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PRETORIA, GP, South Africa
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30 November 2011

Makro`s distribution centre to be expanded

Makro`s distribution centre to be expanded

Investec Property on Tuesday said it had secured the development rights for Makro's distribution centre in Midrand, north of Johannesburg.

The distribution centre is to undergo a massive refurbishment and development that will see the existing premises expand from approximately 16,000 square metres to 27,000 square metres.

Investec Property is a division of Investec Bank (INP, INL) and one of SA's leading property operations.

Makro, which operates within Massmart's (MSM) Masswarehouse division, required an expanded facility for its central distribution centre, ideally without having to relocate, as well as being able to keep the facility fully operational during the construction period.

Investec Property, through its relationship and engagement with the tenant and the existing owner of the property were able to provide a creative and entrepreneurial solution to meet the client's exact needs, it said.

The current distribution centre will be transformed into a modern facility and will include an additional 11,000 square metres of warehousing space.
Improvements to the site will include an expanded yard area and a new perimeter ring road to facilitate more efficient vehicular movement.

The fire control systems and sprinklers will also be upgraded during this process maintaining a strong focus on safety.

"We were able to provide a long term warehousing solution to accommodate Makro's requirements. We are proud of our contribution to this important development for one of SA's major retail groups," Investec Property's David Rosmarin said.

Doug Jones, Masswarehouse commercial director, said it was particularly important for the group that its current operating capacity was not compromised during the building phase, so that it could continue to ensure that its customers' needs were met without interruption or unnecessary cost.

Construction has commenced on the facility, which will be delivered by the end of July next year.

Where to for property in 2012?

Where to for property in 2012?

No one could claim that the South African property market has done well in 2011. Sellers are finding that their estimated prices need to be lowered; buyers are eager but struggle to buy with banks hesitant to approve home loans. The result is that the market suffers and speculation is rife as to how long this downturn will last.

While the debate is relevant it is only so in the short term. This is because property really is a long term investment and seen from this perspective the current market down-turn takes on a different level of importance.

One mustn't forget that for most South African households owning a home equates to a good investment and stability which in the long term is not overly affected by the international drama. Consumers being transferred or being in need of up or downgrading or all the other good reasons for buying or selling, can do so under any market conditions. For the run of the mill property owner life goes on, for the investor the short term market remains depressed.

Those buyers who plan to sit on their newly purchased properties for the next four to six years will not be overly affected by the current property maelstrom. It also remains true that while the property market fluctuates in the short term, long term prices continue to increase. As such, those in the know still recommend buying, if you can afford it now and you can afford to sit on the property for a period.

That being said, the current market has far from recovered. It is a seriously ill patient. All indications are that the patient will recover - given the right medication such as the government's R1 billion mortgage-backed insurance fund. The National Housing Finance Corporation (NHFC) chief executive, Samson Moraba, confirmed last week that the fund will be operational by October 2012 and will aim to galvanize banks into approving more home loans.

While it is true that our banks were largely exempt from the international banking woes the current global situation has made them more skittish than usual. The insurance fund will hopefully ease their concerns through mitigating the risk to banks by being "a wholly owned subsidiary of the NHFC but registered, licensed and regulated by the Financial Services Board in terms of compliance with the regulations and its solvency requirements", says Moraba (as quoted in a Business Report:)

According to the same report Marius Marais, the chief executive of First National Bank (FNB) Housing Finance, is of the opinion that the fund could decrease the cost of mortgage insurance as all mortgage bonds would be pooled into one and the risk shared on a bigger portfolio base.

Other positive indicators are: the downward trend in the ratio household income versus debt which peaked at 82% but is now in the upper 70%. This is a positive sign but is still far too high (although much better than most first world countries at present!). The patient is getting the right treatment - household debt is coming down and the interest rates are stable.

There is however a few risk factors that need to be dealt with. Firstly the fact that the current international, financial crisis looks to be far from over with analysts and citizens alike waiting with baited breath to see if Italy will be able to make its debt repayments.

Secondly, we have our own political hot pot brewing with the leadership struggles in the ANC which are set to intensify in 2012. Anyone who witnessed the impact of the Polokwane conference knows the potential for market unrest during this period.

All being said and done does it mean potential property buyers need to wait? Not necessarily says John Loos as quoted in Moneyweb: “it’s important, I think, in these tough times to buy well within your means. Yes, some do still believe interest rates will go up later this year or early next year and ultimately interest rates always do go up. But it’s not only about that, it’s also about all the costs being heaped on to housing, we know about Eskom and we know about municipalities. So, in these tough economic times, tough financial times, I think it’s always good to buy within one’s means if one is entering the property market.”

And that seems to be the best advice for the moment – by all means buy property yes; in the long run it will be a valuable investment. But, buy within your means and take a long term view. Investors seeking to make a quick buck might want to think twice.

*Bruce Swain is the Managing Director of Leapfrog Property Group.

Best-of-the-best in SA shopping centres revealed at the Spectrum Awards

Best-of-the-best in SA shopping centres revealed at the Spectrum Awards

Mall of the North in Polokwane, Canal Walk Shopping Centre in Cape Town, Cape Union Mart Adventure Centre at Canal Walk and Supercare Cleaning Services at Paarl Mall have all claimed top honours at the annual South African shopping centre industry awards.

The Spectrum Awards recognise excellence, innovation and service across four categories which underpin the retail centre sector in South Africa. An initiative of the South African Council of Shopping Centres (SACSC), finalists for the Spectrum Awards comprise winners of the regional Special Star Retailer and Service Provider Awards, the Footprint Marketing Awards and the Retail Design and Development Awards (RDDA).

Retail plays a vital role in the SA economy and shopping centres are at the heart of this significant economic activity. Furthering excellence in retail is of wide benefit and represents vast positive outcomes for consumers, retailers, shopping centres, service providers and the economy in general.

Mall of the North in Polokwane, Limpopo, scooped the prestigious Spectrum Retail Design Development Award, much to the delight of architect MDS Architecture and the centre’s joint owners and developers, JSE-listed Resilient Property Income Fund, Flanagan & Gerard Property Development & Investment and Moolman Group. This is the second consecutive year in which the team of MDS and Flanagan & Gerard have clinched this award.

The Spectrum RDDAs recognise exceptional shopping centre design, combined with economic success, within the South African property industry. Finalists for this award included Jubilee Mall in Hammanskraal, Pick n Pay on Nicol, Eastgate re-positioning phase one and the store design of Tasha's at The Zone @ Rosebank.

Nedbank Corporate Property Finance is the principal sponsor of the RDDA awards in 2011. “We are pleased to play a role in industry events such as the RDDA Awards. This involvement allows us to celebrate the hard work that goes into property design, as this is a discipline that brings together creative and commercial elements in the design and construction of retail space to the benefit of consumers,” says Frank Berkeley, Managing Executive of Nedbank Corporate Property Finance.

Cape Union Mart Adventure Centre at Canal Walk Shopping Centre in Cape Town triumphed in the National Retailer of the Year Award, delivering first-rate service. Category finalists included Dis-Chem La Lucia Mall in KwaZulu-Natal, SuperSpar Sunridge Village in the Eastern Cape and Fruit & Veg City Food Lovers’ Market at The Wedge in Gauteng.

Holding the spotlight, Canal Walk’s ‘Snow’ marketing campaign by Marketing Concepts won the Spectrum Shopping Centre Marketing Excellence Award 2011, the hotly-contested category which celebrates excellence in shopping centre marketing.

Regional finalists from KwaZulu-Natal included ‘Sugars The Bitter Truth’ at Chatsworth Centre and ‘The Pavilion contributes towards the building blocks of education’ at The Pavilion. Wonderpark Shopping Centre’s ‘Please donate your Small/Big/Brown/Silver Change’ represented the Gauteng region. In addition to the winner, Western Cape finalists comprised ‘J&B Met 2011’ at Cavendish Square, Canal Walk ‘Gets Social’ and ‘Growsmart’ which is undertaken at four Growthpoint Properties’ centres in the province, being The Constantia Village, Longbeach Mall, Golden Acre and Middestad Mall.

Making sure that our shopping centres remain attractive and safe are the industry service providers and this year Supercare Cleaning Services cleaned up in the National Service Provider of the Year category and won the Spectrum Award for its services at Paarl Mall.

Other smart finalists in this category included Prestige Cleaning Services at Gateway Theatre of Shopping in KwaZulu-Natal, Marina Landscapers at Fountains Mall in the Eastern Cape and Life Landscapes at Lifestyle Garden Centre in Gauteng.

The strong pack of entries in 2011 an excellent indication of retail sector innovation and business savvy in South Africa. It also shows the respect in which the highly coveted Spectrum Awards are held by the industry.

*Amanda Stops is the General Manager of SACSC.

29 November 2011

Liberty Properties to expand into east and west Africa

Liberty Properties to expand into east and west Africa - Property Moneyweb

Follows the successful launch of a $200m mall in Lusaka.

The property arm of JSE-listed Liberty Holdings (JSE:LBH) says the entity is looking to east and west Africa as possible destinations for development. Liberty Properties successfully launched a mixed use development comprising a 30 000m² upmarket mall, a 10 000m² office park and budget hotel in the Zambian capital, Lusaka, earlier this week. The Levy shopping centre is named after former Zambian president Levy Mwanawasa.

Liberty Properties’ CEO Samuel Ogbu says the company hopes to launch a project in west Africa within the first half of 2012. Ogbu said after the Zambian launch: “We’re looking at west Africa , we’re looking at east Africa. We’re looking at doing another one of these projects in Zambia, possibly in the copper belt. It doesn’t’ make sense just to do one. Zambia has been identified as one of the growth areas and we are also under pressure from retailers to grow capacity for them.”

In west Africa Liberty currently has its sights set on Nigeria and Ghana, while Kenya and Tanzania are its main focus in east Africa. “We’re not at a stage yet to tell you that a site has been identified and we’re ready to go. We need to be very cautious of who our partners are because the one thing we are not willing to do is to compromise on delivery,” Ogbu said.

The CEO said that further developments in Africa will be based on the Levy model but will obviously be tweaked in line with the needs of the destination chosen. “We want to build capacity which is actually cheaper in the long run than to keep flooding the place with expats. You do need the expatriate expertise to start, and you do need to ensure the standards are complied with and at times it does take time to build capacity. South Africa does add value but for it to be sustainable, you need local partners to play an active part.”

Liberty’s first foray into Africa was indeed a learning curve for it and other stakeholders, and the approach was unique. The aim was to build a facility in line with the needs of the community together with the input of local businesses and local authorities. It wasn’t all plain sailing as Ogbu explains: “We were very hands on and was guided by the client (funder, Zambia’s National Pension Scheme Authority). We were dealing with a different set of rules. Local authorities are set up to protect their citizens. Wwe had to learn their rules and make sure we complied with them.”

The realities of Africa and its lack of infrastructure also impacted the Zambian project as the arrival of goods for some tenants were delayed for five weeks due to border problems. Shipments were stuck at the Zimbabwean border due to computer glitches. Trying to get the goods through via Botswana also experienced problems. Shrugging his shoulders, Ogbu says: “I’ve learnt a new phrase: just roll with it.”

Another encouraging element of the Levy project was the partnerships formed between South African professionals and their Zambian counterparts, which was a prerequisite of the funder. Ogbu explains: “It worked through the procurement process and was part of the tender process. We made it clear it was not a question of merely getting a local face to a South African provider. There had to be effective input from a local partner, which meant that local partner had to have the capacity to deliver. It made the process longer and it made it a bit frustrating at times, but in the long term it leads to a much better result. It leads to a true transfer of skills and building capacity in the local market which I think is essential for a sustainable offering and is the difference between the approach that makes you welcome and not an intruder.”

He says the journey for some of the South African contractors had not been easy: “The temptation is there for the skilled South African partner to say stand aside, let me do it. But we said no, no, no, you’ve got to take that person along with you.”

In instances where there were differences of opinion on building techniques, Ogbu said: “If it’s the way they build there, you have to persuade them why yours is better. Even in the design phase there was a problem when it became clear local capacity was inadequate. We said okay let the South Africans do it, but we had to find a way to skill them.”

The mall manager is Zambian with a technical back-up team of South Africans who are partnering with locals who will eventually take over the running of the facility.

On a lighter note, Ogbu says cultural differences also provided several challenges notably when stakeholders were invited to a “roof wetting”. “We had to explain what it was before they would come.”

Ogbu says what is clear is that Africa is hungry for an upmarket shopping experience.

23 November 2011

What your rights are with 'prescribed debt'

What your rights are with 'prescribed debt'

Is a debt collector hounding you via letter, e-mail or SMS to pay a very old debt you can barely recall? If so, you need to get clued up on the term "prescribed debt".

In short, according to the Prescription Act, if in the past three years you have not made any payment towards settling a debt, acknowledged owing the debt in any way - including over the phone, agreed to pay it or been summonsed in respect of it, it has prescribed, and you can raise this as a defence when asked to pay it.

This excludes mortgage debt, taxes and any staterelated debt such as a television licence.

But here's the thing: it is perfectly legal for a debt collector or attorney to demand payment from a debtor for a prescribed debt, and if you succumb to the pressure and pay it, you can't raise the defence of prescription afterwards.

In other words, if you don't realise the debt you're being asked to pay has prescribed, and you pay it, you lose.

The idea was to compel creditors and their collecting agents to collect money owed to them within a defined period, to protect consumers from unscrupulous creditors and/or collectors who intentionally delay the recovery of their debt so that it accumulates massive amounts of interest and costs.

Of course, the debt-collecting industry argues that the act was never designed to give people an excuse not to pay their debts, as this would be morally wrong.

There is some merit in that argument, of course, but what's also morally wrong is for a collector to contact a consumer many years after an alleged default and demand that they pay a sum which they refuse to substantiate.

A firm notorious for doing just this is JM Attorneys of Randburg, which continues to hound former Health & Racquet Club members for payment of subscriptions allegedly owed to the group, which went into liquidation about 10 years ago.

Many debt collectors go into "pay up" overdrive in November and December, presumably hoping to snare a share of their targets' end-ofyear bonuses.

I've heard from three former Health & Racquet Club members in recent weeks, all of whom have received fresh demands from JM Attorneys on behalf of the "client".

Dylan Mcgarry was 16 in 1999 when he was given a limited free membership to H&R as a thank you for recruiting other members.

He was under-age at the time and could therefore not have signed a legal contract. Even if he had done so, and then failed to pay, that debt would have prescribed many years ago.

Still, JM Attorneys is demanding payment, based on a contract which is, in fact, a "physical activity and readiness questionnaire" which McGarry was asked to sign.

Now 29, he received a letter from the firm, dated October 17, headed "Negative Impact on your Future Job".

It reads: "Did you know that if you are listed with the major credit bureaus, your chances of getting employment in the future will be affected?

"You are making this difficult for yourself if you do not pay your Health & Racquet Club debt on or before 31 October, 2011."

His mother, Kathy Bennett, told Consumerwatch the first letter from JM Attorneys came on ominously bright red paper, in January last year, followed by another four since.

"And they are adding R37.34 to the alleged debt for the cost of every letter," Bennett said. The latest sum being demanded is a few cents less than R2 000.

"To receive that first red letter was horrifying, firstly that it was so long ago, and especially knowing that there was no debt in the first place."

The implied threat of blacklisting had rattled both of them, Bennett said, "as Dylan has studied and worked extremely hard at getting his PHD, on scholarships".

In another case, Michael Maphutse of Joburg paid his H&R debit order for 24 months, despite visiting the Watermeyer branch just twice, and never heard from the club after that. Then the company liquidated.

His first demand for payment from JM Attorneys came in 2006, and his most recent communication was via SMS on November 4.

Despite asking for a copy of his H&R contract and proof of arrears in two e-mails in 2006, he did not get a response.

Then this month he received a fax putting the burden of proof on him - he was asked to provide a host of documents as proof of the cancelled contract, acceptance of such cancellation, an affidavit and more in order to prove his claim not to owe any money.

I wrote to JM Attorneys' managing director, Gert Visser, setting out these two cases, plus a third, and asking, among other things, why the Mcgarry file had not been closed given that no contract existed in the first place, and why the firm continued to pursue consumers for payment when they had raised prescription as a defence, and the firm was unable to prove that this was not a valid defence.

I was asked for reference numbers for all three cases but Visser began his written response by saying that "we" would not comment on each case "as there are attorney/ client confidentiality requirements that we must not violate".

"The law of prescription was… never designed to provide a mechanism to attempt to evade liability and we are really not sure why you are suggesting that merely after an elapse of time somebody may attempt to evade payments of debt and why you seem to suggest that this is proper behaviour when we surely all know that a person must honour their obligations," Visser said.

He said that any threat of "blacklisting" was contrary to company policies "and we absolutely do not do so".

"It may be your understanding was incorrect and that you inadvertently thought that we might give adverse information to credit bureaus," he said.

Well, yes, when Mcgarry got that letter last month, headed "Negative Impact on your Future Job", followed by the words "Did you know that if you are listed with the major credit bureaus, your chances of getting employment in the future will be affected?", he might have "inadvertently" thought the firm was threatening to have his credit record "blacklisted".

Incidentally, according to the Credit Ombud, prescribed debt may not be listed on a person's credit record.

I'm not suggesting people should avoid paying their debt. But this is precisely the sort of "very old debt" scenario the Prescription Act was designed to protect consumers from.

In any event, the onus is on the person demanding the money to prove that it is owed, and to substantiate the amount being demanded, which has not happened in these cases.

I'd encourage consumers to use their bonuses to settle their current outstanding debts before spending it.

Wendy Knowler

Pretoria News

'Will the Consumer Protection Act make the voetstoots clause redundant?'

'Will the Consumer Protection Act make the voetstoots clause redundant?'

With the Consumer Protection Act now making it even more essential that the seller of a home declare openly any defects of which he is aware, it has been said by some estate agents that the voetstoots clause is now becoming redundant - the repair of almost any defect in the home discovered after the transfer of the property can, it has been said, now be claimed for.

Not so, says Anton du Plessis, CEO of the Cape Peninsula central southern suburb estate agency, Vineyard Estates.

Quoting a recent High Court case (Banda and Another vs van der Spuy and Another), du Plessis said this reinforced the voetstoots principle that, if the seller was not aware of the defect, he cannot after the sale be held responsible for it.

"In the case referred to," said du Plessis, "the van der Spuys sold their home to a Mr Banda. About one year prior to the sale, severe storms had damaged the roof and caused leaking. The insurer then paid for comprehensive repairs to be carried out and these were guaranteed for six months by the thatcher. The van der Spuys also informed Mr Banda of this and of the six month warranty.

"Subsequently, heavy winter rains (the home is in Villiersdorp, Cape) fell and the roof again leaked."

At the subsequent trial Mr Banda produced a specialist witness with extensive thatching experience who testified that the problem arose from a latent defect. This was that the 26 to 35 degree pitch of the roof was not steep enough to make the thatch efficient. It had, he said, to have a 45 degree pitch.

The judge, after listening to the technical backup to this statement, accepted its validity - but, he said, the sellers and their agent themselves being unaware of this, could not now be penalised on account of it - and, as the house had been sold voetstoots, the buyer had no claim on them. The sellers had been aware of the defects, had had them repaired and could therefore rightly consider themselves in the clear.

Du Plessis said that it had to be acknowledged that throughout SA legal history, sellers have "hidden behind" the voetstoots clause but in this case only an expert would have recognised the defect and the seller could not be blamed for it.

The voetstoots clause, therefore, could be enforced.

"What is interesting," he said, "is that I would guess that a significant percentage of thatched roofs in South Africa (perhaps 15%) do not have 45 degree roofs but most get away with it because they are not in high rainfall areas. House buyers looking at thatched homes should check the pitch and sellers from now on are advised to warn buyers in advance if the pitch is possibly inadequate."

Trudie Broekmann, a director of Gunstons Attorneys in Tokai, added that if the house was sold subsequent to the CPA becoming effective on 31st March 2011, the estate agent might well have been regarded by the court as a supplier of the property and would have been liable for the defect. Agents, she said, will not, like sellers, be protected by the voetstoots clause.

Vineyard Estates Press Release

22 November 2011

The secret to Vukile’s success

Cost management the secret to Vukile’s success

Property Fund plans on growing fund more aggressively.

Vukile Property Fund CEO, Laurence Rapp, says the company’s recent performance of net rental growth can largely be attributed to cost management generally and lowering the cost of funding. The company on Monday reported a 7.5% increase in its interim distribution to 54.31 cents per linked unit.

It says plans are underway to grow the fund more aggressively. This will include seeking opportunities in the Western Cape. Rapp says in Namibia Vukile’s properties in Rundu and Katima Mulilo are performing exceptionally well and now constitute 7% of the JSE-listed company’s portfolio.

The announced acquisition of 20 properties from Sanlam forms part of Vukile’s growth path and will add around R1.5bn or 25% to the value of its portfolio. Rapp says while it remains committed to being a diversified fund, the emphasis will be on retail.

“To this end, we are exploring acquisitions of retail centres as well as joint venture development opportunities in the retail environment that would complement our existing portfolio make-up. We also continue to believe in the strength and growth of retail in the emerging market and, based on the performance of our current retail assets, we will focus our expansion on this market segment,” Rapp said.

With regards to the Sanlam acquisition, Vukile will embark on several road shows in March 2012 to raise equity and debt for the deal.

Rapp says Vukile’s pipeline will also increasingly be exposed to office space. On the retail side, Vukile will be looking at the lower LSM retail in both rural and urban areas. This does not mean however, that it will not consider opportunities serving higher income groups should they present themselves.

“We will acquire some retail assets in the portfolio, notably Durban’s The Workshop, but the office assets being acquired will enhance the overall quality of our office portfolio as well,” Rapp says.

21 November 2011

Bishopscourt mansion a bargain at R98m

Bishopscourt mansion a bargain at R98m

The price includes imported interlined silk curtaining worth R5m.
JOHANNESBURG – A sprawling 3 500m² mansion in Cape Town’s exclusive Bishopscourt suburb has gone onto the market with the asking price set at a cool R98m. The price includes imported silk interlined curtaining worth R5m and some of the furniture.

Estate agent Ingrid McFarlane of Seeff Properties says the current owner is a well-known South African mining magnate who wants to scale down. Asked about the likely profile of a prospective buyer, McFarlane said it was likely to be a “black diamond”, referring to South Africa’s and Africa’s growing affluent and influential black community.

Interest is likely to come from the who’s who of SA’s mining or business sector, someone “who loves entertaining and enjoys a lavish lifestyle”.

McFarlane says the property is akin to owning a small three acre estate in the middle of Bishopscourt. An average three to four bedroomed house usually comprises 800m². The land alone is estimated to be worth in excess or R43m.

Seeff’s Andy Todd says the property is surrounded by some of the most valuable real estate on the African continent with houses in the vicinity fetching anything from R40m and upwards.

Now, what can you expect to get for R98m? The basics include six massive en suite bedrooms including dressing rooms. The main suite includes a separate lounge with a fireplace and his and hers dressing rooms and bathrooms. McFarlane says the house consists of several other large rooms that can be converted into at least four additional suites.

The Canterbury Drive mansion includes an entrance court leading into a double volume entrance hall with a dual staircase that connects the living spaces dotted with priceless art and Persian carpets.

The entertainment area sports an opulent lounge and a formal 24-seater dining room for large scale entertaining. A central bar area is flanked by a billiard room, a cinema, a large kitchen with a separate scullery, an open plan family room and a casual dining area.

Other features the living section boasts include a cigar lounge in the basement with a wine cellar and tasting room. Here you will also find a large office with an adjoining lounge cum library and separate access for guests and dignitaries.

The sprawling exterior includes a large covered terrace leading onto a multi-million rand landscaped garden, swimming pool, tennis court and pavilion.

Of course, you will have to set aside at least R30 000 a month to maintain the property. This is the unenviable task of the “estate manager” who resides on the property in a separate two-bedroomed home.

McFarlane says the mansion was built in 2008.

Gradual recovery for listed property

Gradual recovery for listed property

Residential and commercial real estate to fall a further 10%

WITH investor demand being hampered by enduring economic challenges and stalled global growth, Auction Alliance is predicting a gradual and patchy recovery for the local commercial property sector over coming months, with certain segments expected to perform better than others.

The values of both residential and commercial real estate assets in SA are expected to fall by a further 10% over the next 12 months according to Auction Alliance.

The auctioneer warned investors considering ploughing their money into property to be thorough when carrying out due diligence.

“Three years into the recession, the question on the status of the commercial property sector’s recovery is difficult to answer, with recovery appearing to have stalled significantly in recent months in the face of renewed economic fears”, said Rael Levitt, CEO of Auction Alliance.

According to a recently released report by PricewaterhouseCoopers in the US and the Urban Land Institute, entitled Emerging Trends in Real Estate 2012: “The return landscape for 2012 presents a mixed bag, and all depends on where and when investors bought, the amount of property leverage employed, and asset quality.”

The report warned that: “As markets creep back in 2012, investors can no longer just ride the capital tide of rate compression, but instead must pick projects well and execute on management.”

Another important factor was the performance of local municipalities when considering commercial property investment. Redefine one of SA’s largest listed property groups, had already decided to stop investing in poorly run municipalities and halted further improvements on their existing properties in such areas.

“SA poses its own challenges to the property investor with rising costs and an increased risk of stagflation in the economy, as price pressures rise and economic recovery remains sluggish. Both buyers and sellers need to realign their expectations of the property sector, and face up to the tough reality of today’s market”, said Levitt.

Kirsh is king of London’s castle

Kirsh is king of London’s castle

Says £285m purchase of Natwest Tower is a great investment.

Natie Kirsh, the London-based SA billionaire, today confirmed that his £285m bid for one of London’s tallest buildings, Tower 42, has been successful.

Speaking to Moneyweb, Kirsh said: “It’s in the documentation phase, which means all the papers still have to be signed but we have secured it. The owners received 12 offers and whittled it down to three. They interviewed me to make sure I could finance the deal. They were nervous, having been let down in the past but after the interview they confirmed we were the guys.”

Kirsh is one of SA’s richest men. His biggest asset is Jetro, a successful cash and carry chain in the US styled after Metro Cash of SA. He is the sole owner. He said he will not be selling a single share in Jetro to fund the deal but its cash flow would make it easy to pay.

Asked if such a large investment in a single property was not risky at the present juncture of the UK and world economy, he said: “No. It is a fantastic building in the heart of the City. It is fully let with 300 tenants and a waiting list of corporates wanting to get it. It was built by a bank, not by a property developer. The bank was building its own head office and wasn’t fussy about lettable space. Every part of the building has huge window space. It is built in the shape of a 3-leaf clover. Each floor is 3 000 square feet.”

According to Wikipedia, Tower 42, originally named Natwest Tower, was for 30 years London’s highest building. Now it ranks fifth and second in the city. The 42-storey building is 183m (600 feet) high. It has an automated mail train and external window washing. The building was extensively damaged in the IRA’s Bishopsgate bombing.

Kirsh says even at the £285m price tag, the rental yield starts off at 7%. He intends to gear his purchase and thus to get the yield to 11%.

“With everyone printing money, inflation is not going away. If you factor in inflation, the yield could quickly exceed 20%.”

Kirsh owns a city block in Rivonia Rd, a stone’s throw from Sandton City. Did he not consider building a skyscraper there, as has been speculated?

“You tell me where SA is going. Can the government make a foreign investor comfortable?

“Right now, I feel disinclined at my age (79) to start a major development. As they say, a shroud doesn’t have pockets. I have one idea for the site, which is not commercial – a sort of museum to reflect the contribution to the SA economy made by immigrants over the years.

“I would like to ask other rich South Africans, the Ruperts, the Oppenheimers to help develop this, possibly in association with the university (Wits is Kirsh’s alma mater).

“It would be a living thing with lecture halls and so on. I am coming down there soon for a couple of months and will see how they respond.”

18 November 2011

South African billionaire buying London landmark!

South African billionaire eyes buying London landmark!

Bidding 285 million pounds for Britain's tallest building.

The family office of South African billionaire Nathan Kirsh is in exclusive negotiations to buy the former NatWest headquarters, in the heart of the London, after bidding 285 million pounds for the skyscraper, the Times reported on Friday.

The newspaper said, without citing a source, Kirsh's bid for Britain's tallest building is thought to have outweighed those of rival contenders by at least 10 million pounds.

He beat off the London-focused Exemplar Properties and the private equity firm Doughty Hanson, according to the article.

The 2.2 acre estate was put up for sale by its joint owners, BlackRock UK Property Fund and LaSalle Investment Management, with a 290 million pounds price tag.

In addition to the skyscraper, which was renamed Tower 42 when NatWest Bank moved out, the site includes four other adjacent properties. Jones Lang LaSalle, the property adviser, conducted the sale.

16 November 2011

Investec CM refinances Growthpoint BEE debt

Investec CM refinances Growthpoint BEE debt

Provides R888.5m of funding to settle the existing banks' exposure.
Johannesburg, Nov 16 (I-Net Bridge) - The AMU Trust, Growthpoint Properties Limited's largest BEE shareholder has refinanced debt raised in 2005 to fund the acquisition of 100 million Growthpoint Properties linked units as part of the company's landmark BEE transaction.

Investec Capital Markets has provided R888.5 million of funding to settle the existing banks' exposure and to partially reduce Growthpoint's mezzanine debt participation from R500 million to R200 million, thereby repaying R300 million to Growthpoint. This is being provided as a 4-year capital bullet facility.

The AMU Trust owns approximately 5.7% of Growthpoint Properties, worth approximately R1.8 billion, and represents the interests of Amabubesi Investments, Miganu Investment Holdings and Unipalm Investment Holdings.

"Investec welcomed the opportunity to participate in the funding and structuring of the transaction, enabling AMU to take advantage of the lower interest rate environment, provide funding flexibility and value extraction," said Rick Lupini of Investec Capital Markets in Cape Town.

Norbert Sasse, Chief Executive Officer of Growthpoint Properties Limited, pointed out that AMU continues to own 100 million Growthpoint linked units and that the BEE consortium has also extracted cash as a result of the debt refinancing.

"We are pleased that the beneficiaries of the AMU Trust were able to realise value from their investment, and that we've been able to distribute a portion of the Trust's existing cash resources to them. We continue to value the support and involvement of our BEE partners," noted Sasse.

The AMU trustees commented: "The refinance parameters provide the AMU Trust with a more flexible structure to utilise surplus cash, reduce the overall cost of funding and allow for upfront and semi-annual distribution of cash to beneficiaries."

Charges may await directors of failed Pinnacle Point property group

Charges may await directors of failed Pinnacle Point property group

Pinnacle Point Group's directors and former directors may face prosecution following the liquidation of the leisure property group and its subsidiaries earlier this month.

Cape Point Vineyards, which was part of the application for the liquidation of the group, wants an investigation into the affairs of all the directors and their subsequent prosecution if any wrongdoing is discovered.

The wine estate, which owns 1 percent of Pinnacle, said there was no way the property group could be rescued as it was seriously insolvent.

"There's nothing that one could have done, the group is irretrievably insolvent. We want an article 417/418 inquiry into the affairs of the directors and previous director. They should be prosecuted," Cape Point Vineyards owner Sybrand van der Spuy said.

Pinnacle Point was placed in final liquidation on November 4 after six of its subsidiaries were liquidated earlier in the month. Investec is a major creditor of the subsidiaries.

The subsidiaries - Pinnacle Point Resorts, Pinnacle Point Investments, Clarens Golf and Trout Estate, Property Promotions and Management, Eagle Creek Investments 74 and Festival Bay Trading 55 - were liquidated through a court order granted by the Western Cape High Court on November 2.

The listed holding company, Pinnacle Point Group, was liquidated following an application by Cape Point Vineyards.

Investec applied for the liquidation of the subsidiaries to recover amounts owed to the bank, arguing that Pinnacle Point subsidiaries and the holding group were commercially insolvent. Investec said the group owed it R120 million.

The bank initially submitted the liquidation application in February. The subsidiaries were placed under provisional liquidation in August.

Investec lawyers from Edward Nathan Sonnenbergs said the final orders were granted on an unopposed basis. The holding group's final liquidation at the instance of Cape Point Vineyards was also granted on an unopposed basis.

"Now that the companies have been placed into final liquidation, the liquidators are obliged to realise the assets in consultation with creditors. Investec is the major secured creditor... of the subsidiaries," lawyer Lisa Melis said.

"It is unclear what portion of Investec's claim will be settled by way of the realisation of the subsidiaries' assets."

Melis said the liquidators of the holding group had now instructed the law firm to assist with the winding up of the group, which would include an inquiry into its affairs in terms of the Companies Act.

Pinnacle Point had lodged six separate business rescue applications under the new bankruptcy protection provisions of the new act in July.

The firm lodged another host of applications during the hearing of its provisional liquidation in August.

Lawyer Leonard Katz asked the court to disregard these applications as they were a "complete abuse" of proceedings.

The applications were all removed, unprocessed, from the court roll shortly after provisional liquidation orders were granted.

In May, Pinnacle Point said it had secured the amount it owed Investec through the sale of its Pinnacle Point Resort.

The group said it had finalised a deal with Veritable Investments and Raptoguard to sell the golf and beach resort for R75m. At the time, Pinnacle Point said it owed Investec only R58m.

Pinnacle Point shares have been suspended by the JSE.

Business Report

18-month hiatus expected before property gains

18-month hiatus expected before property gains

Last week's decision by the Reserve Bank to leave the interest rate unchanged at 9 percent should not give consumers an excuse to go on a spending spree, warn the experts.

John Loos, property strategist at FNB Home Loans, cautioned consumers and said although the interest rate remained unchanged, it would be wise for households to make provision in their financial planning for future hikes.

He said although there was no certainty around how much to make provision for, the past two hikes saw the interest rate increase by four and five percentage points respectively.

"It doesn't necessarily mean not making one's desired purchases, but may mean lowering one's aspirations in terms of the home or car that one may have been considering purchasing, if there is no 'buffer'."

In an earlier report, Paul Barnard, executive financial planner at Consolidated Financial Planning, warned consumers that although unchanged interest rates made home and car loans relatively cheap, credit users should not overextend themselves.

He advised consumers to always budget for an interest rate 2 percent higher than the current rate and to increase installments accordingly. Barnard gave the example of a R1 million bond paid over 20 years at 9 percent. This would require a monthly installment of R8 997, meaning the total interest a consumer would have paid in the end is R1.2m.

"If you budget for an interest rate of 11 percent instead of 9 percent, your installment would be R10 322. If interest rates rise to 11 percent you will be able to afford the installment because you have budgeted for it."

He added that should the interest rates not rise and a consumer pays R10 322 instead of R8 997, the bond would be paid off in 14 years.

"If you adopt that approach and interest rates do not rise, then you will settle your debt early and save on costs of credit. If interest rates do rise, then you can easily absorb the increase because you are used to paying more than the minimum installment.

"Speak to your financial planner, who will advise you how to budget for your debt repayments and include a buffer of 2 percent."

Samuel Seeff, chairman of Seeff properties, said in view of the continued global and domestic economic pressure and the upward inflationary trend driven by fuel and utility hikes, a conservative approach would benefit the economy in the medium to long term.

He cautioned that while the low interest rate improved affordability for bond holders it should not be a signal for consumers to spend. They should rather focus on bringing down their household debt levels.

Seeff said he believed the introduction of a formalised policy that enabled first-time buyers to acquire 100 percent bonds was a good idea.

"I believe that prices and sales volumes will ebb along for the next 18 months and that only once there is a significant pick-up of the macro economy, underpinned by employment growth, are we likely to see any real uptick in the real estate market."

However, the CE of RE/MAX of Southern Africa, Adrian Goslett, was more optimistic.

He said RE/MAX believed the property market in South Africa had performed remarkably well compared to other markets.

Goslett said RE/MAX had found South African consumers felt better about the future of the local real estate market following improved winter sales.

"South Africa seems set to see a full recovery in the market, far quicker than our international counterparts. South Africa's inclusion into Brics (Brazil, Russia, India, China and South Africa) will also have a positive impact on the local market as this will attract investment and fuel in the economy and real estate market alike."

Cape Argus

Market 'not likely to turn for months'

Market 'not likely to turn for months'

Reacting to the latest housing data, Seeff chairman Samuel Seeff says he remains upbeat - but cautions that recovery of the property market will take longer than expected.

"Following the robust pre-2007 levels, there have been more than four years of slowed activity and market adjustment," he says.

"As with all markets, property is cyclical, and I believe we are now near the bottom of the curve and that prices and sales volumes are likely to ebb for at least the next 18 months before any noteworthy uptick. This would however, need to be driven by an economic pick-up, under pinned by positive employment growth.

"Because of significantly fewer new developments and new stock being built there is likely to be a stock shortage once the market turns."

He says the number of distressed properties continues to weigh on the performance of the market, and that normal activity levels can be expected to return only once there is a significant clearance of these.

On the upside, Seeff believes banks' deposit requirements will help bring more stability to the market in the long term. When home owners have some of their own money invested in their homes, they generally work harder to keep up their mortgage payments. This will enable owners to better withstand some of the updown effects characterised during this downswing and will result in fewer foreclosures.

The exception, he says should be first-time home-buyers, where he would encourage the introduction of a formalised policy that enables them to acquire 100 percent bonds.

There are still keen buyers in the market, but sellers need to be mindful of what buyers are prepared to pay and price correctly if they hope to sell their properties.

Buyers are negotiating strongly and on their terms. The upshot, he says, is that because of the slow turnover, there is real value to be gained at the top end of the market.

"Now is indeed a good time to buy, but buyers should be aware that these conditions are unlikely to continue indefinitely," says Seeff.

Dianne Brock, general manager of the Western Cape Institute of Estate Agents, says she is often asked to predict what direction the residential property market will take next.

"Right now Propstats data shows that that the traditional seasonal upswing is again a reality: spring always brings with it a new crop of house buyers and this year there has been increased activity, particularly in the entry level to R1.5 million bracket," she says.

"The more expensive homes are still difficult to sell, especially as so many of their owners, despite extensive media coverage on the subject, have not accepted today's lower market prices."

Looking at the bigger picture, Brock says that after attending several sessions on the state of the market, she agrees with economists like John Loos of FNB, who say there will be no significant upturn in house prices for three years.

"Here again, however, there are figures which indicate that the worst may now be over. Although growth may be insignificant, I think the likelihood of a further big drop in prices can be discounted. With national house price increases at 5.1 percent, prices are more or less holding steady against inflation. This suggests that now could be a good time to buy."

From the estate agents' viewpoint, Brock says the current scenario is quite promising because, with the total number of registered agents reduced from 86 000 to 25 000, competent agents are finding they can maintain a reasonable turnover.

"In many instances, competent, professional agents are now selling more units than they did in the boom times, but they have to work harder for them."

Weekend Argus (Saturday Edition)

Political climate 'will boost property market'

Political climate 'will boost property market'

There has always been a strong link between political confidence - faith in the future of the country - and home-buying confidence, says Bill Rawson, chairman of Rawson Properties.

"Surveys have shown that political confidence - or the lack of it - can often be more important than traditional decision-influencing factors like interest rate levels," he says.

"Right now the feedback from my colleagues and many others is that political and house-buying confidence has been significantly boosted by the far more decisive stance taken by President Zuma on maladministration, corruption and the advocating by out-of-line ANC members of policies not sanctioned by his cabinet.

"The dismissal of two cabinet ministers, the suspension of the police chief, the inquiry into the arms deal and the fact that whatever the outcome, Julius Malema has had to go on trial, have all sent out a positive message that South Africa will not be allowed to drift into a chaotic Third World state. These moves by the president, along with the Finance Minister's mid-term budget, have definitely restored confidence in a leadership that appeared to be losing control."

Rawson says what appears to be a stand against corruption at last will be especially welcome.

"Many years ago, Clem Sunter in his High Road presentations listed a lack of corruption as one of the three most important factors leading to a successful society. When state officials spend thousands of rands on useless airline trips and expensive hotels or sign leases (with colleagues) at three times the going rate, investors run fast.

"The more definite repudiation of nationalisation by various top state officials is also sending out a good message, and it is also encouraging that the main opposition party in Parliament is becoming increasingly multi-racial."

Weekend Argus (Saturday Edition)

Joburg denies R13bn debt

Joburg denies R13bn debt

The city of Johannesburg on Thursday denied it was R13 billion in debt after reports of a possible liquidity crisis.

Outstanding balances related to rates and taxes amounted to about R5.3 billion by September 30 this year, city spokesman Kgamanyane Stan Maphologela said in a statement.

"The cash position of the city has improved significantly in the first quarter of the current financial year. This can be attributed to improved levels in the collection of revenue."

On Wednesday, the Democratic Alliance said the city was running out of money because it was not collecting enough revenue.

DA caucus leader Mmusi Maimane called on the city to beef up its revenue department and set up a team to collect the outstanding R13 billion in debt.

"You don't need to be a rocket scientist to know what R13 billion could do for the city."

He said this was largely due to a dysfunctional revenue department that could not arrange for meters to be read correctly.

The city denied this and said the number of accurately billed customers has increased significantly.

"Revenue collection has responded to the interventions made in billing and credit management. Back office re-establishment has also resulted in accelerated query resolution," Maphologela said.

"The city is making inroads in the collection of old debt as indicated by the 102 percent collection level achieved during (July and September this year)."

The collection average over the last eight years has always been between 91 percent and 95 percent.

"There are certain historical areas where collection levels have always been low with the current socio-economic environment and this will always be an issue."

He said no business that sold services for credit could ever have 100 percent collection.

"We are currently on the 92 percent collection levels."

During January and February 2011, the city embarked on a credit control campaign, with the cutting of services but this was put on hold due to a public outcry.

Maphologela said the city established a task team to deal with queries.

The operating hours of main customer service centres were extended to seven days a week and an outbound call centre was set up to deal with outstanding queries.

The city had also sent pre-termination notices to customers and after 14 days services would be cut off as a last resort to collect outstanding debt.

"Given the current circumstances, the city of Johannesburg is bound by legal mandate to collect what is owned," Maphologela said

14 November 2011

Massive new CBD for Soweto’s Jabulani

Massive new CBD for Soweto’s Jabulani

JSE’s top performing share behind the integrated development.

Calgro M3 - the JSE’s top-ranking share for the first ten months of 2011 - is behind massive developments in Jabulani, Soweto in an attempt to turn it into a fully-fledged central business district, such projects a property analyst believes is the future.

A 300 bed hospital, a state of the art performing arts theatre and an integrated residential housing development form part of the mix to upgrade Jabulani in conjunction with the Gauteng government and other stakeholders.

Calgro M3, as an unusual mass housing developer and the best performing share on the JSE (JSE:JSE) in the ten months to October, has identified Jabulani as one of the growth nodes in Soweto as it is within walking distance of the Rea Vaya rapid transport system , the train station, the Jabulani Mall and other amenities.

Another part of the upliftment of the area is the demolition of the dilapidated Jabulani hostels originally built to house migrants who once worked the mines along Johannesburg’s reefs decades ago. Over the years the workers’ families have joined them in the hostels where there are no ablutions and sewerage runs freely through the complex.

Also in the development is what people in the business of property call “walk ups”. These are two and three storey apartment blocks without lifts and form part of the RDP element of the development.

Developers Calgro M3 Holdings (JSE:CGR) are working on making sure the development is aesthetically pleasing, with shrubs and greenery dotted along the grounds. While the units are generally compact, the structures are sound with the basic necessities to accommodate any family as a start-up.

CEO Ben-Pierre Malherbe says this kind of development is the face of the future to cope with the ongoing influx of South Africans into cities.

Property consultant Francois Viruly says an estimated 10m people are expected to flock to Gauteng by 2014. Malherbe says these mixed=income housing developments are set to become an important benchmark in managing urban population dynamics in Gauteng.

In Meadowlands another development known as Fleurhof is under construction. It comprises sectional title units ranging in price from R279 000 to R299 000. Free standing units also form part of the mix costing between R289 000 and R296 000.

Fleurhof is also a fully integrated development in terms of government’s 2007 policy for RDP housing to form part of any new housing initiatives. Provision has been made for the building of crèches, churches, a community centre and other amenities within the development. The location ensures easy access to transport and the Johannesburg CBD. It’s also close to an industrial hub where many Soweto residents work.

This is also in line with government’s new thinking on housing developments that they must be close to places of work and transport. This node is also serviced by Rea Vaya.

Calgro says its model allows it to sell in the open market and to institutional buyers. Malherbe explains that unlike some traditional developers, Calgro buys the land, develops it and at the end of the day provides a turnkey product that cuts out town planners, civil engineers and contracting contractors. This in turn helps cut costs, enabling it to add value to the development.

Calgro has 30 developments in the pipeline in various areas over the next seven to ten years.

Vukile acquires R1.5 billion portfolio from Sanlam

Vukile acquires R1.5bn portfolio from Sanlam

And the PIC will acquire 70.2m Vukile linked units from Sanlam.

Johannesburg, Nov 14 (I-Net Bridge) - Property loan stock company Vukile Property Fund (VKE) is to acquire a portfolio of 20 properties, worth nearly R1.5 billion, from Sanlam Life Insurance.

The acquisition is expected to be effective in June next year, once a number of conditions precedent have been fulfilled, and will be funded through a combination of debt and the issue of new linked units. It said on Monday.

Vukile chief executive Laurence Rapp said the acquisition is in line with Vukile's new strategy of growing a quality portfolio of properties with strong contractual cash flows in order to achieve meaningful capital appreciation and sustainable growth in distributions.

"It will enhance the quality of our current property portfolio and will strengthen our presence in the Western Cape."

Rapp said Vukile has been managing this portfolio on behalf of Sanlam for some time and, therefore, has an in-depth understanding of the properties being acquired, making this a low risk acquisition opportunity for the company.

"The buildings being acquired are well located with good quality specifications," he said.

At the same time, the Public Investment Corporation (PIC) has reached an agreement with Sanlam, in terms of which it will acquire 70.2 million Vukile linked units from Sanlam.

Following the transaction between Sanlam and the PIC, Sanlam's holding in Vukile would decrease to 13.6%, of which 7.6% would be held by Sanlam policy holder funds and, as such, constitutes an institutional holding. The PIC's stake in Vukile will be around 20%, it said.

The introduction of the PIC as an investor is a positive development for Vukile as it will broaden its shareholder base and should lead to an increased JSE free float, it said.

"The PIC is one of the largest property investors in South Africa and the introduction of such an esteemed property investor is an affirmation of Vukile's new strategy," said Rapp.

The properties being acquired are: Bassonia Office Park, Bellville Barons, Bellville Santyger, Bellville Tijger Park 1, Bellville Tijger Park 2, Bellville Tijger Park 3, Bellville Tijger Park 4, Bellville Tijger Park 5, Bloemfontein Trador Cash & Carry, Durban Westville Surrey Park, Durban Workshop, Johannesburg Empire Road Offices, Johannesburg Houghton, Pretoria Sanlynn, Midrand IBG, Pretoria Rosslyn Joshua Doore Warehouse, Pretoria Sancardia, Sandton Ascot Offices, Sandton Rivonia Tuscany and Sandton Sunninghill Park.

10 November 2011

Is it the right time to fix your home loan?

Is it the right time to fix your home loan?

Here is what the big-four banks say.

The demand to fix interest rates on a home loan has been subdued according to the majority of the big-four banks, but Standard Bank says it has fixed over R1bn in loans in the past five months and believes it is a great idea to fix if a client wants to ride out volatility.

“We have obviously been doing a campaign where we have actually said to the people that interest rates are at the lowest level in 36 years. Yes there is a risk that interest rates will go down based on what is happening in the world economy, but there is also a risk that interest rates will go up,” Standard Bank’s director of home loans, Funeka Ntombela said.

“For the customers, to the extent that they want to protect themselves, we think that it’s a great idea ... Previously if you wanted to fix the rate it would be prime plus but now it is hovering around prime to fix for about two years. If you are a customer and you are already on prime or prime minus 50 basis points is not such a giant leap. You might just say I am going to give up this to get a 24 month protection.”

A Reuters poll posted last week showed analysts see the Reserve Bank leaving the repo rate unchanged at 5.5% on Thursday. Reuters said almost half of the 26 polled forecast rates to start rising in the second half of next year.

Ntombela said although Standard Bank had fixed loans over R1bn in the past five months, the take up rate for the customers phoned was not 100%. But there were clients who thought it was not as expensive to fix now. She said for those who had a rate of prime minus two in their rate it was difficult for them to give that away by fixing.

Earlier in the year Moneyweb reported that Standard Bank was the only big-four bank that was not fixing. But after the report the bank backtracked on its decision and started awarding its customers the opportunity to fix.

Absa, FNB and Nedbank said the demand to fix was currently subdued. managing executive for Absa home loans, Sifiso Shongwe said the total value of loans fixed since April was about R60m. He added the majority of fixed rates taken up over the last six months were for a period of 24 months and in the range of 9% to 12%.

“The decision to fix or not will be influenced by, the term available for fixing, the initial difference between the fixed and variable rates offered to the customer – and the immediate impact thereof on the free cash flow of the customer,” Shongwe said.

He added that the customers interest rate expectations over the term available for fixing were also a factor.

Head of product, marketing and pricing at First National Bank (FNB), Praven Subbramoney, also shared the view that if customers fixed they would benefit from maintaining certainty of cash flow.

Subbramoney said at FNB clients were mostly taking up the 36 and 60 month fixing options. On top of the current interest rate, Subbramoney added the average premium to fix at FNB was 0.15% for 12 and 18 months, 0.20% for 24 months, 0.25% for 36 months, 0.55% for 48 months and 0.85% for 60 months.

Nedbank’s general manager of sales and customer service, Pat Lamont said although fixed rates protected people from unexpected additional monthly expenses a potential customer needs to consult widely before fixing.

“Clients need to take cognisance of the fact that fixed rate contracts carry financial penalties should one opt to cancel the contract. Dependent on the term, and the value of the bond amount, this may constitute a substantial amount. Hence, we would suggest that clients consider their options carefully and consult widely prior to entering into long-term fixed rate contracts,” Lamont said.

At Nedbank people can fix from 12-60 months and on average clients have been fixing for a period of 12-36 months.

Sluggish economic fundamentals subdues housing market outlook

Sluggish economic fundamentals subdues housing market outlook

Samuel Seef remains upbeat, but cautions that recovery of the property market will take longer than anticipated.

I remain upbeat, but the recovery of the property market will take longer than anticipated given the sluggish underlying macro-economic fundamentals. Following the robust pre-2007 levels he says, there has been more than four years of slowed activity and market adjustment. As with all markets, real estate is cyclical and I believe that we are now near the bottom of the curve and that prices and sales volumes are likely to ebb along for at least the next eighteen months before any noteworthy uptick. This would however, need to be driven by an economic pick-up, underpinned by positive employment growth.

There has also been significantly low levels of new developments and new stock brought to the market. This is likely to lead to a stock shortage once the market turns.

The volume of distressed properties continues to weigh on the general performance of the market. Only once there is a significant clearance of these can we look to return to normal activity levels he says. On the upside, the Bank deposit requirements will serve to bring more stability to the market in the long term. When home owners have some of their own money invested in their homes, they would generally work harder to keep up their mortgage payments. This will enable owners to better withstand some of the up-down effects characterised during this down-swing and will result in fewer foreclosures. The exception, should be first time home buyers where I would encourage the introduction of a formalised policy that enables them to acquire hundred percent bonds to encourage home ownership.

I do not believe that consumers can look forward to any further interest rate reductions. The South African Reserve Bank has been conservative in their monetary policy and given the upward inflationary trend and continued fuel and utility cost hikes, this would send the wrong message to the market. While a rate cut will improve affordability and help reduce consumer debt levels, it is unlikely to stimulate any significant demand push. The historically low interest rate has done very little to encourage any significant participation in the market by investors and top end buyers this year.

That being said, it is business as usual and activity continues in the market. There are still and keen buyers out there, but sellers need to be mindful of what buyers are prepared to pay and price correctly if they hope to conclude a successful transaction. Buyers are negotiating strongly and on their terms. The upshot is that as a result of the slow turnover, there is real value to be gained at the top end of the market. Now is indeed a good time to buy, but buyers should be aware that these conditions are unlikely to continue indefinitely.

09 November 2011

Unravelling China versus Europe - Myths and Misunderstandings

Unravelling China versus Europe - Myths and Misunderstandings

… provides parallel insights for SA.

Commentators – along with many investors - have taken to questioning the ability of democracies to compete with authoritarian China. The case gaining credence is that Europe’s leaders are innately incapable of taking sufficient action to remedy the deep flaws of the euro experiment. But even if most of Europe is destined for a generation of meagre growth, the core problems are not inherent to Western-styled democracy or capitalism. The core problem is that managing the intersection of democracy and capitalism requires transcending cultural differences.

The rapid changes and hyper competitiveness due to globalisation and advancing technologies raise the bar faster than poorly congealed multi-cultural societies such as the eurozone or SA can adjust.

In difficult times pain needs to be distributed by governments between various groups such as, workers and investors. Authoritarian regimes have an advantage when a tiny group of people behind closed doors can quickly decide. The Chinese approach also appeared advantageous earlier this year during Japan’s nuclear reactor melt down. Nuclear power became a radioactive discussion in democracies whereas China’s policymakers were much less overwhelmed.

Self interest is at the heart of both capitalism and democracy. But so is managing factional conflicts. China’s governing apparatus reeks of corruption but its overall track record of managing factional conflicts for the greater good has been exceptional for over 30 years. The legitimacy of the Chinese ruling elite however rests upon being able to maintain approximately 7% economic growth thus maintaining considerable employment momentum. A prolonged slowing of economic activity risks an Arab Spring with Chinese characters.

Moving beyond the typically wafer-thin analyses of brief TV commentaries, to right the European ship involves distributing pain. Lower benefits and pay must be distributed among various worker groups and voter factions while many investors must also be made to suffer. Haircuts on sovereign debts must be negotiated alongside recapitalising banks and concessions from unions and voters.

It is frequently pointed out that China foreign reserves and investments exceed $3trn. But for this reason and the fact that China cannot maintain 7% growth if its export markets are sliding into a deep recession, they have a deep vested interests in seeing the euro challenges being successfully resolved. As a substantial holder of euro denominated assets and a funder of the IMF, China is also directly at risk of having to share in the pain to be allocated.

The ideal scenario for China is that it gains political advantages while more aggressively weighting its European holdings at or near the bottom of asset prices. However, when seeking to manage holdings of distressed assets such greed-induced styles of thinking can be very dangerous. When commentators eye China’s cash hordes as a source of solutions they routinely overlook the generally bleak relationship between China’s overall balance sheet and its income statement.

China’s latest five year plan calls for shifting from extreme reliance on infrastructure investments and exports to a more normal economic mix with domestic consumption playing a rising role. There are reasons however that so many Chinese save so aggressively despite yields on many investments being less than inflation. Life expectancy in China has been expanding at a rapid clip while pension benefits remain scarce. As nearly 7% of the population starved to death half a century ago there are broad fears of old age misery. China’s long-term balance sheet is further diminished by the greatest demographic time bomb of all time brought on by its one child policy.

The income statement desired by China’s five year plan is threatened by Europe’s woes and its starvation-induced savings culture which can’t be overcome without huge pension fund investments. Three trillion dollars sounds like a lot but it works out to less than R20 000 per person.

Nor can China liquidate its accumulation of overseas investments without provoking currency appreciation and thus a contraction in its export income. European leaders would be able to negotiate aggressively with China and all their key investors if only they had a vision for a dynamic Europe.

In SA the key factional divides are among government, business and unions. Just as in Europe there is some alignment of interests and cooperation but not enough to be globally competitive. In Europe the core disconnects are among the higher savings countries in the North versus the deeply indebted nations on the periphery.

On the current path, countries that slip into Greece’s predicament will suffer for a very long time. Instead, four or five like-minded, higher savings countries should exit the Euro in favour of a new currency union supported by formidable fiscal unity. Of course this would be extremely difficult and expensive but it would lead to higher growth across the continent while providing an example for those countries which remain in the euro.

By comparison, SA’s challenges are much more manageable. Government should commit to becoming genuinely pro business. They will know they have become successful when SA becomes a popular destination for foreign direct investment including and beyond extractive industries.

*Shawn Hagedorn is an independent analyst

My thoughts echo the majority of what is stated here. In particular, I agree that SA will not be able to compete with China in any sector of the economy while the playing field remains uneven. The article points out that as an autocrisy (rather than a democracy), China is in a position to quickly implement decisions, especially when compared with Europe and SA. What the article does not point out clearly is that China can also quickly put down any hint of dissent and this puts them in a superior position vis-a-vis the trade unions and other civil society. There is no doubt that lower wages makes China more competative. From a purely economic point of view this puts China in a vastly superior position. The contrary is, however, also true from a humanitarian point of view. The question would therefore appear to me to be: "How much civil liberty are you prepared to sacrifice in exchange for economic superiority." I agree with the writer that ALL role players will need to take a "haircut" including government, shareholders, finacial institutions and workers in order to become more competative.

Gareth Shepperson

08 November 2011

Nominal house prices edge higher: ABSA

Nominal house prices edge higher: Absa

While small houses continued its downwards trend.

(I-Net Bridge) - Nominal house prices continued to improve in two size categories (medium-sized and large) in October, while small houses continued its downwards trend according to Absa Home Loans.

According to Absa's calculations, the nominal value of homes in the medium-sized (building area of 141 square metres-200 square metres) increased to 404.1 index points from 386.7 a year before and large sized homes (building area of 221 square metres-400 square metres) improved to 405.2 index points from 397.3 for the comparative period a year ago.

Small houses (building area of 80 square metres-140 square metres) declined from 380.8 points for October last year to 368.9 points for October this year.

In real terms (after adjustment for the effect of inflation) annual price deflation continued across all three segments of housing up to September 2011, impacted by rising headline consumer price inflation, which reached a level of 5.7% year-on-year (y/y) in September.

The average real price (at constant 2008 prices) of houses in the middle-segment of the market was in September this year about 13% below its peak of mid-2007. This was the result of average nominal house price growth being below the average headline consumer price inflation rate during this period.

The average nominal house price was R734,800 for small homes, R1,009,500 for medium-sized homes, and R1,475,800 for large homes in October 2011.

Pinnacle Point liquidated, to be probed

Pinnacle Point liquidated, to be probed

Section 417/418 inquiry to be initiated.

Ailing property firm Pinnacle Point, a company in which union workers invested over R200m, has been liquidated following an order granted in favour of one of its shareholders Cape Point Vineyard.

Sybrand van der Spuy, the owner of Cape Point Vineyard, told Moneyweb that Pinnacle Point had been liquidated late last week. He said the next step would be to initiate a section 417/418 inquiry, which would investigate how Pinnacle Point monies were expanded and how the company got to a financially appalling mode.

“Yes Pinnacle Point has been liquidated ... A liquidator has been appointed already. I am seeing the liquidators later this week. We will be asking for a section 417/418 inquiry,” Van Der Spuy said.

Van Der Spuy’s company Cape Point Vineyard owns 80m shares or just under 1% of the Pinnacle Point Group. Cape Point Vineyard won a business rescue in July, appointing Mike Lane as a practitioner. But because of issues and allegations of some who failed to support the business rescue, the circumstances pushed Cape Point Vineyard to convert its business rescue application into a final liquidation.

Initially Van Der Spuy felt there were prospects to rescue Pinnacle Point and potentially help recover millions of rands of workers money invested in the ailing company.

About R260m of Southern African Clothing and Textile Workers Union (SACTWU) monies were invested in Pinnacle Point Group (PPG). Referring to the liquidation Van Der Spuy told Moneyweb two months ago that:

“It’s not a disaster for myself I am losing a bit of money but if you look at the poor pensioner they are losing R260m and the chances of shareholders getting any money back I think it’s zero ... I have lost R5m. It’s one thing for me to lose R5m and other people to lose R260m.”

Another source confirmed the final liquidation was unopposed, but there were plans to push for a business rescue in spite of the final liquidation.

Pinnacle Point has been suspended from the JSE and could be delisted.

07 November 2011

Concourt to rule when landlords may cancel leases

Concourt to rule when landlords may cancel leases

Concourt to rule when landlords may cancel leases

The Constitutional Court was due to hear argument today on whether a landlord may cancel leases and evict tenants to get higher rentals.

The matter will be brought by Ntombizodwa Yvonne Maphango and 14 others against Aengus Lifestyle Properties, with the Inner City Resource Centre as a friend of the court.

Aengus specialises in fashionable inner-city apartments and lofts developed in refurbished old Joburg buildings and office blocks. Its buildings include Tribeca Lofts and Fashion Lofts.

The company bought Lowliebenhof in Braamfontein and terminated existing residents' leases in order to put up rentals over amounts allowed by the escalation clauses.

Some of the residents objected to being evicted and took the matter to court.

The Johannesburg High Court and Supreme Court of Appeal held that the landlord was allowed to do this.

The 15 applicants will apply for leave to appeal to the Constitutional Court.

They argue they cannot be evicted, even if the leases were lawfully terminated.


Analysts challenge property pundit`s call not to buy

Analysts challenge property pundit`s call not to buy

Say it is a buyers’ market.

Interest rates are low, property is in abundance and distressed homes are going for a song, so if you are in the market, now is the time to buy. At least that is the view of realtor Engel & Völker and property specialists Lightstone.

In fact, CEO of Engel & Völker, Craig Hutchinson says with interest rates at the lowest it has been in years and with an abundance of property to choose from, now is the perfect time to buy. “It is very important to enter the property market as soon as possible as property should form part of any balanced financial plan and the sooner you own rather than rent, the sooner you start enjoying the capital appreciation which property gives,” Hutchinson said.

He maintains that property is the one asset that remains one of the best inflation beating vehicles over the long term.

In October 2011 the Rode Report for the third quarter advised first time entrants to rather rent for the next four to five years, rather than buy, adding not to expect any capital growth in the residential sector during this period.

Hutchinson says it is expected that there will be a month-to-month decline in the seasonally adjusted house price index in the near team which is good news for new entrants or those who are upgrading.

On first time buyers, the Rode Report said people buying now could expect a much higher instalment than if they were to rent. Erwin Rode maintains if you were to save the difference between what you would be paying if you rented as opposed to what you would be paying if you bought with four or five years in mind, you would actually be better off.

Engel & Völker hold a different view saying renting for less than you can buy and investing in something else only makes sense if you rent with the intention to buy. “Buying a property now would mean a buyer can negotiate a very good deal as this is very much a buyers’ market. At this stage there are also a lot of distressed properties available at below market value that means you will receive better value for your money.”

It says bond mortgages are 30% lower now than two years ago due to the current interest rates. “Even if you pay a premium for a fixed rate loan, it is highly unlikely that rates will be this low again. All these facts indicate that the time to buy is now.”

A Lightstone report has said house prices were particularly attractive in places like the KwaZulu-Natal south coast. Lightstone property analyst, Hailey Ivins, says: “If you look at annual inflation coast versus non coast, your coast is still going down, which means the value of property is going down – they are selling for values that are lower than what they were previously sold for, whereas your non-coastal is going up.

“That’s key to the economics and the pressure people are under… having to sell their holiday homes while still not getting what they want. Now is the time to buy because you’ll be getting property for really good value in terms of what you pay,” Ivins said.

House prices will sink further: Absa Home Loans - Property | Moneyweb

House prices will sink further: Absa Home Loans - Property Moneyweb

On the back of rising headline consumer price inflation.

(I-Net Bridge) - House prices in real terms are expected to continue to decline for the rest of the year and in 2012 on the back of rising headline consumer price inflation, which is forecast to marginally breach the 6% level by the end of the year and for part of 2012 according to Jacques du Toit, property analyst at Absa Home Loans.

Du Toit said that based on house price trends up to the third quarter, and prospects for the economy and household finances, nominal price growth in the middle segment of the market was forecast to be well within single digits for the full year, projected at between 2% and 2.5%.

Absa Home Loans released their fourth quarter housing review report on Thursday, outlining trends in South African house prices and other property market related indicators up the third quarter of the year.

The report pointed out that SA's real economic growth came to a seasonally adjusted annualised rate of 1.3% in the second quarter of 2011, after rising by 4.5% in the first quarter.

Growth was influenced by global and domestic demand trends; the Japanese earthquake and tsunami, which negatively affected the local manufacturing sector as a result of supply shortages; and labour action in some sectors of the economy, which impacted production and service delivery. Real economic growth of 3.1% is projected for 2011, marginally higher than growth of 2.8% achieved in 2010.

Household income and consumption expenditure continued to grow in real terms in the second quarter, although at a slower pace as a result of rising inflation, which impacts consumers' spending power. The ratio of household debt to disposable income was somewhat lower at around 76% in the second quarter, which contributed to contain the cost of servicing debt against the background of low interest rates.

Du Toit said that many consumers were still battling with impaired credit records, negatively affecting their ability to take up credit, with this situation being reflected in continued low growth in household credit extension.

Trends in nominal house prices varied on an annual as well as a quarterly basis in the different segments of the market and geographical areas in the third quarter. In real terms, i.e. after adjustment for the effect of consumer price inflation, house prices declined year on year and quarter on quarter in the various regions and categories of housing during the quarter. Recent trends in house prices are believed to be affected by various factors related to the macro economy and the state of household finances.

The ratios of house prices and mortgage repayments to household disposable income, depicting the affordability of housing, were virtually unchanged in the second quarter. This was the net result of trends in house price and income growth during the quarter, while interest rates remained unchanged during this period. As a result, the affordability of housing remained favourable up to mid-2011.

Du Toit said that many households' ability to take advantage of these affordability trends was however still hampered by a relatively high level of indebtedness, impaired credit records, the impact of the National Credit Act and banks' resultant lending criteria.

The continued low growth in outstanding mortgage balances in the household sector is indicative of the impact of these factors on the residential property market, and the demand for and accessibility of mortgage finance.

Property leviathan pulls millions from SA

Property leviathan pulls millions from SA

Bribery is driving Redefine out of SA; CEO says he is voting with his chequebook.

Marc Wainer, CEO of one of SA’s largest property listings – Redefine – has lashed out at “administrative practices” of local authorities. He has also come out strongly against bribery and corruption saying he is voting with his chequebook.

Redefine has a market cap of R22bn and total assets under management of about R37bn

In a chilling special report podcast with Alec Hogg on Redefine’s year end results for August 31 2011, Wainer said the giant property fund is not investing in areas where it has concerns about “administrative practices” of local authorities.

This decision was not taken lightly, says Wainer: “We are really committed to job creation but we are sick and tired of being used as the milking cow for some local authorities who simply increase our rates and taxes by astronomical amounts: 15, 16, 18% and there is either no improvement in services and in many instances a deterioration”.

This approach says Wainer is only being tolerated for properties it owns, because “we don’t have an alternative service provider.

“For the properties we are going to construct, we have a choice and we are now going to vote with our chequebooks and say enough is enough”, especially in the case of commercial and industrial properties.

He is also not going to invest in areas where bribes are expected, he cites Kopanong, the former Hammanskraal, as an example, where two years ago Redefine took a decision to expand one of its properties.

It wanted to build a free standing supermarket, add 26 shops plus a China Town and a new taxi rank, worth about R120m.

The first phase, the supermarket worth R40m has been completed but it came at a high cost. During construction in February, Wainer says the local community wouldn’t allow Redefine’s contractor on the site because it wanted the property leviathan to employ more people at three times the price of its current labour.

The local community were also divided in factions and threatened to destroy the buildings if necessary, reveals Wainer.

About ten days ago, as Redefine handed over the supermarket for beneficial occupation, a Redefine employee reported that nine local councillors had asked for R20 000 each or they would disrupt the site and not let Redefine back to complete construction.

Wainer said he would not pay 1c and the rest of the project has been canned, meaning that about R70m to R80m will now not be spent in Kopanong.

“I am voting with my chequebook.

"I don’t have the time and I can’t spend my people’s time in going through long and lengthy processes, laying charges, court cases, they come to nothing at the end of the day,

“We will simply spend our money elsewhere,” he said.

In fact the movement out of industrial and commercial properties has seen the fund’s exposure reduce to 4-5% of its portfolio from 20-23% before the unbundling of Arrowhead agreed to on Friday.

Wainer however says “it is not so much what we are left with - it’s the fact that we are not going to go into it anymore.”

Wainer says it can do this because its fund is “fortunately big enough and we don’t have to buy locally we have offshore alternatives. We are certainly not going to be blackmailed to pay people bribes corruption in order to expedite a process so we will rather just call it a day.

“We have just got to the stage, we have tried, we negotiate, we try to do things, we act in accordance with the law, the by-laws, the town planning and we are just frustrated and the tragedy is we are not creating jobs in the areas that need it”.

Wainer is however not completely dismissive of South Africa he says it may still consider investing in the Western Cape, which is the only local authority that has an “open for business sign”.

The Eastern Cape, North West and Northern Cape are “totally out”, he says.

Other provinces may be considered depending on the area, he adds.

He also suggests that local authorities should give companies like his that pay “R80m to R90m a year in rates and taxes a relationship manager... If we want to spend R500m or R1bn, don’t make us stand in the same queue and go through the same processes as someone who is spending R500 on bathroom alterations”.

Redefine’s full year headline earnings per linked unit were down 27%. The share price fell 0.9% to R8.

More township malls on the cards

More township malls on the cards

Major developers are increasingly targeting sprawling townships which are seen as the development nodes of the future for both the residential and retail sectors. Many of these developments are concentrated around transport hubs like taxi ranks which by their very nature attract tens of thousands of commuters daily.

Country manager of International Housing Solutions (IHS), Rob Wesselo, says on the residential side 97% of the market is in under developed areas. Massive urbanisation has also contributed to increased demand for affordable housing. Two of IHS’s largest developments are in Soweto south west of Johannesburg.

On the retail side the Pan African Shopping Centre in Alexandra north of Johannesburg is but one example of a successful mall which is in the process of expanding due to increased demand from retailers and shoppers.

Entrepreneur and owner of the centre Tebogo Mogashoa of Tebfin Property, says major tenants seem less nervous about investing in areas like Alex with a sometimes dubious reputation as being unsafe. Mogashoa says Tebfin Property has similar projects in the pipeline in places like Eden Park and Daveyton on the East Rand. “We see ourselves as an upcoming developer in this space… focusing on retail development in under-serviced areas with the specific focus on emerging markets,” Mogashoa says.

He attributes the success in Alex to the buy-in from the community and local players like the taxi associations who are shareholders in the project. The centre’s focus is the bustling taxi rank which attracts people from near and far. “The development responds to the needs of the communities.”

Several reports have been written saying the mushrooming of malls is threatening small business – a sector seen as key in the creation of jobs. Mogashoa disagrees, saying small business and informal traders were consulted extensively prior to the launch of the development and came to realise how they could trade successfully alongside the more formal sector.

Mark Stevens, the MD of Fortress, says his company is focusing on the market that has large volumes of feet moving through it, whether it be the Johannesburg CBD, Diepsloot or the bustling Louis Botha Avenue close to the city, or anywhere close to a taxi rank. “It might be the township where there’s a taxi rank, but it might be a commuter point where we know there’s a train or a bus.”

Fortress’s market is the lower LSM which is commuter orientated. “This is the market we’re chasing wherever that market may be,” Stevens said.

He added that their market now had more disposable income and had high aspirations. “They want better quality and brands. A lot of the tenants that we deal with, you can see from their trading how they are doing, I’m talking your Shoprites, the Capitecs, Pep (and) Cashbuild (JSE:CSB)”.

And, according to Stevens, the future looks rosy: “Going forward we see a lot of growth in that market, the rentals are off a low base… as opposed to some of the shopping centres in Johannesburg with very, very high rentals.” He says while their trading densities might be larger, getting good growth out of them going forward will be difficult.