Tag: property

Redefine Properties income takes a knock

By Edward West for IOL

REDEFINE Properties’s distributable income fell 21.8 percent per share to 26.2 cents in the six months to February 28, compared with a pre-Covid reporting period, mainly because of the impact of Covid-19 on the property sector and economy.

However, the company was in a good position to benefit from an anticipated uptick in property fundamentals in line with the expected vaccine rollout in the latter half of the year, chief executive Andrew Konig said yesterday in a presentation.

No full-year distribution guidance was provided, and the dividend was deferred until the end of the financial year because of the uncertain environment.

Redefine shares dipped 4.36 percent to close at R4.17 on the JSE yesterday.

“We did not take this decision lightly. It is fundamental to our investment proposition to pay dividends, but, unfortunately, there is just too much uncertainty to factor in right now. We hope to have better news towards the end of the year,” Konig said.He said an improvement back to pre-Covid levels should take place once vaccines were broadly rolled out.

“We believe the bottom of the cycle has been reached. What we are expecting – and this is also what has happened in other countries who have made good strides on their vaccine programmes – is that the roll-out of vaccines will lead to more mobility in the system.

“This means more people going out to work, to shop and to play, and that quickly translates into confidence, which is the cheapest form of economic stimulus,” he said.

However, until this began, weaker property fundamentals and low economic growth had to be factored in for this year and beyond.

Redefine’s new chief financial officer, Ntobeko Nyawo, said Redefine’s loan-to-value ratio reduced to 44.3 percent at half-year from 47.5 percent, and the plan was to reduce this to below 40 percent next year.

Liquidity was “ample” at R4.8 billion, and 98 percent of gross billings were being achieved in collections.

Apart from the impact of Covid-19, the lower revenue was attributable to the deconsolidation of European Logistics Investment BV in the second half of last year, the sale of Leicester Street, and the disposal of non-core local properties.

According to News24, some of Redefine Properties’ offices are now empty. The property company, which owns a handful of shopping malls and offices in Sandton – including WeWork – is battling the highest office vacancy rate in its history.

Office vacancies rose to 14.6% from 13.8% at the end of the company’s 2020 financial year in August last year. When including vacant offices held for sale, this figure rises to 14.9%. Secondary grade offices that include older buildings and those not very well located had a vacancy rate of 24.2%.

Eskom moves to dispose of non-core properties

By Sibahle Motha for Jacaranda FM

Power utility Eskom has confirmed that it will finalise the sale of Die Wilge flats at the Kusile power station during the first half of the year (pictured).

Construction work at the flats began in 2008 at a budget of R160-million.

However, costs ballooned to more than R800-million by 2019 with the project now being abandoned and incomplete.

Eskom says the sale of Die Wilge and other properties form part of the power utility’s disposal of non-core immovable property.

The power utility has since managed to sell two high rise offices in Kimberley and Johannesburg, raising a total of R76.1-million.

Eskom says it aims to raise more than R2-billion from the sale of non-core property.

Cell C’s head office for rent

Source: MyBroadband

Parts of Cell C’s head office in Midrand, which boasts a customer walk-in centre, an IT centre, warehouse facilities and office space, is for rent.

The Cell C campus was developed by Atterbury, with construction starting in July 2012 after an official sod-turning ceremony with former Cell C CEO Alan Knott-Craig.

It formed part of Atterbury’s commercial development rights for 330 hectares of land north of Sandton, which included the Waterfall Business Estate.

After its completion in 2013, Cell C’s head office soon became a landmark in Gauteng thanks to its excellent visibility from the Buccleuch Interchange.

Atterbury later sold the Cell C campus to the Attacq Property Fund, which has recently put the property, or at least part of the property, up for rent.

The Cell C head office boasts a gross leasable area of 43,890m² and features rehabilitated wetlands and a 1.8km walking trail aimed at encouraging a healthy workforce.

According to two people linked to the lease of the property, potential tenants have the option of renting the full property or only part of it.

There is speculation that Varsity College, which is rapidly expanding, is (or was) one of the parties interested. This could, however, not be confirmed.

Louise Wiseman, MD of Varsity College and IIE MSA, told MyBroadband their campus footprint has grown for a number of years to accommodate their increasing number of students.

Most recently, IIE Varsity College constructed a new state-of-the-art campus at the Newlands Cricket Ground development.

Varsity College is planning to expand the Pretoria campus this year and is considering various options for the envisioned campus expansions in other areas.

Cell C explains its decision
Cell C took occupation of its new campus at the end of 2013 on a 15-year lease, which means the initial agreement is set to expire in 2028.

Should the property be rented to a different company, it means the initial agreement will be terminated well before it was supposed to end.

There is, however, also the potential of sub-leasing part of the campus while Cell C maintains some of the office space.

Cell C told MyBroadband that in response to COVID-19 and the reduction in staff numbers subsequent to the conclusion of the Section 189 process, it is looking at ways to optimise cost and use its resources more efficiently.

The company has also adopted a hybrid remote working model, which has seen a further reduction in the number of staff coming into the office.

It is therefore looking at ways to sublease areas of the campus no longer required or those the company does not foresee being occupied in the short to medium term period going forward.

“All staff will continue to be working on a rotational basis from the campus aligned to the Cell C work from home policy as well as to ensure compliance with COVID-19 protocols,” the company said.

Cell C added that the store and support centre situated on the campus were closed during the end of 2020.

Cell C customers who still visit the head office are assisted at the main campus by on-site internal customer care consultants.

The intention is, however, for customers to use other Cell C retail outlets, like the one at Mall of Africa.

 

By Londiwe Buthelezi for Fin24

Even though the ongoing nationwide lockdown has sent many of its tenants’ operations on a tailspin, property giant Redefine says South Africa’s retail sector is showing a better recovery trajectory than markets like China where shoppers continue to stay away from shopping malls.

The owner of shopping centres such as the Centurion Mall and the East Rand Mall told journalists during the presentation of its interim results on Monday that while it expects demand for retail space to change as the coronavirus (Covid-19) and lockdown changed people’s way of doing things, South Africans are still showing love for malls.

Redefine Financial Director, Leon Kok said looking at photographs of the group’s shopping centres and malls taken over the past long weekend, they resembled a “normal weekend” with people visiting in droves, but still keeping the required level of social distancing.

Shoppers flock back to malls

“I can’t believe the numbers of people that were going to shopping centres… Surprisingly, I would say that in our centres, between 40% and 70% of the centres’ [shops] were open,” he said, but acknowledged that since restaurants and gyms will remain closed for the foreseeable future, this will affect foot traffic.

Richard Cheesman, senior analyst at Protea Capital Management said most people’s observation of shopping centre activity over the past weekend would probably correlate with what Redefine reported. But in the medium-term, as the current economic situation dampens consumer spending, Covid-19 will weigh on the local real estate industry as many other commentators have predicted.

“You would expect an initial bounce back after the lockdown. This may moderate going forward. Some areas are still not open such as entertainment and sit-down restaurants. Eventually the market should stabilise at a below average level,” he said.

Stanlib’s Head of Listed Property Funds, Keillen Ndlovu, said what set South Africa apart from other markets is that South Africans love to shop.
“We are a shopping nation and the malls opened (for Level 4 lockdown trading) at the beginning of the month after most people have just been paid. Most of all, we have low levels of online shopping at about 2% of total retail sales. So, people have to go out and shop,” he said.

In comparison, online shopping in China now accounts for over 30% of total retail sales compared to South Africa’s 2%, and even if people wanted to shop more online in the country, delivery of many items has not been allowed during the lockdown, he added.

But rental income will still be low

South African’s willingness to go out shopping again will be a welcome relief to landlords, as it could help convince their retail tenants to keep their rented space. However, Redefine said it still expects to grant more rental concessions to tenants or that some tenants will not make it at all.

The group’s Chief Operating Officer, David Rice, said rental discussions were taking place between Redefine and many of its tenants, as some were not happy about paying rates and taxes. Rice said the group also expects the vacancy rate in its office portfolio, which climbed to 12.3% in the six months to February, to continue rising.

Ndlovu said unfortunately property companies are going into these negotiations with tenants in a “tenants’ market”.

“Landlords have to do the best they can to nurse ailing tenants. It costs more to lose a tenant than to retain one, even at a lower rent. There’s no demand for vacant space at the moment. Even if there was, there’s an opportunity cost of missed rentals when the property is vacant,” he said.

Last week, the recently formed Property Industry Group announced the availability of industry-wide assistance and relief packages for all retail tenants during South Africa’s 35 days of lockdown.

While this will provide a much-needed stopgap for many tenants concerned about their operational viability post-lockdown, the announcement puts pressure on the various unlisted property groups, many which are not part of the Property Industry Group and were not consulted on the proposed packages, says Soria Hay, head of Corporate Finance at Bravura.

The Property Industry Group consists of the sector’s three biggest players, namely the South African Reit Association (SA REIT), the SA Property Owners Association (SAPOA) and the South African Council of Shopping Centres (SACSC), and is the mouthpiece for the South African commercial real estate sector.

The intention of the assistance and relief package initiative is to preserve the jobs of retailers, suppliers and service providers, with a qualifying criteria for tenants to ensure that no staff retrenchments are made during the relief period. Assistance and relief is to be at the discretion of the landlord, but the package stipulates the minimum that qualifying retailers can expect.

The package is to be made available for the periods of April and May 2020 and will provide basic assistance and relief as well as interest-free deferment recovery periods for SMMEs and tenants providing non-essential services. Relief can consist of rental reductions (between 35% to 100% for the first month and between 25% and 50% rental reduction for the second) or rental deferments.

The Property Industry Group acknowledges that the relief package comes at a high cost for the industry. Group spokesperson, Estienne de Klerk says that it is time for bigger and stronger companies to step up and form a buffer to protect smaller retailers so that the sector can collectively come out stronger.

Unlisted property groups and independent shopping centres are not part of the Property Industry Group collective. As such these industry players were not included in the consultation process that took place when obtaining buy-in for the proposed package. Yet the relief initiative undoubtedly sets an industry precedent which could see independent landlords and property groups challenged to provide similar relief to their own tenants.

Although the listed property sector has not been immune to the challenges experienced by the retail sector preceding lockdown (in fact it was named as the worst-performing asset class of 2019) there is arguably better liquidity and wiggle room here in which to provide tenant assistance than within their unlisted counterparts. Just recently leading REIT, Redefine Properties, which owns more than 300 retail properties across the country, said that it was in a position of strong liquidity with which to face off the lockdown, with access to R2.8 billion in committed undrawn credit facilities. This is certainly not the case for several thousand medium and small retail operations in South Africa.

Prior to lockdown, retailers were already experiencing the negative COVID-19 impacts. For example, in the short “stay at home” period leading up to the original 21-day lockdown, struggling retail group Edcon was hit with a 45% income loss and a reduction of about R400m in sales from flagship stores Edgars and Jet chains. The group anticipates a further R800m loss in sales over the lockdown period and a question mark remains over whether the group will be able to pick up operations once the lockdown is over. The ripple effect if Edcon folds will be felt throughout the sector – listed and unlisted.

The Property Industry Group has only stipulated the relief package for April and May, and it will be a different ball game should timeframes become longer. For the unlisted sector – and their tenants – with less concerted relief efforts available, the playing field may grow more uneven.

How Edcon is shrinking its footprint

By Glenda Williamns for Fin Week

Edcon’s current restructuring process includes significant space rationalisation.

JSE-listed real estate investment trust (REIT) Attacq, owner of Mall of Africa, announced that Edcon exposure, (25 499sqm at 31 December 2018, down from 29 262sqm at 30 June 2018) will settle at 22 945sqm of primary gross lettable area (PGLA) by 1 October 2019 for an estimated 3% of the REIT’s effective PGLA. Contractual gross monthly rental at this time will be R3.2m, down from R4.1m at 30 June 2018.

Owner of Sandton City, Liberty Two Degrees’ (L2D), says Edcon currently occupies 5.3% of its current portfolio, which is expected to reduce to 4.3% of gross lettable area (GLA) by 31 December 2019.

Redefine Properties, SA’s second-largest REIT and owner of Centurion Mall, has a hefty retail portfolio that at 31 August 2018 comprised 1.4m sqm of GLA.

The REIT is a significant landlord to Edcon with GLA exposure of 78 760sqm (down from 122 856sqm at August 2018) housing the Edgars and Jet brands.

Redefine’s equity contribution will amount to R54.6m, the REIT says. As a consequence, Redefine will receive 100% of its rental due from Edcon on 56 788sqm representing in force leases for profitable Edcon stores.

Redefine has also agreed to rental reductions up to a maximum amount of R13.8m over a two-year period in respect of leases totaling 21 972sqm.

Other major players in the listed property sector have yet to make their formal announcements on the recapitalisation process.

Some like Hyprop Investments Limited, owner of super-regional mall Canal Walk, have significant exposure to Edcon.

At 31 December 2018 that amounts to 9.4% of GLA (66 781sqm) and 7.6% of gross income.

Speaking at Hyprop’s interim financial results for the six months to December 2018, newly-appointed CEO Morné Wilken says that almost 7 600sqm of Edcon’s total 67 000sqm floorspace has already been taken back and mostly re-tenanted.

Hyprop has, in principle, agreed to support the Edcon restructuring proposal with a reduction in rentals, compensated for by equity participation in Edcon, says Wilken.

“While that will impact distributable earnings in the 2019 and 2020 financial years by 0.8% and 2.3% respectively, it is considered an acceptable limitation of the risk,” he says.

Others like top-performing SA REIT and low-LSM focused Fairvest Property Holdings have insignificant Edcon exposure.

In Fairvest’s case that’s a mere 0.8% and exposure is only to the still well-trading Jet Stores. “That,” CEO Darren Wilder tells finweek “was not by chance, but by strategy.”

Six property scams to avoid

A recent article by Business Tech highlights the leading property scams to avoid.

These are just a few tips for house sellers as well as for buyers. As there are many fraudsters in today’s world out there thus being alert at all time is a must, especially when it comes to real estate where the entire transactions generally happen for a large sum of amount.

Engel & Völkers singled out the most predominant property scams you may encounter while searching to buy or rent property:

1. Intercepted emails

This involves scammers, hacking into the email of people involved in the transactions, such as agents or lawyers, by tricking home buyers into wiring funds to them instead of the appropriate parties. They often will use a generic email address indicating that the funds should be wired to a specific account which will then vanish without a paper trail.

2. Fraudsters posing as a buyer

They will approach a seller privately and show keen interest in the property and put in an offer. After a few days, the supposed buyer will contact the seller asking for a document to be signed to help them get their home loan approved, which the seller then signs without reading too much of the document only to discover later that a third party claims to have bought the home.
It will be found that the scam artist (the first buyer) has been marketing the home online as an agent, by taking the photos off various websites, and has found a buyer who is also unaware that something is wrong – and who might have paid a large deposit over to the supposed agent. The absolute best way to avoid this type of disaser is to use an agent from a reputable agency who’s office is availble to visit. This way you are certain of their legitimacy and they will do the due dilligence necessary to vet potential buyers.

3. Identity theft

Criminals have become much more experienced and are using stolen identity details not only to empty bank accounts but to obtain various credit accounts and even home loans, according to hard money lenders Seattle experts. They are able to delay detection of the fraud for long periods while the unpaid bills and instalments mount up.

The scammer will use false documents to pose as the property owner, register forged documents transferring a property to their name, and then get a new mortgage against the property. After securing a mortgage or line of credit, the criminal takes the cash and disappears.

4. Bait and switch scheme

This occurs when a prospective buyer offers an ‘above market value’ price to a seller. The seller, impressed by the high offer signs the contract, meanwhile the deceitful buyer has no intention to purchase the property.

Once the seller signs the contract, the seller may only sell to that buyer for a specified time, when that time ends the fraudster asks to extend the contract a few weeks to work out closing details. Sounding reasonable, the seller agrees to the extension blinded by the high offer.

In the meantime the seller keeps paying taxes, maintenance, utilities and insurance the buyer comes back to the seller with an excuse as to why this price no longer works, and requests a reduction to below market value and threatens to cancel if their demand is not met. Stressed by time and on-going costs, the seller agrees to the reduction.

5. Duplicated listings

“Agents” copy legitimate rental listings and advertise for a much cheaper price. Unfortunately, many people fall for these fake listings and wire money to the owners of these fake listings.

6. Fake rental agents

When you find a property you really like, you call the agent to arrange a viewing and they say they will meet you there. Later they call and say they won’t be able to make it anymore, but no need to worry the landlord will be there to show you around. The agent then promises to negotiate a lower price with the landlord.

When you arrive at the house you find many other people interested in renting the same place. You call the agent back to negotiate a better price that you’re happy with; they will phone you back shortly to inform you of the new price, all you have to do is transfer the money for the first two months to secure the place.

On moving day, you find someone else is moving in and the agent wasn’t an agent; they just found the property online and reposted it with their own contact information. They purposely send several people at a time to view the property to generate a sense of urgency for the potential renters. Emerald Property Management is a trustworthy company, which can find the ideal place for you at a reasonable price.

Avoid becoming a victim

  • Be wary when you are requested to make a payment for something minor like a credit check or security deposit, in most cases, there’s nothing you can do to get your money back because the scammer can’t be tracked.
  • If the price looks too good to be true, it probably is. Prices are considerably higher than they were a few years ago.
  • The email sounds strange – some listings hide the email address when you send a message, so you might not be able to see the address if you respond to the listing. Scammers usually use free email servers and they’ll often go by a series of random letters to make them less easily traceable.
  • The agent won’t show you the property – If you ask to see the property and they claim it’s impossible, it’s probably a fake listing. Agent will make time for people who are interested in the property.
  • The seller pushes you – the faster a scammer gets you to agree to a business deal, the faster they can steal your money and avoid getting caught. The seller will often use high-pressure tactics that attempt to push you into acting quickly in order to purchase the home. Don’t be prodded by any seller to send money.
  • The seller asks you to wire money – when you see the term “wire money” or similar variation of that phrase come up in a business conversation with someone you’ve never met, red flags should go up. Many scams entail wiring of funds because it’s more difficult to trace and enables the scammer to collect the money sooner. Scammers will come up with a variety of plausible reasons why the money should be wired rather than sent through a bank or lawyer.
  • The buyer or seller is foreign and wants to buy a home unseen – most people want to at least see a property and become familiar with the area before making a large investment. This doesn’t mean you should be wary of all foreign inquiries, but many scams often occur overseas because it’s harder to trace the person behind the fraud. Foreign buyers who don’t ask questions, act in haste, and don’t care to see the property indicate a high likelihood of fraud.
  • Be well informed about market related prices within the area you are looking to rent or buy. If a property is advertised way below the market related price for that area it should raise your concerns.
  • If you found a “bargain” online you should call the estate agency to find out if the deal is for real. Don’t call the number at the bottom of the ad because this number could lead to a fake office. Rather find the actual office number, call there and ask the receptionist to give you the number of the specific agent or branch you are looking for.
  • Be wary of agents and landlord who seem too eager or pushy to get you to live in their property or one they are marketing. A legit agent or landlord will always conduct the necessary checks and will not be too disappointed when you don’t show much interest in the property.
  • If the agent is constantly making up excuses as to why they are not able to meet you or show you the property, you should also be worried. The chances are good that they don’t have access to the property and are stalling for time until they can think of a clever way to get you to pay the deposit.
  • Never pay a deposit before you have viewed a property.

Get more insight on real estate by checking out Taylor Private Estate land for sale Caversham.

Source: Business Tech

Co-working spaces, the trend that is shaking up the traditional workplace model the world over, is set to cause a dramatic change in how and where people work in South Africa.

Linda Trim, director of FutureSpace – a joint venture between Investec Property and workplace specialists Giant Leap that offers high end co-working space, says that in 2016, there were approximately 11 000 co-working locations around the world.

“But this figure is expected to more than double to 26 000 by 2020. By comparison, there are approximately 24 000 Starbucks locations worldwide. Taking a cue from the popular reference to the coffee giant’s location strategy, that means there may soon be a co-working space on every corner.”

Trim noted that co-working spaces were increasingly popular with strong demand for FutureSpace’s offices.

“We already have steady 80% occupancy rate only three months after launching.”

FutureSpace plans to open further offices around South Africa, a possibly overseas in 2018 such is the demand.

The biggest shift Trim expects to see in the coming years is that co-workspace will become a key component of many companies’ workplace and real estate strategies — for occupiers and building owners alike.

“Flexible workspace is not just for millennial freelancers or tech startups anymore. Large, multinational companies are increasingly taking on space at flexible workspace operators or integrating shared working spaces into their own environments,” she noted.

For example, Microsoft recently shifted 70% of their sales staff in New York City to flexible workspace. Large employers already make up the fastest growing market for shared workspace provider and many businesses’ preferences are moving toward short-term real estate contracts with flexible provisions.

Companies like IBM and Microsoft have begun to outsource the design, building and management of some of their workspaces to third parties.

Says Trim: “In the same way we now purchase many technologies as services rather than as software, the future of ‘space as a service’ looks bright.

“This model provides companies with a way to access space in an on-demand fashion, drawing on the knowledge of outside experts in a way that frees them to focus on their own core businesses.”

Building owners are also finding opportunities to revitalise underused spaces by transforming them into the type of shared work areas that are increasingly in demand.

Already, many occupiers won’t consider a building without available flexible space. To remain relevant, commercial office buildings will need to create spaces that attract people to connect and collaborate — both within the office and outside of it.

In South Africa, as in the rest of the world, companies will soon need to think more about accessing office space than owning or leasing it.

This paradigm shift will require an evaluation of “core” and “flexible” space needs.

Core space is the real estate a company must rent or own over the long term for the business to function. Flexible space is the real estate that can be deployed quickly without long-term commitment, adjusting in near “real time” based on needs.

“By categorising space needs this way, businesses can make better decisions about how to execute a real estate strategy that minimises cost and maximises opportunities,” Trim adds.

One of the best examples of large companies adopting the flexible co-working workspace approach in Asia is HSBC’s recent contract for 400 desks in WeWork’s Tower 535 in Hong Kong.

“It created the right environment for their staff, working in the same location as other like-minded teams, including Hong Kong’s fin techs and other startups,” says Trim.

By making flexible workspace an integral part of an organisation’s workplace strategy, companies can not only provide employees with a valuable opportunity for choice and connectivity, but they can realise meaningful benefits thanks to flexibility.

In balancing core and flexible space needs, companies can reduce financial risks related to long-term space needs and be nimble in making changes as needed.

“Building owners can benefit from transforming underutilised spaces into shared working areas, which in turn can help attract and retain tenants, “ Trim concludes.

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