- March 22, 2015
- Posted by: admin
- Category: Properties
IT is a well-trodden narrative in South Africa: a suburb falls on hard times, urban grime sets in and major retailers are lured away to more upmarket climes. Residents of Sea Point, Cape Town, watched retail shift to the V&A Waterfront, to be replaced by falling rents and unsavoury commercial tenants.
Now, thanks to some coordinated action by local property owners and the development of the suburb’s first mall, Sea Point is experiencing a revival.
The rebuilding of the old Checkers Galleria building on Regent Street followed the establishment of the City Improvement District, a section 21 entity, which uses a portion of rates paid by property owners to clean up the 1.2km Main Road precinct — 24-hour security, patrols, an emergency service and waste removal in addition to the municipal services.
Sea Point locals Saul and Paul Berman, who are property developers and brothers, were part of the CID board and had had their eyes on the Galleria building for years.
“For many years it had gone through various facelifts and changed ownership, and a company called Two Oceans had planned to turn it into a life rights apartment scheme. But that plan fell apart,” said Saul.
Saul, who had been unable to convince property funds of the value he saw in the building, had a chance meeting with Rob Nicolella of Hosken Consolidated Investments (HCI), who was tasked with growing the company’s property portfolio.
Nicolella quickly appreciated the potential of the existing structure with 270 parking bays and 8 000m² of commercial space, half of which was unlet at the time.
HCI and Berman Bros formed a joint venture, with HCI owning 60%. The joint venture bought the building for R52-million.
“The underground parking and the infrastructure and the bulk we could have built above the parking envelope would have been very costly to develop on the Atlantic seaboard, so that was what sold us on the idea of The Point,” Nicolella said.
The Point now has 18 000m² of lettable retail space, with a further 10 000m² office and health and wellness space.
“We realised this would be very difficult to replicate. If we could deliver in the construction it would be very hard for someone else to compete.”
HCI’s office is now located in The Point’s office tower, as is Berman Bros’.
The redevelopment involved jacking up the building to create even more underground parking space — a process so difficult that National Geographic expressed an interest in filming it. There are now 490 wide underground parking bays.
Through all of this, Checkers refused to stop trading for a single day, which meant the Bermans had to add a fourth basement level, widen the building and shoot up four floors above Checkers and nine storeys next to the retailer with customers coming in and out. The Checkers store itself was also upgraded.
The Bermans elected not to use agents to fill the commercial space with tenants. Instead, they cold-called executives from retail chains.
About 80% of the tenants operate with a turnover clause as opposed to a straight fixed rental, with minimum lease periods of five years, some longer, and escalations at 8%.
“We’re comfortably satisfied with the tenant mix. The trading figures we’ve got, especially from the nationals, show very good trading densities,” said Nicolella.
The Bermans brought in a Sportsmans Warehouse, Dis-Chem, Checkers Liquor, Pick n Pay clothing and Knead bakery, as well as a collection of niche operators such as Cycle Lab and the high-end restaurant NV80.
Robert Silke of Louis Karol Architects, who led the design, said: “This was a brief not just about the mall but about something bigger — the direction of the suburb. There was an element of enlightened self-interest that went into making The Point bigger than just the sum of its parts.
“They could have just refurbished Checkers, but the value-add has been substantial.
“They needed an iconic project because if you want to capture the imagination of an area you have to make a multivalent gesture that has something for everyone.
“It very deftly speaks to the top and the bottom of the market at the same time.”
HCI’s property book is quietly growing to substantial proportions. “We develop and hold. We don’t make a big play of it, although our pipeline of projects is large. We don’t have a set target for how big we want the portfolio to get, but we’re growing it in a controlled way — there’s a focus on it,” said Nicolella.
“We continue to look at sites all over the country. To give some perspective, the value of The Point is now over R500-million, Kalahari Village Mall we just finished in Upington is worth R400-million-plus, and there are probably 12 other sites under way.”
Will this mean floating a listed property fund in the near future? “That would be one exit mechanism, and there are various ones we could look at as a liquidity event. Currently we’re just looking at aggregating good products — if you have a good product, you have more liquidity options down the line.”
The Point is relatively small by South African mall standards, but the HCI-Berman Bros joint venture is in the process of other developments in Sea Point with further commercial space.
“Growthpoint CEO Norbert Sasse told me we’re not hurting the Waterfront yet but we’re denting it. We’ll achieve more of that by doing second and third developments,” said Paul.
Source: BDLive – Brendan Peacock
• This article was first published in Sunday Times: Business Times