NEWS WRAP - 2 OCTOBER 2014
Category NEWS WRAP - 2 OCTOBER 2014
Growthpoint teams up with Cavaleros for large Samrand development
Growthpoint properties recently announced its largest industrial deal to date. In an article published on its website, the largest property investment holding company listed on the JSE, said it is acquiring a fully-serviced 43 hectare site in Samrand (equal in size to 86 rugby fields), from the Cavaleros Group, which will also be their development partner for the land.
The land, situated between Johannesburg and Pretoria, has a reported development potential of R2 billion. Previously owned by Malaysian banker Dato Samsudin Abu Hassan, it will be developed with tailor-made turnkey commercial and industrial solutions with a flexible mix of ownership options.
South African property shows modest improvement
The IPD South Africa Biannual Property Indicator, released on 25 September, showed that the South African property sector delivered an improved 7.4% total return for the first six months in 2014. This is 90 basis points more than the December 2013 biannual total return of 6.5%.
According to a press release on the IPD website, the uptick in performance growth can be attributed to an improved capital growth of 3.1% compared to the 2.2% recorded for the last half of 2013. The growth in capital growth was reportedly underpinned by an improving base rental growth and a firming in the rental yield. Income return remained stable at 4.2%.
The property sector outperformed both bonds (JP Morgan 7-10 Year South Africa Government Bond Index) and consumer price inflation, which recorded growth of 2.0% and 4.3% respectively.
A continued focus on operating costs has started to bear fruit for landlords as costs only increased by an annualised 3.2% for the six months ending June 2014. Operating costs as percentage of gross rent decreased to 44.6% from 46.9% as at December 2013.
New Orange Farm mall raises the bar in social innovation
Eyethu Orange Farm Mall, 10% of which is owned by its community, is set to open on 28 October. According to eProp Commercial Property News, the mall will raise the bar in socially innovative retail real estate development in South Africa. The mall will sponsor space for a day care centre and local radio station.
The community’s 10% ownership of the mall as facilitated by the National Empowerment Fund’s Rural and Community Development Fund unit. Co-owners, each holding 30%, include mall developers Stretford Land Developments, Flanagan & Gerard Investments and JSE-listed property company Dipula Income Fund.
SA quantity surveying body receives international recognition
The South African Council for Quantity Surveying Profession (SACQSP) and the Royal Institution of Chartered Surveyors (RICS) in London have signed a “Mutual Recognition of Professional Competence” which will consolidate the relationship between the two bodies.
According to a RICS press release, mutual recognition of qualifications will also mean that registered members of SACQSP are permitted to become full members of RICS, while qualified quantity surveying members of RICS can be registered as professional quantity surveyors with SACQSP.
RICS is recognised worldwide as the leading qualification in respect of professional standards in land, property and construction, enabling member to work across markets.
Prepare for 2020 and beyond – report
A recent publication by Price Waterhouse Coopers argues that real estate investment organisations need to be prepared for a rapidly changing future. Looking forward to 2020 and beyond, the industry will be at the centre of rapid economic and social change, particularly in the developing economies, giving real estate managers a “broader range of opportunities, with greater risks and new value drivers,” the report says.
Titled “Real Estate 2020: Building the future”, the report predicts that total investable real estate in Sub-Saharan Africa will rise by a staggering 90% to $0.7 trillion by 2020, from a 2012 total of $0.4 trillion. Other predictions, in brief, are as follows:
- The global investable real estate universe will expand substantially, leading to a huge expansion in opportunity, especially in emerging economies.
- Fast-growing cities will present a wider range of risk and return opportunities. The greatest social migration of all time – chiefly in emerging economies – will drive the biggest ever construction surge.
- Technology innovation and sustainability will be key drivers for value.
- Collaborating with governments will become more important.
- Competition for prime assets will intensify further.
- New risks will emerge. Climate change risk, accelerating behavioural change and political risk will be key.
The full report and press release is available on the PWC website.
Pivotal announces intention to list on JSE
According to a recent report from BDLive prime office space specialists Pivotal Property Fund plans to list on the JSE before the year end. According to the report, despite consolidation in the sector over the past year there were seven new listings between June 2013 and June 2014. Pivotal, whose primary asset is Sandton’s Alice Lane Offices, plans to list with a R9 billion property portfolio.
Investec Australia Property Fund announces rights offer
Further to the July announcement of the office acquisition of 757 Ann Street in Brisbane for AUD 70 million (R688 million), including costs, the Investec Australia Property Fund (IAPF) has confirmed details of a renounceable rights offer to existing unitholders of AUD120 million (R1.1 billion).
According to an article on the Investec website, the offer will run from 6 to 17 October and is priced at a 6.1% discount to the closing price of IAPF stock prior to the offer announcement. The offer entitles investors to 83.08 shares in return for every 100 IAPF shares held.
The rights to this offer will be tradable on the JSE, and commence trading on Monday 29 September. The proceeds raised through the offer will be used to complete the Ann Street acquisition with the remainder earmarked to pay down existing debt to create further acquisition capacity.
SAPOA welcomes Department of Public Works spending probe
The South African Property Owners Association (SAPOA) has welcomed the announcement by Public Works Minister, Thulas Nxesi, that there will be a thorough investigation into irregular expenditure by the Department of Public Works (DPW). On 29 September Nxesi announced the department had uncovered R34.9 billion worth of irregular expenditure, some of which goes back as far as 2001. Some R1.1 billion of this is being investigated for fraud and corruption.
Neil Gopal, CEO of SAPOA, commented as follows in a press release: “The commercial property sector welcomes Ministers Nxesi’s promise that each and every instance of irregular expenditure will be fully investigated. We will assist these investigations in any way we can, and stand ready to support the department to meet their goal of wrapping up these investigations during its current financial year.”
SAPOA is the voice of the South Africa’s commercial property sector, which makes a significant contribution to the country’s economy. Its members control about 90% of all commercial property, with assets estimated at more than R400 billion in value. Many commercial property owners have leases in place with government departments, through the DPW, and thus are affected by the department’s level of effective functioning and ethical conduct.
Aucor to host its largest multiple auction yet
Properties worth R400 million will come under the Aucor Property hammer in Johannesburg on 14 October at noon at the Maslow Hotel. The event is set to be one of the largest multiple auctions ever hosted by the company.
According to an announcement on the company’s website, Aucor has been mandated to sell a portfolio of properties by a large property consortium needing to divest of a portion of their assets.
John Hislop, Business Development Executive, said the value of the portfolio which alones comprises 35 properties is well over R300 million and is made up largely of a mix of residential and retail offerings. He said areas such as Germiston, Edenvale, Springs and Boksburg have caught the eye of opportunistic investors over the last 12 months.
SA hospitality industry shows promising results
Price Waterhouse Coopers recently launched the fourth edition of its Hospitality Outlook 2014-2018. Subtitled “Passport to Africa”, the report notes that in the South African market, overall spending on rooms in all categories rose 14% in 2013 to R17.3 billion, reflecting an increase in stay unit nights and an 8.4% rise in the average room rate.
In the rest of Africa, the report notes that the hotel market in Nigeria grew 9% in 2013 and by a cumulative 59% over the past four years. Growth has been fuelled by a large increase in available rooms and a rapidly growing economy. Hotel room revenue in Mauritius decreased by 8.7% in 2013 and is projected to grow at 4.6% compounded annually to 2018. Kenya’s hotel market declined during the past two years, falling 6.6% in 2012 and by a further 2.6% in 2013.
The full report can be found on the PWC website.
Author: Sharon Dell