Inner city project may bring investors back
A R2bn project backed by RMH and Nedbank could kick-start the return of large corporations who deserted Johannesburg’s inner city in the 1990s, accelerating its decay, says mayor Herman Mashaba.
While certain parts of the inner city have been rejuvenated, largely in the lead-up to the 2010 Soccer World Cup, many sections are suffering from poor infrastructure, bad spatial planning, inadequate transport links, a lack of new businesses doing trade and crime.
Speaking at the launch of the Divercity Urban Property Fund in Newtown on Wednesday, Mashaba likened the property opportunity offered by the inner city to the “second discovery of gold. I believe that this project can be the start of something which sees the private sector commit to the city again.
“We are going to make Johannesburg great again. In the past, government worked against the private sector in the inner city, but this is changing.”
Divercity is a new real estate group backed by institutional money, which is committed to growing a substantial inner city property portfolio that it eventually wants to list. The company was created with the intention of making large meaningful investments into Johannesburg, “which benefit a range of people instead of just the upper middle class and rich”, it said.
In the past, investors had created inner-city precincts, which often included nightspots and restaurants that appealed to relatively wealthy South Africans and tourists, and spent money on scattered residential developments, but big institutions had not been convinced of coming back and putting their cash to use in Johannesburg, said Carel Kleynhans, executive director at Ithemba Property Development.
Ithemba is one of the main shareholders in Divercity, along with mainstream property developer Atterbury.
Kleynhans said Divercity’s initial R2bn investment, which would be spent on redeveloping Absa Towers Main and creating the new mixed-use six-cityblock Jewel City, showed that there was scope for large
commercial developments and refurbishments in downtown Johannesburg.
“We’re starting by investing R2bn over 18 months. It’s been years since such a large sum of money was spent on the inner city in such a short period.
“In the past decade or so there have been some small investors who have bought and developed buildings here and there and the likes of Jonathan Liebmann’s Propertuity, which spent hundreds of millions over a number of years, but nobody has invested half of what we’re doing here,” he said.
Propertuity is the main developer of the Maboneng redevelopment.
Divercity acquired the 30storey unoccupied Absa Towers Main building from Absa, and plans to redevelop it into one that includes 520 affordably-priced residential rental apartments, a floor of restaurants, ground floor convenience retail and a public park.
Absa will also be leasing back nine floors with 10,000m² of office space in the redeveloped building. Once completed, the development will be valued at more than R400m.
Talis Property Fund helped form Divercity, which already owns R2bn of assets in the inner city, including Newtown Junction Mall and Turbine Hall.
RMH Property and Nedbank Property Partners’ role as cornerstone investors are subject to Competition Commission approval.
Wouter de Vos, CEO of Atterbury Property Fund, said Divercity might list in the next three to four years as a real estate investment trust when it owns about R6bn in assets.