R1.46bn transactions in Cape property market

Posted On Saturday, 20 July 2013 15:02 Published by Commercial Property News
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Recent activity by listed property counters in the Western Cape suggests the local real estate market could be ready to resume a more vibrant trend.

Aurecon BuildingIn this regard, three recent transactions – worth collectively more than R1,4bn – stand out.

The biggest is Ingenuity Property's purchase of the Aurecon Building, Estuaries No 1, Mazars House, the Virgin building and Gateway – which are all well known properties in Century City. At the same time Ingenuity also acquired several Southern Suburb properties - the Intaba building in central Claremont, the retail and office segments of Tokai on Main and Palmyra Junction.

The properties are worth R866m collectively, and fit Ingenuity's provincial policy of only acquiring and developing properties in the Western Cape.

The deal seems reasonably priced with pro forma effects on the acquisition showing the properties generated net income of some R62m.

The latest foray by Ingenuity is a significant vote of confidence in cape real estate since the company has already spent extensively on re-developing a handful of its properties – most notably the R156m radical revamp of the Newspaper House building in St George's Mall in central Cape Town.

At the time of going to press Ingenuity had just launched it's re-developed Atlantic Centre on Martin Hammerschlag Way at the Cape Town Foreshore.

The scheme comprised a total makeover of the property and included an extension to the existing structure by adding a further four floors. Ingenuity forked out almost R160m for the project.

The second major transaction involved Vividend Income Fund – headed by well known Cape Town businessman Ari Jacobson – buying 90% of the well known southern suburbs retail node, Access Park, for R483m.

Vividend directors reckoned Access Park was a "globally unique high-quality, well established, defensive and historically resilient property in terms of income growth and tenant demand.

It is also noteworthy that the existing owner managers of Access Park remain locked into the property via the remaining 10% share not acquired by Vividend.

Interestingly, Vividend – despite being headquartered in Cape Town – is short of Cape-based properties, which up until recently was limited to a property in Roggebaai and small retail properties in Beaufort West and George.

The Access Park acquisition is by far the biggest property in Vividend's R1,5bn portfolio, which must be interpreted as a sign of solid prospects for Cape Town retail real estate.

The smallest of the three transactions may well be the biggest pointer of things to come in Western cape property – especially the often fickle residential side.

Trematon Capital Investments, which has real estate whizz Allan Groll as a prime mover, recently acquired a 50% interest in the iconic Hibernian Towers on the Strand beachfront.

Trematon made the acquisition through its 50% held subsidiary, the Resi Investment Trust, which houses a portfolio of residential properties.

Hibernian Towers comprises sectional title apartments, and was acquired from UK-based Quaypower Properties Limited.

The purchase consideration was R63m, which means the property won't be significant in terms of Trematon's earnings in the short to medium term.

But what the acquisition highlights is that the recently formed Resi Investment Trust is seeing value in the residential side of the Cape real estate market.

The Resi Investment Trust, which is co-owned by R1.4bn  - has remained relatively low key since its launch. The modus operandi sees Resi purchase high value residential properties with both a good income yield and a high potential for capital appreciation.

In November last year Trematon CEO Arnold Shapiro reported that the deal

pipeline for Resi was strong and that the portfolio was expected to grow appreciably in the next financial year.

Not much else is known about the other components of the Resi Investment Trust, but developments do have bearing on some of Trematon's other Cape-based property developments.

It might, for instance, sharpen the focus on what Trematon intends doing at its Club Mykonos Langebaan (CML) subsidiary, which holds swathes of developed and undeveloped leisure property on the Cape West Coast.

It's hardly been an active few years since property prices and the general West Coast economy had been subdued.

The most recent development at CML is 'The Boatyard at Club Mykonos', which when completed will comprise 360 boat and general storage garages to boating and water sports enthusiasts. Phase 1, consisting of 135 garages, was recently completed with all the large garages are fully let.

Shapiro reported in November that there are no new residential developments currently selling at CML - although there is a large amount of prime land available for development.

He said developments would be launched when the market became more robust.

The Hibernian Towers purchase certainly suggests that there is an element of robustness creeping back into the Cape leisure property market.

Source: CBN

Last modified on Saturday, 20 July 2013 16:03

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