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.


Denny Crane

Denny Crane
It's not me ... yet. Denny Crane from the TV series Boston Legal. Click on picture if you're not sure who he is!