Nedbank backs inner city development
Nedbank Corporate Property Finance has again thrown its weight behind urban renewal and the revitalisation of the inner city by backing another development in the CBD of Johannesburg, the powerhouse of Africa.
In a R41 million finance deal, Nedbank has backed the redevelopment of the existing nine-storey building at 16 Frederick Street in Marshalltown into a modern residential apartment building. Once completed, the property will boast a total GLA of 4 503m2, consisting of 138 residential units, including 68 studio units, 48 one-bedroom units, 17 two-bedroom units and five duplexes, as well as 300m2 of retail space on the ground floor and 36 parking bays in the basement.
A sales agreement has already been concluded with Diluculo Investments (Pty) Ltd for the purchase of the building based on the rental return calculation, on completion of the refurbishment. The deal forms part of Diluculo’s long-term strategy to acquire residential units specifically in the affordable housing rental market.
The development of 16 Frederick Street is being undertaken by Lemay Properties (Pty) Ltd, which fulfils the role of developer, and Lemay Construction (Pty) Ltd as the main turnkey contractor.
This is the second finance partnership Nedbank Corporate Property Finance has entered into with the Lemay Group, reaffirming Nedbank Corporate Property Finance’s approach of working closely with clients to provide financial solutions that anticipate and fulfil the requirement for growth and expansion. Last year, Nedbank Corporate Property Finance provided finance for the R100 million redevelopment of an office building situated at 29 Kerk Street in the Johannesburg CBD, also for sale to Diluculo on completion of the refurbishment, which was completed in an impressive five month contract period without sacrificing quality.
“Nedbank Corporate Property Finance is pleased to participate in the exciting urban renewal taking place in inner city Johannesburg, the powerhouse of Africa,” says Ken Reynolds, Nedbank Corporate Property Finance divisional executive for Gauteng. “The nine-storey building is well-located in the heart of the CBD, on the corner of Frederick and Sauer Streets, directly opposite the Standard Bank superblock. It offers easy and convenient accessibility to various transportation nodes, including the Metro Taxi rank and Ghandi Square Bus Terminal.
The project falls within the Urban Development Zone of the Johannesburg CBD, the focus point of the inner city development programme aimed at converting old, derelict office buildings into good quality residential developments. The surrounding buildings are in impeccable condition, and this building is, in fact, the only one available in this node for a full refurbishment for an ‘A’ grade tenant. Demand for residential accommodation in the area is strong in light of the ongoing shift of young professionals from outlying regions into the CBD to benefit from living close to work, educational institutions, transport and amenities. All these factors ensure that this is yet another successful inner city project backed by Nedbank Corporate Property Finance,” concludes Reynolds.
Lemay Construction was established in 2009 to initiate the shareholders’ own opportunities in property development as well as to source construction work through the tender market. Lemay Properties was established shortly after to complement the construction division with the sourcing of development opportunities and the management of acquisitions and properties.
Although recently established, the directors and management team at Lemay have a combined experience exceeding 60 years in the construction and property development industry, specifically in urban renewal projects.
In addition to Lemay acting as project managers, quantity surveyors, main contractors and developers, the professional team for this development includes Interspace Architects; Lidwala Consulting Engineers; Stander Associates acting as the structural engineers and Bergman Fisher Associates (BFA) as the electrical engineers.
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- Gareth Shepperson
- Pretoria, Gauteng Province, South Africa
- Property Lawyer & Conveyancer ... Lover of Life in general!! www.prop-law.co.za In this Blog we have always brought you the latest PROPERTY NEWS but now we will also bring you a Q & A SECTION, where we answer readers questions. Please e-mail your questions to gareth@propertylaw.onmicrosoft.com (The information contained in this Blog does NOT constitute legal advice. If you require legal advice, you are very welcome to contact me.)
08 September 2011
06 September 2011
Investec Property Fund to expand property portfolio
Investec Property Fund to expand property portfolio
Proposes R185m acquisition of two prime commercial properties in Gauteng.
Investec Property Fund Limited (“The Fund”), Investec’s recently launched listed property vehicle announces its intention to acquire two new properties as it grows its portfolio of quality South African real estate. This proposed transaction marks the Fund’s first acquisition since listing in April this year. The total value of the transaction will be R185 million, which will be paid in cash and funded initially by way of a bridging loan facility provided by Investec Bank.
Commenting on the news, Sam Leon, Chief Executive Officer of The Fund said: “As the first acquisition for the Fund, these are two attractive properties, in prime locations with strong tenants, which we believe offer good value at an attractive yield, which will enhance the earnings and growth prospects of the Fund.”
The properties are both located in Gauteng, in strong commercial areas. The first, The Innovation Building, is located in Randburg, and following a recent refurbishment provides 15,000 square metres of quality office accommodation, including parking and storage. It is situated on Bram Fischer Drive, one of the main arteries of the Randburg CBD, in easy reach of the highways and is a landmark building in the area. A ten year lease has been concluded with a tenant.
The second property is the 5,733 square metre Scientific Building, part of the new Cosmo Business Park, just north of the Kya Sands industrial node, with direct access to Malibongwe Drive and in close proximity to Lanseria Airport. The building is home to the Scientific Group who have signed a seven year, triple net lease.
An independent valuation performed on the properties provided a valuation of R194.5 million which is above the purchase consideration. In terms of the unaudited forecast financial performance of the properties over the next 18 months the directors are confident that the proposed transaction will increase the distributions to be paid to the linked unit holders of the Fund.
Sam Leon added: “The Fund was established with the purpose of investing in direct real estate where there is potential for income generation and capital growth. These properties fulfill our acquisition criteria with quality tenants in place and will enhance the distribution prospects of the Fund going forward.”
The acquisition is subject to the approval of the unit holders of the Fund and this will be sought at a general meeting.
Proposes R185m acquisition of two prime commercial properties in Gauteng.
Investec Property Fund Limited (“The Fund”), Investec’s recently launched listed property vehicle announces its intention to acquire two new properties as it grows its portfolio of quality South African real estate. This proposed transaction marks the Fund’s first acquisition since listing in April this year. The total value of the transaction will be R185 million, which will be paid in cash and funded initially by way of a bridging loan facility provided by Investec Bank.
Commenting on the news, Sam Leon, Chief Executive Officer of The Fund said: “As the first acquisition for the Fund, these are two attractive properties, in prime locations with strong tenants, which we believe offer good value at an attractive yield, which will enhance the earnings and growth prospects of the Fund.”
The properties are both located in Gauteng, in strong commercial areas. The first, The Innovation Building, is located in Randburg, and following a recent refurbishment provides 15,000 square metres of quality office accommodation, including parking and storage. It is situated on Bram Fischer Drive, one of the main arteries of the Randburg CBD, in easy reach of the highways and is a landmark building in the area. A ten year lease has been concluded with a tenant.
The second property is the 5,733 square metre Scientific Building, part of the new Cosmo Business Park, just north of the Kya Sands industrial node, with direct access to Malibongwe Drive and in close proximity to Lanseria Airport. The building is home to the Scientific Group who have signed a seven year, triple net lease.
An independent valuation performed on the properties provided a valuation of R194.5 million which is above the purchase consideration. In terms of the unaudited forecast financial performance of the properties over the next 18 months the directors are confident that the proposed transaction will increase the distributions to be paid to the linked unit holders of the Fund.
Sam Leon added: “The Fund was established with the purpose of investing in direct real estate where there is potential for income generation and capital growth. These properties fulfill our acquisition criteria with quality tenants in place and will enhance the distribution prospects of the Fund going forward.”
The acquisition is subject to the approval of the unit holders of the Fund and this will be sought at a general meeting.
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05 September 2011
End of the road for disastrous luxury North West development (Platinum Planet)
End of the road for disastrous luxury North West "Metsi Pepa" development
Only a portion of investors in the controversial and now defunct luxury Metsi Pepa development in the North West province can expect to get a percentage of their money back, depending on who they paid their hard earned cash to.
As recently as July 13 2011, developers Nicola and Jaco Prinsloo promised investors that the project was on track and that the development would be completed towards the end of the year.
But, last week Nicola Prinsloo and her attorney Johan Botha confirmed to Moneyweb that the land had been sold to government for less than 30% of its commercial value. A settlement was reached with the Department of Rural Development after protracted negotiations. Botha says investors who paid deposits or full amounts when the development was first sold in 2007 will be able to apply for compensation, with conditions, and this is where the waters become muddied. More than 200 people invested their money in this development.
Prinsloo says only investors who paid monies directly to Metsi Pepa’s nominated lawyers and auditors will qualify to apply for compensation. Those who paid the marketing company Platinum Planet at the time will unfortunately not. Botha says it has emerged that several individuals had paid their deposits or full amounts to Platinum Planet headed by Cherie Eilertsen whom some have described as the “evangelist” of property.
In the past year, Moneyweb has been inundated with complaints over Eilertsten’s hard-hitting direct marketing strategies which have left people out of pocket and in some instances bankrupt.
Several attempts have been made to reach Eilertsen to ascertain what has happened to the deposits and other revenue paid to her, but she has not responded.
The Metsi Pepa development, situated between Potchefstroom and Carletonville, has been dogged by controversy since its inception and if that wasn’t enough it was recently burnt down in a spate of fires in the North West province. In fact, it’s been alleged that the fire originated on Metsi Pepa, destroying 6 000 hectares of farmland and killing scores of small wild animals on the property. It’s been alleged that Eskom workers were accidently responsible for the blaze.
Surrounding farmers also suffered damages running into millions. It’s understood the farm had already been sold at the time of the catastrophe which happened towards the end of August 2011.
Only a portion of investors in the controversial and now defunct luxury Metsi Pepa development in the North West province can expect to get a percentage of their money back, depending on who they paid their hard earned cash to.
As recently as July 13 2011, developers Nicola and Jaco Prinsloo promised investors that the project was on track and that the development would be completed towards the end of the year.
But, last week Nicola Prinsloo and her attorney Johan Botha confirmed to Moneyweb that the land had been sold to government for less than 30% of its commercial value. A settlement was reached with the Department of Rural Development after protracted negotiations. Botha says investors who paid deposits or full amounts when the development was first sold in 2007 will be able to apply for compensation, with conditions, and this is where the waters become muddied. More than 200 people invested their money in this development.
Prinsloo says only investors who paid monies directly to Metsi Pepa’s nominated lawyers and auditors will qualify to apply for compensation. Those who paid the marketing company Platinum Planet at the time will unfortunately not. Botha says it has emerged that several individuals had paid their deposits or full amounts to Platinum Planet headed by Cherie Eilertsen whom some have described as the “evangelist” of property.
In the past year, Moneyweb has been inundated with complaints over Eilertsten’s hard-hitting direct marketing strategies which have left people out of pocket and in some instances bankrupt.
Several attempts have been made to reach Eilertsen to ascertain what has happened to the deposits and other revenue paid to her, but she has not responded.
The Metsi Pepa development, situated between Potchefstroom and Carletonville, has been dogged by controversy since its inception and if that wasn’t enough it was recently burnt down in a spate of fires in the North West province. In fact, it’s been alleged that the fire originated on Metsi Pepa, destroying 6 000 hectares of farmland and killing scores of small wild animals on the property. It’s been alleged that Eskom workers were accidently responsible for the blaze.
Surrounding farmers also suffered damages running into millions. It’s understood the farm had already been sold at the time of the catastrophe which happened towards the end of August 2011.
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Young property buyers make a comeback
Young property buyers are reportedly making a comeback and supporting the residential property market in South Africa thanks to improved market conditions.
According to the FNB Property Barometer First Time and Age Group Property Buying Q2 2011, an estimated 25 percent of buyers were first-time buyers. This is up from 22 percent in Q1 2011 and higher than the low of 12 percent reached in Q3 2008 as the recession hit.
FNB Home Loans property strategist, John Loos, says this reflects improvement in the property market since the 2008 recession and the peak in interest rates.
“The percentage of young buyers would also suggest an environment still far more benign than early last decade where the 20 and the under age group reached a 20.6 percent peak in 2001,” says Loos.
He explains that since 2009, there has been evidence of something of a young buyer comeback both in the FNB Estate Agent Survey and the Deeds Office data for property purchases by individuals.
Long before tightened credit requirements in 2008, younger buyers started to decline in significance due to sharply rising house prices, which gave rise to an affordability issue.
Estate agents, according to the FNB Property surveys started to report a decline in the percentage of first-time buyers in 2006 while the Deeds Office data reported that the 30 and under age group peaked as a percentage of total buyers as early as 2001.
The Deeds Office data indicates that since early 2010 the younger age groups have been playing a more prominent role in supporting home buying demand. From a low of 15.1 percent as at the Q3 2009, the fourth quarter moving average percentage of “age 30 and below” buyers rose to 16.9 percent as at the Q2 2010. The 31 to 40 year age group’s percentage rose from 29.6 percent to 31.1 percent of total buying.
“Trends in buyer age groups can be an important indicator of the economic and interest rate environment.”
Younger buyers in their 20s and even some in their 30s have more flexibility. Often having not yet established a family, they have basic residential needs. They can opt to stay with their parents for longer or rent.
“Young aspirant buyers have accumulated fewer saving and are more sensitive to deposit requirements by banks and house price fluctuations,” says Loos.
He says there is a high degree of cyclicality in first-time or in younger age group home buying in general. These groups stay out of the market in greater numbers than their older counterparts and enter at a more rapid rate off a low base once conditions turn for the better.
The 61 year old and older age group is the least cyclical, being far less dependent on credit and having more wealth in store to weather the storms. This group saw its percentage of total buying rise sharply through the 2008 recession as younger age groups felt the pinch and pulled back, peaking at 13.56 percent for the four quarters to Q3 2009.
Loos says the 61 and older age group never reached the same high percentage of total buying that it did in 1998 (16.3 percent for the four quarters of that year).
That was the year that interest rates spiked to 25.5 percent prime. It was admittedly short-lived, and interest rates fell dramatically soon thereafter.
He adds that the composition of age group buying is an important indicator of the general environment, which includes economic growth, interest rates, inflation, bank lending criteria and home affordability.
Right now, we’re somewhere “midway between great and bad”, with young buyers having increased in prominence since 2008, but not having reached the same high percentages of the boom years. The less cyclical over 60s have declined in prominence, as they do in better times, but at 11.75 percent of total buying they are not yet near the low of 9 percent of total buying reached in 2006.
According to the FNB Property Barometer First Time and Age Group Property Buying Q2 2011, an estimated 25 percent of buyers were first-time buyers. This is up from 22 percent in Q1 2011 and higher than the low of 12 percent reached in Q3 2008 as the recession hit.
FNB Home Loans property strategist, John Loos, says this reflects improvement in the property market since the 2008 recession and the peak in interest rates.
“The percentage of young buyers would also suggest an environment still far more benign than early last decade where the 20 and the under age group reached a 20.6 percent peak in 2001,” says Loos.
He explains that since 2009, there has been evidence of something of a young buyer comeback both in the FNB Estate Agent Survey and the Deeds Office data for property purchases by individuals.
Long before tightened credit requirements in 2008, younger buyers started to decline in significance due to sharply rising house prices, which gave rise to an affordability issue.
Estate agents, according to the FNB Property surveys started to report a decline in the percentage of first-time buyers in 2006 while the Deeds Office data reported that the 30 and under age group peaked as a percentage of total buyers as early as 2001.
The Deeds Office data indicates that since early 2010 the younger age groups have been playing a more prominent role in supporting home buying demand. From a low of 15.1 percent as at the Q3 2009, the fourth quarter moving average percentage of “age 30 and below” buyers rose to 16.9 percent as at the Q2 2010. The 31 to 40 year age group’s percentage rose from 29.6 percent to 31.1 percent of total buying.
“Trends in buyer age groups can be an important indicator of the economic and interest rate environment.”
Younger buyers in their 20s and even some in their 30s have more flexibility. Often having not yet established a family, they have basic residential needs. They can opt to stay with their parents for longer or rent.
“Young aspirant buyers have accumulated fewer saving and are more sensitive to deposit requirements by banks and house price fluctuations,” says Loos.
He says there is a high degree of cyclicality in first-time or in younger age group home buying in general. These groups stay out of the market in greater numbers than their older counterparts and enter at a more rapid rate off a low base once conditions turn for the better.
The 61 year old and older age group is the least cyclical, being far less dependent on credit and having more wealth in store to weather the storms. This group saw its percentage of total buying rise sharply through the 2008 recession as younger age groups felt the pinch and pulled back, peaking at 13.56 percent for the four quarters to Q3 2009.
Loos says the 61 and older age group never reached the same high percentage of total buying that it did in 1998 (16.3 percent for the four quarters of that year).
That was the year that interest rates spiked to 25.5 percent prime. It was admittedly short-lived, and interest rates fell dramatically soon thereafter.
He adds that the composition of age group buying is an important indicator of the general environment, which includes economic growth, interest rates, inflation, bank lending criteria and home affordability.
Right now, we’re somewhere “midway between great and bad”, with young buyers having increased in prominence since 2008, but not having reached the same high percentages of the boom years. The less cyclical over 60s have declined in prominence, as they do in better times, but at 11.75 percent of total buying they are not yet near the low of 9 percent of total buying reached in 2006.
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FNB house price index up 6%
FNB house price index up 6%
FNB house price index up 6%
August FNB House price numbers are providing a mixed picture for the residential property sector according to John Loos, property market strategist at FNB Home Loans.
In year-on-year (y/y) terms, the FNB House Price Index growth rate continued to accelerate, he said; the index rose by 6.1% y/y in August. This represented an increase on the revised growth rate of 4.8% for July and a reflection, with a lag, of the mild resurgence in demand in the summer of 2010/11.
Loos said that in real terms, adjusted for CPI inflation, the y/y percentage change for July was still mildly negative to the tune of -0.5%, given that CPI inflation in July was 5.3% and the revised nominal house price growth rate for that month was 4.8%. Given the further acceleration in nominal house price growth in August, it was quite possible that last month would show the first positive real y/y house price growth since October last year.
He said that on the other hand, while the seasonally-adjusted month-on-month growth rate continued to point to still-positive growth, it also indicated a slowing in growth momentum. This arguably reflected some weakening demand, more recently during the winter months, not only as a result of seasonal factors but also due to no further interest rate cuts in 2011 as well as slowing economic growth (and likely household income growth too). Simultaneously, FNB's valuers continue to suggest a deteriorating balance between supply and demand.
Despite the recent rise in y/y house-price growth, FNB's expectations remained modest against a backdrop of slowing economic growth with a not-insignificant risk of global and local recession according to Loos. In addition, monetary policy was not as relaxed as it seemed when examined in real terms. Real interest rates, by both of FNB's measures, have been declining in recent months.
Loos explained that without much economic or interest rate stimulus, FNB's valuers implicitly suggested that there should be further market correction to come. Whether that correction was in nominal or real terms, though, for the time being the FNB valuers' impressions of the market imbalance, coupled to the FNB Estate Agent Surveys of recent quarters, which estimated the average time of homes on the market to be near to a lengthy four months, suggested that this recent surge in y/y house price growth was not yet the start of a sustained longer term accelerating trend.
FNB house price index up 6%
August FNB House price numbers are providing a mixed picture for the residential property sector according to John Loos, property market strategist at FNB Home Loans.
In year-on-year (y/y) terms, the FNB House Price Index growth rate continued to accelerate, he said; the index rose by 6.1% y/y in August. This represented an increase on the revised growth rate of 4.8% for July and a reflection, with a lag, of the mild resurgence in demand in the summer of 2010/11.
Loos said that in real terms, adjusted for CPI inflation, the y/y percentage change for July was still mildly negative to the tune of -0.5%, given that CPI inflation in July was 5.3% and the revised nominal house price growth rate for that month was 4.8%. Given the further acceleration in nominal house price growth in August, it was quite possible that last month would show the first positive real y/y house price growth since October last year.
He said that on the other hand, while the seasonally-adjusted month-on-month growth rate continued to point to still-positive growth, it also indicated a slowing in growth momentum. This arguably reflected some weakening demand, more recently during the winter months, not only as a result of seasonal factors but also due to no further interest rate cuts in 2011 as well as slowing economic growth (and likely household income growth too). Simultaneously, FNB's valuers continue to suggest a deteriorating balance between supply and demand.
Despite the recent rise in y/y house-price growth, FNB's expectations remained modest against a backdrop of slowing economic growth with a not-insignificant risk of global and local recession according to Loos. In addition, monetary policy was not as relaxed as it seemed when examined in real terms. Real interest rates, by both of FNB's measures, have been declining in recent months.
Loos explained that without much economic or interest rate stimulus, FNB's valuers implicitly suggested that there should be further market correction to come. Whether that correction was in nominal or real terms, though, for the time being the FNB valuers' impressions of the market imbalance, coupled to the FNB Estate Agent Surveys of recent quarters, which estimated the average time of homes on the market to be near to a lengthy four months, suggested that this recent surge in y/y house price growth was not yet the start of a sustained longer term accelerating trend.
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