Countdown
Sandton’s Kgoro Central development eyes liftoff
● Development of the Kgoro Central precinct, on prime property in Sandton, may finally get liftoff this year after a decade of legal wrangling.
The developers, Cedar Park Properties, a broad-based black economic empowerment consortium led by financial advisory firm Regiments Capital, are now close to securing funding and expect to see the soil-turning for the main portion of the development happen within the next six months.
Speaking to Business Times this week Litha Nyhonyha, a co-founder of Regiments, said discussions over funding had been narrowed to at least five potential funders, none of which were banks. But he declined to comment on who the potential funders were.
Once touted as one of the largest civil construction projects in the area, Kgoro Central — a 200 000m² mixed-used development comprising offices, hotels, residential, theatre and gallery space, was expected to lead transformation of the Sandton landscape. The development is envisaged to comprise eight interlinked buildings, above an eight-level parking basement. About 304 apartments will frame a park.
The name Kgoro is derived from the Sotho word meaning gateway.
But as its developers were caught up in legal battles with authorities over the relocation of the Sandton taxi rank, which eventually took place in late 2015, the development was overtaken by other major projects such as Discovery’s new head office overlooking the US embassy and the main entrance to Sandton City Mall.
Cedar Park was awarded development
There is a reasonable amount of demand for headquarter space in the area Craig Smith Anchor Stockbrokers
rights by the City of Johannesburg in August 2008, but the contract was only signed in June 2009. The property was transferred to the consortium in 2012.
“We’ve just been having endless uphills,” Nyhonyha said.
Banks they had approached were reluctant to lend, citing the consortium’s lack of property development experience. But companies the bank’s advised them to partner with wanted to take over and give the consortium a management fee. The consortium refused.
In 2013, Vantage Capital invested R150million in the development for pre-development costs and to enable the transfer of the land, money for fees and the first phase of development. The consortium has self-funded other costs.
The first phase of two levels that flanks the entrance to the Gautrain station is already operational with street-level shop tenants such as Krispy Kreme, Bidvest and Nedbank already operating.
Last year the consortium applied for a site development plan to begin work on the second phase, which will sprawl across the top of the station and link to Sandton City. But there were objections from some other property developers in the area. A settlement is expected soon.
Construction costs are understood to be between R4-billion to R6-billion.
According to the Kgoro website, the development is projected for completion in 2024.
Craig Smith, head of research at Anchor Stockbrokers, said: “You can clearly see there’s a lot of demand around the area. There is a reasonable amount of demand for headquarter space in the area.”
Smith said construction costs to build above the Gautrain would be significant and that anyone funding the development would likely want the assurance there would be occupiers. He said given developments that have recently been erected in the area “a lot of demand [for office space] has been sucked out of the market”.
Smith said Liberty, the owners of Sandton City, were likely to be “more interested in re- tail expansion or adding to Sandton City.”
Lawrence Koikoi, a listed property analyst at Stanlib, said a trend by corporates was to seek new energy-efficient glass buildings to cut costs in a weak economy. This had spurred the large-scale migration by corporates into the Sandton CBD, where although rents were initially high, the energy efficiencies would cut costs over the long term.
But occupation trends in future will depend on how quickly the economy grows to drive business expansion. “It’s going to be more of a consolidation story where a company with multiple offices will consolidate into one good node with good amenities … than strong tenant demand. I can’t imagine it would be tenants who are looking for space because their business is booming.”