R1BN PLAN TO DEVELOP FORESHORE DRAWS FIRE
Long-term lease structure limits bidders
THE much-anticipated auction for Cape Town’s Foreshore Tower Block, scheduled at the end of the month, has drawn criticism from the Western Cape Property Development Forum due to its “complicated” long-term lease structure.
Positioned next to the Cape Town International Convention Centre, the Foreshore Tower auction has been hailed by the City of Cape Town as a means to boost the economy, while it was anticipated private investment of R1 billion would go into the site.
The winning bidder will secure a 99-year lease for a 25000m2 bulk Tower Block development.
The initial lease duration is set at 60 years, with a 20-year renewal option followed by an additional 19-year optional extension.
Deon van Zyl, Western Cape Property Development Forum chairperson, said due to funding issues, among others, only a select number of bidders would be able to participate.
“It is positive that the City of Cape Town is releasing land to the market. The specific proposed transaction is, however, complicated by the longterm lease structure.
“We await to see the nature of bids that will be submitted and whether the appropriate funding structures can be accessed on what is a reasonably new concept in the property market, ie long-term land leases. The concept of long-term land leases will either require the support of the funding institutions or require bidders to be self-funding, which will limit the number of potential bidders.”
High Street Auctions partnered with the City to auction extended commercial leases.
Its managing director, James Dall, said it was a once-in-a-lifetime opportunity for developers to benefit from the 99-year leasehold.
High Street Auctions director Greg Dart said: “The Foreshore Tower Block development rights offering within the CTICC precinct stands as an unquestionably bold move, given the prime site and investment scales, but the lease auction method is now a tried and tested formula proven to generate significant revenue streams for the City that go directly towards improving infrastructure and service delivery to the residents of Cape Town, without surrendering ownership of the core asset that’s effectively being held in trust for future generations of Capetonians.”
Ross Levin, licensee for Seeff Atlantic Seaboard and City Bowl, said any development opportunity from the City was welcomed.
Levin said the Cape Town CBD remained a property success story.
“It is one of the most visited areas in Cape Town and sits in the heart of a premier tourist hub with huge potential. The influx of people to Cape Town for tourist, leisure, business and residential reasons should provide ample motivation to unlock future opportunities and to continue to develop the area and grow the economy of the city,” said Levin.
Mayco member for Economic growth James Vos said by auctioning the lease, the City opened the bidding opportunity to attract a wider audience, both locally and internationally.
“By developing these properties for mixed-use, we aim to unlock diverse business opportunities and generate valuable construction jobs. This initiative underscores our commitment to strategic urban development,” said Vos.
“Investment in the development of this property will bolster the city’s economy with massive socio-economic spin-offs contributing to the metro’s GDP, creation of employment opportunities and be a productive asset in perpetuity.
“This bespoke development will complement the CTICC’s offering, further enhancing attractions to international conferences which, in all, bolsters the City’s ability to provide basic services to our citizens while helping to reduce unemployment,” said Vos.