Following the purchase of Spearhead Property Holdings by Redefine Income Fund, part of the Madison Property Fund Managers stable, a property development and leasing division was created under the leadership of Mike Flax. As Executive Director of Madison Property Fund Managers, Flax immediately set about establishing a new development division headquartered in JHB.
Mike Ruttell, a Quantity Surveyor-trained Development Manager with extensive construction and property experience in South Africa and in the Middle East, became the Development Manager and Grant Silverman was put in charge of the Leasing Division after serving for five years as a leasing executive in Cape Town.
"The thinking," said Ruttell, "was that the group's asset managers should be freed up to concentrate fully on asset management and maximise returns from existing centres and that in-house specialists in our fields would be less costly and more motivated than independent operators. The challenge was to satisfy the demands of the funds for whom we were working, and through growth, to examine other value-added development opportunities in the market place.
The development team takes full responsibility for the initial conceptual designs and feasibility studies. A leasing strategy is then drawn up in consultation with Silverman's team. If and when a project gets the go-ahead from the relevant fund, the development team confirms the professionals' appointments and construction begins on site. The professionals have in every case to be tried and tested experts in the particular field to which the development is related. This is especially important on retail centres, which require specialised experience.
At an early, stage, said Ruttell, it became clear that refurbishment and upgrade work on the various funds' existing portfolios would probably be as important, if not more important, as greenfields projects. This was particularly true in the case of retail centres where the fund managers were highly conscious that total refurbishments, upgrades and new tenant mixes had become necessary if returns were to continue to be sustainable.
"Since the Eskom problems have surfaced," continued Ruttell, "it has become necessary to focus on refurbishment projects which often have surplus available power, and do not require lengthy Town Planning and Council approvals, which in some cases can cause delays of over two years in bringing projects to reality."
Discussing these matters, David Rice, MD of ApexHi, which has 415 properties worth R9,4 billion in its portfolio, has said that the high current costs of building and interest rates, although apparently inimical to further development, will ensure that rental growth on existing premises will be higher than previously expected and any upgrades that can be handled during this difficult period are therefore to be welcomed..
On the leasing side, said Silverman, the new leasing team has adopted the same policy that they followed at Cape Town: they have warmly welcomed contact with local brokers and encouraged them to become as fully involved as possible, keeping them informed regularly with emailed updates and project websites. Many brokers, said Silverman, are helping in the hunt for tenants, but the two working closest with his team are Broll Real Estate and Polydav Properties.
Ruttell's team now has close to R1 billion worth of work on its plate, all of it for group companies. Many of these projects have already attracted press notice, however, Ruttell recently pointed to three that have immense potential to transform their areas but have so far gone largely unnoticed.
These are:
* ApexHi's new R210 million The Village at the Horizon development near Roodepoort on the West Rand. By May next year this will have taken the place of the old, almost venerated Horizon View Shopping Centre on which ApexHi battled for many years to secure a feasible re-development solution, always working within the existing structural framework. Earlier this year, said Ruttell, it was agreed that 90% of the existing complex should be demolished to make way for a modernised solution which was able to attract high quality new tenants.
The new centre will have approximately 17,600m2 of retail and above this 2,800m2 of ‘B' grade offices. Key retail anchor tenants will be Checkers (3,000m2) and Woolworths (840m2). The tenant mix will include a hardware store, post office, medical centre, filling station and SARS depot.
The project architects, LPA Architects, were asked to come up with an authentic village atmosphere, and they have done this by staggering the facades of many of the shops and using various awnings and covered walkways in order to create interest. All the visible roofs will be pitched and tiled, with plastered feature parapet walls and entrances.
"The great advantage of this centre," said Ruttell, "is that it will be a true convenience destination with excellent retail offerings provided in a pleasant environment which has been designed to enhance the shopping experience. The easy, open landscaped parking for approximately 1,200 cars, will suit shoppers in a hurry to pick up food, pharmaceuticals, videos, air time, and similar daily necessities. Provision has, however, also been made for those who have the time to relax by including an attractive stand alone eatery precinct with street restaurants or coffee shops."
Silverman said that on the office section, which he described as upmarket ‘B' grade, reasonable rentals of R65 per m2 to R95 per m2 (depending on the size taken) will be charged - and air-conditioning will be an optional extra.
ApexHi's Moreleta Plaza development in Pretoria East. This is a R31,5 million refurbishment designed by LPA Architects. The contactors started work in February this year at one end of the 8,800m2 complex and they are now progressing rapidly to the other end, a programme which allows the tenants to continue trading for as long as possible. Every shop will be worked over and upgraded and the finishes throughout the interior will be much improved.
The major changes, however, said Ruttell, will be seen in the prominent new entrances featuring large brickwork piers and decorative timber trusses, together with a totally new front façade to the building will create a "fresh and modern aesthetic".
Anchor tenants at Moreleta Place will be a 3,750m2 new look Checkers and 500m2 Woolworths Foods, together with a "refreshing" new mix of tenants including home décor, interior decorating, banks, cell phone outlets, a News Café, Portuguese restaurant and a coffee shop.
Redefine's R193 million Festival Town Square development. This is sited on the corners of CR Swart Drive and Kelvin Drive in Kempton Park, another fast growing retail node adjacent the existing Festival Mall. It is a greenfields project that will offer approximately 20,000m2 of new retail space.
The long rectangular Festival Town Square site will have a stand-alone 8,500m2 Builders Warehouse at one end and an11,500m2 Convenience Centre at the other end. Again parking will be easy, with 1 200 open air landscaped bays. The anchor tenant here will be a 2,500m2 Super Spar.
The design, again by retail experts LPA Architects working in conjunction with Sutherlands Consulting Engineers, and BWR Quantity Surveyors, is modern but makes extensive use of natural stone, wood and exposed metal components.
Other developments with which the Madison development and marketing teams are now actively involved include:
· The second phase (5,000m2) of the Kempton Square redevelopment, Kempton Park. Phase I, with 15,000m2 of refurbished retail, was completed in November 2007. The two phases will together cost the owners ApexHi Properties R75 million.
· ApexHi's flagship Golden Walk shopping Centre, which is undergoing a R109 million refurbishment and will be given another 12,000m2 of retail space to the centre.
· Cleary Mall, owned by ApexHi Properties, on the eastern outskirts of Port Elizabeth. This is well placed to serve large formerly disadvantaged areas. The existing centre will be upgraded and extended by 10,500m2 at a total cost of R88 million.
· The much publicised Jewel City in central Johannesburg, which is now undergoing a R94 million upgrade, and
· The R200 million Hyde Park Hotel, for Hyprop, perhaps the most prestigious of all the current projects. The new hotel will be sited above the existing Hyde Park Shopping Centre, will be operated by Southern Sun, and will have a four star rating with 132 rooms.
"The scale and speed at which Madison Property Fund Managers has initiated new projects on behalf of the various funds in the stable," said Ruttell, "justifies Mike Flax's claim earlier this year that we would in 2008/2010 be the most active of the listed fund developers. The good news is that to date despite the many obstacles encountered in the current economic climate, most projects remain on track and are leasing well."
