Property Investment: Premises promises

January 28, 2016, 8:29pm

The Atrium on 5th, part of the Sandton City complex. Office developments in Sandton and Rosebank are driving demand for executive residential properties. Picture: SUPPLIED  on BDLive

Edited by Joan Muller, Business Day Live

Namibia a good buy-to-let bet

Buy-to-let investors in pursuit of higher rental and capital growth than what is available in their own backyards should take a look at Namibia. The country is becoming an increasingly attractive drawcard for residential property punters on the back of a growing housing shortage.

The demand for middle-and upper-end housing has increased to such an extent that Namibian house prices rose 17% on average in the second quarter year on year, according to the latest data from FNB Namibia Holdings. The capital city of Windhoek recorded price growth of a substantial 23% over the same time. That is more than three times the average price growth of 6,1% recorded in the South African housing market in the second quarter (Absa figures).

Paul Kruger, joint area principal for Pam Golding Properties (PGP) Namibia, says the group has experienced a 20% increase in sales turnover for the year to date (year on year), with a large portion of sales going to investors. There is strong demand for upmarket rental accommodation in Windhoek and surrounds in the price bracket equivalent to R8,000-R20,000/month, especially from professionals and contractors connected to the country’s ongoing infrastructure development boom, Kruger says.

"We’re also experiencing increased demand from Namibian expatriates returning from SA and abroad, including doctors, engineers, other professionals and those in the agricultural sector, bringing valuable skills back into the country."

Kruger says a number of new sectional title developments have sprung up in the Windhoek suburb of Kleine Kuppe, where the country’s largest shopping centre, the 55,000m² Grove Mall of Namibia, opened last year. Units in new apartment blocks and small townhouse developments, priced in the region of R1,2m-R1,3m, typically achieve rental income of about R8,500/month.

That translates to a gross rental yield of about 8,5%/year.

PGP is also marketing larger, standalone units in The Vantage, a new security estate in the affluent suburb of Klein Windhoek in the eastern part of the city at prices ranging from R10,65m to R11,875m.

Jo’burg shoppers spoilt for choice

A number of international brands have opened outlets in malls across Johannesburg in recent weeks, as property owners continue to refresh their tenant mix.

That includes Swedish clothing retailer H&M at Sandton City and US fashion brand Forever 21’s flagship store at the adjacent Nelson Mandela Square. The latter is part of an extensive redevelopment undertaken by Liberty Group, which is the majority owner of both centres. Other new fashion tenants that will soon be introduced at Nelson Mandela Square include Luminance, La Martini and Thomas Pink. The centre’s restaurant offering will be extended with Tasha’s Café, Big Mouth and Remo’s.

Trendy mixed-use precinct Melrose Arch also recently introduced a number of new local and international offerings such as Asian beauty brand Harnn, specialised gifting marque The Vault by Daytona, Juicy Couture and three brands from the Surtee Group — True Religion, 7 For All Mankind, and the stylish Grays, which includes men’s, kids’ and home brands such as Boss & Boss Green, Hackett, Aigner, Canali, Caruso, Façonnable, Little Marc Jacobs, FAM, Ralph Lauren, Calvin Klein, Kenzo and Olivier Desforges.

Not fazed by state’s rental arrears

It appears that Redefine Properties, the JSE’s second-largest real estate counter after Growthpoint Properties, with a market cap of around R55bn, has finally found a buyer for its government-tenanted office portfolio. Management has tried unsuccessfully for a number of years to offload the portfolio, which is valued at R2,5bn.

While these office buildings represent a small portion of the company’s R64,5bn property portfolio, Redefine CEO Marc Wainer said at the company’s annual results presentation earlier this month that they nevertheless accounted for one third of the company’s rental arrears.

"We don’t want exposure to government and post office tenants as they don’t pay rent on time. In recent years we have probably sold the portfolio 10 times over, but the deal always fell through," said Wainer.

However, it seems that this time around the outcome could be different, as government-focused Delta Property Fund recently indicated its intention to take the portfolio off Redefine’s hands.

Delta CEO Sandile Nomvete says the successful conclusion of the Redefine acquisition will represent a "step change" for Delta, as it is expected to be significantly yield accretive. "We have the know-how, infrastructure and track record to manage and unlock value from government-tenanted assets exceptionally well.

"Approximately 54% of our current portfolio by gross lettable area is tenanted by government, and we intend to increase this to 60%," Nomvete says.