Latest Property News
USHAKA MALL IN STANGER GOES ON AUCTION
19 July 2017
Property investors are gearing up for the sale of one of Kwa-Zulu Natal’s largest retail properties which is set to come under the hammer on 23 August 2017 at 12h00. The property, which is being taken to the market due to the seller consolidating their assets, offers investors the opportunity to purchase a well-tenanted mall with leading brands on long-term leases.
Accordingly to Greg Nafte, co-director of Nexus Property Group, the uShaka Mall has developed into a desirable investment among property owners as it’s a secure asset with guaranteed returns due to its strong tenant mix. “The gross annual rental income for this property is over R7.5 million which excludes recoveries for operating expenses.
“In terms of obtaining finance for a property of this stature, it becomes a lot easier to get funding from banks when you’re able show them that large retail chains are invested in the property too. The mall will also always be a valuable asset as it services the local community’s needs.”
Nafte explains that the mall boasts an erf size of 2, 1128 hectares with a gross lettable area of around 8700 m². The mall is currently 95% occupied and includes a strong mix of stable tenants including CashBuild, Clicks, Telkom, Crazy Store and Cell C as well as anchor tenant, Pick n Pay, who have a lease in place until 2026, after which there be three options to extend for five year periods.”
When discussing how the method of sale was decided upon, Nafte says that an auction was deemed the best method as it brings finality to sale and gives all prospective buyers a fair chance to submit their bids. All due diligence information is available on request.
Smaller Properties Yield Great Investments
22 May 2017
Prospective investors disheartened by the price of properties in South Africa at present may be interested to learn that smaller and more affordable properties are almost invariably the highest performers. In fact, the latest statistics released by FNB show that affordable properties in major metros are appreciating more than twice as fast as their high-end counterparts - a trend that is likely to continue as political turmoil weakens consumer spending power.
Low and mid-range homes tend to appreciate faster than luxury properties on the residential market for several reasons. The first of these is the consistently high demand seen for properties of this type.
Smaller properties appeal to a much broader target market than other housing segments, attracting low income earners, first-time buyers, professionals looking for low-maintenance lifestyles, and elderly people scaling down.
Having such a wide pool of potential and repeat buyers ensures ongoing demand for these types of properties, regardless of economic conditions. If the economy is strong, and spending power is high, more first-time buyers and low income earners feed into the market on this entry level. If the economy weakens and consumers are forced to cut back on spending as we’re seeing at present, buyers who may have qualified for mid-range homes in better times feed into this market from above.
In addition to affordability, smaller homes also tend to require less maintenance, are easier to secure, have lower rates and taxes and lend themselves to a lock-up-and-go lifestyle. These factors are becoming increasingly sought-after by modern homeowners and are bolstering the already high demand for compact properties in all price ranges.
As in any market, high demand is inextricably linked to price growth and, historically, smaller homes have seen healthy appreciation even when other market segments have struggled.
House price inflation for small homes between 20m2 and 80m2 in South Africa was 8.1% in 2016 according to FNB’s Property Barometer report on House Price Indices by Size, released in November 2016. In contrast, medium sized homes of 80m2 to 230m2 appreciated by 5.8%, and large homes between 230m2 and 800m2 grew by a mere 3% on average, nationally.
Steady growth to continue
While the outlook for 2017 is uncertain thanks to the recent government reshuffle and resulting damage to the rand, small properties in South Africa’s major metros will continue to see steady growth.
Small homes have consistently outperformed larger properties for the last 15 years, during growth and recession periods alike. We may be entering tough times as a country, but people will always need somewhere to live, and compact properties are going to be the most attractive and accessible option for many of our citizens.
For investors, this could be a great opportunity – particularly when weighed together with the recently increased transfer duty threshold.
Property sales under R900,000 are exempt from transfer duty from 1 March 2017, which does help with the short-term affordability of an investment. It also opens the door for bigger investors to acquire a portfolio of small properties, avoiding the burden of transfer duty altogether, and capitalising on the superior growth potential of this market.
Investec Australia Property Fund
30 January 2017
Investec Australia Property Fund (“IAPF” or the “Fund”) is pleased to announce the acquisition of 2 Richardson Road, North Ryde (“North Ryde Property”) and 20 and 24 Rodborough Road, Frenchs Forest (“Frenchs Forest Property”).
The acquisitions increase the Fund’s exposure to New South Wales, Australia’s largest and best preforming economy.
The total purchase consideration amounts to AUD 160 million (excluding transaction costs):
· AUD 85 million (excluding transaction costs) for the North Ryde Property, which equates to an initial passing yield of 7.0% (pre transaction costs)
· AUD 75 million (excluding transaction costs) for the Frenchs Forest Property, equating to an initial passing yield of 7.5% (pre transaction costs) and a fully leased yield of 8.0% (pre transaction costs)
The North Ryde Property is a four level, high quality, A-grade office building located 10 kms north-west of the Sydney CBD in the established North Ryde commercial precinct. The North Ryde Property was built in 2004 and comprises 15,055m² of office space, 150m² of ground floor retail space and 492 undercover and on-grade car parks. The North Ryde Property benefits from immediate access to the M2 motorway, which in turn provides direct access to the Sydney CBD. It is located approximately 750 metres from the North Ryde train station which is currently undergoing a major upgrade as part of the Sydney Metro Rail Link project, which is Australia’s largest public infrastructure project.
The Frenchs Forest Property comprises two separate buildings, 20 Rodborough Road and 24 Rodborough Road. 20 Rodborough Road is a campus style office building providing 12,366m² of office space, 325m² of ground floor retail space and 453 undercover and on-grade car parks. The building has recently undergone an extensive refurbishment program costing AUD 1.3 million which included upgrades to the lifts, refurbishment of some of the office levels, upgrades to the bathrooms and new disabled amenities. 24 Rodborough Road is a modern office and warehouse facility with two levels of office space totaling 3,219m², one level of high clearance warehouse space totaling 3,979m² and 130 undercover car parks.
The close proximity of the Frenchs Forest Property to the new Northern Beaches Hospital and the associated infrastructure upgrades is anticipated to positively impact tenant demand, especially from medical and health related tenants looking to locate in close proximity to the hospital and other tenants in the medical and health related sectors. This is further boosted by the fact that the annual growth rate for professional employment in the Frenchs Forest precinct is expected to be double that of greater Sydney over the next 20 years as a direct result of its proximity to the Northern Beaches Hospital.
Commenting on the acquisitions IAPF CEO Graeme Katz said: “These acquisitions are attractive in that they increase our exposure to Australia’s largest and best performing economy of New South Wales. These properties secure medium term income for the Fund with a weighted average lease expiry of at least 4.1 years. Furthermore the buildings have extremely low vacancy rates, are occupied by quality tenants, and are ideally located to benefit from rezoning initiatives and surrounding infrastructure developments.”
Katz added: “The acquisitions continue the Fund’s focus of investing in established metropolitan office markets where we see value relative to the major CBD office markets. We are starting to see rental growth in most of Sydney’s office markets and as such, precincts such as North Ryde and Frenchs Forest, which both have comparably favourable net face rents to other Sydney metropolitan office markets, will only become more attractive to cost conscious occupiers.”
The acquisitions will be partially funded by way of a ZAR 1.53 billion renounceable rights offer (approximately AUD 150 million). This will ensure that post transaction the Fund’s gearing remains within or below its target range of 35% - 40%. The rights offer issue price of ZAR 13.50 equates to a clean price of ZAR 13.12 per unit and represents a forward yield of 7.6% pre withholding tax on the theoretical ex-rights price and a discount of 3.4% to the relevant 30 day weighted average clean price of R13.58, calculated as at the date of approval of the acquisitions and the associated rights offer by the Fund (being 15 December 2016). The Fund has already received irrevocable and underwriting commitments to the value of approximately ZAR1.02 billion (67.2%) from unitholders holding 29.2% of the units.
The effective date of the acquisitions is anticipated to be 6 March 2017.
Growthpoint Properties Romanian foray
30 January 2017
Growthpoint Properties Romanian foray 'too small'
Growthpoint Properties' first foray into Eastern Europe receives a mixed reaction from one South African fund manager.
Real estate group Growthpoint Properties’ first foray into Eastern Europe has received a mixed reaction from one South African fund manager who is concerned its investment in Romania is too small to move the fund’s needle.
More than 10 South African property companies have already invested in Eastern Europe in the past two years but many have made larger investments than the €186m (R2.7bn) Growthpoint is spending on a 26.9% stake in Globalworth Real Estate Investment.
The investment in the Romanian office owner has come long after the likes of New Europe Property Investments bought into shopping centres in the country and some eight months after Growthpoint’s rival, Redefine Properties, invested in Polish retail and offices.
There have been questions about whether Growthpoint’s initial exposure to Romania will be too small to deliver meaningful returns early on for the R71bn-valued company.
Portfolio manager at Alternative Real Estate Capital Management, Garreth Elston, said his team were "neutral on the deal" until they knew more details.
"We are not sure that the deal has the size and scope to significantly move the needle for a company of Growthpoint’s size over the short to medium term.
"In addition, we are not completely convinced that Romania is the best investment choice in Central and Eastern Europe at the moment," he said.
Romania’s government had been wracked by political scandals in recent times, he said.
Corruption was also an issue, with Romania being ranked by Transparency International’s Corruption Index at 58 globally, which is only three ranks higher than SA.
Elston said Poland, the other favoured destination for South African property investors, was ranked 30th. "So, politically, Romania does not really offer Growthpoint much more stability nor transparency than SA does," he said.
However, in economic terms, Romania offered several advantages. "GDP growth at 4.4% is encouraging, GDP per capita has been growing and unemployment is low at 5.8%," he said.
Globalworth, founded by entrepreneur Ioannis Papalekas, has operated for more than 15 years in Romania.
Catalyst Fund Managers investment manager Paul Duncan said the deal looked reasonable for Growthpoint and it was difficult for it to find large, well-priced deals.
"It does not look like they are overpaying for the equity stake. They are acquiring a modestly geared fund at a discount to net asset value with a platform. Management are aligned via a material equity ownership.
"We don’t believe there is much cap rate compression on the existing portfolio, but there does appear to be the ability to reduce interest costs. This is a very similar type of deal to what they did successfully in Australia. Growthpoint are so big now that they can only do incremental bulk-ons to grow earnings and quality," he said.
Growthpoint anticipates the yield on Globalworth equity to be about 6%. This would be fully funded with debt and cross-currency swaps at an approximate all-in rate of 3%.
source: Business Day
Redefine International lets remaining space at City Point, Leeds
30 January 2017
Redefine International (“Redefine International” or the “Company”), the opportunistic income focused FTSE 250 UK-REIT, has let 1,022 sqm (11,000 sq ft) at City Point, Leeds to Blacks Solicitors LLP, bringing the office asset, which was acquired as part of the AUK portfolio in March 2016, to full occupancy.
Blacks is taking the entire second floor on a 10 year lease, which was secured at ERV, and will join existing tenants Ashcourt Rowan plc, GVA, Savills, JLL, Starbucks and HSBC. Located on the corner of King Street and Park Place in Leeds city centre, City Point is one of Leeds’ most prominent buildings, comprising a total of 61,500 sq ft of Grade A office accommodation over seven floors.
Adrian Horsburgh, Property Director at Redefine International commented:
“City Point is a high quality, modern building in a prime location that has consistently attracted some of the most dynamic businesses in the Leeds marketplace. The 10 year lease was completed within nine months of acquisition, which is testament to the strength of the property offer as well as the skills of our asset management team. The addition of Blacks augments the existing high quality tenant line up and reflects our ongoing efforts to reduce the vacancy in the assets we acquired as part of the AUK portfolio earlier this year, and ultimately to maximise the income potential.”
Sanderson Weatherall and JLL acted for Redefine International on the transaction while Blacks was represented by WSB.
Shanghai Zendai Acquires Property Development Project in Johannesburg
09 July 2014
Hong Kong listed Shanghai Zendai , a major integrated property developer from the PRC ( People's Republic of China), has signed an agreement with AECI Limited of South Africa to acquire a property development project comprising several parcels of land and buildings. Their Johannesburg property project covers approximately a total of 1,600 hectares in Modderfontein, Johannesburg for a total consideration of over a billion rand.
Johannesburg is the political, economic and cultural centre of South Africa and Shanghai Zendai's plans are to build a new city centre on the largest stretch of vacant land between OR Tambo international airport and Sandton, Johannesburg- situated 8km from the airport and 7km from Sandton.
A socially conscious company, with previous developments such as the Himalayas Centre, Mandarin Palace, and Thumb Plaza, is expected to generate long term growth for Modderfontein as their project will be among the largest real estate deals by a Chinese firm in South Africa.
According to the current planning, the project will include the development of a complex with residential, commercial, light industries and retail facilities.
Mr Dai Zhikang, Chairman of Shanghai Zendai, said, " We are excited about the opportunity to develop a new Gauteng CBD, strategically located and linking integral parts of the province, providing a platform for further social and economic growth. Our long standing and reputable developments stand us in good stead to bring to life this inspired initiative."
Booming Sandton leading the way
10 June 2012
According to the Rode Report, there are early indications that the grade-A office market might be staging a recovery. The rally is being led by bellwether Sandton central business district, which showed phenomenal rental growth of 16% in the fourth quarter of 2011.
Digging behind the scenes of Sandton's rental performance reveals declining vacancy rates on the back of improving demand for A-grade office space. In other top office nodes, however, the rental performance was not as impressive. Here vacancy rates are finding it hard to decline, and nominal rental-growth below building-cost inflation (+14%) has been the general observation.
For the time being, no improvement in the demand for industrial space is descernible. This explains the pedestrian performance of industrial rentals. In the reporting quarter, Pretoria (+8%) showed the best yearly growth. The picture was, however, more dreary in the other conurbations, with nominal-rental growth ranging between 2% and 3% for the Central Witwatersrand, the Cape Peninsula and Durban. In Port Elizabeth, nominal rentals were 1% lower than a year earlier.
At the same time, signs of a possible improvement in investment demand for industrial and office properties became visible in the fourth quarter of 2011 when capitalisation rates on these property types strengthened (decreased) marginally. But, cautions property economist, Erwin Rode: "One should not read too much into this considering that office and industrial vacancy rates are still stubbornly refusing to drop, while rentals are finding it difficult to beat inflation.This, naturally, does not augur well for Capital-growth prospects."
On the residential-rental front, while townhouses showed no growth compared to a year ago, rentals on flats and houses were able to show 4 % growth. says Rode: "As if dealing with mediocre growth in rentals is not enough, landlords who do not meter electricity separately will soon face another severe hike in operating costs in the from of seriously higher power costs- this on top of ever-rising assessment rates." On the positive side, however, landlords who still have to service mortgage debt can for now breathe a sigh of relief in light of the Reserve Bank's decision to keep interst rates steady for the time being.
The housing market continues to be stuck in a rut inspite of a year of record low interest rates. Says Rode: " it seems that neither households nor mortgage providers are taking the bait of low borrowing costs."
Banks themselves seem to be constrained by the still frustratingly high ratios of debt to disposable income. " A further factor that has entered the equation quite recently is the explosive growth of unsecured loans. These factors form an important brake on granting mortgage bonds- and one can add to this concoction the expected sharp increase in utility charges, more modest salary increases this year, and the fact that house prices are still very high in real terms," concludes Rode.
Flat commercial property market in 2012 - FNB
29 March 2012
""A flat commercial property market in 2012 is on the cards, based on signs of economic weakness and rising vacancies. According to John Loos, household sector and property strategist at FNB, FNB's All Commercial Property Performance Indices have begun to point to weakening performance ahead. Loos says," The third quarter did see some rise in the All Commercial Property average price growth rate. However, it also saw a very slight rise in the average capitalisation rate,and more significantly the FNB All Commercial Vacancy Rate Index rose noticeably for two consecutive quarters, from an index level of 93.6 as at the first quarter of 2011 to 97.7 by the third. This is the highest vacancy index reading since the fourth quarter of 2005."
If this trend continues it could dampen rental income prospects, leading to a noticeable rise in capitalisation rates. This in turn can put downward pressure on price growth. Based on global leading business cycle indicators, 2012 is expected to be a weaker global economic growth year than 2011.
Says Loos," Not only would a weakening economy be expected to exert upward pressure on commercial vacancies, but concerns about global economic prospects also tend to exert upward pressure on long bond yields of emerging economies such as South Africa, as investors flee for 'safe havens' in the developed world." He adds, " A further sign of possible looming commercial property price weakness is the slowing in year-on-year price growth in the residential market in recent months."
Property Prognosis for 2012- Professor Francois Viruly
25 March 2012
Professor Francois Viruly, Owner of Viruly Consulting and a professor at the University of Cape Town comments that much of the focus for property investment in 2011 was on tenant retention, which was critical for most property owners. In addition, a great deal of attention was paid to operating costs, which have steadily been rising. "This remains one of the critical threats to the market as operating costs are eating away at net property income," Francios says.
One of the sectors that has been showing strength, he says, is the retail sector. "Going into 2012, property investors will carry on focusing on retail opportunities across the African continent. There are a multitude of opportunities in Africa and investors and developers in South Africa will have to be prepared to compete," he explains." Of course, there is the recurring question of whether South Africa is overshopped, but new opportunities arise as the type of developments tends to change. I suspect many of the projects that have come to the fore in the past year have not necessarily been undertaken because of improving market conditions, but rather because building costs have come down, making projects more feasible," Francois adds.
He believes that the opportunities in the coming years will largely present themselves at the micro-level, in specific areas and related to particular opportunities such as those, along transport corridors and in burgeoning towns around the country. Towns like Stilpoort and Burgersfort have seen increased development thanks to the demand for commodities and growth in mining activity in the region. These smaller towns across the country will continue to offer opportunities.
The office sector is likely to experience improved vacancy rates in 2012. Building activity has slowed and there has been some increase in the take-up of office space." By the end of 2012 the fundamentals of the sector will probably start to look better, and rental increases by late 2012/2013 will likely start to increase to levels above the inflation rate," Francois notes.
However, he says the industrial sector will remain under considerable strain for some time. Some de-industrialisation of South Africa is taking place - much of it in the face of cheaper competition from China and India. The recession, coupled with rising costs and an unfavourable exchange rate, have all contributed to this. The sector may well benefit from the decrease in interest rates, but business conditions remain difficult at present.
Francois says the macro-economic environment remains highly uncertain, driven largely by fundamentals in the Euro Zone. The impact of this on the South African scenario is of serious concern to investors, he says.
In general on the local front, the banks do seem somewhat more willing to fund projects, and some deals that didn't materialise in 2010 or 2011 have now been done." I don't see a peaking of the property cycle before 2013/14 t the earliest, though," says Francois.
There are a couple of key themes that he says will prevail in the oming year - namely urbanisation, densification and transport - all of which are linked. As transport remains an issue and transport nodes become increasingly important, Francois believes tha we will see increasing development and densification around these nodes and along transport corridors. While some of these corridors will be at an urban level, others will connect cities across South Africa. As the need for densities along these corridors increases, we will start to see bulk being used more effectively and more vertical development taking place. Mixed-use developments will become more common with the increasing urbanisation, and the possibility of providing vertical mixed-use developments offers some exciting opportunities. Overall, he comments that those who will benefit in the coming years are those who not only correctly read the property cycle but who also understand the broader social trends and patterns that will influence South African cities over the longer term.