Buildings that sparkle and shine
Inner-city Revamp | Octodec and Premium Properties are bringing the Johannesburg and Pretoria CBDS back to life
IT’S not often outsiders are brought into a business to see exactly how it works, and it’s the kind of experience any investor with an eye on a particular company would value.
But with listed property, the nuts and bolts of the business model are more or less on permanent display. For anyone willing to make the effort, a visit to the portfolio of a listed property company can reveal a lot about the way it deals with its assets and shareholders.
A recent walking tour of some of Octodec and Premium Properties property holdings took in the central business districts of Pretoria and Johannesburg.
At the end of August last year, Octodec had a total investment portfolio of R3.566-billion spread across 108 buildings and a total lettable area of 567 963m².
Offices make up a fifth of its rental income, with retail shops at about 22%, shopping centres nearly 33%, industrial space 20% and residential 6.9%.
At the end of February, Premium held an investment portfolio of R4.699-billion across 169 buildings and a total lettable area of 733 903m². Offices make up a quarter of the rental stream, with retail at 37%, industrial at 9.5% and residential at 28.7%.
Octodec and Premium are responsible for such diverse interests as the Killarney Mall, Station Square in Hatfield, Tudor Chambers in Pretoria as well as a string of developments bearing the suffixes Place and Towers.
Underlying both companies , which listed in the early 1990s, is
City Property is dealing with 76 refurbishment projects under way
City Property Administration, the property management company that deals with leasing, building refurbishment projects and tenant issues.
With all these functions kept inhouse, hundreds of employees are spread across a variety of tasks, from IT and database services to legal response teams.
City Property is currently dealing with 76 refurbishment projects under way or in the planning phase in Pretoria and Johannesburg, to the value of R600-million. Such projects range from simple paint jobs to large residential or greenfield developments.
It is perhaps in the residential units that the casual observer can most easily discern the funds’ approach to tenants, and it is a relatively rare inclusion in the portfolio of a South African listed property fund. Residential vacancies remain in the low single-digit percentages, and a fairly stringent look-and-feel formula has been applied to the residential spaces which are sometimes standalone, but more often found above retail space on the ground floor.
Jeffrey Wapnick, the affable MD of Octodec and Premium, took over from his father Alec in 1998 and heads three sides of what has essentially been a family business.
With approval of the real estate investment trust (REIT) structure in South Africa and removal of capital gains tax threats, the official word is that the board is considering a merger once both companies have converted to REITs.
Financial director Anthony Stein said that halving the reporting burden would be one of the greatest benefits of the merger, and the market would support such a move.
City Property doesn’t rely on the cities’ municipal services, which can be inconsistent. Instead, it has revamped and maintains the pavements fronting its properties. It has also installed prepaid electricity meters which come with laminated printouts of typical costs by appliance and typical water prices per bathtub.
Knocking on unsuspecting tenants’ doors — and there are more than 11 000 doors in all — you can find living spaces which were prepared three years ago but look spotless and fresh. Communal areas are free of litter and clutter, and no washing is allowed to hang out of windows. Building managers are attentive and rules are adhered to.
Buildings that once were dishevelled husks with cracked walls, shattered windows and even trees growing inside them now sport attractively branded facades in similar shades of stone-brown with revamped entrances and well-lit, welcoming entrances.
Floor by floor, spaces can be transformed from office to residential, but the sums have to be done first. “You can’t just stick up residential units and hope for tenants. There’s a lot of competition here already and the proposition has to be right,” said Stein.
It will take time — some of the companies’ buildings in Johannesburg stand alongside those belonging to slumlords or which have been hijacked. In such cases, it will take
You can’t just stick up residential units and hope for tenants
some years for developers to convert the long, dark hallways with ramshackle desks manned by equally shadowy characters into the kind of spaces that will attract your average Johannesburg resident back to the inner city.
City Property has shown a particular focus on modernisation without destroying what may sometimes be idiosyncratic architecture — whether national retailers and their in-house design teams move in, or small businesses which require branding and shopfitting assistance from City Property.
Wapnick is bullish on the future of both cities’ CBDs, and there’s a particularly positive buzz in the air in central Pretoria, where between them Octodec and Premium own the largest single property holding of any entity. He said the funds intend to maintain their focus in these cities, avoiding spreading themselves too thinly.
Which is just as well — of late property companies have been snatching up buildings in the Joburg CBD which were once nearly unsellable and prices are rising. “There’s still plenty to work on — refurbishments, new projects. We don’t have to be too acquisitive to grow value for shareholders, though we’re ready if something presents itself.”
Watching Wapnick walk through retail and residential space, taking bets that should one of us find an envelope in the wrong mailbox in any lobby he will pay us R500 for each misfiled address, one feels he is tending to his brood like a farmer — a vocation rather than a career.
“I suppose at some stage I ought to think about retiring,” he joked, clearly ill at ease with the prospect of one day walking these streets with a different purpose.