A Funders perspective of Durban Inner City Development

Posted On Monday, 03 June 2013 12:45 Published by Commercial Property News
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Durban is like any other urban space; it suffers from decay and is constantly in need of regeneration. 

Brook Street Central MarketPrivate enterprise has at least one funder that is attempting to tackle what appears to be a double headed monster of urban decay: the decay itself and the bureaucratic red tape required to get the job done.

Since the 1990’s the eThekwini Metro has responded to the need for urban renewal with iTrump (Inner City Thekwini Regeneration and Urban Management Programme). The goal has been to improve conditions, placing strategic value on the inner city in a quest to become a sustainable city.

Urban decay remains but there are many success stories. Many of those success stories were as a result of partnerships between Jo’burg’s Better Buildings Programme (BBP)and inner-city commercial property financiers TUHF (Trust for Urban Housing Finance).  Lusanda Netshifhefhe, Regional Manager of TUHF (KZN) in an interview with eProp explained: “When TUHF first came we saw that Durban had not degenerated to the degree that Hillbrow and Berea had. (We felt there was) still time to rescue these areas. Unfortunately the situation has grown dire.”

iTrump has some success stories like the Brook Street Central Market and is showing current interest in urban renewal by making promises to restore Warwick Junction. But what about the bureaucratic red tape that seems to be hampering efforts by private enterprise to close off on promising projects like TUHF’s Albert Park building? It’s a project called Hometown.“The whole idea is that guys come from the rural areas and they want to rent a small place here in the city so that they feel like they’re at home” says Netshifhefhe, The building has 141 units – all of them are bachelor pads. “The idea that we didn’t have a mix of 1 bed and 2 bed was because we saw that in that area the demand was for the smaller units, if you provide anything bigger people end up sub-letting.”

Sadly red tape is blocking proceedings as there are difficulties in getting the plans approved on time.  The city also requires that parking must be provided. But if you are refurbishing an existing building that did not have parking to begin with it’s difficult to provide that parking.Unfortunately for Hometown project the City is requiring parking to be provided and parking cannot be provided. “There needs to be a change to a town ordinance for this process to go ahead.” Lusanda believes.  The result of this is that theinvestor cannot get his plans passedwhich means he cannot get the necessary compliance certificates

So what does this do to the investment process? “If you consider this from a financier’s point of view, at a certain point your project has to start generating income so that it can pay for its own obligations. Now the risk that the investor has to take is having to occupy the building to start generating that income to pay municipal services and to service the loan obligation while waiting for the plans to be passed” explained Netshifhefhe.  Much energy is wasted on trying to liaise with the city and the planning department specifically.

“So what we are saying is that if you want to re-generate a city there are certain things that you need to relax – for example parking – if the building didn’t require it in the first place it is now impractical to bulldoze the building and start from scratch all for parking.  It doesn’t make economic sense.  These things are just not commercially viable.  It makes sense to look at existing structures and to do something with them, because what is happening is that they get hijacked by street children and hawkers and that is where the degeneration happens.”

So does Netshifhefhe think the city has a genuine interest in urban regeneration: “There is commitment from the city to try and fix these the city – to regenerate the city and create a community and to provide places to live close to work and to transport central in to the CBD – they say all that but action to make this happen is not always easy to see.”

And what about a client’s incentive: “Yes, the client is taking the risk, and if he is a private investor he then thinks to himself next time I’m not investing in the city again.  He takes the risk and at the end of the day he must make profit.  They want to provide some accommodation in the city but at the end of the day there must be light at the end of the tunnel, and things that take 2 to 3 years to show any return for the investor becomes frustrating.”

Netshifhefhe goes on to explain that she is in favour of iTrump and how TUHF has expressed many times the desire to build partnerships with them but little if anything has ever come of it. She explains how back in Jo’burg where there is  something called the Better Buildings Programme( BBP) there is a strong relationship between BBP and TUHF that comes together in the form of a committee that fast tracks dealing with by-laws and ordinances with the common goal of speeding up regeneration.

One naturally questions whether it’s worth the effort of private enterprise. Netshifhefhe is optimistic: “Where we are at though is: we still believe in inner city regeneration, affordable rental accommodation in centrally located places. We have investors who see the potential of this sort of business. Obviously you can only keep their interest for so long, if there are so many things to go through before they get to the answer. It’s easier to be a slumlord here than to run a property properly.”

Clearly hard work and creativity in dealing with everything from slumlords and grime to municipal laws and red tape are all part of the funders of inner-city development’s job. What’s the good news: Netshifhefhe remains upbeat:  “the good news story is that we have some projects that are complete…and/or nearing completion - we have projects that are fully occupied, they have fingerprint access control, good security, cleanliness, no overcrowding. For us, we don’t want to see washing on the balconies these are an indication of a declining city.”

Two landmark buildings that are giving a return on their investment are Founder and Redford. Also Saddles on Lots Street, Laurent House on St. Georges are all good news stories. Currently there is construction at the White House on Diakonia Avenue and there’s more.  TUHF has already made its presence felt in the short time it’s been in the Durban CBD.

Funders of inner city development should not expect to turn over a quick profit, but where can you turn over a quick profit these days? It’s no secret that there are obstacles in the way of the developer but as Netshifhefhe highlights, there is a market for “affordable rental accommodation in centrally located places.” There is a dearth of accommodation in the inner-city and if someone one doesn’t refurbish and manage old building the slumlords will. It’s profitable to be a slumlord and if the by-law enforcement pressure is not constant enough from the city Council  then nothing will stop slumlords.

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