R580m inner-city property development for Cape Town

R580m inner-city property development for Cape Town


A massive R580 million development, including flats, parking and retail space within walking distance of Parliament, is set to change the face of the Cape Town city centre.

Investment and property development company Eurocape's plans for the first phase include 9 900m² of retail space and parking.

The development, in Roeland Street and sections of Hope Street, includes the building housing Equal Education's Bookery and may have a supermarket as an anchor tenant.

This is the latest in a series of major city centre developments and comes as the national Department of Public Works is demolishing eight buildings in the vicinity of Parliament to create short-term parking for parliamentary staff.

The first phase would cost more than R216m, including the land, and the cost of all phases would be R580m, said Simphiwe Mathebula, Eurocape's sales and marketing manager.

Plans for phase one were at an advanced stage and planning approvals were in place, he said.

"Tenants for more than 40 percent of the retail space have been secured. As soon as the balance has been secured, ground breaking will commence."

Phase two would include 100 flats for "young city workers" while the third phase could include more flats or offices.

The development was expected to be completed in 2013.

Public Works spokesman Thami Mchunu said the eight buildings around Parliament, which are being demolished at a cost of R11m, would be replaced by surface parking for parliamentary staff in the short term.

In the long term it would be an extension to the parliamentary precinct which could include offices.

In 2009 it was reported that housing for MPs also formed part of Eurocape's plans.

Mathebula said this might be included in phase three.

Plans for MP accommodation in the precinct depended on funding and approvals, said Mchunu.

Demolition was expected to be completed in November.

The Cape Argus recently reported that a 32-storey skyscraper, which would be the city's tallest, was also expected to be completed by the end of 2013, and would accommodate about 3 000 people.

The R1.6 billion Portside building will be between Buitengracht, Hans Strijdom Avenue and Bree and Mechau streets.

It is the biggest commercial building project in the city since Safmarine House was built in 1993.

Michael Bagraim, president of the Cape Chamber of Commerce and Industry, said the Eurocape and Portside developments showed "people have faith in the economy. Our city is making a comeback".

In April the Weekend Argus reported there were plans for the regeneration of six city precincts.

Public Works and Transport MEC Robin Carlisle said at the time these were the Artscape, Somerset, Prestwich Street, Government and Garage precincts and the area around Oude Molen, which would be named the Two Rivers Urban Park.

The Artscape Precinct would involve the expansion of the Cape Town International Convention Centre and the area around the theatre, and raising the Artscape Garden to freeway level, allowing for parking underneath.

The R4.5bn project would turn the area into a 24-hour entertainment zone, with coffee shops and about 30 000m 2 of retail space.

Plans for the Somerset Precinct, around Somerset Hospital, have not yet been finalised.

The plan for the Prestwich Street Precinct was to link the city with the V&A Waterfront via a pedestrian route similar to the fan mile between the CBD and Green Point for the Soccer World Cup.

The Government Precinct would centre on provincial government-owned buildings such as those in Dorp Street and the provincial administration building in Wale Street. Changes would include one main entrance to government buildings beneath the arches in Keerom Street, while a high-rise is to be built on the corner of Loop and Leeuwen streets to house government departments.

The Government Precinct comprises land in the Buitenkant, Mill, Hope and Roeland street areas. The government garage will move to the old abattoir site at Maitland, along with the ambulance depot, freeing up valuable land. Entrylevel housing is part of the plan.

The urban park around Oude Molen and the Valkenberg psychiatric hospital will be the base for a hi-tech medical park.

Allan Gray to relocate HQ to V&A Waterfront

Allan Gray to relocate HQ to V&A Waterfront

JSE-listed Growthpoint says it has committed R684m for a new development on the landmark V&A Waterfront with investment management firm, Allan Gray, as an anchor tenant.

In June 2011 the company took transfer of 50% of the Waterfront in Cape Town in a R4.9bn deal which has been described as one of the country’s largest property transactions yet. The Allan Gray headquarters will fall within the Clock Tower/Silo Square precinct and is expected to be ready for occupation in April 2013. A development blueprint is in the process of being put together with work scheduled to begin In September 2011. A retail component is on spec to cater for the Allan Gray staff.

CEO Nortbert Sasse says the property company’s long-term expectations for the V&A are for superior returns generated by completing all development opportunities. He also mentioned that the debt-funded Waterfront transaction took Growthpoint’s borrowings from R9.3bn to R14.3bn, increasing the company’s loan-to-value ratio from 29.9% to 37.8%. Growthpoint has a portfolio of 424 directly owned properties in South Africa valued at R32.5bn, it also owns 37 properties in Australia valued at R6.4bn and bought the V&A at a cost of R4.9bn.

In its annual results presentation, the property giant said it had posted an 8.1% rise in distributions to 131c per linked investment unit in the year ended June, compared with the previous financial year. Growthpoint Properties says given the global and economic uncertainties, higher interest margins on debt refinance and other pressures, it expects to show positive growth in distribution of between 3% and 7% in the next financial year.

CEO Norbert Sasse has attributed its performance to aggressive property management, vigilant control of arrears, fortified portfolio occupancy levels and the distribution enhancing performance of Growthpoint Properties Australia (GOZ) in which Growthpoint has a 61% holding.

With regards to its investment in Australia, Sasse says the venture continues to perform positively with the strong Australian dollar providing an additional boost to the company’s distributions. Its total return over the past year has amounted to 28.6% made up of an income return of 11.4% and a capital return of 17.2%. GOZ has acquired 15 properties during the year, bringing its total number of properties to 37 across Australia and increasing the value of the GOZ portfolio to just more than Aus$1bn. The portfolio there has gone from purely industrial properties to include a 28% spread of offices at year end.

Sasse says at a level of 7.4%, tenant arrears as a percentage of total monthly collectables have been successfully cut by Growthpoint to levels prior to the 2008/2009 global financial crisis. He added the company’s portfolio occupancy had strengthened during the year, with the overall vacancy level coming down from 6.4% to 5%. “The successful cutbacks in vacancies has been balanced against lacklustre demand, particularly for office space, in the context of a gruelling economic climate with low GDP growth and increasing unemployment figures,” Sasse said. He added that clients were generally seeking shorter leases, reflecting uncertainty on the outlook of the South African and global economies.

Bonitas curators to auction scheme`s `investment` properties

Bonitas curators to auction scheme`s `investment` properties

'Time to stop bad-mouthing the property market'

'Time to stop bad-mouthing the property market'

'Time to stop bad-mouthing the property market'


"Ongoing - and mostly unfounded - pessimism in the residential property market is threatening to become self-fulfilling prophecy."

So says Berry Everitt, MD of the Chas Everitt International property group, who notes: "The truth is that there are a great many positive indicators for property at the moment, and our industry as well as the banks and the economists should be doing more to reinforce and underline these in order to strengthen the recovery."

Writing in the Property Signposts newsletter, he says: "The truth is that home prices are rising again and while the average increase may not yet match inflation, more activity in the market and more sales will take care of that.

"What is more, it is important to communicate the fact that those who buy now before prices really start escalating are making a good move, for two reasons, the first being that they are getting more house for their money and the second that they are putting themselves in a position to make greater returns on their investments than if they wait until later in the property cycle to buy.

"Just ask anyone who bought in 2004 at the beginning of the last property boom, instead of waiting until 2007, when prices - and thus the costs of entering the market - were already sky-high."

Meanwhile, Everitt says, he is encouraged by the fact that sales volumes in most of his group's offices are substantially up on this time last year - and that the average time it is taking them to sell a well-priced home is down to around 10 to 12 weeks, a far cry from the average 20 to 24 weeks two years ago.

"To a large extent, this is because prospective buyers are generally in much better financial shape than they were two years ago, and thus better qualified to obtain home loans. Many debt defaults have been addressed and sorted out, household income levels are up and the average debt-to-income ratio has dropped below 77%, it's lowest level since the end of 2006."

And perhaps in recognition of this, he says, the banks have definitely been granting more loan approvals for the past few months.

"Consequently, I really think it is time now to let the August winds blow away any negativity, stop sitting on the fence and get involved in the market with a positive attitude. We have it in our power to create our own 'happy ending' instead of allowing the doomsayers to talk us into disaster."

Property News Gauteng: Increasing number of young expats returning to SA

Property News Gauteng: Increasing number of young expats returning to SA: Extreme weather conditions and geological events in many parts of the world this year, as well as prolonged political protests, huge financi...

Residential fixed investment hit by the lagged impact of the recession

Residential fixed investment hit by the lagged impact of the recession

The FNB Estate Agent Survey provides evidence to this effect.

Residential fixed investment has been hard hit in recent years by the lagged impact of the 2008 recession and residential property market slowdown, which in turn was caused by a global recession along with significant interest rate hiking from 2006 to 2008.

The decline in overall residential fixed investment started back in 2007, and has continued unabated up until early in 2011, according to the Reserve Bank’s (SARB) data. It is not only new building activity that has suffered but the additions and alterations market too, and sometimes even home maintenance has fallen short.

The FNB Estate Agent Survey provides evidence to this effect. The sample of agents has been of the opinion that, since the start of the survey back in 2004, there has been a broad decline in the percentage of home owners undertaking “value-adding upgrades” or “maintaining and making some improvements” on their homes. From 79.5% of total estimated homeowners in early-2004, agents see homeowners falling into these 2 categories of home investment as having declined to 41.5% of total homeowners in their areas.

This implies a major shift by a significant portion of homeowners towards “lesser forms” of home investment, namely “fully maintaining with no improvements”, “only attending to basic maintenance” and ”letting homes get run down”.

This is reflective of tough economic times as well as an ongoing obsession with consumption, by households, in order to maintain their material lifestyle in the short term. This propensity to consume can be seen in the SARB numbers, where saving is so low that households remain in a situation of “net dis-saving”, i.e. where the little gross saving that exists is insufficient to cover the depreciation on fixed assets owned by households. In the 1st quarter of 2011, the SARB reports that real household consumption expenditure grew year-on-year by 5%, higher than real disposable income growth in the same quarter, while residential fixed investment was the victim of the need to trim expenditure, declining year-on-year by -4.9% in real terms.,

Not only did home investment/upgrades suffer, but building of new homes has also been reduced greatly. From the peak of building completions at the end of 2005, square metres completed had dropped by -57.4% by the 2nd quarter of 2011.

However, there is some sign of stabilization at these lower levels of building activity. In the 2nd quarter of 2011, square metres of residential buildings completed were only marginally down year-on-year by -3.2%, after far greater drops in earlier quarters. Interest rates remain low, existing residential demand has picked up since the lows of 2008/9, and one would expect building activity to respond positively to these events with a lag. However, we expect stabilization and very low growth in completions at best in 2012, as the household sector remains financially stressed, supply overhangs in many existing markets remain, and existing home bargains are still to be found. On top of this, estimated replacement costs of homes are on average 21.7 higher than existing home prices. Therefore, after a projected -0.8% slight decline for 2011 as a whole, we forecast a mild +2.4% growth rate in square metres of residential buildings completed for 2012 as a whole.

In addition, economic growth slowdown is at hand, and the risk of a 2nd global recession is significant. Under those conditions, we would expect any residential building sector growth to run out of steam towards the latter stage of 2012.

The relative bright spot is expected to be the Affordable Housing Market, which we think should be the key driver of any building activity growth that may take place, having been the least oversupplied market following the property boom.

___________________________

You can view the FULL REPORT here.

Gareth

Valuation of Property

Valuing of property

It is essential to understand how banks go about property valuations.
The property media have done an excellent job in educating and informing the general public on property matters and their increased knowledge has become apparent in the questions they put to agents and the requests they regularly make for carefully researched information to back up the agent’s statements.

Nevertheless many surprising “patches of ignorance” still exist – one of which concerns the valuing of property.

South African valuers operate to international standards, but this does not mean that all valuations will be the same or be what the agent, seller or buyer feel they should be.

The most important fact to grasp is that the bank valuer is there to assess how the property rates in relation to the price being paid for it, i.e. how much security its value offers the bank.

A valuer is not there to check on the physical state of the property or what parts of it need repair.

Bank and other valuers use a number of tools to do a market related price valuation, one of which will be a Comparative Market Analysis. This tries to fix a realistic value for the home by comparing it to similar properties in the area that have sold recently.

CMAs are, of course, an inexact science because no two homes are the same, even when they have the same designs and are in the same estate. In particular, the condition of one home may be very different from that of another – its defects, or lack of them – should lead to a different valuation but often do not.

Where a property has obvious defects, but the valuer feels that the valuation can be reached if these are fixed, valuers may take cognisance of such defects by calculating what it would cost to repair them and inserting a retention clause stipulating that specialised repairs have to be carried out before the Bond can be registered.

Municipal valuations can be useful guidelines, provided it is accepted that these days they are often far higher (as much as 20%) than the market value – the aim of the municipalities being to increase their rates and taxes.

Another guideline in establishing a fair valuation may be the insurance value – but as this will take into account the cost of replacing the home, it, too, will probably be high because, in today’s market, building a new home is 20 to 30% more expensive than buying one “second hand”.

Valuations become exceptionally important when a buyer is applying for a bond. Quite often the bond applicant will, possibly on his estate agent’s advice, make an offer only to find that the banks’ valuers see the property as being considerably less. The bank will then be prepared to issue a bond only in relation to their valuation.

In these cases if market value is not found, a good bond originator may be able to persuade the bank that their valuation is not market related or he may be able to get the buyer and seller to rectify defects which will make the higher valuation valid.

It has to be understood that a home may have certain features (e.g. proximity to a school or an especially attractive garden) which give it huge value for some buyers but might reduce its appeal to other buyers.

In a willing buyer, willing seller market, where a bank does not find value, we always suggest that the valuer meets with the estate agent selling the property and have a relook at the comparative market analysis and decide what it is about this property that detracts from the value as calculated by the valuer.

This will enable the agent to find out what the bank thinks should be changed or improved before they will consider granting the loan and often matters can then be put right.

*Rob Lawrence is the National Manager of Rawson Finance, the Bond Originators for the Rawson Group.