Afhco

AFHCO

AFHCO

Afhco Nears Completion With

Half-Billion Rand Developments in Jo’burg CBD PRODUCTION: Karl Pietersen

Afhco is a leading provider of affordable housing and retail spaces in the Johannesburg inner-city, but in the future, this innovative and high-quality business is looking to expand its reach. Managing Director of Afhco Property Management, Kevin van den Heever talks to Enterprise Africa about the exciting projects which are underway right now.

//

This month, November 2018, sees South Africa still battling a growing housing backlog of more than 2.1 million units – that’s around 12 million people without access to adequate housing. Affordable property is difficult to come by, social housing is vastly under supplied, and home builders are facing the reality of a slow and unpredictable economic environment.

In South Africa’s urban areas, where employment and education opportunities are easier to come by, the problem is even more stark. The central business districts (CBD) of the major cities are difficult places to find accommodation. Despite significant demand in the market, supply fails to keep up.

Johannesburg’s inner-city area is a prime example. Huge demand for

2 / www.enterprise-africa.net

accommodation from all sectors of society is not met with sustainable and quality supply, pushing prices up and leaving many in need.

The issue is recognised by government and former-Human Settlements Minister Lindiwe Sisulu who, in 2017, committed R188 million to the City of Johannesburg for the development of housing in the innercity. The then-Mayor of Johannesburg, Herman Mashaba welcomed the influx but stated that the city still faced a 300,000-unit backlog, calling on provincial and national government to ramp up efforts to drive economic revival of the inner-city is a priority, “it is key to creating an inclusive and prosperous city for all residents,” he said. But the shortage remains

as urbanisation continues at an accelerated pace.

This problem, that has existed for decades, was a driver behind the formation of Africa Housing Company (Afhco), or Affordable Housing Company as it was known when it was founded by entrepreneur Wayne Plit, back in 1996.

MAKING A DIFFERENCE In the post-94 election period, the Johannesburg inner-city had become a not-so-attractive place and many of the corporates had fled the area. This left a stock of empty buildings that Wayne Plit saw as a perfect solution to the shortage.

He acquired some buildings and existing residential stock, repurposed and refurbished them into quality residential space and at first began selling units to

INDUSTRY FOCUS: PROPERTY

Jeppe Street Post Office

// IT’S THE FIRST HIGH-RISE DEVELOPMENT TAKING PLACE IN THE CBD FOR DECADES. PEOPLE HAVEN’T SEEN CRANES IN THE CBD FOR SOME TIME SO IT’S EXCITING // end users who could not get finance from banks for the purchase of property in the inner-city. At the time, Afhco was essentially providing end-user finance, taking up mortgagees on the property, and then instalment deals were entered into with the debtors who were paying these off until such times that the property transferred into their names.

“There were so many vacant buildings in the inner-city, which was essentially the business hub of South Africa, and some had become hijacked and others had fallen into a state of disrepair,” remembers Afhco Property Management Managing Director, Kevin van den Heever. “In the early 2000s, Mr Plit started the first conversion from open commercial to residential, a building called Castle Mansions. That is what started the trajectory of the business to where it has ended up today.”

Today, Afhco takes the useless and creates the useful. The specialist business

4 / www.enterprise-africa.net

transforms old, unused, derelict, destitute buildings that blemish Johannesburg’s map and comes up with quality rental accommodation. According to van den Heever, Afhco’s work is of a quality better than almost every other company operating in the inner-city.

“Between 2007 and 2011, the company brought around 4000 apartments into the market and at the time we had even established our own in-house construction division, including all professionals, architects and on-site management.

“We like to think our newer units are very sexy and a cut above what most players do in the inner-city. All of our units have granite kitchen tops, the finish is high quality, and we believe that helps us to build a sustainable business. There are many new entrants in the market who have a certain amount of capital for projects and it just isn’t the same level as us. Our buildings often have more

amenities and we are looking at putting in free Wi-Fi where others could not afford to do this. Because we do things with quality in mind, we are not likely to have major repairs and maintenance issues down the line – we like to do things properly.”

Has the work of Afhco had an effect on the housing backlog? The impact is clear.

“As we sit today, we have approximately 6500 rental units in the Johannesburg CBD and a further 2500 in suburban areas, mainly in Gauteng but we do have other assets in Cape Town and the mining town of Steelpoort,” says van den Heever.

And the company’s influence does not stop there. Thousands more units developed by Afhco were sold in the late-2000s after its supply of stock into the market was so aggressive that it became counterproductive. Afhco simply could not tenant its units fast enough and had to offload property in order to continue developing. All told, the company suggests it has contributed more than 10,000 units to the Johannesburg inner-city.

CORPORATE BUSINESS Instead, Afhco’s financial focus is on delivering sustainable returns for the

AFHCO

pension funds, and other stakeholders that are invested in the business since Afhco was taken over by SA Corporate Real Estate in 2014 for a reported R953 million.

When SA Corporate Real Estate, a JSElisted real estate investment trust (REIT), came onboard, the need to diversify the Afhco portfolio was quickly identified.

“The decision was taken to diversify the business so that the focus was no longer just inner-city Johannesburg but we would also look at suburban property,” says van den Heever.

This diversification strategy has proved extremely successful for Afhco.

Alongside its strong CBD selection, the company now boasts a R4.2 billion portfolio with 25% of that outside of the Johannesburg CBD. “We have stock in Pretoria, Centurion, Midrand, Northgate, Randburg, Springs, Randfontein, Soweto, Braamfontein, Cape Town and Steelpoort.

The strategy is to always look at quality assets that provide an accretive yield.”

And, while much work still goes on in the CBD, the real growth for Afhco, according to the MD, will come from investments in the suburban areas.

“We are continually looking at growing our income base and that is through development and acquisition opportunities. We are undertaking substantial acquisitions outside of the boundaries of the CBD and that is where we will see bigger growth for Afhco going forward. The suburban portfolio will see substantial growth and that will help us to offer growing returns to stakeholders,” he says.

JEPPE & END ST. Currently, the big projects underway at Afhco include two major property overhauls as the team looks to repurpose the Jeppe Street Post Office building in Johannesburg’s CBD to include residential units and retail areas, and completely overhaul an old industrial structure known as the Sidelsky building, also in the CBD and close to many other Afhco buildings.

“Those two developments equate to approximately half a billion Rand,” enthuses van den Heever.

“The conversion of the old Jeppe Street Post Office building which is an iconic heritage building, built in 1935, sees us repurposing the upper floors into residential and retaining the ground floor as retail. We have onboarded Boxer Superstore, which is part of the Pick n Pay group, and they will be the anchor tenant. It is being built in three phases and we released the first phase which is residential in September with the following two phases to come on line in the next six to 18 months.

“The second project is a brownfield development in the CBD, a R225 million project, where we demolished an old light-industrial structure and we will put up a purpose built, 15-storey student accommodation building. It’s the first high-rise development taking place in the CBD for decades. People haven’t

seen cranes in the CBD for some time so it’s exciting,” he adds.

The building is located across the railway from the University of Johannesburg’s Doornfontein campus and is due to come online from January 2019.

It is the first of its nature completed by Afhco being more ‘new build construction’ rather than revamp and “we are happy with how it is going,” says van den Heever.

Student accommodation represents a major opportunity for a company like Afhco. The very nature of the opportunity is that young people need space to live and study, but only for a limited period. With Afhco being an expert in the rental market, the scenario suits both parties perfectly.

And, of course, there is the massive shortage in supply that faces students and universities all over South Africa.

The first step for Afhco was to build a relationship with the University of

Providing Residential, Commercial and Industrial Customers with a Professional, Specialist Service Since 2005

Dwain Gravett •gravettd@me.com Cell: 082 416 5228 •Fax: 086 654 6307

www.enterprise-africa.net / 5

INDUSTRY FOCUS: PROPERTY

Johannesburg and gain ideas about what the university expects. Next is to design and construct the building, while getting all-important accreditation from the university.

“Students are often taken advantage of as there is such a shortage of accommodation. Unscrupulous landlords have converted backyard shacks or put up something which is really inferior, but students have had very little choice but to accept it. Our new building goes someway to addressing that problem,” explains van den Heever.

“We get accredited as a private, off-campus accommodation provider and the University accredit the building for quality standards. Without that accreditation, you cannot qualify to let to students. We typically target bursaryfunded students who are funded by the National Student Financial Aid Scheme.

They get full or partial bursaries, that includes accommodation, and the money

flows to us via that institution.”

Afhco has two student buildings with around 500 apartments and 850 beds in total. The new building will add another 244 units which translates in 984 beds.

“When we’re complete, we’re looking at around 750 apartments which will house 1800 students,” states van den Heever.

He is understandably proud of the project and says that it complements the wider End Street precinct, which Afhco has transformed and continues to develop.

“This building is situated within a precinct where we have put in the most value to date. We currently have around 2000 of our tenants housed in and around that precinct so we view it as very important. We have repurposed almost all of the other buildings in the area into mixed-use retail and residential buildings.

“Because of the location, being so close to the university, and because the university has such a need in terms

// SOUTH HILLS HAS NOT SEEN ANY DEVELOPMENT FOR A VERY LONG TIME AND WE BELIEVE OUR PROJECT COULD BE THE FIRST FULL LIFESTYLE DEVELOPMENT IN THE COUNTRY //

of beds, and given that we already have a big footprint in the region, we thought the student market was the better use so we didn’t eat into our own market and so that we could provide a much-needed service to the university by giving students a quality, purpose built accommodation.”

When complete, the new building will give students everything they could require from an accommodation, making their time at university as productive as possible.

“Time will tell but we believe it will be very successful for students,” says van den Heever. It will come with all amenities including recreational areas, chill areas, dining facilities, study areas, laundry facilities, outdoor areas and the bedrooms will come fully equipped, “it really is quality accommodation,” he promises.

The Johannesburg CBD is a hot spot for students with UNISA, WITS, UJ, and many technicon’s all attracting thousands of learners every year. The huge demand has seen spill over into Braamfontein which many property professionals now regard as a ‘student suburb’.

Jeppe Street Post Office

6 / www.enterprise-africa.net

AFHCO

INDUSTRY LEADING PARTNERSHIPS In 2016, Afhco, through SA Corporate Real Estate, partnered with leading SA developer Calgro M3 to further alleviate the current shortfall of housing units in the low to mid segment of the residential market.

Calgro M3’s Managing Director, Wikus Lategan, said the goal of the partnership is to build a substantial residential portfolio to give South Africans access to rental options within Metro’s.

“The current housing shortfall in metropolitan areas is estimated at a mammoth two million units. Despite government’s commitment to closing the gap, spending on infrastructure for housing development is under pressure, and this joint initiative will assist government in improving living conditions for ordinary South Africans,” he said.

But Calgro had not worked in the rental market before so needed a partner with knowledge of the sector.

“They typically focus on the lower end of the market specialising in largescale integrated mixed-use projects that include FLISP, GAP, CRU housing as well as units for sale to the public, and the partnership with us was their first venture into the rental market,” says van den Heever.

“Where the economy has been going over the last few years, developers have been seeing that there is a decline in the number of homebuyers in South Africa but the rental market had become very strong.”

Initially, the partnership involves the two companies working together to develop and rent affordable units in Johannesburg and Cape Town. The development sites, located at Belhar and Scottsdene in Cape Town and Jabulani, Fleurhof and South Hills in Johannesburg will deliver approximately 4000 new units Particularly exciting for van den Heever is the project in South Hills, around 10 minutes from the CBD. “The Johannesburg sites have progressed well despite some minor delays and we are effectively into take up of tenanting in

Projitech is an Accredited and Registered Lift Inspection Authority and Vertical Transportation Consulting firm.

We offer professional advice and solutions in the built environment on new and existing vertical transportation systems nationwide Our comprehensive range of services includes; Performing the mandatory Lift, Escalator & Passenger Conveyor Annexure Inspections Vertical Transportation Traffic Sensitivity Studies, on a group of lifts, based on assumptions about the expected traffic situation The design of new vertical transportation requirements and compilation of details technical specifications for the built environment Detailed Equipment Condition Evaluation Audits Maintenance Deficiencies Audits Due Diligence Audits and lift expectancy opinion Maintenance Service Level Agreements compilation and/or assistance with existing agreements Bid & negotiate Services, inclusive of tender documents Specify and project manage the upgrade and/or replacement of existing lift and escalator systems

Proud to be associated with AFHCO for the past 7 years

Managing Member: Bill Murphy Office: 011 609 4977 Cell: 082 783 2600 Email: admin@projitech.co.za Website: www.proj-i-tech.co.za

www.enterprise-africa.net / 7

INDUSTRY FOCUS: PROPERTY

Jeppe Street Post Office

South Hills and Jabulani. Unfortunately, the Fleurhof site remains delayed because of infrastructural issues from the City of Johannesburg. Unfortunately, the sites in Cape Town were held back because of the water shortages. They couldn’t use potable water for construction and that caused a massive delay. They had to bore for water but the water pressure level wasn’t great and the sites came to a standstill. Now that there is water in Cape Town, they are starting to ramp up delivery again. We don’t expect to see any units until March 2019.

// WE BELIEVE WE PROVIDE OPPORTUNITY FOR PEOPLE TO LIVE A BETTER LIFE AND THAT DOESN’T MEAN BY JUST PROVIDING HOMES // 8 / www.enterprise-africa.net

“South Hills has not seen any development for a very long time and we believe the project could be the first affordable full lifestyle development in the country with a mixture of three-storey walk up apartments and freestanding houses. It has a green belt which includes a walking path, a children’s area, a soccer field and basketball court, and even braai areas, all on a secure estate with access control and security. It really is one of the first affordable lifestyle estates in the country. The take up has been a little slower than we would have liked but construction is nearing completion and we think uptake will ramp up quickly.”

BUILDING GROWTH The future for Afhco is exciting, and this is in turn exciting for the company’s tenants.

Afhco’s reach will grow as more units come online and as more opportunities are realised. With the backing of SA Corporate Real Estate, a highly-

experienced employee base, and a quality list of partners, Afhco has all the building blocks needed to create a sustainable organisation that solves a dire problem.

“We’ve revisited why we exist as a business and opportunity was a key word that came out of it,” explains van den Heever. “We believe we provide opportunity for people to live a better life and that doesn’t mean by just providing homes. It talks about everything the company has stood for over the years.

“We provide an incredible opportunity for staff and a lot of our building managers have come up from being cleaners or handymen. A lot of our admin team have grown to become middle-managers. We believe we are a sustainable business and that gives comfort to staff as they know they will have jobs in the future.”

Asked whether Afhco’s reach could eventually move significantly beyond its current stronghold of the Johannesburg

AFHCO

inner-city, the Managing Director says that nothing will be ruled out. “Certainly, we would take a look at opportunities anywhere in South Africa if the right opportunity presented itself.

“We look at things that have scale.

Something with 30 units here and there would not be for us. As long as we can instil high-quality - that is our focus. And that doesn’t have to mean high rental; Afhco started as Affordable Housing Company but we changed that to Africa Housing Company because when we moved into the suburban areas, we acquired highquality assets that command higher rentals and those clients do not necessarily want to associate with an ‘affordable’ brand, so we made the change.”

Going forward, the perfect scenario for further Afhco investment would be where the company can uplift an entire community by developing an entire region, much like what has been done in and around End Street. The returns are more attractive and the impact the company can have on its tenants’ lives is bigger.

“One of our investment strategies previously was to look at precinct development, not just individual buildings. We took a decision many years ago that buying buildings in isolation, scattered all over, does not have the same impact so we would focus on buying up more buildings in one area so that we can have a real impact. End Street is the perfect example,” details van den Heever. “We have developed almost every building in that precinct and we contribute extensively to the upkeep of the precinct. We cannot rely on the municipality. As landlords, in some respects, we have been let down so we must provide security, cleaning and other services. We see that as a necessary for the city because if we don’t do it, it doesn’t get done and our tenants are impacted.”

He explains that Afhco manages the city park adjacent to End Street on behalf of the City, and has done so for the past eight years because it provides an opportunity for tenants to get outside. “We do it because we know

Electric Storm Pty Ltd is proud to be associated with Afhco Holdings on these unique projects.

We specialise in design & supply of all electrical projects, operating for 20 years!

T: 011 791 7173 E: info@elstorm.co.za

they won’t do it better than us.

“We have just opened another park between two of our other buildings where we required permission from the City to pedestrianize the street. We created a public park and we put in all the amenities and have entered into an agreement to manage the park for the next three years with contributions from us for security and cleaning and an option to renew same. We are providing opportunities for tenants, and other citizens to get out of their property into public spaces.”

Afhco has been providing an affordable, safe, quality lifestyle for more than 20 years. Gauteng, South Africa’s wealthiest province, remarkably, remains in desperate need for quality accommodation solutions, and this is one company stepping up and answering the call.

With government and private sector

understanding that quality affordable housing is a basic right of all, those that have experience and reputation in the space are sure to benefit in the future.

Come back to Enterprise Africa in December to hear more from Kevin van den Heever and learn more about Afhco’s amazing corporate social responsibility projects, some of which are firsts for the industry and are kickstarting the growth of new industry sectors in Johannesburg’s CBD. We will also hear about the potential for Afhco in the social housing space – a sector that is desperate for a change in model to ensure it delivers for all South Africans.

WWW.AFHCO.CO.ZA

www.enterprise-africa.net / 9

Published by CMB Media Group Chris Bolderstone – General Manager E. chris@cmb-media.co.uk Sackville Place, 44-48 Magdalen Street, Norwich, NR3 1JU T. +44 (0) 20 8123 7859 E. info@cmb-media.co.uk www.cmb-media.co.uk CMB Media Group does not accept responsibility for omissions or errors. The points of view expressed in articles by attributing writers and/ or in advertisements included in this magazine do not necessarily represent those of the publisher.

Any resemblance to real persons, living or dead is purely coincidental. Whilst every effort is made to ensure the accuracy of the information contained within this magazine, no legal responsibility will be accepted by the publishers for loss arising from use of information published. All rights reserved.

No part of this publication may be reproduced or stored in a retrievable system or transmitted in any form or by any means without the prior written consent of the publisher. Š CMB Media Group Ltd 2018

AS FEAT UR ED IN

ENTERPRISE AFRICA

NOVEMBER 2018