The property arms of institutions such as Liberty Group, Old Mutual and Sanlam are redeveloping and extending projects to increase the value of their assets.
Mariette Warner, head of property funds at Stanlib Asset Management, says that for most of the past 10 years institutions were selling their underperforming properties. Warner says with the property rental market being strong, new property developments and refurbishments are again viable.
She says institutions such as Old Mutual will focus on large developments in order for them to have any kind of effect on their bottom-line performance. Warner expects institutions to increase their exposure to fixed property because of the good prospects on rentals.
Angelique de Rauville, MD of Investec Listed Property Investments, says her company would like to see large institutions such as Sanlam and Old Mutual converting their physical property portfolios to listed portfolios by selling their physical property assets into the listed property sector.
But De Rauville says it is encouraging that large institutions are still bullish on property and are demonstrating this by injecting additional funds into refurbishments.
She says that globally institutions have been underweight as far as property investments are concerned and that there is a trend to increase this asset allocation to property.
At the end of September, Liberty Properties, unveiled its plan for a R120 million extension to the Liberty Midlands Mall in Pietermaritzburg. The R270 millions first phase of this development only opened in 2003. Last year the group invested about R300 million in the Liberty Promenade shopping centre in Mitchells Plain.
"What's happened from a Liberty perspective is we have reduced our office portfolio to focus on the large retail properties, and, or leisure and in that sense are also planning to spend a lot of money on upgrading our current properties," says Liberty Properties MD Roger Corlett. He says that Liberty Properties has completed a R60 million refurbishment of the Eastgate shopping centre.
The group has also done a "tenant reorganisation" at Alberton City to include a much larger Mr Price Home.
"We are focused on ensuring that our current properties are at the standards required by our customer base," says Corlett.
He says their intention is to get as much of a return as possible out of their existing properties.
"At the same time we are reasonably active when it comes to acquisitions or new development of shopping centres," he says.
Meanwhile, Old Mutual Properties announced last week that a R100m redevelopment of East London's Vincent Park shopping centre would get under way in January.
Old Mutual Properties will be adding a new mall to the northeast corner of the complex in which Vincent Park is situated. The new 4300m² building will be linked into the existing centre.
Old Mutual Properties also recently expanded the Riverside Mall in Nelspruit on behalf of Old Mutual.
The group created another 13000m² of space at the centre, bringing the total gross lettable area to 49529m².
Sanlam Properties MD Banus van der Walt says he believes Sanlam was ahead of other institutions when it came to upgrading and extending its properties.
Several key properties have undergone a number major refurbishments and extensions since Sanlam acquired them.
Van der Walt says Sanlam Properties is looking at the acquisition of two "quite big" shopping centre developments. He says Sanlam Properties also sold nearly all of its noncore properties worth R6 billion over the past six or seven years.
"We felt in selling these properties we would do better with cash. We also had to dispose of assets to gain liquidity," says Van der Walt.
He says Sanlam Properties will continue to sell some properties but will also be acquiring new ones, as well as developing others. The group completed the R65 million Midridge Square shopping centre about four or five months ago.
"Right now we are looking at extending and upgrading other shopping centres at a cost of about R220 million," he says.
Van der Walt says Sanlam sees a lot of value in holding physical property.
"Directly held property is a very sought-after investment class in an investment portfolio nowadays," he says.
Business Day
Publisher: I-Net Bridge
Source: I-Net Bridge
