins is director of the real estate department in Cape Town, with expertise in commercial property transactions and developments, general conveyancing and township registrations, town planning applications, nationwide registrations of properties on behalf of loan-stock companies to be listed on the stock exchange, and high volume township registrations throughout the Western Cape. He also manages affairs and investments for absentee and overseas clients. With an interest in developing foreign investment in South Africa, Collins has presented seminars at the South African embassy in Brussels to foreign investors. Always mindful of the need to keep up to date with the latest trends, he has attended the SAPOA and University of Cape Town Graduate School of Business Property Introductory Programme and Property Development Programme. “Apart from providing legal services to our clients, we strive to forge a relationship akin to a partnership with them,” he says. “In doing so, we are able to better understand each individual business and management need. Having a good rapport with our clients is vital to the provision of efficient, tailor-made services.”

Andrew Heiberg ,began his career as a candidate attorney at Silberbauers in 1992. In 1994 he was appointed as an associate and in 1998 as a director at Silberbauers, which joined the practice of Cliffe Dekker Fuller Moore in 1999. Heiberg remained a director. In September 2008, he became a director at Cliffe Dekker Hofmeyr, when Cliffe Dekker merged with Hofmeyr Herbstein & Gihwala. He was appointed regional head of the real estate department, supervising a staff and professional compliment of 80. Acting on behalf of Rabie Properties, Heiberg handled the Lakeview property development in Retreat, Cape Town, including the establishment of the township register, the transfer of approximately 600 units to end-purchasers in various phases, and the establishment and registration of several sectional-title schemes within this development. It was also necessary to assist with the establishment of community facilities and to provide advice to the newly established bodies corporate within these communities. He has also registered several residential and commercial sectional-title schemes in Cape Town, and has acted for financial institutions in respect of the financing of developments. Cliffe Dekker Hofmeyr places its clients’ interests first, providing excellent and efficient service, and ensuring that it offers practical and workable solutions to fit its clients’ needs. The focus on commercial property, specialist advice and the range of expertise in all spheres of property law, sets the company apart from its competitors. Due to the dynamic nature of the property industry and the continued changes in the regulatory environment, it is imperative that property lawyers remain up to date with the latest legislation and case law, and continue to upskill themselves. The attorneys of Cliffe Dekker Hofmeyr frequently attend training seminars, and provide workshops and seminars for their clients on topical issues.

Attie Pretorius graduated from the University of the Free State with a BCom LLB in 1978, then served articles with a firm of attorneys in Bloemfontein and was admitted in 1980. In 1984, he made his best career move by joining Hofmeyr van der Merwe (now Cliffe Dekker Hofmeyr). Since being admitted, he has followed his passion for real estate and never looked back. He is currently the national practice head of the real estate practice area in the firm, which employs approximately 100 people in the Sandton and Cape Town offices respectively. Pretorius has been part of a magnificent team of real estate professionals who, together, succeeded in building one of the biggest and most successful real estate practices in South Africa. Over a period of almost 30 years, he has worked for various corporate clients, disposing or acquiring immovable property (which included commercial and retail properties). The deal value in many of these transactions exceeded R1-billion. He also acts for various banks in respect of security structures for commercial loans. “We advised the Mia Group of companies in the development of Waterfall City,” he says. “This ongoing development, worth R11-billion, was ranked as the largest property development in South African history.” Cliffe Dekker Hofmeyr is advising project companies, prospective financiers and joint venture partners of project companies on the property aspects pertaining to renewable energy projects in terms of the request for qualification and proposals for new generation capacity under the Independent Power Purchase Procurement Program issued by the Department of Energy. “Long-term residential leases are not as common in South Africa as elsewhere in the world,” says Pretorius. “I believe that a long-term residential lease will become more popular as an alternative to land ownership, especially in the instances of persons falling in the lower income bracket.”

+27 (0)21 4816401 / +27 (0)21 481 6446 mike.collins@dlacdh.com www.cliffedekkerhofmeyr.com

+27 (0)21 481 6317/ 082 461 6586 andrew.heiberg@dlacdh.com www.cliffedekkerhofmeyr.com

+27 (0)11 562 1101 attie.pretorius@dlacdh.com www.cliffedekkerhofmeyr.com

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attorneys in focus

John Webber, Cliffe Dekker Hofmeyr John Webber completed his articles in Bloemfontein before moving to Johannesburg to join EFK Tucker Incorporated in 1999. After EFK Tucker closed down, he joined Hofmeyr Herbstein & Gihwala Incorporated, where he became a director in 2003. In September 2008, he became a director at Cliffe Dekker Hofmeyr when Cliffe Dekker and Hofmeyr Herbstein & Gihwala merged. Webber’s practice focuses on the development of land, in particular for housing and industrial purposes. “To provide an effective and efficient service to developers in the housing market, we have to remain at the cutting edge of technology, and we have to adapt the existing technologies to allow us to operate more effectively than our competitors when dealing with large-scale projects’” he says. “This, coupled with our sound knowledge of the law as it relates to real estate development, has allowed us to be a leader in the provision of legal services to the real estate development sector, and in particular to the housing market.” Significant projects undertaken by Webber in this sector include Tshepisong to the west of Johannesburg (5 000 units), acting for the JFS Group, the development of Cosmo City, and various extensions of Dawn Park, Vosloorus, Lakeside and Heidelberg (collectively more than 10 000 units), as well as Bram Fischerville (16 500 RDP units on behalf of Rand Leases Properties and a further 1 500 units in the affordable housing market). He is also responsible for the Waterfall Development in Midrand, which is currently the largest commercial and residential development in the country. This development includes 1,5-million square metres of new office, retail and warehousing space, and more than 8 000 residential properties. The development is unique in the nature of the land tenure, being a long-term lease for a period of 99 years, capable of an indefinite number of extensions, and Webber has been at the heart of this development from its inception.

+27 (0)11 562 1444 / +27 (0)83 407 1444 john.webber@dlacdh.com www.cliffedekkerhofmeyr.com

Park or parking lot. Play ground or dumping ground. High rise or low cost. Demolition or development. Conservation or construction. Deal or dispute.

OUR EXPERTISE COVERS IT ALL. Our real estate team can handle any property transaction or land issue with insightful legal expertise that includes specialist skills in finance and tax, competition, employment law, environmental law and dispute resolution.

Discover what our Real Estate Practice can do for you.

www.cliffedekkerhofmeyr.com Cliffe Dekker Hofmeyr is a member of DLA Piper Group, an alliance of legal practices SOUTH AFRICAN PROPERTY REVIEW

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focus on attorneys

Mike Gregory, Henkel Gregory Inc Henkel Gregory Inc (formerly Craig Henkel & Associates) is a two-director law firm that has been operating from offices in Fourways, Johannesburg since 1995. The directors, Craig Henkel and Mike Gregory, each have more than 30 years of experience in the property and conveyancing fields, and are both are experienced in all aspects of property law. Gregory, who joined Henkel in 2010, heads up the property and commercial law departments at the firm. Having spent a number of years in the UK practising as a solicitor, he has gained valuable insight and associations in the property markets there. Every property transaction, however large or small, relies for its success on a speedy and problemfree conclusion. Henkel Gregory’s “hands-on” approach and personal involvement at senior level throughout the transaction process ensures this is achieved consistently.

“We have been associated for many years with the law society in training and mentoring attorneys who wish to qualify as conveyancers, and we regularly present lectures to students wishing to write the conveyancing examination,” says Gregory. “Having qualified and practised in the UK, we have strong connections in the UK and European property markets. We regularly introduce South African clients to property opportunities there and have introduced oversees clients to property opportunities in South Africa. We go out of our way to build lasting relationships with our clients and key players in the property industry. With our years of experience in property, we are able to provide a level of service equal to any of the big law firms without the ‘big law firm’ price tag.” New legislation affecting the property industry is being passed all the time, and the criteria for success in property development or speculation is becoming increasingly stringent. As a result, the inexperienced property developer will struggle to succeed without experienced advisers.

Jos Hooyberg, Hooyberg Attorneys In April 2005, Jos Hooyberg started Hooyberg Attorneys, a boutique firm specialising in property law. Hooyberg

acknowledges the importance of interpersonal relationships, both internal and external, and of nurturing these. In acting with integrity and ensuring the best for the client, Hooyberg creates a culture of mutual loyalty between the company and its clients, as well as its professionals and business partners. The result is a comprehensive and collaborative approach towards addressing the challenges and opportunities faced by its clients. Hooyberg is the legal force behind several upscale mixed-use property developments in Gauteng. The firm has been involved in precedent-setting policy adoption by municipalities in respect of bulk service contributions, as well as in the constitutional challenge to the Development Facilitation Act. Hooyberg Attorneys is a small firm that offers its clients direct, one-on-one attention and has a strong skills set across various areas of the law, from contractual drafting to conveyancing and international transactions. These complement its offering in commercial property law and property litigation, in both Johannesburg and Cape Town. The law of property in South Africa needs to be understood within the context of the opportunities and challenges facing the country. On one hand, the growth of the South African economy requires a close look at how government policy and legislation facilitates and protects property values, as well as how acts such as the Spatial Land Use and Management Act 16 of 2013 affect property development more broadly. On the other hand, it is necessary to understand the challenges faced by South Africa in ensuring equitable access to land and housing, and specifically how the right to property interfaces with legislation and case law, which often subordinate property in favour of other concerns.

Gareth Shepperson, Shepperson Attorneys When Gareth Shepperson realised that law firms seldom provide the blend of corporate, commercial and property advice that the diversity of players in the property industry seek, he created a property-focused boutique practice that is highly enthusiastic about providing such services. Shepperson Attorneys was born out of a desire to assist its clients in achieving unsurpassed outcomes: “A footnote in your success story, so to speak,” he says. Shepperson represents an extremely diverse clientele. He believes that, whether you are representing a multinational property service group, a national property developer, an estate agency or a private individual, it is essential that you listen to their unique story and then provide them with practical solutions to the problems they’re experiencing. He provides regular updates on property industry news to more than 4 000 monthly readers of his blog and to followers of the firm’s Facebook and LinkedIn pages. The Q&A section provides the firm with valuable insight into the thoughts of the people affected by legal issues in the property industry. “My clients want to be certain that they have access to the most modern and innovative solutions to their real-world problems,” he says. “I strive to be at the cutting edge of the property industry, which is why I’m an active participant in SAPOA.” Shepperson serves as the chairman of SAPOA Gauteng, a member of the SAPOA National Council and a member of the SAPOA legal committee. He is a member of the property committee of the Pretoria Attorneys Association and attends its monthly meetings with the Registrar of Deeds and the Deputy Registrars, thereby contributing to effective conveyancing practice in Gauteng. For more information on Shepperston Attorneys, please visit their website.

For ALL of  Your Real Estate Questions, We Are the Answer!

+27 (0)10 591 3220 mike@hglaw.co.za www.henkelgregory.co.za

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+27 (0)11 684 1111 jos@hooyberg.com www.hooyberg.com

+27 (0)12 362 4688 gareth@propertylaw.onmicrosoft.com www.prop-law.co.za


focus on attorneys

Service

with a personal touch

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stablished in August 2005, the Dlamini Michael Inc law firm evolved from a small practice in Verulam,

and quickly expanded, opening its Durban office in 2006. As a testament to the firm’s success, Dlamini Michael Inc joined forces earlier this year with attorneys SA Singh and Associates in La Lucia, increasing the practice’s capacity by 10 staff members. By having a conveyancer and a notary in their offices at all times, Dlamini Michael Inc is able to set itself apart from other law firms. Its team of property law practitioners also has to deal with numerous evictions. Despite the current downward economic trend, the NCA, Consumer Protection Act, unfavourable

Michelle Michael is a member of the South African Women Lawyers Association and the Black Conveyancers Association. She is on the master’s panel of liquidators in KwaZuluNatal, a board director at Aids Health care and a member of the Women’s Property Network. She was instrumental in the drafting of the Youth Commission Act in KwaZulu-Natal.

eviction laws and hikes in municipal rates, the firm has adapted comfortably by pushing its boundaries to discover other sectors of conveyancing work within both the commercial and public sectors. In so doing, it is now able to offer a more diversified service to its clients. The firm’s ability to strike a comprehensive balance between public and private sectors has resulted in the development and growth of strong separate departments within it. These include the public sector, human settlements, a municipality section, and a division that deals with developments in the private sector. Dlamini Michael Inc is also proud to be on the panels of a number of major banks. As a result of Michelle being a recipient of a double lung transplant in 2012, the firm (as part of its socialcommitment drive) has been working closely with the transplant unit at the Ethekwini Hospital and Heart Centre. The firm also works with the Cheshire Children’s Home, and represents the South African Women’s Forte on a pro bono basis.

Dlamini Michael Inc is a boutique law firm that focuses on maintaining long-term client partnerships by providing personalised and cost-effective services by industry specialists using cutting-edge technology

Tel: Durban +27 (0)31 301 9128 Verulam +27 (032) 533 5110 dlaminimichaelinc@telkomsa.net www.dlaminimichaelinc.co.za SOUTH AFRICAN PROPERTY REVIEW

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ipd conference

IPD in action

The property investment sector celebrated its successes and shared its strategies at South Africa’s premier property investment event

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n July, Cape Town played host to the Stanlib-sponsored 11th annual Investment Property Databank (IPD) Property Investment Conference, drawing property investors, asset owners and managers from across Africa to assess the sector’s prospects. “The theme of the conference was  ‘Property on the Red Carpet’ ,” says IPD SA managing director Stan Garrun. “It’s a reference to the property taking up its place as a mainstream asset class – secure with dependable cash flows and returns. As property steps onto the red carpet, joining the other celebrity institutional assets, does it offer a real alternative to investors in a changing world that needs to diversify and offset risk? This is just one of the questions that was asked. Top-rated speakers examined the global and local environments, looked at the performance, the dynamics of asset allocation and the factors that add value. The impact of structural and market change, including the new SA REIT conversion and the development of markets in Africa, were very strong subthemes.” The annual IPD Property Investment Awards were presented at a glittering gala dinner on the first night of the conference. A highlight of the two-day conference was the IPD dinner, sponsored by Nedbank Corporate. The annual IPD Investment Awards were announced prior to the dinner to top performing funds in the IPD database. The overall IPD universe comprises both listed and unlisted funds representing 63% of all professionally-managed real estate in South Africa, and 72% of market capitalisation listed property investments on the JSE. From 2013, it also covers SA REITs.

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The awards focus on property fundamentals and exclude the impact of gearing, fees and other financial interventions that justifiably reflect in a fund’s overall result but may mask the performance of the underlying assets. This gives a fair evaluation of the quality of stock, asset selection and management performance. The awards are based on validated results over three years. Importantly, the awards celebrate exceptional performance in South Africa’s fast-growing, competitive property sector. Resilient scooped both the overall and retail awards, with Vukile and Capital beating other funds in the industrial and office categories, respectively. Resilient achieved the highest annualised total return over three years, based on ungeared

property data for the funds measured by IPD. It reported a 19,3% total return across its entire property portfolio, compared with an IPD overall benchmark return of 14,7%. The award for retail portfolio performance also went to Resilient. Its portfolio of shopping centres delivered a 19,9% return, substantially outperforming the IPD retail benchmark of 14,6%. This is the fourth time Resilient has clinched this award, supporting sustainable performance and management quality. Last year’s winner for industrial property portfolio performance, Vukile Income Fund, again notched up the top returns in this sector with a 19,5% total return compared to the IPD benchmark return of 14,7%. Capital Property Fund recorded the highest returns for office property performance at an 18% total return, well above the IPD benchmark of 13,5%. Quality data is essential for measuring this performance and IPD also recognises internal data excellence. Pareto Limited received IPD’s Data Quality Award for best meeting IPD’s data provision criteria: accuracy, completeness, timing and detail. The conference lived up to its reputation for delivering cutting-edge, topical and relevant conference sessions on the value and challenges of property investment, both globally and in Africa.


ipd conference

ABOVE Patience Luxomo and Elsie Monamate of Nedbank Corporate ABOVE RIGHT South Africa’s leading political cartoonist, Zapiro BOTTOM Resilient Property Income Fund claimed the overall Investment Property Databank (IPD) Direct Property Investment Award 2013 at the 11th annual IPD South Africa Property Investment Conference in Cape Town OPPOSITE Stan Garrun, Dries du Toit and David Williams OPPOSITE BOTTOM Tom Bate and Bruce McGlogan

The conference provides a pivotal gathering place for investors and property experts from different parts of the country to share experiences, discuss best practices and analyse lessons learnt.

The conference showcased four specific topics: l The first was “Back from the Brink”, an examination of property investment in the post-recession era. Facilitated by respected journalist and TV host David Williams, the discussion highlighted global economic events and put a spotlight on the prognosis for investment in Africa.

“Real estate – and particularly private equity real estate – investment continues to grow in sub-Saharan Africa. While it may be true there are risks associated with emergingmarket investments, core returns in sub-Saharan Africa are comparable to opportunistic returns in developed countries. And risk is a key imperative in global real estate investments.” In the southern African context, he pointed to governance, transparency and a lack of sophistication in portfolio management, along with macroeconomic considerations, inflation and exchange rate fluctuations, as general risks. l The third and fourth sessions were titled  “A Time for War” and  “A Time for Peace”, respectively. These topics looked at changes in the asset allocation process, the impact on property investment, and on adding value

through governance, green initiatives and public sector property initiatives. Speakers included Estienne de Klerk of listed property giant Growthpoint Properties, the popular financial analyst Dries du Toit and Anton de Goede of Coronation Fund Managers. Other speakers who brought their insight and perspectives to the conference included economist and academic Brian Kantor; political commentator Aubrey Matshiqi; senior resident representative of the International Monetary Fund Axel Schimmelpfennig; deputy CEO of Hospitality Property Fund Andrew Rogers; and Rob Wesselo, the director at International Housing Solutions. As the 2013 conference wrapped up, both SAPOA and IPD were already thinking ahead to the 2014 conference and looking forward to another successful meeting of the property investment sector.

l The second was  “Real Estate in a Changing World”, which assessed postrecession risk and the scarcity paradigm in a limited growth scenario, looking towards property as a hard asset with strong and reliable cash flows. Among others, speaker Bruce McGlogan, head of private equity and real estate fund services at the Maitland Group, brought an international perspective to the discussion. “The most standout feature of South African commercial real estate investment is the return on investment,” he said. SOUTH AFRICAN PROPERTY REVIEW

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interview

GAME CHANGERS 10 | Towers Perrin Global Workforce Study — Global Report

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hat are the questions that most clients ask when looking for corporate rental space or developments? How much will it cost? How long will it take? How much space do we need? Few ask the critical question, “How could this project impact my business?” Once the leases are signed, the snags are addressed and the clients start carrying their boxes through the front door, it’s too late to start this discussion. Ironically, this is usually when the greater business impact becomes clear. One corporate interior design firm is asking this question upfront.  “We are starting a revolution in our industry,” says Paragon Interiors’ marketing manager Lucy le Roux. “For a number of years now businesses have tried to fit a progressively diverse workforce into an increasingly generic and shrinking  ‘one size fits all’ solution. There has also been little concern for how staff react to office moves or upgrade processes, or any inherent changes. We’ve seen this approach take its toll on the businesses we’ve worked with and wanted to do something to add value to our industry.” With open-plan offices gaining popularity in South Africa, design firms have been faced with the challenge of removing desk space, privacy and hard-earned status to make room for more and more people. They have been achieving this while, at the same time, creating environments that promise happier people and greater productivity. But this seems unlikely. With more than 15 years of experience in handling such projects, well-known local office design specialists, Paragon Interiors, saw that this inconvenient truth would need to be addressed head on. Paragon’s rudimentary analysis of past projects revealed that the first few months of a move were often low-productivity periods with significant employee resistance to new ways of working. According to Bill Helyar, a partner at the business, “We were seeing a number of clients face resistance from staff due to changes in their work environment.

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A few companies even saw an increase so they could make more informed decisions. in resignations as a result of the change We also realised that the introduction of an not being managed effectively. Some of aspect of change management to our projects A resistance LEADERSHIP EVOLUTION this was because the needs was necessary.” of the staff were being ignored in favour Paragon Interiors made a decision late of potentialmanagement’s cost savings.” last year to recruit angenuine in-house industrial Senior ability to demonstrate interest in employees is In the past, the attitude to handling psychologist in an effort to address the is on the top 10 l driver not only globally, but in at least seven countries, and office moves or upgrades was to move full matter. “After finding the correct candidate, steam ahead and hope that people would Jillian Williamson, in early 2013, we began eventually settle down and get back to work. development on a customised changemanagement programme specially tailored for corporate interior design,” says Le Roux. “We didn’t just want to hire a change-management consultant because we believe that there is a unique Organizations intuitively understand thatopportunity employeesto want But employees are clearly sa deliverto a customised believe senior leaders truly care about them. A review of any from deeds. Our study shows service – one where design and change addressed simultaneously through the around the world aren randomly selected collection of corporateareannual reports is people way our projects are handled. Weonly were one also in 10 of our respon likely to turn up numerous examples of appreciative CEOs sensitive to the fact that timings for projects crediting their companies’ success to the hard work and in their companies actually t are increasingly tight; we wanted to find dedication of their employees. A Web search for the phrase assets. A larger percentage re a way to introduce the service without “Our people are our most important asset” is likely to time yieldto our process. employees don’t matter (Exh adding any extra ” hundreds, if not thousands, of results. Paragon Interiors has achieved this Exhibit 9 presents an even m through creating customised packages for clients. For clients with longer the project attributes of leadership b “This seemed a bit too haphazard to us,” says timelines, the service includes a prelateand with a positive perceptio Helyar. post-research survey, measuring occupant EXHIBIT“We 8 wanted to find a way to deliver a Note that fewer than half of better service to ourThink clients.Their We realised the Leaders satisfaction levels as well as current How Employees Company’s View Them views about their leaders’ pe need to educate our clients on the impact engagement and productivity. For shorter an office environment has on their staff, projects, Paragon focuses on communication

“What has been a really exciting outcome of this endeavour is that we are now the first South African interior-design firm to have our own industrial psychologist, and also the first to introduce change management”

15%

10%

37% 38% employees How

As if we’re the most important part of the organization

thinkAs valued, theirrespected contributors As just company’s leaders view another thempart of the organization to be managed As if we don’t matter As if we’re the most important part of the organisation

A reasonable question, of co really are so deficient in the them to connect with employ expectations and perceptions could live up to them. The a

It’s worth keeping in mind, a executives preside over compl As just another part of the organisation to be managed that serve millions of custome As if we9don’t matter EXHIBIT of jobs and generate billions How Employees Rate Leadership on Key Behaviors wealth. For security, public a How employees rate % of respondents agreeing with statement many limit their appearances (in descending order of importance of behavior in driving positive perceptions of leadership) leadership on key behaviours events. Like modern athletes 0% 10% 20% 30% 40% 50% roles and personas seem large Senior management sincerely interested in employee well-being as, in fact, they are. To expe 38 connect in any genuine and m Source: Global Workforce Study 2007. Sample of 88 000 full-time employees across 18diverse countriesgroups of employees Senior management communicates openly and honestly 38 whom they rarely, if ever, me As valued, respected contributors

Senior management tries to be visible and accessible 44

Senior management effectively communicates the reasons for key business decisions


interview

FROM LEFT Jillian Williamson, industrial psychologist at Paragon Interiors, and the company’s marketing manager Lucy le Roux

and education to ensure staff are comfortable and familiar with the new environment. “What has been a really exciting outcome of this endeavour is that we are now the first South African interior-design firm to have our own industrial psychologist, and also the first to introduce change management (or onboarding, as we like to call it),” says Le Roux. “We understand that South African businesses today are hard-pressed to cut costs and thus have created a service offering that is sympathetic to this. We decided, as a business, to absorb this additional service as an overhead because, ultimately, the success of our projects is a reflection of our brand. Since launching the programme in May, all of our projects now include change

management to some degree, dependant on the project timeline, and at no extra cost to our clients.” The introduction of change management into the roll-out of corporate interior-design projects appears to be far more than just a  “nice to have”. Addressing the needs and concerns of employees has a knock-on effect for achieving maximum productivity and staff engagement. Research from the 2007 Global Workforce Study by  Towers Perrin reveals that the global driver of employee engagement, the desire of an employee to give their full passion, commitment and effort to an organisation, is the belief that senior management is sincerely interested in employee wellbeing. Despite the importance

of this factor for staff, research shows that more than half of global business leaders are missing the mark in this area. “How businesses choose to handle something as personal to staff as where they spend their nine-to-five is a key opportunity for organisations to send the message that employees are valued,” says Jillian Williamson, the industrial psychologist at Paragon Interiors. “The types of companies that are increasingly successful globally are those that have realised the fundamental shift in the employer-employee relationship to one of mutual caring, trust and respect. Get this wrong and no amount of cost-cutting will result in the desired business performance.” SOUTH AFRICAN PROPERTY REVIEW

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mandela day

Abland Foundation plants seeds for the future “There can be no keener revelation of a society’s soul than the way in which it treats its children” Nelson Mandela

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ccording to the official Mandela Day website, the predominant aim of Mandela Day is to inspire individuals to take action to help change the world for the better, to build a global movement for good. The ultimate goal is to empower communities everywhere: to “Take action, inspire change; make every day a Mandela Day.” Individuals and organisations are free to participate in Mandela Day as they wish, but participants are urged to adhere to the ethical framework of “service to one’s fellow human”. The Abland Foundation took this message to heart and celebrated Mandela Day on 18 July by planting trees, flowers and a vegetable garden at one of its CSI benefactors, the Genesis Crèche in Diepsloot. A soccer field was laid on the premises to keep the youngsters living in Diepsloot off the streets, and the goal posts and jungle gyms were given a fresh coat of paint. Although the Abland Foundation has had various CSI projects in the past, it chose to focus

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on a single project to enable the Foundation to make a real impact. Through contacts at the Lonehill Village Church, the Foundation was introduced to the Genesis Crèche and felt that this was where a noticeable impact could be made in the lives of South Africa’s children. When the Foundation began its involvement at the crèche, there were nine children in attendance and it was operating from a tent that would often get blown down in heavy winds and flooded during rain. The crèche now takes care of 65 children in two fitted containers provided by the Foundation. A play area was created between the two containers and paved, and a roof was constructed over it. As the crèche has grown, the Foundation has continued to improve on the infrastructure, constructing a community centre. Bathroom and kitchen facilities have also been added to the community centre. The children have blossomed within the (now safe) environment of the crèche, with reports from the community confirming a

marked positive change in the children’s behaviour. Twice a year, the Abland Foundation treats the children to an outing, which has become a highlight in their otherwise poverty-stricken lives. In the past, the outings have included trips to Yeesh, Barnyard Kids in Midrand, a rugby game at Loftus and a visit to the Johannesburg Zoo. Over the Easter and Christmas period, Abland staff members donate gifts for the children, and in winter blanket and clothing drives are embarked upon. As a result of its involvement with the crèche, the Abland Foundation was also introduced to the Impilo Foster Home for AIDS orphans. In 2007, there were approximately 1,2-million Aids orphans in South Africa, with about 250 000 of these living in abject poverty in Gauteng. It is estimated that there will be 1,9-million orphans by 2015. The Foundation feels it’s imperative to help these children and create a better future for them.


statistics at a glance

Stats: construction, infrastructure and utilities T

he government’s inability to spend its infrastructure budget is a chronic problem. In June 2012, Trevor Manuel, the minister in the presidency responsible for the NDP and the chairman of the National Planning Commission, said, “The large sums allocated by the government for infrastructure each year are routinely rolled over because of a lack of capacity to get projects off the ground.” In October last year the minister of economic development said that under-spending had improved from 38% to 20% of the budgeted amount. But in November, the Department of Public Works referred to a problem of  “rising under-spend”. One of the reasons why the government is unable to spend its infrastructure budgets is the dearth of engineers able to manage the public sector’s procurement processes. According to the South African Reinforced Concrete Engineers Association, the gap between ageing professional engineers and appropriately skilled newcomers is being widened by the country’s failure to produce enough high-calibre maths and science graduates. The generation of jobs in this sector is more directly and more heavily dependent on the government itself than it is in any other. “Crumbling” infrastructure and the weak state go hand in hand.

I

n a paper titled  “ Transforming Human Settlement and the National Space Economy”, the NDP states that, although 3,2-million subsidised units have been completed or  “are in progress”, another R300-billion is required to address the 2,1million backlog in housing units. The housing programme was a  “blunt instrument” that gave “insufficient attention to the workings of the market, including the rental market”. The NDP claims that the fact that only 15% of households are able to take care of their housing needs independently of the state (via bond finance) “points to market failure”. It points out that stateprovided houses are not being “integrated into the property market” because there is a delay in the registration and issuing of title deeds. Also, home-owners are not allowed to sell their statesubsidised houses for eight years after receiving them, evidently to “protect state investment”. The NDP recommends a review of the eight-year restriction, taking into account the need to protect state

investment as well as to allow the integration of state-provided housing into the property market to stimulate the housing market. The subsidy and grant scheme for housing should be urgently reviewed with a view, among other things, to leverage private-sector funding into providing increased levels of finance to the lower end of the market. The NDP also suggests providing people with “housing vouchers” that are not spatially tied. Another proposal is to place greater emphasis on more rental housing. Well-located informal settlements should be upgraded in situ, and rights of residence recognised, including  “incremental upgrade of tenure rights”. New ghetto formation should be avoided by promoting a mix of race and income groups in new housing developments. “Urban sprawl” should be contained and possibly reversed. The NDP also says that “providing housing could help people earn an income from home”. However, there is a lack of clear policy on homebased income generation.

Source July Fast Facts, South African Institute of Race Relations (SAIRR)

Employment has dropped from 833 000 in 2006 to 712 000 in 2009; 60% of it is formal. The country’s  “crumbling” infrastructure needs “urgent” fixing. So the NDP envisages an increase of 579 000 jobs in construction and utilities between 2010 and 2030 to a total of 1 407 000, or nearly six percent of all jobs.

According to Stats SA, construction jobs have increased by 370 000 in the past decade, and those in utilities by 22 000. Among proposals to grow this sector is addressing the government’s inability to spend its infrastructure budget.

President Jacob Zuma has announced that South Africa has  “an infrastructure programme in place that will cost at least R4-trillion in the next 15 years”. The National Treasury said in February that R827-billion would be spent over the next three years.

This will be spent on, among other things, hospitals, schools, water, sanitation, housing and electrification; ports, railways, and roads; two new power stations; the rehabilitation of 25 dams and the construction of seven new ones; and two new universities. One major construction company said after Mr Zuma’s R4-trillion announcement that not a single tender had been issued for a major infrastructure project. An analyst stated in June that, until the government issued tenders for its large infrastructure projects, the best option for South African construction companies might be to work in the rest of Africa. Another big construction company said that it previously took six to eight months from proposal submission to the award of a contract by the government, but that the time lag for some projects was now 12 to 18 months.

T

he NDP says that  “there is a serious ambivalence towards skills in the public service”, one consequence of which is that “professionals in government institutions feel undervalued”. A deficit in skills and professionalism affects all elements. Moreover, the government lacks many key professional skills, and is suffering the consequences of its inability to reproduce expertise. The shortage is particularly severe at the municipal level, where municipalities require engineers to build, maintain, and operate infrastructure. Even when these functions are contracted out, municipalities still need to have the technical expertise to commission and oversee contractors. “Efforts to extend access to basic services have not been accompanied by a comparable focus on ensuring the emergence of skilled professionals. ”This problem,” said the earlier version of the NDP,  “had arisen partly because the state had retreated from its core role in training and producing professionals – unlike in the apartheid era when it played an active role in producing them”. Also, “many departments struggle to recruit appropriate people”. Nevertheless, it says, “recruitment drives at universities should target people from disadvantaged backgrounds”.

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kwazulu-natal – social networking

SAPOA swings into golf S

APOA recently welcomed its first-ever regional set of golf days, with the inaugural event teeing off in KwaZulu-Natal on 9 July 2013. The KZN golf day was a huge success, with a substantial pool of players participating at Mount Edgecombe Country Club Estate in Durban. It was followed by the Gauteng leg on 22 July 2013 at the

KZN golf at mount Edgecombe country estate

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Dainfern Country Club in Johannesburg. For the remainder of the year, golf days have been scheduled for East London and Port Elizabeth, as well as the Western Cape. SAPOA is excited about its regional roundup of golf activities, and plans to continue hosting these networking events on an annual basis.


gauteng – social networking

Gauteng golf at Dainfern country club

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off the wall

Simulating city planning A new simulation program takes the principles of urban planning and development out of the municipal offices and into the classroom By David A Steynberg

C

ould computer games help urban planners and engineers create more efficient cities while using the game models to fix and improve on existing infrastructure challenges? One man believes games may be able to do just that. Mike Rose wrote a blog post on a website called Gamasutra, about how he used the simulator game SimCity to understand the significant traffic congestion in his home town of Northenden in the UK, despite it having a very small population. He figured bottlenecks were to blame due to the road layout of the town. Rose decided to test his theory by downloading and redrawing the Google map of his city into the simulator’s map editor. He proceeded to create a true-to-life population density in his game city, especially where the biggest problems were being experienced: where the town connected to other cities. During game play, Rose noted that his virtual city dwellers experienced similar issues to that of real Northenden residents: there was a major delay in commuting time, and traffic build-up during rush hour was hugely significant. “This little project definitely gave me a sense of what could be accomplished with SimCity if put in the right hands,” he wrote.

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And this is exactly what is happening with the launch of SimCityEDU. The game itself combines the tried-and-tested concept of education and entertainment to teach schoolchildren about STEM subjects (science, technology, engineering and maths). “SimCityEDU is a place for educators to create and share SimCity learning tools and assessments that use SimCity to encourage students to think critically about the challenges facing modern cities,” says the game’s website. “Lesson plans will be aligned to Common Core State Standards as well as content standards for a broad range of subjects, and attuned to student development of 21st-century skills such as collaboration and creative problem-solving. In the classroom, SimCity is more than a game – it is a way for the next generation of leaders to hone their skills through urban planning, environmental management and socioeconomic development.” And this new generation of leaders will surely combine both innovation and practicality with efficiency and economy. Our cities deserve positive leadership and design insight. The modern city is truly one of the human race’s most valuable inventions – and the beauty is that it will forever continue to evolve into something better and more beautiful.


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South African Property Review September 2013  

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