South African Property Review March 2016 by SAPOA

South African Property Review

PROPERTY SOUTH AFRICAN

REVIEW

March 2016

SAPOA bursary success

An investigation Africa’s cities of opportunity

Students reﬂect on the impact of the Bursary Fund

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Technology & innovation

Real estate investment trusts SA’s special tax regime

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March 2016

A Turkish delight The country on two continents

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THE F UTUR E OF P ROP ERT Y T H INK ING

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contents

March 2016

PROPERTY SOUTH AFRICAN

Abland

REVIEW

South African Property Review

PROPERTY SOUTH AFRICAN

March 2016

REVIEW

SAPOA bursary success

Students reﬂect on the impact of the Bursary Fund

An investigation Africa’s cities of opportunity

series

Abreal

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s●

monthly cou n Our

The WOR

Technology & innovation

Real estate investment trusts SA’s special tax regime

ON THE COVER Globally competitive ‘smart cities’ require new technology and innovation that puts emphasis on livability and longevity in the pursuit of a vibrant global village

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March 2016

A Turkish delight The country on two continents

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From the CEO Tribute Lisa Maria Blane From the Editor’s desk Industry news Legal update Municipal valuation objection overlooked Education, training and development The Wits Real Estate Programme reaches new heights Planning and development Spearheading economic development Feature East Africa’s first REIT offer opened Update When technology calls… Report World real estate accounts for 60% of all mainstream assets Report Cities: embracing urban development News Ensuring a successful construction contract Theme leader A new era of facilities management Report Into Africa Eye on the world Turkey SAPOA bursary A new crop of property professionals Profiles Feature The complexities of the lease agreement Frankly speaking Artistic Brigitte in living colour What’s on Upcoming events 2016 Off the wall If the shoe fits

Oilgro

FOR EDITORIAL ENQUIRIES, email nthabi@mpdps.com or mark@mpdps.com Published by SAPOA, Paddock View, Hunt’s End Office Park, 36 Wierda Road West, Wierda Valley, Sandton PO Box 78544, Sandton 2146 t: +27 (0)11 883 0679 f: +27 (0)11 883 0684 Editor in Chief Neil Gopal Editorial Advisor Jane Padayachee Managing Editor Mark Pettipher Editor Nthabi Nhlapo Copy Editor Ania Rokita Production Manager Dalene van Niekerk Designers Wade Hunkin, Eugene Jonck Sales Robbie Pansegrauw e: rob@mpdps.com; Riëtte Stevens e: sales@sapoa.org.za Finance Susan du Toit Contributors Ann Ellis Brown, Ben Strauss, Eugenia Makgabo, Lekgolo Mayatula, Maud Nale, Tony Stokes Photographers Jabu Nkosi, Mark Pettipher, Xavier Saer DISCLAIMER: The publisher and editor of this magazine give no warranties, guarantees or assurances and make no representations regarding any goods or services advertised within this edition. Copyright South African Property Owners’ Association (SAPOA). All rights reserved. No portion of this publication may be reproduced in any form without prior written consent from SAPOA. The publishers are not responsible for any unsolicited material.

P R O P E R T Y

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Printed by Designed, written and produced for SAPOA by MPDPS (PTY) Ltd e: mark@mpdps.com

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from the CEO

Building smart cities through technology and innovation Technology and innovation are the key to creating smart cities that respond to the dynamic needs of modern communities across the globe

fund socio-political development objectives to achieve economic transformation in South Africa. The smart city is beneficial to the public and private sector, as well as to the citizens themselves. It promotes collaboration and transformation, which in turn stimulate economic growth, more intelligent use of resources, access to up-to-date information, and the creation of jobs and skills. By working together, the public and private sector can collaborate on the transformation of municipalities and the country as a whole, using innovative technology as an enabler.

The country’s economic development

he concept of a “smart city” has emerged as a term to describe a city that uses technology to address service-delivery challenges. It’s a city with well-defined processes, connected by smart innovative technologies that enable citizens to experience all public services with ease and low cost, fuelling economic development to stimulate a high quality of life for all. However, building a smart city is about more than just using technology – it is about innovation and transformation that improves the quality of life of citizens. Smart cities need not only government commitment but also engagement from citizens and the collaboration of the private sector in order to succeed.

Connectivity is the foundation At the heart of the smart city is the ability to connect the dots between ICT and basic services, and to innovate in using technology to deliver better services to citizens. Building a real smart city requires a holistic view – one that includes changing cultures and behaviours alongside the introduction of enabling technology. Hand in hand with this goes a requirement for collaboration between the government and the private sector, and the need to incorporate innovative ways to

South Africa’s growth is stuck in low gear. Last month, the World Bank became the latest to downgrade South Africa’s economic growth forecasts for this and next year, warning that the slowdown in growth and the drought would drive thousands more people into poverty. The bank sees South Africa’s economy growing 0,8% this year (from an earlier forecast of 1,4%). The forecast for next year was revised from 1,6% to 1,1%. The bank stated that while it does not forecast a recession, the extremely low levels of economic growth would lead to further declines in per capita income. The drought could shave off 0,2 percentage points from the gross domestic product this year, and push an estimated 50 000 people into poverty. The bank estimates South Africa will need to grow at more than seven percent on average from 2018 if it is to significantly reduce poverty and double income. These figures show that economic growth is central to economic development. Expanding on this notion, according to the 2015 “State of City Finances Report”, published in November 2015 by South African Cities Network, the two necessary conditions for achieving financial sustainability are doing the basics right and innovation. Doing the basics right underpins the city’s role in encouraging business development, developing human settlements and managing public transport, and having robust systems

of management accountability and council financial oversight to ensure municipal revenue is accounted for, that spending goes to where it is most needed, and that wastage and misappropriation of funds are avoided. With a foundation of doing the basics right, a city must innovate. In a changing and challenging environment, city officials need to explore new ways of doing things. It means looking at “out of the box” ideas for expanding municipal revenue sources and better ways of managing the city’s existing revenues, structuring tariffs to be more equitable and affordable, and developing more affordable approaches to delivering basic services. While cities need to take responsibility for doing the basics right and innovating, they also operate within a context influenced by the decisions and actions national and provincial government. This means that cities must work as part of the full system of government to ensure long-term sustainability of city finances. Cities are steadily improving in doing the basics right but should continue to do better, in particular by addressing inefficiencies in the current system. This will require rethinking how cities are funded and seeking innovative ways to increase their revenue and to improve their day-to-day financial management. They will also need to adapt and innovate in order to maximise their revenues and fulfil their developmental mandates within a shifting, dynamic economic and fiscal environment. This will require a rethinking on the part of government on how cities are financed and funded so as to allow them to drive the economy while also developing inclusive and accessible cities that are both affordable and liveable for all of South Africa’s urban dwellers. By localising global innovations to fit local needs, South Africa can remain relevant on a global stage while improving the lives of all citizens and meeting its servicedelivery obligations. Neil Gopal, CEO

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tribute

LISA MARIA BLANE 29.10.1966 â&#x20AC;&#x201C; 25.01.2016 Lisa was a partner at KMH Architects, and served as a director and board member of Blueprint Architects from 2001. She was the recipient of many awards, including the SACSC Lifetime Achievement Award, Five Star Woman award and several other architectural accolades. She contributed to and played an active role in the marketing and convention committees at SAPOA. She was one of the founding members of the Womenâ&#x20AC;&#x2122;s Property Network and of the Five Star and Rising Star Awards, which she passionately supported and administered. Lisa will be remembered for her kindness, love, sense of humour and the power to inspire others to excel. She will be sorely missed by all her colleagues and friends. Our hearts, prayers and deepest sympathies are with her husband Russell and the family.

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from the Editor’s desk

When technology calls… As the world becomes a faster-paced global village, the commercial property sector should always try to meet international technological advances

rom green building technologies to 3D printing skyscrapers, technological innovation is a necessary element of any business sector, including the commercial property sector. When buildings come up and town planners create new environments for communities to live and do commerce in, they have to consider the longevity of their plans. Those buildings, ideally, are structures that are meant to outlive generations. With that consideration in mind, the current art forms, architectural practice and many other factors also have to be acknowledged in order to come up with plans that are relevant, executable and in line with current norms and practices. This is a challenging task, especially when one considers that technological advancement is a very rapid process. It is no surprise to wake up to new technological inventions on a daily basis. The smartphone is a classic example of how quickly technology changes – it seems like every other day, the device of choice and its specifications change. It is almost impossible to keep any mobile device, especially a cellphone, for more than a year without a better model being released. It can be said – and rightly so – that technology waits for no man. This demonstrates what a challenging task it will be to create cities

that embrace technology but can also stand the test of time, remaining functional and aesthetically pleasing for decades. In this issue of the South African Property Review, we look at some companies that are making strides in the technology space. Derek Jack of Bidvest Facilities Management tells us how his company is changing the way in which traditional facilities management is run. The company, Jack says, realised that, more than ever before, companies are demanding interactive digital management systems that allow them to perform real-time online functions without having to physically be in their buildings. Time is quickly becoming a scarce and expensive commodity; as a result, companies are becoming more willing to make lucrative investments to secure management systems that will create efficient work-flows and encourage client participation. As the bulk of South Africa and the continent as a whole depends more and more on smartphones and digital devices, it is imperative that the construction and property sectors keep abreast of these technological advances. Also in this issue, we look at McKinsey & Co’s independent report, titled “South Africa’s Big Five: Bold Priorities for Inclusive Growth”. The report identifies opportunities in manufacturing, infrastructure, natural gas, agriculture and the export of services.

It is evident that Africa is filled with opportunity – we look at how some of these markets can be penetrated to create longevity and economic stability. It is essential to invest in growing markets such as Nigeria, whose population has increased exponentially over the years. Countries such as Ghana are also showing a lot of business potential and may have lucrative opportunities that are ripe for exploitation. In an exciting feature, we connect with university students who are beneficiaries of the SAPOA Bursary Fund. The student bursaries are an initiative that not only aims to change the lives of young, hopeful South Africans, but also endeavours to create more professionals in the property space. With the recently highlighted “fees must fall” protests in mind, it is clear that South Africa’s children are hungry for education. The students we talk to express their delight at having had the opportunity to further their studies and hopefully meet their lifelong goals, which might have seemed impossible before the bursary fund. As South Africa continues to strive for a stronger economy and job creation, it is imperative that all South Africans in the property sector recognise their role in creating cities that outlive generations. Until next time. Nthabi Nhlapo, Editor

Sandton Towers is co-owned by Zenprop

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industry news

Karen Nyenga, CEO and licensee of Fine & Country Zimbabwe

Global expansion for Fine & Country

ine & Country Zimbabwe recently welcomed its first customers to the Borrowdale, Harare office. The agency hopes to bring a fresh approach to the property market in Harare. “We have an influential team that’s trained and knowledgeable on local, regional and international trends,” says Karen Nyenga, CEO and licensee of Fine & Country Zimbabwe. “Each agent has a vast networks

from first-time buyers to top business leaders in the country. We also have the desire to achieve and exceed our individual goals. Most importantly, we love what we do. The passion is genuine.” Located in Borrowdale, a wealthy residential suburb in north Harare, the new office is three minutes’ walk from the shopping area known as Sam Levy’s Village. “Zimbabwe is still a good country to invest in or own property in,” says Nyenga. “Most of the houses have large tracts of land; the infrastructure is fairly good. There is a huge push for sustainable (green energy) developments, which is a new frontier for the country.” “We’re very upbeat about the new addition to our business and look forward to establishing ourselves in Zimbabwe,” says Linda Erasmus, CEO of Fine & Country for subSaharan Africa. “As new offices open across Zimbabwe, we hope to have about 80 Fine & Country agents nationwide servicing vendors and buyers alike with commercial, residential, industrial, land and small-holdings, vacation spots and new developments.”

Failure to review liability insurance policies can be costly for SA businesses

any business owners assume their liability insurance policy renewal automatically happens once a year. Unfortunately, missing a policy renewal date generally leads to a gap in insurance cover – and when it comes to a liability, a gap in coverage can result in significant financial losses as a result of legal costs and lawsuits. This is according to Simon Colman, underwriting executive at SHA Specialist Underwriters, who says it is essential for all businesses to review and update their liability policies annually. “Liability policies are often referred to ‘long tail’ insurance because the liability claim often comes through many months (or even years) after the actual event happens,” he says. “This can raise serious issues for the business owner if the policy is not renewed.” It is also important that the business description gets reviewed to ensure the insurer is aware of all the activities the business undertakes. “With the economy under strain, various business owners may consider diversifying their offerings

in an effort to generate further revenue,” says Colman. “The new activities will come with new risks, so it’s vital that the new activities are disclosed to the insurer. Failure to do so will result in a claim rejection in the event of an incident related to the new services arising.” Many local businesses have also opted to take advantage of the weak local currency and have started to export products, says Colman. “As some countries are more litigious than others, the business owner has to ensure that the existing liability policy will respond to claims brought from foreign territories.” He recommends that businesses employ the services of a reputable insurance broker who has a good understanding of the various types of liability insurance. “Not all risks are the same for every business and there are many types of liability policies on the market,” he says. “Given the increased frequency and severity of litigation in South Africa, it is also important that the policy states a limit of indemnity that’s relevant and adequate for the business.”

Property still a safe bet W

ith a volatile start to the year for global markets and a mixed economic outlook for 2016, the property investment industry remains stable. International property investment firm IP Global has a large number of clients in South Africa requesting to liquidate their share portfolios, moving towards fixed stable assets instead. “Property, especially during uncertain times, is one of the most sought-after investment asset classes,” says George Radford, the firm’s Director for Africa. “Our investors are choosing to allocate

their funds to safe-haven property markets such as the UK and Australia, for diversification and stability purposes.” The current economic climate, with all stock markets down (the FTSE the lowest it’s been in years, and China’s growth slowing), sets the tone for further instability this year. So why should South Africans be looking to invest in offshore property now? “People are getting nervous, and with inflation forecast at the six percent mark, diversifying into foreign markets makes a lot of sense,” Radford explains.

“Many of our clients are choosing to invest in core markets such as the UK, Australia and Germany.” In cities such as London, Brisbane and Berlin, for example, populations are growing, housing remains in short supply and prices continue to head upwards. In the UK, property prices across England and Wales have increased by 211% over the last 20 years. In London, in the last decade, property prices have climbed 82% (446% over 20 years). Even in undervalued Manchester and Birmingham,

George Radford, IP Global’s Director for Africa

past performance reinforces the significant price growth forecast in these markets. “It’s during these periods of volatility that investors often appreciate bricks and mortar more than ever,” Radford says.

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industry news

Clairwood Logistics Park

Clairwood Logistics Park given the go-ahead

onstruction of the R3,5billion Clairwood Logistics Park will begin in the first quarter of 2016, creating much-needed employment and business opportunities within the South Durban Basin. KwaZulu-Natal’s MEC of Economic Development, Tourism and Environmental Affairs, Michael Mabuyakhulu, gave the project the go-ahead after his department found that the amended environmental impact report received from the Capital Property Fund in September 2014 complied with stringent regulations and adequately addressed concerns raised during an appeal. (Capital Property Fund has since merged with the JSE-listed Fortress Income Fund, which will now develop the project). The Clairwood Logistics Park will be located on the site of the former Clairwood Race Course, which was purchased by the then-Capital Property Fund in 2012 for R430-million. Fortress Income Fund intends developing approximately 350 000m² of warehousing, with the remainder becoming paved yards to service the facilities. The development will also include an eight-hectare wetland, which will be fully rehabilitated. “The Clairwood Logistics Park will not only meet growing demand for A-grade logistics and distribution facilities in the south of Durban, it will also improve

the livelihoods of surrounding communities through job creation,” said Nico Prinsloo, Fortress Income Fund’s Development Manager. The new facility is expected to create an estimated 18 900 jobs during the four-year construction period and more than 4 600 permanent jobs after completion in December 2020. The Clairwood Logistics Park site is strategically located.

It is the last remaining flat land that’s available for development in south Durban. It’s just 11,2km from the existing container terminal entrance and 3,5km from the site set aside for the Durban Dig Out port. An efficient logistics and distribution facility close to the port is expected to minimise road traffic to congested areas to the north of the city as well

as to inland areas such as Hammarsdale. The R3,5-billion to be invested in developing the site includes R110-million that will be spent on extensive upgrades of roads and infrastructure surrounding the facility. To date, Fortress Income Fund has invested R3,8-million in schools close to the Clairwood Logistics Park site through the Siyakha Education Trust.

“Eighteen on 18” residential development launched in Hermanus

ernkloof Estate, a wellestablished residential village situated in Hermanus on the Walker Bay whale-watching coastline and surrounding the 27-hole Hermanus Golf Club, has added another string to its bow with the launch of a new precinct, “Eighteen on 18”, overlooking the 18th fairway. Marketed by Pam Golding Properties, the new development comprises 18 sectional title units, each 185m² in size and with its own garden, priced from R4,3-million to R4,6-million including VAT, and with no transfer duty payable. With 330 completed homes situated on nine precincts on the estate, of which only two remain to be developed, residential

sales on Fernkloof Estate are consistently buoyant, with very little stock available on the market at any one time, says Annien Borg, MD of Pam Golding Properties in the Boland and Overberg region. “Interest in the new development is running high and the uptake is very positive, with construction on site commencing in early 2016 and completion of the project scheduled for November 2016,” she says.” In my opinion, these units will sell well, being within a price range in which a high percentage of sales occur in South Africa, particularly as these are brand-new units with high specifications. “Generally on the estate, we find that about half the owners are permanent residents, with

the balance being leisure users, including South African expats who spend about six months of the year here, or weekend users from Cape Town and surrounds, as well as investment buyers.”

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industry news

Attacq introduces new Head of Development A ttacq, the pioneering JSE-listed capital growth property fund, has appointed accomplished property professional Pete Mackenzie as its Head of Development. This new position highlights Attacq’s strategic focus on development, and aims to grow its skills base under the leadership of a seasoned property development and investment professional. Mackenzie has more than 25 years of experience in property construction, development and investment industries, in a career that includes a progression of senior positions with performance-driven companies.

Prior to joining Attacq, Mackenzie ran his own development business, MacEagle Properties. Before that he was the Managing Director of JSE AltX-listed Vunani Properties, and was part of the team that grew the business from its inception to become a respected player in the South African property environment in the space a decade. Preceding his role at Vunani, Mackenzie was the Managing Director of Pegasus 111 Properties, the development arm of Corovest Property Group. Mackenzie holds a BSc in building management from the University of Cape Town and an MBA from Wits Business School. He has also completed the

SAPOA Property Development Programme at the University of Cape Town’s Business School. “Pete’s experience in property development and in the listed property sector gives him a solid platform for the task of overseeing all of Attacq’s developments,” says Attacq CEO Morné Wilken of the appointment. “We welcome Pete and look forward to the skills and insight he will bring to Attacq. His long record of professional achievement positions him to make a valuable contribution to the Attacq team and Exco.” “It is an extremely exciting opportunity to be able to work with a quality team on the best piece of real estate in South Africa,” says Mackenzie.

“I would like to ensure that whatever developments Attacq undertakes, we create buildings that we can be proud of. I am committed to building a team that makes people stand up and take note of Attacq – and of Waterfall in particular – for its development excellence.”

Pete Mackenzie, Head of Development at Attacq

Social Housing Regulatory Authority Centre in KZN secures turns the tide more top retailers

he new multi-million rand Tugela Ferry Mall and Jozini Mall in rural KwaZulu-Natal have been trading very well since opening. Both have had an excellent festive season. That’s the word from Gavin Tagg, CEO of Retail Network Services, the leading full-service specialist retail leasing and development company that is responsible for leasing both centres. The 15 000m² Tugela Ferry Mall has been open for almost nine months, while the 18 000m² Jozini Shopping Centre opened in October 2013. “Tugela Ferry is a vibrant yet isolated town in rural KwaZuluNatal that previously did not have a quality one-stop shopping centre,” says Tagg. “Residents previously had to travel long distances for basic shopping

services, with Tugela Ferry being 45km north of Greytown.” A 3 000m² Shoprite supermarket and a 1 350m² Cashbuild anchor the Tugela Ferry Mall. New additions secured as part of the Tugela Ferry Mall tenant mix since its opening include Edgars Active, Legit, Ackermans, Focus Cosmetics, Chesa Nyama and Debonairs. Meanwhile, the great news for Jozini Shopping Centre is that leading national health, beauty and pharmacy retailer Clicks will be opening a 550m² store at the centre soon. This will be the first Clicks store in the town of Jozini. “Jozini is a bustling tourist town in northern KZN and Jozini Mall is a quality addition to the town’s retail offering,” says Tagg.

he Social Housing Regulatory Authority (SHRA) has appointed a new CEO, Rory Gallocher. This comes after a two-year period of the organisation being put under administration by the Department of Human Settlements. In 2014, Minister of Human Settlements Lindiwe Sisulu disbanded the then-board of the SHRA and set up remedial measures at the organisation. These included: ●● Instituting a transparent and fair process of accreditation of social housing institutions; ●● The appointment of an administrator who would be a caretaker CEO until a permanent appointment of a suitable candidate; ●● Repositioning the SHRA as the driver of a key component of housing delivery in urban centres; and ●● Setting up a new board that would drive the organisation according to its core mandate. In 2015 a new board was appointed; now a new CEO takes over. This is a move to ensure that the SHRA attains its goal of delivering 27 000 social housing units by 2019. Gallocher comes to the SHRA from Johannesburg Social Housing Company, where he was also the CEO and in charge of changing Johannesburg’s affordable housing landscape. Gallocher has a master’s degree in town and regional planning from the University of KwaZulu-Natal.

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industry news

Pam Golding on Main shopping complex

SA’s shifting retail landscape underpins property prices S

trategically located, up-market niche shopping complexes in Cape Town are contributing to the upswing in prices of nearby residential property and to the sales of both new and existing sectional title units. This is according to Pam Golding Properties (PGP) MD Laurie Wener, who cites several

examples of the impact of smallscale, bigger-spend centres. The Pam Golding on Main multi-use retail and office development opened in mid2015 in Kenilworth Main Road, and is anchored by a 510m² Pick n Pay store. Its pavement-cafe ambience is already making the area more vibrant, and boosting

Stor-Age’s three latest developments J SE newcomer Stor-Age property REIT has followed its November 2015 listing debut with strong growth momentum, despite the current turbulence in the local economy. The company, which rents out space on a shortterm flexible-lease basis, provided an update on three developments within its pipeline that will enhance its revenue and fee income streams. CEO Gavin Lucas says Stor-Age enjoyed strong demand in the last quarter of 2015, evidenced by an eight percent growth in customer enquiry numbers year-on-year for the final quarter, supporting his assertion that the Stor-Age business model fares equally well in economic down-cycles.

“People need storage space in both strong and weak economies as they move and/or downsize,” he says, adding that enquiry levels are continuing to increase in all of South Africa’s six main cities. Of the three additions to the portfolio he says, “Our newest properties in Sunninghill and Randburg (Johannesburg) and Berea (Durban) will raise the company’s profile and further entrench the StorAge brand to consolidate our market leadership of the local self-storage sector.” Stor-Age Sunninghill will be one of the company’s flagship properties and marks its entry into Johannesburg’s highdensity northern suburbs.

interest in buying and renovating flats in the area. Palmyra Junction opened five years ago in Claremont (anchored by a large, “green” Woolworths Food convenience store). PGP exclusively marketed four plotand-plan homes at 44 on Palmyra this year – and they have all sold, priced from R4,35million. PGP Atlantic Seaboard and City Bowl area manager Basil Moraitis says these shopping centres have all contributed to the regeneration of the area and encouraged locals to enjoy more traditional high-street local shopping instead of travelling to the V&A Waterfront.

This has helped underpin property price increases in Sea Point, which is characterised by luxury high-rise apartments close to the beach. Many professionals buy Sea Point apartments to take advantage of the quick commute into the CBD, while investors rent out sea-facing units to holiday-makers. Moraitis says that entry level in Sea Point starts from R1,5-million for a one-bedroom apartment. Two bedrooms start at around R2,6-million; prices can range up to R12million to R15million for a three-bedroom penthouse.

Standalone brokering division for Spire A

standalone property brokering division has been launched by the Spire Property Group. Spire Property Broking (SPB) officially began operating on 18 January and is being overseen by Brad Rosmarin, who has been appointed as the Managing Director. Gregg Huntingford, CEO of Spire Property Management, explains that the group decided to launch a specialist brokering division as it felt it expanded the service offering of the group and would allow Spire to provide an independent specialist service to property investors and tenants. “Spire is growing because we want to be able to provide a full basket of services to all our clients,” he says. “The SPB division allows us to offer unique and customised deals that are structured from cradle to grave, where we can work collaboratively with all parties from the outset.” He also says that by becoming involved in rental deals early enough, Spire can include the services of the sustainability division, assisting with possible rental reductions and cost savings. Rosmarin, who worked for Spire several years ago, says he is very excited about his new role at SPB and looks forward to growing this new division in collaboration with the team from Spire Property Management. “I’m very pleased to be back within the Spire Property Group, and anticipate a busy and successful year ahead as we roll out our brokering services,” he says. “There is a need in the industry for a property brokering company that looks at each client and contract from a holistic perspective. I am confident that the collaboration between the divisions of the Spire Property Group – these being Spire Property Management, Intersect, Spire’s sustainability division and SPB – will offer great benefits to our clients.”

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legal update

Municipal valuation objection overlooked Municipal valuations are key for every property owner because they directly impact on property rates

I Eugenia Makgabo is an Admitted Attorney of the High Court and Legal Manager at SAPOA

This legal opinion is only a guide and should not be copied with the expectation that it will serve each party’s individual circumstances. Most of these recommendations have not been tested in our courts. SAPOA cannot guarantee any success in any court if any of these recommendations are put to use. 12

ncorrect valuations have far-reaching implications: landlord budgets are affected, as are tenant relationships given the fact that assessment rates are one of the top expenses on the landlord’s list of operating expenses. In terms of the Municipal Property Rates Act (MPRA) property rates are calculated on the value of the land and of any improvements or buildings. This value is based on the property’s market value, which is the price you would realistically get for a property in the open market, between a willing buyer and a willing seller. Property owners are at liberty to dispute any increases imposed on the property by way of valuation. An objection can be lodged to this effect. In a recent judgment in the matter between Dimitri Coutsourides NO and Another v Nelson Mandela Bay Metropolitan Municipality and Others, the purpose of an objection was looked at as well as the extent to which property owners “deserve” to be furnished with reasons.

Background The main issue was the fact that the trustees of Markman Venture Trust (hereinafter referred to as the applicant) sought to compel the chief valuer (hereinafter referred to as the third respondent) to provide adequate reasons for a decision to dismiss an objection to the valuation of immovable property owned by the applicant. The applicant is the registered owner of erf 451, Wells Estate in Port Elizabeth. The first respondent is the municipality

in whose area of jurisdiction the property is situated. The second respondent is the municipal manager of the first respondent, and the third respondent is the designated municipal valuer.

Property owners are at liberty to dispute any increases imposed on the property by way of valuation The basis of the application was founded on a general valuation of the aforementioned property in 2012. The applicant’s property was valued and the second respondent served a notice, upon the applicant reflecting that the applicant’s property had been valued at R1,7-million. The applicant subsequently lodged an objection to the valuation in accordance with the MPRA. In its objection, the applicant stated the following: “Subject property has been vacant for 18 months. Market has declined, therefore the market value of my property should also be reduced.” The applicant contended that the reasons given by the chief valuer are invalid and do not constitute lawful reasons, and therefore requested a change in valuation. The applicant requested reasons for the chief valuer’s decision based on Section 5(1) of the Promotion of Administrative Justice Act, 2000 (Act No. 3 of 2000), hereinafter referred to as PAJA.

Considerations ● In order to qualify for reasons, the applicant must, in terms of PAJA, show that his or her rights have been materially and adversely affected by the decision. ● The definition of materially and adversely affected was described as administrative action that had a significant and not trivial effect in the Joseph and Others v City of Johannesburg and Others case. ● Where reasons have been provided, a party to whom the reasons have been provided would be entitled to raise a challenge to the adequacy of such reasons on the basis of the administrator’s failure to comply with Section 5(2) of PAJA. ● Considerations of “adequacy” of the reasons already provided, it has been said, may involve determination of the sufficiency of the reasons and whether such reasons enable the person concerned to decide on further steps to remedy the administrative action. ● Chapter 4 of MPRA deals with the general valuation of rateable property. Section 34 sets out the functions of the municipal valuer appointed in terms of section 33. The section states the following: The valuer of a municipality must in accordance with this Act, a) Value all properties in the municipality determined in terms of section 30(2); b) Prepare a valuation roll for properties in the

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legal update

c) d)

i) ii) g)

municipality determined in terms of section 30 (3); sign and certify the valuation roll; submit the valuation roll to the municipal manager within the prescribed period; consider and decide on objections to the valuation roll; attend every meeting of an appeal board when that appeals board â&#x20AC;&#x201C; hears an appeal against a decision of that valuer; or reviews a decision of that valuer; prepare a supplementary valuation roll when this becomes necessary; assist the municipality in the collection of postal addresses of owners when such addresses can reasonably be determined by the valuer when valuing property; and generally, provide the municipality with appropriate administrative support incidental to the valuation roll.

Section 45 provides as follows: 1. Property must be valued in accordance with generally recognised valuation practices, methods and standards, and the provisions of this Act. 2. For the purposes of subsection (1) â&#x20AC;&#x201C; a) physical inspection of the property to be valued is optional; and b) comparative, analytical and other systems or techniques may be used, including aerial photography and computer-assisted mass appraisal systems or techniques, taking into account changes in technology and valuation systems and techniques. Further, Section 46 states the following: 1. Subject to any other applicable provisions

i) ii) iii) iv)

of this Act, the market value of the property is the amount the property would have realised if sold on the date of valuation on the open market by willing seller to a willing buyer. In determining the market value of the property, the following must be considered for purposes of valuing the property: The value of any licence, permission or other privilege granted in terms of legislation in relation to the property; the value of any immovable improvement on the property that was erected or is being used for a purpose that is inconsistent with or in contravention of the permitted use of the property, as if the improvement was erected or is being used for a lawful purpose; and the value of the use of the property for a purpose that is inconsistent with or in contravention of the permitted use of the property, as if the property is being used for a lawful purpose. In determining the market value of a property, the following must be disregarded for purposes of valuing the property: Any building or other immovable structure under the surface of the property that is the subject matter of any mining authorisation or mining right defined in the Mineral and Petroleum Resources Development Act, 2002 (Act No. 28 of 2002); any equipment or machinery which, in relation to the property concerned, is immovable property, excluding â&#x20AC;&#x201C; a lift; an escalator; an air-conditioning plant; fire-extinguishing apparatus;

vi)

a water pump installation for a swimming pool or for irrigation or domestic purposes; and Any other equipment or machinery that may be prescribed; and any unregistered lease in respect of the property.

The judge emphasised that the appeal that lies from a decision to refuse the objection is an appeal against that decision. It is not an appeal against the original valuation decision except to the extent that the factual basis for the objection and the reasons for refusing it implicate the underlying decision-making relating to the valuation 4.

In determining the market value of a property used for agricultural purposes, the value of any annual crops or growing timber on the property that have not yet been harvested as at the date of valuation must be disregarded for purposes of valuing the property

Judgment The judge held the following: the reasons given by the municipal valuer are entirely adequate. No substantive information was submitted to challenge or dispute the valuation that had been undertaken. The submission was merely that

the property had been vacant for a period of 18 months. The existence or otherwise of unregistered lease agreements and therefore the tenancy of an immovable property is, in any event, to be disregarded in the process of determining the market value of the property. Further, the statement that there is insufficient information contained in the objection to justify a variation of the valuation explains not only the reason for the decision, but also why the municipal valuer considers that the decision not to uphold the objection is justified. The mere lodging of an objection, however ill-founded, does not trigger an obligation to furnish detailed reasons for the underlying decision relating to the valuation of the property. The judge emphasised that the appeal that lies from a decision to refuse the objection is an appeal against that decision. It is not an appeal against the original valuation decision except to the extent that the factual basis for the objection and the reasons for refusing it implicate the underlying decision-making relating to the valuation. In this instance, the objection plainly does not do so and so it cannot be suggested that the applicant is not in a position to decide whether or not it should pursue any further administrative remedies pursuant to the refusal of the objection. It accordingly follows that the reasons furnished that are neither unlawful nor in any respects inadequate. The application was dismissed with costs.

Conclusion The successful implementation of the MPRA across all the municipalities in the country is pivotal. SAPOA continues to monitor this situation as we strive to see uniform valuation processes.

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education, training and development

The Wits Real Estate Programme reaches new heights Professor David Root

More than ﬁve years ago, the Wits School of Construction Economics and Management was in serious trouble, mainly because of internal quality problems. Professor Samuel Azasu explains the case for re-engineering Wits’s real estate programmes, the SAPOA partnership and the future of real estate education in South Africa

n 2009, the School of Construction Economics and Management at Wits University attracted negative headlines for serious quality problems resulting mainly from the absence of qualified academics. Its property programmes in particular were not accredited, and the BSc programme was shut down. A total overhaul of staff and course content brought the programmes in line with world standards. A partnership with SAPOA in executive education is the latest in the line of positive outcomes from the reorganisation that took place. The school is now a totally different place, thanks to Professor David Root taking up the position of Head of School in 2011. It is housed in a new building and has attracted 10 young Africans with doctoral degrees from Europe, Asia and South Africa, making it the strongest school in South Africa in terms of the number of qualified PhD holders who work there.

For more information, please contact: Mafonti Morobi Training Coordinator t: +27 (0)11 883 0679 f: +27 (0)11 883 0684 e: hr-education@sapoa.org.za

Transformation of real estate sector driven by education The shutdown of the undergraduate programme meant Johannesburg metro had only one programme in valuation (by the University of Johannesburg). The specialised

nature of the University of Johannesburg programme meant other parts of the industry – finance, investment, development and corporate real estate – had no graduates. “Johannesburg was in dire need of a comprehensive, world-class real estate programme, and Wits took advantage to build one,” says Professor Samuel Azasu. “We were of the view that the transformation of the South African real estate sector was going to be accelerated by the provision of world-class education to previously disadvantaged groups in the country, and Wits’s location in Jo’burg placed us in a unique position to lead that process”. In 2012, the school revamped its undergraduate and postgraduate programmes, a change spurred by (among others) the arrival of Professor Samuel Azasu who is an awardwinning Associate Professor from the Royal Institute of Technology in Stockholm. “The changes started with the redesign and relaunch of the four-year BSc programme in property studies as well as the redesign of the existing postgraduate courses,” says Azasu. “One of the goals of the relaunch process was to benchmark the programmes against the best programmes in the world.”

To this end, two top academics in the field were invited to South Africa in 2012: Professor Karen Gibler from Georgia State

“The changes started with the redesign and relaunch of the four-year BSc programme in property studies as well as the redesign of the existing postgraduate courses. One of the goals of the relaunch process was to benchmark the programmes against the best programmes in the world” University and Professor Michael Lacour-Little from California State University in Fullerton. The new four-year undergrad programme was described as “comprehensive

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education, training and development and more complete than most” by Gibler. Both academics proposed modifications, which were put into action in 2013. The increase in qualified staff continued in 2013 with PhD holders from Singapore (Dr Kola Akinsomi) and the UK (Dr Kola Ijasan), recruited to strengthen the research and teaching capacity of the school. In the second half of 2015, Dr Yewande Adewunmi joined from the University of Lagos. The school also promoted Prisca Simbanegavi to the position of lecturer (she had postgraduate degrees from KTH Stockholm and UCT, and is working towards a doctoral degree), while Thabelo Ramantswana was accepted as the first black female doctoral student in real estate at the school. In addition to implementing the new programmes, this team of academics also began the work of clearing the backlog of postgraduate students who had not completed their research reports.

Empowering graduates through new approaches

“Instead of lectures (which are essentially one-way interactions), we would use cases, modelling exercises and projects with explicit awareness of what skills our graduates acquire through these activities” 16

Previous versions of the undergraduate and postgraduate programmes consisted of large amounts of construction and quantity surveying studies, with only a few real estate courses towards the end. The new programmes, in contrast, not only cover real estate courses from the first year but also include training in leadership skills and entrepreneurship. This goes a long way towards empowering graduates to establish their own small practice in an area of their choice. “Our undergraduates now do more real estate credits than their American counterparts,” stated Azasu. Lastly, more interactive approaches to learning have also been introduced in place of more traditional lectures.

“This means that instead of just lectures (which are essentially one-way interactions), we use cases, modelling exercises and projects with explicit awareness of what skills our graduates acquire through these activities.”

World-class graduates ready to meet industry needs Azasu points out these changes have had the desired impact in three areas. Enrolment numbers have doubled since 2012 and students who had dropped out of previous versions of the programmes are returning to complete their degrees. Also, each year sees the doubling of application numbers.

In addition to implementing the new programmes, this team of academics also began the work of clearing the backlog of postgraduate students who had not completed their research reports In addition, the school’s research output has increased, addressing one of the issues that triggered the near-closure of the school in 2009. A critical test of degree quality is the employability of the graduates. Three first-year postgraduate students who were hired by Broll in mid-2015 as interns have been given permanent positions, and there’s a possibility of hiring at least six more in 2016. “We also succeeded in placing some of our postgraduate students at Nedbank Corporate Property Finance before they graduated. Some of them have since been offered permanent positions”. Nedbank Corporate Property

Finance approved best student awards for each year of the undergraduate and postgraduate programmes from 2015 onwards. Others, for example from architecture, have used the programmes to transition into careers in development. At the current rate, employers in the real estate sector can count on Wits to create a steady pipeline of worldclass graduates to meet the needs of the industry. The programme can now seek accreditation from all the relevant bodies.

The partnership with SAPOA Discussions with SAPOA began in 2015 with the need to revamp SAPOA’s executive education, as courses in the existing portfolio had grown only organically over the years. The persistent difficulty was the inability of graduates from most of these courses to use the course credits to access higher qualifications at the universities. In addition, one usually found a skills area was addressed by a single course, for example property/facilities management. This prevented the development of working knowledge to the desired proficiency level. Azasu argues that any of the real estate skills areas can only be meaningfully addressed by a sequence of courses in an informal but programmatic way, even if it did not lead to qualifications. “The difference with this approach is that you get to use a sequence of courses to gradually, systematically train participants in an occupational area and maximise the chance participants would develop working knowledge of each skills area,” he says. So facilities management requires additional courses in building services and project management beyond a course in facilities management itself. In addition, National Diploma holders with work experience who pass these courses can use the courses to gain access to the Wits postgraduate programmes.

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planning and development

Spearheading economic development In January, SAPOA and National Treasury signed a Memorandum of Understanding (MOU). Given the mandate of both organisations, it is important to understand the signiﬁcance of this relationship and the intended results

Lekgolo Mayatula is SAPOA’s Planning and Development Manager

In 2014, PwC produced the report “Drivers of Change for the Real Estate Industry”, which highlights that the worldwide growth in the real estate industry over the years to 2020 will be largely driven by developments resulting from farreaching economic and social changes 18

irstly, both SAPOA and the National Treasury play a facilitation role in the economic development of the country – SAPOA via its members and the National Treasury via its resources. Secondly, the strategic focus areas of the MOU are encapsulated under the following topics; spatial transformation, infrastructure financing, skills, capacity and leadership sharing. Thirdly, the partnership is in response to the fact that the public and the private sector are mutually dependent, and therefore fragmented development efforts as previously highlighted in the 2014 and 2015 Medium Term Budget Policy Statements are limiting to the country’s vision of economic growth, which aims to reduce high levels of unemployment, poverty and inequity. According to the National Treasury’s Medium Term Budget Policy Statement (2015), government had allocated R542-billion to public infrastructures such as roads and public transport, public housing, water, education and health infrastructure. But the same report points out that the private sector has not positively responded to the public sector capital outlay, and hence there is a need for a more collaborative approach. The predicted tough economic challenges that are said to

impact on the South African economy requires for all sectors to derive solutions that would provide a higher return on their investment; therefore it is without a doubt that this agreement is set to be one of the game-changers in terms of the country’s second chapter in the transformation journey.

The Department of National Treasury has put in place a number of funding programmes in line with the Division of Revenue Act (DORA) and other legislation to assist municipalities, speciﬁc national and provincial departments and state-owned companies In 2014, Pricewaterhouse Coopers (PwC) produced the report “Drivers of Change for the Real Estate Industry”, which highlights that the worldwide growth in the real estate industry over the years to 2020 will be largely driven by developments resulting from far-reaching economic and social changes. The report also highlighted six predictions and their

implications for real estate managers and the investment community for 2020. These were listed as follows: ● Real estate managers will need to think more globally, as global investable real estate will expand substantially, especially in emerging markets; ● Real estate managers will need to understand the underlying economics of cities; ● Real estate managers will need to factor technology and sustainability into asset valuations; ● Real estate managers will need to decide where and how to compete as the competition for prime assets continues to intensify; ● Real estate managers, the investment community and developers will need to partner with the government to mitigate risks of schemes that might otherwise be uneconomic; and ● As the nature of real estate investment changes, demanding greater global specialisation, more risks will emerge. Climate change risk, accelerating behavioural change and political risk will be key. In response to points 2 and 5 raised above, it is important to provide a brief overview of opportunities that could be further explored by both parties in terms of ensuring

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planning and development that the partnership is solidified and that the results produced are to the benefit of both and beyond. As a matter of fact, no development can take place without the necessary funding. Added to this, no funder would make funds available without the appropriate management, monitoring and evaluation processes thereof. The Department of National Treasury has put in place a number of funding programmes in line with the Division of Revenue Act (DORA) and other legislation to assist municipalities, specific national and provincial departments and stateowned companies. These programmes are aimed at assisting the recipients with strategic planning and development of infrastructure with the intention of attracting private/community investment. These funding grants include the Integrated City Development Grant (ICDG), the Urban Settlements Development Grant (USDG), the Human Settlements Development Grant (HSDG), the Neighbourhood Development Partnership Grant (NDPG), Public Transport Infrastructure Grant (PTIG), and the Integrated Electrification Programme Grant (INEP). Through its Cities Support Programme, National Treasury introduced its Built Environment Planning Plans (BEPPs), which facilitate access to the USDG and other infrastructure-related grants. BEPPs are defined as a strategic overview of the built environment that is to be used for the enhancement of inter-governmental relations, with the aim of improving the performance of metropolitan municipalities. How is this done? Basically, the National Treasury, through DORA, is supposed to equally distribute nationally raised revenue among the three

spheres of government within a specified financial year. According to Schedule 4 of DORA, municipalities and provincial government are able to apply for supplementary funding via specified grants, and the Integrated City Development Grant (ICDG) is one of the grants utilised by metro municipalities. In order to access the ICDG, metro municipalities are required to submit their Built Environment Planning Plans (BEPPs) to the National Treasury. National Treasury has a number of requirements that need to be adhered to by the applicant (i.e. metro municipalities) which include, but are not limited to the following: ● BEPPs should be incorporated in the municipalities’ medium term expenditure framework (MTEF); ● BEPPs need to be aligned with other Statutory Planning Instruments (i.e. Spatial Planning & Land Use Management Act – SPLUMA, Municipal Systems Act – MSA, Integrated Development Plans (IDPs), the State of the City’s report/plan, Municipal Financial Management Act – MFMA, Service Delivery & Budget Implementation Plan – SDBIP, Functional Performance, etc); ● BEPPs need to give priority to spatial targeting, which means that they need to be aligned with the metro municipalities’ spatial development strategy; ● BEPPs need to give priority to inter-governmental project pipelines and capital funding, which means these submissions must demonstrate the alignment of intergovernmental funding via the various project pipelines; ● BEPPs need to validate the implementation of metro municipalities’ urban development projects; and

● BEPPs need to exhibit urban management to protect and sustain public, private and household investment.

According to the National Treasury’s Medium Term Budget Policy Statement (2015), the government had allocated R542billion to public infrastructures such as roads and public transport, public housing, water, education and health infrastructure. The same report points out that the private sector has not positively responded to the public sector capital outlay; hence there is a need for a more collaborative approach What does the private sector need to do, in order to benefit from the various infrastructure grants that are offered by the National Treasury? These grants are accessible via the metro municipalities; this requires intentional and active participation by the private sector in the various municipal planning processes, such as the SDF, IDP, etc. The private sector needs to be able to engage with the public sector on genuine matters that negatively impact

on their developments/ projects and aim to collectively find sustainable solutions. Organisations such as the South African Property Owners Association (SAPOA), South African Institute of Black Property Practitioners (SAIBPP), South African Women in Construction (SAWIC), Women’s Property Network (WPN), South African Council of Shopping Centres (SACSC), Green Building Council of South Africa (GBCSA), South African Institute of Valuers (SAIV), African Real Estate Society (Afres), Property Charter, etc are able to facilitate various engagement opportunities that, if nurtured objectively, could produce extraordinary results. The various metro municipalities have already submitted their draft BEPPs to the National Treasury, and the final council approval is due on 31 May. These draft submissions are available on the various metro websites; it is essential for the private sector to familiarise itself with these submissions as they would assist with providing strategic direction in terms of the sector’s business objectives. An annual BEPPs evaluation is scheduled for 22 June 2016, and discussions on the 2017/18 BEPP guidelines are scheduled for 13 July 2016, the approved guidelines will most likely be issued by 29 July 2016. In conclusion, there are many ways to skin a cat, as the proverb says, and through partnership and collectively focusing on our long-term vision of creating a new, inclusive, opportunity-filled country, there is scope for exponential growth. This can be done by commitment and determination – definitely the substance that makes up our country – alive with possibilities.

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feature

East Africa’s ﬁrst REIT offer opened STANLIB recently opened East Africa’s ﬁrst REIT offer in Kenya. SAPOA speaks to STANLIB Fahari REIT CEO, Anton Borkum who is based in Kenya about what this milestone means for the company By Nthabi Nhlapo

STANLIB opened the STANLIB Fahari I-REIT, which is Kenya’s first REIT offer at the Nairobi Stock Exchange. In which other parts in Africa is STANLIB doing the same? The STANLIB Fahari I-REIT is the first income real estate investment trust (I-REIT) to list in East Africa. It is managed by STANLIB, and was listed on the Nairobi Securities Exchange (NSE) in November 2015. STANLIB has operations in 10 African countries and will consider opportunities where they make sense for our customers.

Anton Borkum - STANLIB Fahari REIT CEO

STANLIB Investments is set to buy Greenspan Mall in Donholm, Nairobi, with proceeds from Kenya’s first-ever REIT sales. What does this mean for the company as a leader in the African financial sector? STANLIB Fahari I-REIT is a separate entity managed by STANLIB Kenya. Both STANLIB Fahari I-REIT and the vendors of Greenspan Mall (a modern 17 000m² GLA mall located in the east of Nairobi) have completed all conditions precedent required for the transfer of Greenspan Mall, and the parties are now awaiting final regulatory confirmation. Once this has been secured, STANLIB Fahari I-REIT will become the first I-REIT in East Africa to acquire incomeproducing real estate on behalf of its unitholders. This is significant because the transaction will facilitate the exposure of more than 6 000 units-holders (many of whom would ordinarily never be able to own a shopping mall themselves) to an equity interest in Greenspan Mall. The experience that the STANLIB Direct Property Investments team has accumulated in managing assets such as Sandton City, Mitchells Plain and Midlands Mall in South Africa will be applied to Greenspan, in order to deliver long-term sustainable returns for the STANLIB Fahari I-REIT unit-holders, as well as a an attractive retail environment for both tenants and shoppers.

STANLIB says that a mixed development is one of the property types to be bought with the proceeds of its initial public offer. Do you believe mixeduse developments are the next big thing in urban development across the African continent? Mixed-use precincts (for example Melrose Arch) consist of one or more property types (such as retail plus hotel, or retail plus residential), and are the embodiment of the modern “live/work/play” townplanning philosophy, which seeks to promote integrated developments that feature a number of different property uses within a single environment. We believe that urban development in Africa will embrace such mixed-use developments over the longer term, for the following reasons: ● There is a mutually beneficial relationship between live/work/play developments and the natural environment. ● As the requirements for car-based transport decrease, the demand for walkable environments will increase, and so the economic viability will grow. This is in part driven by recognition of the value of walkability. Mixed-use development that promotes a walkable built environment can help revitalise and increase private investment (leading to higher property values), promote tourism and support the development of a good business climate. ● The savings are even larger when developments are built outside of an urban setting, which may yield more revenue. ● Mixed-use developments reduce car usage, positively impacting the environment. With the incorporation of mixed-use development, sprawling development patterns could be reduced and quality of life may be enhanced. Undeveloped land, open space and historic and natural resources could be preserved.

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feature STANLIB’s I-REIT will invest in shopping malls, residential units, hospitals, hotels, offices and warehouses with attractive target returns. Would you advise the “ordinary man on the street” to invest in I-REITs? STANLIB Fahari I-REIT provides both retail and institutional investors with a transparent, well regulated, tax-efficient investment structure, offering income and capital returns as well as an opportunity for diversification into a new asset class (listed real estate). For international investors, STANLIB Fahari I-REIT offers exposure to the growing Kenyan economy. Specific benefits include the following: ●● Diversification. Empirical data shows that inclusion of listed real estate in an investment portfolio improves that portfolio’s risk return profile. ●● Tax efficiency. The STANLIB Fahari I-REIT has specific tax dispensation from the Kenya Revenue Authority, which means that it does not pay income tax. Further, no tax is paid on distributions. ●● Transparent investment. Given the public disclosure and quoted pricing empowers investors to be able to understand exactly what they’re invested in, and the value of their STANLIB Fahari I-REIT units. ●● Accessibility. An I-REIT unit can easily be bought or sold through the NSE. This is a significant saving in time and money, as investors do not have to deal with the complexity of selling a physical property.

●● Liquidity. The STANLIB Fahari I-REIT is listed on the NSE, thus creating a secondary market for I-REIT shares. ●● Returns. The STANLIB Fahari I-REIT will benefit from underlying properties’ net rental income, as well as capital gains. Our objective is to deliver to our investors a consistent return profile over the medium to long-term. ●● Regulatory oversight. The STANLIB Fahari I-REIT is subject to regulatory oversight of the Kenyan Capital Markets Authority.

REITs are expected to make it easier for companies to pool funds for either buying rental properties or for developing properties. Have you seen this happening already?

REITs provide a mechanism for aggregating large pools of capital (on behalf of investors), which can then be deployed into real estate investments. In this manner they deepen the Capital Markets in which they operate.

REITs provide a relatively simple mechanism for aggregating large pools of capital (on behalf of investors), which can then be deployed into real estate investments. In this way, they deepen the capital markets in which they operate. They provide price disclosure in terms of buying and selling prices of their assets, and as more REITs are listed, it is anticipated that the market will benefit from greater trading activity in real estate assets, and the universe of publicly available data will grow. Given that there is only one I-REIT listed in Kenya at this time, it is too soon to comment on market trends.

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update

REITs – a recent ruling about ‘qualifying distributions’ Real estate investment trusts (REITs) are subject to a special tax regime in South Africa By Ben Strauss

Ben Strauss, Director in Cliffe Dekker Hofmeyr’s tax department

REIT may deduct for income tax purposes distributions made to its shareholders. Because a REIT by its nature distributes most of its net income to its investors, the REIT itself usually pays little or no income tax. Instead, the shareholder pays income tax on the distributions received from the REIT. The distribution, however, is only deductible by the REIT if it falls within the definition of “qualifying distribution” in Section 25BB(1) of the Income Tax Act, No. 58 of 1962 (the Act). To fall under the definition, the REIT must meet one of the following requirements (among others): a. at least 75% of the gross income of the company during the first year of assessment that the company qualifies as a REIT (or a controlled company in relation to the REIT) must consist of rental income; or b. in any other case, at least 75% of the gross income of a REIT or a controlled company in the preceding year of assessment must have consisted of rental income. The term “rental income” is defined in Section 25BB(1) of the Act. (Note that the provisions in paragraph (a) above were amended with effect from 1 April 2013, the date that the new REIT taxation regime was introduced. Before the change, the provision stated that “at least 75% of the gross income received by

or accrued to a REIT or a controlled company until the date of the declaration of that dividend consists of rental income where a REIT or a controlled company is incorporated, formed or established during that year of assessment”.) The term “qualifying distribution” was the subject matter of a recent ruling of the South African Revenue Service (SARS), Binding Private Ruling: BPR 218, dated 1 February 2016. The facts of the ruling were these: the first financial year and first year of assessment of a newly incorporated local company (NewCo) ended on 30 June 2015. NewCo listed on the JSE shortly after 30 June 2015 after concluding an amalgamation transaction with a portfolio created as a collective investment scheme in property (CISP). As from its listing, NewCo started trading as a corporate REIT. The CISP, under the regulatory requirements pertaining to its industry, converted its business to a corporate structure, which was housed in NewCo. The conversion became effective on 1 July 2015. It consisted of the transfer of the assets and liabilities of the CISP to NewCo in exchange for the CISP receiving shares or linked units in NewCo, on the basis that those shares or linked units were issued on behalf of the CISP to the unit holders. The CISP was thereafter voluntarily wound up. This conversion constituted an ‘amalgamation transaction’ under Section 44 of the Act. Notably, NewCo conducted no business activities and earned no income before the conversion. NewCo would make distributions for its year of assessment ending 30 June 2016, being its first year of earning rental income and its first year to be assessed as a REIT. The distribution in respect of its 2016 year of assessment (to be determined with reference to its financial results for the financial year ending 30 June 2016) will only be made after 30 June 2016, once its financial results have been finalised, unless an interim distribution is made during the course of the 2016 year of assessment, in accordance with the manner in which REITs ordinarily make distributions.

SARS ruled that the provision in paragraph (a) cited above did not apply because the distribution would only be made after 30 June 2016. Instead, in establishing whether 75% of the gross income of NewCo consists of “rental income” in order for it to make a “qualifying distribution” for its year of assessment ending 30 June 2016 – that is, its first year of assessment as a REIT – the applicable year of assessment to consider will be the year of assessment in which NewCo was incorporated, which ended on 30 June 2015. Accordingly, one must have regard to paragraph (b) cited above. However, on the facts of the ruling, NewCo had no “rental income” in its year of assessment ending on 30 June 2015. Accordingly, NewCo would not have been making a “qualifying distribution” in its 2016 year of assessment.

The ruling shows that newly formed REITs must take great care at the time of their formation and listing to ensure the distributions they make after their formation do, in fact, constitute “qualifying distributions” However, SARS nevertheless ruled that NewCo will comply with the provisions of paragraph (b) and that NewCo would be making a “qualifying distribution” in respect of the 2016 year of assessment (provided that all the other requirements of the definition are met). The ruling shows that newly formed REITs must take great care at the time of their formation and listing to ensure that the distributions they make after their formation do in fact constitute “qualifying distributions”.

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World real estate accounts for 60% of all mainstream assets The total value of all developed real estate on the globe reached US$217-trillion in 2015, according to calculations by international real estate adviser Savills, which is represented in Africa by Pam Golding Properties

Sandra Gordon, senior analyst for Pam Golding Properties Research

According to Sandra Gordon, senior analyst for Pam Golding Properties Research, here in South Africa a recent Absa report indicates that in the second quarter of 2015 the total value of South African residential property was R4,155-trillion, which at the current rand/dollar exchange rate represents approximately US$260-billion 24

ssued for the first time, the Savills analysis measures the entire developed property universe, including commercial and residential property as well as forestry and agricultural land. The value of global property in 2015 amounted to 2,7 times the world’s GDP, making up about 60% of mainstream global assets and representing an important store of national, corporate and individual wealth. Residential property accounted for 75% of the total value of global property. According to Sandra Gordon, senior analyst for Pam Golding Properties Research, here in South Africa a recent Absa report indicates that in the second quarter of 2015 the total value of South African residential property was R4,155-trillion, which at the current rand/dollar exchange rate represents approximately US$260-billion. “To give the global figure context, the total value of all the gold ever mined is approximately US$6-trillion, which pales in comparison to the total value of developed property by a factor of 36 to 1,” says Yolande Barnes, head of Savills World Research. “The value of global real estate exceeds – by almost a third – the total value of all globally traded equities and securitised debt instruments put together, and this highlights the important role that real estate plays in economies worldwide. Real estate is the pre-eminent asset class that will be most impacted by global monetary conditions and investment activity and which, in turn, has the power to most impact national and international economies.” In recent years, quantitative easing and resulting low interest rates have suppressed real estate yields and fuelled high levels of asset appreciation globally. Investment activity and capital growth has swept around the major real estate markets

of the world and led to asset price inflation in many instances. The Savills report says that, overall, the biggest and most important component of global real estate value is the homes that people live in, totalling US$162trillion. The sector has the largest spread of ownership, with approximately 2,5-billion households, and is most closely tied with the fortunes of ordinary people. Residential real estate value is broadly distributed in line with the size of affluent populations: China accounts for nearly a quarter of the total value, containing nearly a fifth of the world’s population. Yet the weight of value lies with the West – more than a fifth (21%) of the world’s total residential asset value is in North America, despite the act that only five percent of the population lives there. The trend for western nations to dominate real estate is most pronounced in commercial markets, where nearly half of the total asset value resides in North

Yolande Barnes, head of Savills World Research

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report space and retail and leisure space in population centres. This will then create compelling opportunities for those able to deploy capital into the right types of real estate. Not included in the global calculation is the value of informal neighbourhood commercial properties: workshops, work spaces, shops and small business premises that are not part of the high-quality commercial real estate universe that constitutes global property markets, but which are important components of economic growth and prosperity, especially in emerging markets. They are almost

impossible to value at a global level but have huge potential for future investment as economies mature and real estate markets develop within them, adding to the global stock. This year, for the first time, the value of agricultural land and forestry is also included in the Savills measurement of total world real estate at an estimated US$26-trillion, of which about 30% is corporately and institutionally invested. Most agricultural and forestry land is owned by non-investing entities, operators and occupiers – especially in emerging economies, where this is a sector with great potential for further growth and investment.

Breakdown of developed global real estate’s total value Dr Andrew Golding, Chief Executive of Pam Golding Properties

Asset*

Investable (trillions)

Non-investable (trillions)

All (trillions)

ALL REAL ESTATE America. Europe makes up more than a quarter, while Asia and Australasia contain 22%, leaving just five percent for South America, the Middle East and Africa.

US$81

US$136

US$217

Residential

US$54

US$108

US$162

High-quality global commercial

US$19

US$10

$29

Role of housing in developing economies

Agricultural and forestry land

US$8

US$18

US$26

US$155

Equities

US$55

Outstanding securitised debt

US$94

All global ever mined

US$6

GLOBAL MAINSTREAM ASSET UNIVERSE

US$372

OTHER INVESTMENTS

* Values in US$ trillions (rounded) Source: Savills Research, Bank for International Settlements, Dow Jones Total Stock Market Index, Oxford Economics

Global real estate universe in comparison Residential

Commercial

Agricultural and forestry

Debt

Equities

Global GDP 2015

US$250 Trillions

Notably, says Dr Andrew Golding, Chief Executive of the Pam Golding Property group, the report highlights that the growth of residential real estate value in Asia illustrates the role of housing in developing economies. Its growth means there is now more collateral in the personal finance and small business sector of these countries. If African residential real estate markets were to develop in the same way over the next decade or two as the Asian markets (excluding China) have, this would add US$5,8-trillion to the global total. The global potential for economic development to impact on residential real estate is huge. A growing middle class and growing home ownership in areas of economic growth will increase the size of residential property as an asset class. If residential property in Middle Eastern, African and Asian countries were to move towards the global average per head of population, this would increase global residential asset values by 32% – or US$52-trillion. There are big rewards for the superopportunistic investor. While emerging economies will always be seen as higherrisk, the fundamentals of economic growth with strong demographics will undoubtedly increase demand for housing, work

US$200 US$150 US$100 US$50 US$-

Global real estate

Global equities and debt securities

Global GDP 2015

Source: Savills Research, Bank for International Settlements, Dow Jones Total Stock Market Index, Oxford Economics

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report

Cities: embracing urban development Globalisation and the development of cities around the world are a grave concern for developers – so much so that they are employing new technology and innovation to create universally competitive cities Compiled by Nthabi Nhlapo

The cities that make up

ore than half of the world’s population is concentrated in cities, and the rest the Global300 account of the rural world is developing rapidly and following the trend into city living. The Centre for Development and for more than one-third Enterprise (CDE) reports that cities account of the world’s economy, for more than 80% of global economic output. In South Africa, four city-regions along with nearly three- (Gauteng, Cape Town, eThekwini and Nelson Mandela Bay) account for 42% of the country’s quarters of global real population and 57% of formal economic activity. Between 1996 and 2013, the metro estate investment and economies grew at nearly twice the pace of the rest of the country. In his presentation titled “Cities: more than 80% of the Pathways to Prosperity”, Edward Glaeser, world’s prime office stock one of the world’s leading urban economists and the Fred and Eleanor Glimp Professor of Economics at Harvard University, makes a powerful case for cities as the path out of poverty and key to any nation’s growth. He was invited to South Africa by the CDE recently and addressed National Treasury officials, the CEOs of public companies, Largest cities in Africa: 2010 - 2050diplomats, academics and representatives of civil society organisations.

Top 10 largest cities 2010-2050 1. LAGOS Nigeria 2. KINSHASA DRC 3. CAIRO Egypt 4. LUANDA Angola 5. ABIDJAN Côte D’Ivoire 6. NAIROBI Kenya 7. DAR ES SALAAM Tanzania 8. ALEXANDRIA Egypt 9. KANO Nigeria 10. ADDIS ABABA Ethiopia

10,578 15,810 8,754 15,041 11 12,54 4,772 8,077 4,125 6,264 3,523 6,246 3,349 6,202 4,387 5,648 3,395 5,06 2,93 4,757

(2010) (2050)

(Unit: Millions of people)

Source: UN Habitat research 2010

Glaeser says that three elements lie at the heart of effective cities: the magic of economic interaction, combating the demons of density and the human spirit in the city.

A global perspective According to JLL, globalisation is propelling four international cities into the realm of “super city” status: Tokyo, New York, London and Paris are an elite group that possesses a powerful combination of economic scale and influence, deep corporate bases, highly liquid real estate investment markets and large, diverse and high-quality commercial real estate stocks. These four cities wield significant economic might, particularly in the commercial real estate market. They account for nearly one-fifth of the office stock and commercial real estate investment volumes in the Global300 (JLL’s list of the top 300 cities that the company predicts will account for the bulk of economic and commercial real estate activity over the next decade). The cities that make up the Global300 account for more than one-third of the world’s economy, along with nearly threequarters of global real estate investment and more than 80% of the world’s prime office stock. JLL’s Global300 is based on an Index of Commercial Attraction, which measures a city’s economic and real estate power and status. The index is distinct in that it includes key real estate measures (namely investment volumes and commercial real estate stock), as well as socioeconomic and business indicators such as economic output, population, air connectivity and corporate presence. JLL’s Global Cities research states that “Emerging cities have increased their presence in the Global300. China remains at

Source: UN Habitat research 2010

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report Urban infrastructure climbs a ladder from survival to sophisticated, quality-of-life assets Urban infrastructure climbs a ladder from survival to sophisticated, quality of life assets Four-stage urban infrastructure evolution Four-stage urban infrastructure evolution Where are the cities of opportunity positioned today in the evolution of urban infrastructure, and what will future infrastructure demands be? Where are the Cities of Opportunity positioned today in the evolution of urban infrastructure and what will future infrastructure demands be?

Proactive: Setting thethe pace, Proactive: Setting pace, ahead of the demand demandcurve, curve, and moremore attractive city in which to and attractive city in which live, work, and dodo business. to live, work and business

Eco living Technology

Reactive: Struggling toto Reactive: Struggling with demand, keep pace with demand, attractive city in and less attractive which to to live, work, and in which live, work do business. and do business

Water

Green space Leisure

Mass transit

Hospitals Basic housing

Culture

Power

Survival Survival

Environment Elderly care

Air, rail and sea connectivity

Schools

Roads, buses and taxis

Market stalls

Commercial property

Natural disaster risk management

Waste and sewage

Basic Basic

Education and research

Advanced Advanced

Quality of of life life Quality

Source: Cities of Opportunity Source: Cities of Opportunity

the forefront of these opportunities, adding three new cities to this year’s Global300, while there are two new cities in sub-Saharan Africa, which is now home to some of the world’s fastest-growing city economies. Cities are the newRoad economic powerhouses. risk safety*and politicalWater There are now in excess of 1 600 major cities across the world housing 2,2-billion people … all jostling for global 19 attention and looking20 for a winning edge. Competition between 15 12 cities for capital, corporations and talent has 18 10 never been stronger. ” 2 13 The regional composition of the Global300 is heavily focused17on the three core regions 5 of North America, Western Europe and Asia 10 6 but the balance is steadily shifting towards 13 17 emerging cities in Asia as well as Africa. 20

Cape Town, South Africa 16

According to JLL, sub-Saharan Africa has begun to move onto the radar of international corporate occupiers and investors, led by regional hub cities such as Johannesburg and Cape Town (Nigeria) Score Power(South Africa), Lagos and Nairobi (Kenya). With some of the world’s most rapidly expanding city economies, new entrants to the Global300 include Dar es 137 19 Salaam (Tanzania) and Abidjan (Côte d’Ivoire). 18 134 PwC recently presented its report titled 13 Continent’s112Cities of “Into Africa: The 20 107on 20 of Opportunity”, which concentrates the cities that they16judge to be104 among the most dynamic and focused on the future. 11 98 PwC says the African city of opportunity 1 97 is defined by its current development or 17

Cities in Africa

16 5

16 7

18 12

9 4

8 2

80 77

69 68

74 10

95 90

9 14

future potential, an ideal location, nature of the opportunity, “must-have” or “knock-out” factors such as the size of the market, and the time scale. Referring to the time scale, the report states that “Being there for many years – but also building and renovating over time – plays a large part in a city’s success. A fundamental reason why mature cities rank so highly against most developing cities is precisely the fact that they are mature. In the case of socioeconomic organisation and development, maturity means having had the time to put infrastructure into place (not only for roads and public transport, but for schools and hospitals); to establish regulatory frameworks and rules of the road (not only for public

49 45

7 6

44 38

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report Super Cities

Top30

31-100

101-300

the first incubator in West Africa for ICT and mobile technologies. ●● Finally, although Algiers has one of the very few metro systems in Africa, with two lines now operating, it is also developing a tramway to enhance its public transport.

JLL Global300 account and JLL Global300 accountforfor72% 72%ofofreal realestate estateinvestment investment and moreover than 80% of commercial office stock globally 80% of commercial office stock globally 17%

38%

51%

72%

80%

Retail Sales

Real Estate Investment

$ Population

GDP

Office Stock

% of global total Percentage of global total JLL Global300 are derived from a weighted basket of variables covering population, GDP, corporate presence, air connectivity, commercial real estate stock JLL arevolumes derived from a weighted basket of variables covering population, GDP, corporate and realGlobal300 estate investment

presence, air connectivity, commercial real estate stock and real estate investment volumes

Source: JLL, November 2014

health or the environment, but also for the transparency and inviolability of contracts and the legal regime as a whole); and to create a social and cultural ecology in which human capital can expand and thrive (not only through libraries and universities but through cinemas, theatres and concert halls that make urban life appealing and desirable beyond the obvious attraction of personal economic advance).” Several African cities identified by PwC have concluded or initiated significant modernisation projects, specifically: ●● In 2012, Casablanca inaugurated both the largest mall in Africa and a tram network. A new train station has also opened, which will begin high-speed rail service this year to Tangier. Also awaiting completion in 2016 is a new marina, another mall, and the 24 000m² Grand Théâtre de Casablanca. ●● A regional business hub called Tunisia Economic City is planned about 100km from Tunis. It aims to build a global city with a strong base in culture, tourism, education and commerce. Nairobi, Kenya

●● Abidjan is planning a new airport, moving ahead with its “Aerocity” citywithin-an-airport project, renovating its flagship educational institution – the Université Félix Houphouët-Boigny – and beginning construction of a third bridge to ease traffic congestion. ●● Dakar has a new airport under construction too. In 2011, it also launched CTIC Dakar,

Top 5 Global300 Cities Top 5 Global300 cities

Conclusion Cities in Africa and across the globe continue Research Center – abandon Global300 7 to grow as more andCities more people rural living in pursuit of the urban lifestyle. This may very well put pressure on current city infrastructure – but with appropriate planning and development, attractive, functional cities are within reach for most parts of the globe.

Most MOSTexpensive EXPENSIVE OFFICE LOCATIONS office locations

Largest real LARGEST REALestate ESTATE INVESTMENT MARKETS investment markets

World’s LARGEST largest WORLD’S CITY-ECONOMIES city-economies

$ London

London

108 108

Luanda

1920 1920

Tokyo

1,4 1.4

New York

92 92

London

1830 1830

New York

1,3 1.3

Paris Paris

54 54

Hong Kong Hong Kong

1590 1590

Seoul

0,8 0.8

Tokyo Tokyo

54 54

Moscow Moscow

1100 1100

Los Angeles

0,8 0.8

41 Los Angeles Los Angeles 41 Three-year volumes, US$-billion

Three-year volumes, US$ billion

Did you know?

New York Seoul Los Angeles

1090 Beijing Beijing 1090 Benchmark prime rents, US$/m²/pa

Benchmark prime rents, US$/sq m/pa

0,7 0.7 GDP (PPP), US$-trillion

London London

GDP (PPP), US$ trillion

London accounts for 15% of cross-border investment in the Global300

Did you know?

London accounts for 15% of cross-border investment in the Global300 FASTEST-GROWING OFFICE RENTS

HOME TO MOST INTERNATIONAL HEADQUARTERS

Dublin

28%

Tokyo

Singapore

19%

New York

Lyon

11%

London

Wellington

11%

Paris

Houston

10%

Seoul

Q3 2014 Y-o-Y % Change

Even with so much development and great opportunity on the continent, PwC identified many examples of infrastructural “obstructions” that, if removed, would substantially enhance the daily life – and future prospects – of the cities involved. They include constraints on river crossings, clogged city centres, underdeveloped rail infrastructure, poorly developed highways, regional infrastructure and the power debacle.

154

Number of Fortune 2000 HQs

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Did you know?

Dublin office rents have risen by 50% since Q3 2012

2016/02/18 2:40 PM

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2/12/16

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news

Ensuring a successful construction contract Successful contracting requires communication, planning, giving notice and good record-keeping

an Massey, director at MDA Consulting, says that there are four ways to ensure the satisfactory outcome of any construction contract. With more than 18 years of contracting construction experience and nearly 30 years of commercial consulting experience, Massey has worked with some of South Africa’s largest contractors and employers in the building, construction, engineering and mining industries. Planning is often taken for granted, but Massey explains that usually when a contract gets into trouble, the litmus test is whether the planning has been done properly. Notices are important in situations when events and circumstances increase the cost or the time frame of doing the work. In such cases, the contractor has to provide notices to enable the employer and professionals to mitigate the effects of the events that are causing the problem. Issues that arise are varied but can include scope creep, community unrest and strikes. Finally, the contractor must keep records of these events to substantiate and prove his entitlement to more time and money. Massey says what parties often overlook is that the management of any construction contract is the management of risk. “It is not unusual to find that issues which were not even considered at the outset of the project as a potential risk become the most frequently encountered event,” he says.

“The apportionment of the risk between the parties to a contract (the employer and the contractor) is set out in the form of contract used to regulate the relationship between the employer and the contractor. Placing too much risk on a contractor is unwise and will inevitably lead to conflict.” Over the past two decades, South Africa’s standard forms ofC contract have been undergoingM changes. The form of contract Y used for the project will CM determine how each of MY these four key activities is required to be carried out. CY The third edition of the CMY General Conditions of Contract for Construction Works (GCC K 2015) was published by the South African Institution of Civil Engineers late last year. “This is an important milestone in the development of construction contracts that are tailored to the local market yet aligned with international standards and practices,” says Massey. “These contracts now reflect common South African issues. Barriers such as retentions and performance securities have been moderated to ensure that emerging contractors can participate, depending on their Construction Industry Development Board (CIDB) grading.” The new contract GCC 2015 has also taken on board certain of the anticipated requirements of the proposed amendments to the CIDB Act, such as the facility to suspend the work in the event of non-payment. SOUTH AFRICAN PROPERTY REVIEW

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A new era of facilities management The demand for outsourced facilities management services has increased over the past few years, and technological advancement has propelled this area of commercial property into uncharted territory. We look at how technology is changing the way facilities management operates By Nthabi Nhlapo

acilities management as an outsourced and dedicated business has grown over the last 10 years, and so has the use of digital technology, including laptops, tablets, cellphones and other devices. These advancements translate into benefits for business owners, allowing them to focus on their core business and outsource sundry services to specialist companies. One of these companies, which is also one of the largest facilities management solutions companies in Southern Africa, is Bidvest Facilities Management (previously Total Facilities Management Company (Pty) Ltd), which provides various customised and integrated services for approximately 50 000 sites across 23-million square metres of space throughout South Africa. With its re-branding, Bidvest Facilities Management expanded its offering by unbundling its integrated facilities management package to provide additional individual, customised solutions to a wider business market. Bidvest Facilities Management’s Chief Sales and Marketing Officer Derek Jack is an admitted attorney who has worked in the property and facilities management arena

for the past 15 years. He is excited about the evolution of the industry. Having worked in managerial roles in the legal, HR, sourcing, supply chain and new

Bidvest Facilities Management’s Chief Sales and Marketing Officer Derek Jack

business fields in South Africa, other parts of Africa and the Middle East. He is familiar with the holistic approach that successful property management requires.

“There is a high demand for these services,” he says. “Business and property owners need facilities management solutions they can rely on even if they do not necessarily require the full integrated package. Unbundling and customising our integrated package gives more clients access to the specific facilities services they need. Knowing their facilities are in skilled and experienced hands brings real peace of mind to business and property owners. We save them time, effort and unnecessary costs, which leaves them free to focus on their core business.” He is particularly proud of the company’s interactive information technology management solutions. With facilities management covering a broad spectrum of disciplines, Bidvest Facilities Management identified the telecommunications sector as a specific focus area for the company because of the demand from end users for increased speed and uptime. As a result, they have set up a specialised business unit with the appropriate skills set, systems, technology and support to assist customers on a national basis to drive cost reductions across their infrastructure, mitigate risk

Bidvest Facilities Management’s six new focused solutions are: Mobile generators

Mobile maintenance

A large range of environmentally friendly and super-silent generators with 24-hour servicing, maintenance and refuelling support, even in remote areas.

Basic electrical, plumbing, mechanical and general building maintenance on both a scheduled contract and a planned project basis by multi-skilled staff. It is suitable for all kinds of structures, from buildings, towers and street lights to mobile structures, and includes health, safety and environmental compliance.

Utilities management An outsourced administration service that includes the end-to-end financial management of large-volume utilities billing (currently doing 11 000 accounts per month), encompassing analysis, reporting, review and negotiation of tariff structures, including query and legal-dispute resolution when necessary.

Structure integrity inspections Integrity inspection services of structures that comply with statutory requirements, such as masts, towers, billboards, etc, are offered countrywide with a conditioning assessment, which includes photo evidence

and recommendations for remedial work, options to avoid major expenses as well as a detailed inspection report.

Telecommunications services Maintenance and servicing of telecommunications facilities, including data centres, network buildings, telecomms masts and towers, and all network supporting infrastructure.

Training academy A state-of-the-art technical training centre, MERSETA-accredited, with various training initiatives offered to clients’ facilities staff as well as the wider public.

SOUTH AFRICAN PROPERTY REVIEW

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and minimise network downtime caused by network supporting infrastructure. “We are able to track and monitor all our services live and through a paperless environment using smartphones, tablets and laptops,” says Jack. He explains that Bidvest clients, even those with multiple buildings, can track each of their buildings. “Clients are able to log on to a customised portal with a password and user name, and they can view activity in their buildings live,” he says. “This effectively means that lead time of monitoring is reduced and clients have access to data as and when they need it, leading to more informed decision-making on their part.” He explains that the staff at Bidvest Facilities Management also have digital devices that allow them to update processes on the integrated system live. The system was developed in-house, which Jack says makes it very cost-effective, thus enhancing the service offering. The platform also has an assetmanagement module, which means that clients, through a barcoding system, can track their assets to a granular level, right down to tables and chairs. “The system is also able to track and measure parts of assets; this is particularly helpful when it comes to life-cycle management,” he says. Cornelius van der Merwe, Bidvest Facilities Management’s Chief Operations Officer concurs. “The remote monitoring of critical equipment and plants; the creation of a paperless environment in service delivery and management using mobile devices; and linking and interfacing into a complete asset management solution capitalising on big data allows you to proactively diagnose and anticipate any faults in the assets and equipment, and perform certain tasks remotely – such as controlling emergency energy equipment and temperatures,” says Van der Merwe. “This all provides powerful control over assets, as well as reporting on assets and infrastructure on tablets and desktops in a real-time environment, enabling companies to proactively manage their assets.” The face of facilities management is changing fast, and with technological advancements come new exciting ways to manage, monitor and constantly improve the property sector and how it functions.

T h e S A P OA P r o p e r t y A d v o c a t e M a g a z i n e

THE SA POA PRO PER TY

ADV OCATE

MA GA ZIN

02- 201 6

ENSafrica ’s ANDREW BEMBRID GE

Decoding the intricate w orld of Propert y Law JOINT OW NERSHIP Sectional titles unde r the spotlig ht

COMMU NITY SCH EMES OMBUD SER Dispute re VICES solution si mplified NAMIBIA ’S WLOTZK ASBAKEN A peculia r case of owner ship PENSION S, AND ANN PROVIDENT FUN DS UITIES New Tax Laws exp lained Cover feb

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/08 9:51 AM

Reaching leading legal professionals within the property industry By examining various aspects of property law, PROvocate will focus on: ● Regular town planning, legislation and advocacy updates; ● Doing business in Africa: the legal requirements of setting up business in various African countries, in particular when setting up commercial property development partnerships; ● Emerging markets and global growth, financial and economic trends, emerging markets within and beyond South Africa, and the impact of legislation on property development at home and abroad. (As the magazine grows, opinions from leading law-makers and financial gurus will be sought and featured); ● Ownership, mergers and acquisitions, leasing, management agencies, REITs, tax, property ownership laws, and development of the property ownership sector in South Africa; ● Development plans approval, subdivisions, town planning, re-zoning, high-density developments, mixed developments (business/residential, IDZs), and sectional title developments;

● Engineering: storm water, roads and bridges within

●

● ●

the concept of connecting cities and supporting the commercial property sector. Leading experts in the engineering world will be interviewed and featured; Environment: innovative building technology, environmental impact assessments, carbon tax policies, and safety and health regulations at building sites; Private and public sectors: useful contact numbers and specific topics on municipal planning and the Department of Public Works projects; Education: the institutions that offer property as a profession, the innovative methods that are being developed and their application in practice; Attorney and industry profiles, movers and shakers: the people behind the industry; and Leading advocate profiles.

For advertising, contact Robbie Pansegrauw: +27 (0)21 856 0321 / rob@mpdps.com or Mark Pettipher: +27 (0)21 856 1276 / mark@mpdps.com SOUTH AFRICAN PROPERTY REVIEW

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2016/02/18 2016/02/05 8:48 3:59 AM PM

report

n late 2015, management consultant firm McKinsey & Co released an independent report. “South Africa’s Big Five: Bold Priorities for Inclusive Growth” aimed to “provide a fact base on the priorities for accelerated growth and job creation in South Africa.” The five opportunities it identified were advanced manufacturing, infrastructure, natural gas, agriculture and the export of services. On the last, McKinsey wrote, “South Africa has some strong comparative advantages that could help it export more services. It has relatively low labour costs compared with much of the developed world. This is especially true of highly skilled professions, including engineering, law and architecture, in which educational quality is similar to the level in the average developed country.

“The country also has a strong domestic business environment and mature financial institutions. This is important because the domestic ecosystem is well set up to support all types of business activities relatively smoothly and skilfully. South Africa also possesses unique skills that are useful when operating in specific sectors in Africa. These include strong technical expertise in industrial operations and mining, as well as a history of innovation. South African businesses have a better understanding of the African context than their competitors from other regions.” McKinsey estimated that South Africa had only two percent market share of subSaharan Africa’s service imports. If South Africa could increase that share to 15%,

Into Africa McKinsey & Co’s August 2015 report identified five opportunities for South Africa’s growth. One was the export of construction services, including architecture By Ann Ellis Brown

ABOVE Kings Tower in Lagos, Nigeria is just one of the SAOTA office blocks going up in the city. It is due for completion at the end of 2016

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report

McKinsey estimated it would add R245-billion to the country’s GDP and create 460 000 jobs. The three best opportunities, they said, resided in the financial, business and construction sectors, with the export of construction and financial services the major opportunities. Total exports in the construction sector in 2013 were R509-million, “but current market share of foreign-built sub-Saharan African projects stands at only seven percent”. Excluding China’s 32% share, 60% of the remaining projects are in the hands of various other countries. “Capturing roughly one-third of them would yield a market share of 20%.” “To achieve this growth, the construction industry will need to make a concerted effort to develop local market intelligence and expand its footprint across Africa by pursuing local partnerships and sending its best talent into the region… The sector has several advantages to draw on. It has access to the sophisticated business and financial services needed to underwrite and support the execution of contracts, and it has a high-quality, competitively priced skills base – particularly in engineering and architecture.”

SAOTA perspective SAPOA asked director Greg Truen how SAOTA had succeeded in exporting its skills to more than 40 countries with current projects in 18 countries in Africa. There is a flawed perception in South Africa that SAOTA designs high-end single residential projects, mostly in Cape Town. In fact, the US, Switzerland, Russia, the UAE, India and West and East Africa are rapidly expanding nodes of focus, and are currently the origin from which most of SAOTA’s project enquiries stem. For SAOTA, the 1990s were an exciting and challenging time. SAOTA built the business from the bottom up in the way that many African entrepreneurs do. It is true that Stefan Antoni had founded the firm on the back of a focus on the very top end of the residential market. There was no shortage of clients in Cape Town willing to invest in SAOTA’s vision: that a house should be a set of spaces, internal and external, designed to enable an expansive, social lifestyle with a deep connection to the landscape. This period helped SAOTA to understand that regardless of where they live in the world, people are interested in quality,

excellence and an architecture that has a personality and identity. These are universal concepts understood by everyone. “SAOTA used the period to build our systems and skills,” says Truen. “SAOTA is a firm that was founded by a group of people with no real prior work experience. This made it difficult for us to figure out how to create a corporate animal but it gave us one significant advantage: we believed we could achieve the unachievable, and we set out in earnest to do what we wanted to do. There is a lesson in this for emerging creative businesses in Africa: set the bar high.” Around the time that The Economist had proclaimed Africa a basket case, SAOTA was approached by a Senegalese client to fit out an apartment for him at the Water Club in Mouille Point. “This led to a number of projects in Dakar, the first being the Radisson Hotel,” says Truen. “Villas, a shopping and entertainment centre, the Dakar waterfront, a sushi bar, an apartment project and several other commercial projects followed. All were done from Cape Town in association with local consultants in Dakar. This established the model we use to deliver projects around the world. “We have also always consciously worked for local clients with local consultants wherever possible. We did not follow South African businesses into these markets. This has given us a very different understanding of how particular markets work and who the go-to people in those towns and cities are,

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report and has resulted in a project flow from clients and consultants who see value in our contribution to their offering.” This has been bolstered by the transfer of skills, systems and technologies into the offices of friends and affiliates across the globe.

Nigeria calling Nigeria has 160-million people and will double in size over the next 40 years. It is the African economy to be a part of – and the partners at SAOTA think it will be one of the world’s biggest construction markets.

Total exports in the construction sector in 2013 were R509-million, “but current market share of foreign-built sub-Saharan African projects stands at only seven percent” Lagos is a city of tremendous extremes, with enormous poverty (although everyone is productive in some way) and exceptional wealth. Oil is just a part of the equation; Nigeria has vibrant retail, service, banking, manufacturing, entertainment and construction industries. No wonder The Economist has revised its opinion on Africa, proclaiming “Africa Rising” on its cover.

Markets and economies can be very fluid, says Truen. “Lagos was our biggest individual city market two years ago; today it’s Los Angeles.” SAOTA projects range from office towers to apartments, shopping centres and houses. Kings Tower is a commercial building that is nearing completion in Lagos. Its owners are a group of Lebanese businessmen who arrived in the city 20 years ago to make plastic shoes. Needless to say, in such a large market, they have made a fortune – which is now being channelled into real estate. Given the current state of the oil market, and liquidity issues, one needs to have a long-term commitment to stay in markets through economic cycles. “Our projects in Africa have been a springboard into the rest of the world, which has been very exciting,” says Truen. “We are working for clients in France, Russia, Dubai, Australia, Montenegro, Iran, Spain, China and Turkey, and interest has exploded in the US.”

To achieve this growth, the construction industry will need to make a concerted effort to develop local market intelligence and expand its footprint across Africa by pursuing local partnerships and sending its best talent into the region

Conclusion Africa is growing and it’s going to be big. Its population growth will outstrip every region on the planet – it will grow from onebillion today to just under four-billion in 50 years’ time. Its economy will be larger that of Western Europe and the United States combined. There is an extraordinary opportunity now to build networks for the future. But in order to be successful there has to be a focus on quality, excellence, delivery and communication.

BELOW Company headquarters by SAOTA in Luanda, Angola. Facilities include conferencing, public meeting areas and boardrooms OPPOSITE A high-end apartment building in a leafy part of Niamey, Niger. The SAOTA design mitigates against climatic factors, protecting the interior from the harsh sun and allowing natural ventilation

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erie

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monthly cou n Our

Th e WOR

eye onLD thes worlds ●

A Turkish delight

by-country focu try-

When one mentions Turkey, the conversation quickly turns to kebabs, rugs, Turkish coffee, baths, historical sites, mosques and the Mediterranean sunshine. We ﬁnd out more about this country on two continents

Suleymaniye Mosque in Istanbul is emblematic of the 16th century

Key facts ▼ Population 80 694 485 (2013) ▼ Capital Ankara with a population of just under four-million ▼ Neighbouring countries Syria, Greece, Iraq, Iran, Azerbaijan, Armenia, Bulgaria, Georgia ▼ Area 779 452km²

▼ Language Turkish, Kurdish, Arabic, Armenian, Greek ▼ Religion Muslim (mostly Sunni) ▼ Currency Turkish lira ▼ Life expectancy 69 ▼ GDP per capita US$7 300

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eye on the world

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eye on the world

ABOVE A small Turkish village in the mountains by Petr Kratochvil BELOW An aerial view of Istanbul (Photograph by Eusebius@Commons/Flickr.com)

Did you know? ▼ Efes is the beer of Turkey. Efes Beverage Group is the largest producer of beer in Turkey, with approximately 80% market share, and is ranked 12 in the world beer market. ▼ The famous Trojan Wars took place in western Turkey, around the site where the Trojan horse rests today. ▼ Tulips do not originate from the Netherlands, as most people believe. It was a wild flower growing in central Asia that was cultivated by the Turks as early as 1000AD. ▼ The Anatolian peninsula or Asian Turkey is one of the oldest permanently settled regions in the world. ▼ The ancient real-life city of Troy is located on the north-west coast of Turkey, which is now known as Hisarlik. ▼ Football is the most popular sport in Turkey. Galatasaray won the UEFA Cup and UEFA Super Cup in 2000. ▼ The Turkish Delight is one of the oldest sweets in the world, with history dating back 500 years. ▼ The world’s first underground mosque is constructed in Turkey’s Buyukcekmece district in Istanbul. ▼ St Nicholas, commonly referred to as Santa Claus, was a historic 4th-century Christian saint and Greek Bishop of Myra. He lived in Demre, part of modern-day Turkey.

he official name of Turkey is the Republic of Turkey. It tries to be a bridge between the West and the East – geographically, it sits on two continents, Europe and Asia, although about 97% of its land area is on the Asian side. This is also where three of the world’s continents – Europe, Asia and Africa – are closest to each other. There are eight countries that share a border with Turkey – these are Armenia, Azerbaijan, Iran, Iraq, Syria, Bulgaria, Greece, and Georgia. Turkey in Europe comprises an area about equal to the state of Massachusetts, while Turkey in Asia is about the size of Texas. Istanbul is Europe’s largest city, although half of it actually extends into Asia, making it the only city in the world that is built on two continents. This is the country’s economic, cultural an historic centre. With nearly 13-million people, Istanbul is the third most-populous European urban area, after Moscow and Paris. You can move between continents underground when in Turkey. More than a century after a sultan dreamed of a rail link beneath the Bosphorus Strait, Turkey opened the Marmaray metro line in 2013. The former imperial city is also home to the Tünel, a short funicular that’s the second-oldest

continuously running underground railway after London’s. Because of its location on top of a number of plate boundaries, Turkey is prone to earthquakes especially in the north of the country. The dry plateau of Anatolia dominates the Asian part of Turkey; the coastal areas of Anatolia consist of fertile lowlands. Turkey at 5 137m is the biblical resting place of Noah’s ark.

Governance Turkey is a parliamentary representative democracy. Since its foundation as a republic in 1923, it has developed a strong tradition of secularism. The president of the republic is the head of state and has a largely ceremonial role. The president is elected for a five-year term by direct elections; Recep Tayyip Erdoğan is the first president elected by direct voting. Executive power is exercised by the prime minister and the council of ministers, which make up the government, while the legislative power is vested in the unicameral parliament, the Grand National Assembly of Turkey. The prime minister is elected by the parliament through a vote of confidence in the government, and is most often the head of the party having the most seats in parliament.

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eye on the world Economy

Tourism Turkey is ranked the sixth most-popular tourism destination in the world. Many European holidaymakers come to the country for the climate, fine beaches, resorts, Roman ruins and crusader castles. The country hasn’t always been the attraction it is now; but it has experienced rapid growth in the last two decades. In 2013, 37,8-million foreign visitors arrived in Turkey, contributing US$27,9billion to Turkey’s revenue. Accommodating so many vacationers means the national airline carrier, Turkish Airlines, flies to 245 destinations in 105 countries across four

Library of Celsus in Ephesus (Photograph by Svetlana Tikhonova)

continents, making it the fourth in the world by number of destinations. In 2012, 15% of the tourists were from Germany, 11% from Russia, eight percent from the UK, five percent from Bulgaria, four percent each from Georgia, the Netherlands and Iran, three percent from France, two percent each from the US and Syria, and 40% from other countries. Some of the things that bring the tourists to Turkey include the 13 UNESCO World Heritage Sites – such as the historic areas of Istanbul, the Rock Sites of Cappadocia, the Neolithic Site of Çatalhöyük, Hattusa: the Hittite Capital, the archaeological site of Troy, and Mount Nemrut. There are also the

archaeological sites or historic urban centres of Göbekli Tepe, Gordion, Ephesus, Aphrodisias, Perga, Lycia, Sagalassos, Aizanoi, Zeugma, Ani, Harran, Mardin, Konya and Alanya. Turkey also hosts two of the Seven Wonders of the Ancient World, which are the mausoleum at Halicarnassus and the Temple of Artemis. It is home to 383 beaches and 82 693 mosques, the majority of which are in the country’s largest city, Istanbul. The young and creative also have a place in Turkey with the edgy Istanbul Biennial, a must-see art show that attracted more than 300 000 visitors in 2013. This show ranks among the top contemporary art shows in the world.

Turkey: inflation rate from 2010 to 2020 (compared to the previous year) 10% Inflation rate compared to previous year

This country is among the top seven emerging economies. It is a largely freemarket economy and is increasingly driven by its industry and service sectors, although its traditional agriculture sector still accounts for about 25% of employment. It is the first hazelnut producer and exporter in the world, with approximately 70% and 82% of the world`s production and export respectively. Goods that are largely produced here include tobacco, cotton, grain, olives, sugar beets, hazelnuts, pulses and citrus. There is also a market in livestock textiles, food processing, automobiles, electronics, mining (coal, chromate, copper, boron), steel, petroleum, construction, lumber and paper. The largest industries include trade in textiles, food processing, autos, mining, steel and petroleum while exports include apparel, foodstuffs, textiles, metal manufactures and transport equipment. When in comes to shopping, Istanbul’s Grand Bazaar, or Kapalı Çarşı, which dates back to 1455, is one of the world’s largest malls. It was the world’s number-one attraction in 2014, drawing more than 91million people. This is proof that turkey is well worth a visit for avid shoppers.

8,89%

8,57%

8,86% 7,49%

6,47%

7,44%

6,98%

6,5%

4% 2% 0%

2010

2011 2012

2013 2014 2015* 2016* 2017* 2018* 2019* 2020*

Source: IMF © Statista 2015; additional information: Turkey; IMF

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6,5%

2016/02/18 1:00 PM

theme leader

SOUTH AFRICAN PROPERTY REVIEW

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2016/02/18 9:03 AM

SAPOA bursary

A new crop of property professionals Together with its member partners, SAPOA offers bursaries to aspirant students who are working towards industry-related qualiﬁcations By Nthabi Nhlapo Photographs by Mark Pettipher

Boikano Rakgoale, BCom Accounting (UJ)

The SAPOA Bursary Fund is a stepping stone towards reaching goals that will see the commercial property sector welcome more young graduates into the labour market. We spoke to some beneﬁciaries about their experiences and the highlights of being part of this prestigious programme

The most wonderful thing about my degree is that it allows me to work across various sectors. But now that I have been introduced to property, I’d like to learn more about the built environment. Since receiving the SAPOA bursary, my outlook on life has completely been altered. Even though I had dreams while I was still in high school, I knew finding a way to pay for my studies would be a real challenge. Thankfully that is no longer a worry, and now I am able to focus on my studies, sports initiatives at varsity and communityengagement initiatives that focus on giving back to the community. I am also currently the Technical Officer at UJ APK RAG committee for 2016. I took part in the Ithemba walkathon in 2014 and the UJ fun walk for future, which took place in 2015. I offered my service for free by helping at the Ithemba walkathon for cancer awareness last year.

The SAPOA Bursary Fund is a great initiative – it helps its bursars gain experience in different industries by providing vacation work. If all companies in this country took education and student funding as seriously as SAPOA does, we would be guaranteed a wonderful future as a nation. SOUTH AFRICAN PROPERTY REVIEW

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SAPOA bursary Wendy Ngomane, BCom (Hons) Property Valuation & Management (UJ) When I first decided to take this course, I did not know much about property – except that personalities such as Donald Trump and Marc Wainer were involved in the sector. It was only in my third year that I developed a genuine interest in the industry and decided to pursue an honours degree. The property valuation sector currently has a shortage of young professionals; my qualification will assist in bridging that gap and ensuring that the profession continues long after the current valuers have retired. Being awarded the SAPOA bursary afforded me the opportunity to study further at a time when my parents could not really afford it. It evoked a passion in me

Lehlohonolo Mosotho, B Town and Regional Planning (UP) I was persuaded by my love for development and construction to pursue studies in town and regional planning – I get a thrill from seeing something being built into a fully functional structure from nothing. I was also persuaded by the need to be part of the generation that will help improve the local government of South Africa because I believe that if we can win from this level, then we as a country can also win on the provincial and national level. I was funded by NSFAS in the first year of studies – that means that, even before entering the labour market, I am already in debt. It was such a relief to be awarded the SAPOA bursary – it means that I can

focus on my education rather than on financial stumbling blocks. This bursary has enabled me to access opportunities that were previously beyond my reach – such as when we went to Port Elizabeth last October and had a chance to work with the Nelson Mandela Bay Development Agency. We also had an opportunity to see the work that has been done in and around Port Elizabeth (in the Nelson Mandela Bay Metropolitan Municipality) – and we even had time to relax on the beach! SAPOA has truly changed my life and those of my fellow students who also received bursaries. This is a chance for us to change things – make them better for ourselves and our families.

Olebogeng Moagi, BCom Finance (UJ) I have a keen interest in the financial industry, especially with a focus on investment and property. I believe this qualification will benefit me greatly because it is not only inclusive of modules that provide potential entry into industries such as insurance, banking, brokering and investment (which allows me a range of career options to choose from), but it will also allow me to work within the property sector, which I have grown to love. Receiving this bursary has been nothing short of a blessing. It’s really lifted the weight off my parents’ shoulders in providing for my tuition fees, accommodation and book fees. I am really humbled to have been one of the candidates to receive the SAPOA bursary. My varsity highlight for the past year has to be attending the career day/seminar, organised

to encourage others to find their place within this sector and get educated. My studies have also been very inspirational. Conducting research and writing an academic article about student accommodation has definitely been the highlight of my year, while the biggest challenge I encountered this year was obtaining information regarding property programmes for students. Industry information is still scarce and there is a misconception that property is just about the buying and selling of houses. Hopefully SAPOA’s education initiatives will fill this information gap. My hope is for property companies to become more accessible, and for more young people to embrace the endless possibilities presented by this sector.

by the UJ finance department, with one of the leading private property companies in South Africa, Hyprop Investment Limited. Being able to sit with the executive team and having a round-table discussion about the company transformation and how it stays afloat in a challenging economic climate was really enlightening. It broadened my perspective on the property industry, and the types of career one could get into. I believe there is a wealth of knowledge within this field. We can only grow as there are various fields to explore within the sector. I think initiatives such as the SAPOA Bursary Fund are imperative in extending the wealth of knowledge of the property industry to those interested, and those who do not have the resources to undertake similar degrees or diplomas with tertiary institutions.

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SAPOA bursary Bafedile Tsotetsi, B Town and Regional Planning (UP) Town and regional planning is a relevant profession in South Africa – a country with huge urbanisation challenges – which leads to a demand of planners. I needed a challenge where I could design, solve problems and work with different types of people in various fields, so I chose the town planning qualification. The SAPOA bursary has changed me in terms of worrying about my NSFAS debt. Knowing the kind of background I’m coming from (where when you start working, it’s not about you but your entire family), it helps that I can focus my energies on my education rather than other worries. I’m also fortunate that the Town Planning department is one of the smallest on campus. This allows for building relationships between students and lecturers, which has made my learning experience very comfortable.

Happyboy Mnisi, BCom (Hons) Property Valuation and Management (UJ) I believe we should always work towards selfimprovement. The course I’m studying will empower me with the knowledge I need to understand the field better, so I’ll able to make a contribution to the company that employs me. Achieving this qualification will open up opportunities for me in the corporate world. Growing up I always liked building box houses with my friends. I thought I’d become an architect, but in my last year of high school I went to the UJ open day and, after visiting the real estate stand, I made my decision. It was not a popular course but I saw how much opportunity existed in the field, and I never looked back from there. Property is exciting and ever-changing – there are so many possibilities.

The relationship is so big, you have most of your mates on WhatsApp. This is a highlight –it doesn’t happen in all departments. My first year at university was a huge challenge – I was just a little girl from Orange Farm, from a public school where the language of communication was vernacular. My fluency in English was not up to par and my grades were nothing more than average. This is just proof of what a huge impact the SAPOA bursary has made to my life – it has completely changed my path. SAPOA is an organisation that’s very involved not only in growing its members but the nation as a whole. Unless you come from a place like Orange Farm, where dreams of a career are nothing but silly jokes and the prospect of going to university in a far-off dream, it will be hard to imagine the impact that receiving a bursary makes.

One of my highlights has been attending the South African Council of Shopping Centres’ conference in Durban. It was wonderful to interact with industry experts and to learn how others have grown in the industry. I think the SAPOA Bursary Fund is a wonderful initiative that will encourage more and more students – especially those from previously disadvantaged backgrounds – to join the industry. Property companies can contribute further by exposing students to the industry while studying by means of vacation work; this will serve as encouragement to the students. Furthermore, companies can contribute by highlighting these initiatives on their websites and other platforms, so that more people become aware of the opportunities available.

Nosizwe Lerato Kubheka, B Town and Regional Planning (UP) Inspired by the interconnectedness of people within various environments, I discovered town planning as a potential platform to expand on my passion. Since getting the bursary, I have changed my perspective. I feel really empowered in striving for excellence. My work ethic has been reinforced by hard work, and I feel privileged to be sponsored by SAPOA. Town planning allows you to be part of bettering the lives of others through altering the environment in which they grow up. The rapid population growth globally sees challenges of inadequate land supply, so

entering the property industry will help me become part of the solution to these and other global challenges. I believe that SAPOA is doing a good job in investing in us as young leaders of tomorrow, because we will yield good returns for SAPOA and the country as a whole. Raising funds with the aim of helping us is a good educational investment. By engaging other companies with the same vision, SAPOA will be improving the property aspect of the country. Because of the bursary, I have been exposed to different sites where my fellow course mates and I were able to assess the use of town planning tools that we were taught theoretically in class. SOUTH AFRICAN PROPERTY REVIEW

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SAPOA bursary Matimba Ngobeni, BSc (Hons) Urban & Regional Planning (Wits) I’m passionate about working in the built environment so I chose to study urban and regional planning. This multidimensional qualification will help me better my skills in designing and building more equitable and well-designed urban spaces for present and future generations. It will allow me to work as someone who consolidates social and economic accomplishments in a way that helps people realise their dreams, hopes and aspirations. The nature of my degree has prepared me for the corporate world because it involved a great deal of independent research, time management, and a wide range of practical and technical skills. I have been introduced to – and involved in – the production of projects dealing with both private and public sector

development initiatives aimed at fostering sustainable economic growth. I’m extremely grateful to SAPOA for funding my postgraduate studies. The bursary has enabled me to devote more time to my studies by offering me financial security. My parents would have not managed to pay my varsity fees without the aid of this bursary. SAPOA’s educational initiatives improve student access to tertiary education. They also enhance student success and productivity at varsity. In that sense, these initiatives promote social development. This reduces poverty and socioeconomic inequalities in communities in which we live. I think if more property companies could go the extra mile in playing an active role in funding or offering employment to fresh graduates, it would help extend the skills pool even more rapidly.

Katlego Maboko, BCom (Hons) Economics (UJ) The qualification I picked is a bachelor’s degree in economics and econometrics. I’m currently doing my honours in economics, which is a science that is applied in every field of study everywhere, every day. It gives one an open mind. This qualification is very beneficial to me in that it does not limit me to a specific field. I can venture into public planning, property, management, finance and investment, research and development, or even forecasting. To me, receiving a bursary meant no more financial worries – for my parents and for myself. In a way, it was a guarantee to me that I was going to obtain my degree – because if my financial life was sorted, what could possibly stop me now?

Itumeleng Nambo, BSc Property Studies (Wits) I was always interested in buildings and how they add value to every person’s life. Having a degree in property studies enables me to be employed in either the public or the private sector. In addition, the property and real estate sectors are in dire need of highly qualified professionals. Hopefully I will become one of them soon. The SAPOA bursary took a big load off my family’s shoulders. I am the first-born in a family of five children headed by a single, unemployed mother. We survive through the help of child support

My varsity highlight would be getting to make friends who study courses that are different from mine and learning what they do. The entire varsity experience is a highlight, and being a bursary student is a wonderful privilege. I think the fundamental challenge in my studies initially was financial difficulties, and not receiving my exam results immediately when they came out because they’d be held back as a result of unpaid fees. But in my third year of studying, I got the SAPOA bursary and I passed well – and now I’m doing my honours degree and am still on a bursary with SAPOA. I have a very positive view on SAPOA and its education initiatives. I don’t know whether I would have made it this far had the organisation not played such a major role in my life.

grants, so receiving a bursary from SAPOA has changed my life tremendously. It gave me a positive mind-set – I know that my dreams are within reach. My first year at university was a challenging one – but thankfully I could dedicate all my focus to my studies and not worry about fees. In my personal experience, SAPOA is helping make South Africa a better country by investing in education initiatives. I can only hope that more young people get the opportunity to be empowered and fed with information about the benefits and advantages of pursuing a career in the built environment.

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SAPOA bursary Abdullah Sidat, BSc Construction Studies (Wits) From a young age I was fascinated with buildings and architecture. It was something that I was keen on learning more about – it interested me more than anything else. I always said that one day I would build an empire – and what better way to do this than to literally build my own empire? By choosing the BSc degree in construction studies, I will get the necessary expertise, skills and training that are required to pave the way for me reach my full potential and accomplish my goals. This qualification will allow me to help many people and assist the community by erecting homes and centres for the needy.

Receiving this bursary changed my life tremendously. I have been exposed to more opportunities that I can count, and university has been an amazing experience. I’ve worked hard and feel an obligation and responsibility to give my best at my studies because my funders have to see value for their sponsorship. So far, because of being a university student I have had the opportunity to carry out community service as a prerequisite for our course, which was extremely humbling. I enjoyed working with many professionals and seeing an actual structure come to life within a few weeks. SAPOA is the stronghold of propertyrelated business. It is just amazing that the organisation takes the education of the youth so seriously and helps invest in us.

Nomahlubi Ndziba, BSc (Hons) Property Studies (UCT) I picked this qualification because of my interest in property generally, as well as the fascination I had with how one prices/ values property. My qualification will allow me to take a career path that I’m interested in – property valuations. Receiving the SAPOA bursary changed my life in a remarkable way. I no longer had to stress about where I would find funding to do my honours degree.

Because of the qualification I attained through the bursary, I got a job with the Investec property team. At the moment, my main focus is gaining the property valuation experience I need to register as a professional valuer with the South African Council of the Property Valuers Profession. It is really heart-warming to have been part of the bursary scheme. It is clear that SAPOA is doing an incredible job by providing a platform that will encourage students to consider property as a career path.

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development company proﬁle

Proﬁca:

the secrets of success in Africa Key pockets of growth offer opportunities for leading construction and property solutions company, Proﬁca.

he Profica success story began when a group of entrepreneurial South Africans returned home after gaining international project management experience and saw the gap for an experienced local project management firm. In the last decade, Profica has grown to manage an impressive portfolio of projects throughout Africa. Excellerate Holdings, a leading provider of fully integrated, self-performing property-related solutions and services across Africa, recently took a minority stake in the company, which further ABOVE Illovo Edge in Johannesburg, South Africa BELOW Garden City in Nairobi, Kenya

extends Profica’s network of professional colleagues and potential customers. Profica offers strong service capability throughout Africa, with permanent teams across the continent and offices in Nigeria, Ghana and Kenya. Group Managing Director Tim White remains at the helm in the Johannesburg head office, and Managing Directors run the three African regions: Matthew Renshaw in South Africa, Thierry Giannone in East Africa and Chris Titmas in West Africa.

Expansion in Africa can be a challenging, risky business, and White believes that Profica’s success can be ascribed to various factors that enable the company to grasp opportunities and mitigate these risks, competing with the larger, global players from the US and Europe working in Africa. “Although we’ve become a sizeable operation, our entrepreneurial culture and close client relationships are core to our success,” he says. “We nurture these aspects. Our clients trust us as partners and 50% of our work is repeat work from existing clients. Referrals from architects, engineers and consultants cement our reputation for excellence.” A key success factor has been the focused combination of global expertise with local knowledge and presence in the regions. “Our skilled teams are flexible and we encourage real localised ownership of projects,” says White. “You need to have a permanent presence and ensure global skills as well as localised solutions. We benchmark globally to ensure the best ROI for our clients.”

Southern Africa Profica has grown its home base in South Africa and has branched out from its strong focus on commercial property into sectors that include healthcare and turnkey retail tenant installations. Rated as the top projectmanagement company in South Africa by

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company profile PMR.Africa three times in the last five years, the company is delivering high profile developments – including Stella Precinct, a 120 000m² multi-storey mixed-use office precinct in South Africa’s financial hub. Managing Director Matthew Renshaw says that success relies on effective skills and technology. “Because of the increasing number of complex, large projects in South Africa, professional teams are continuously exposed to new problems and challenges,” he says. “As a result, skills and experience are developed. This can only be positive for our industry as local talent leverages off internationally experienced people, contributing to local success. Technology also plays a vital role, and the implementation of advanced software solutions enables effective work flow management.”

Eastern promise East Africa Managing Director Thierry Giannone says countries in the region are experiencing significant growth in mixed-use facilities, modern office parks, and hotel space driven by rapid urbanisation, a growing middle class, high rental yields, technology innovation and sustainability with a drive towards green and open spaces. Riding the wave of this growth, Profica has recently assisted in the completion of Garden City Phase 1 and the Radisson Blu Upper Hill in Nairobi. The company is working on a number of projects in East Africa that stretch across all sectors of the market from retail, hospitality and commercial to mixed-use. Giannone agrees that local knowledge is fundamental to success. “Understanding the nuances of the local market and culture enables you to apply your skills appropriately in the development process at any stage in the project life cycle,” he says. “It is important to instil the company values and operational approach within this context to enhance existing ways of doing things. You need to know what you can influence, otherwise you will spend a lot of time achieving very little.” In this region, Profica has become adept at “rescue” projects and guided these to successful completion within an existing framework. According to Giannone, effective risk management, based on experience, is another essential factor. “Africa’s challenges include cultural differences, bureaucracy and political change. An expert with local knowledge can navigate through this,” he says. “As a company, we strive to deliver beyond the traditional project management function. We work closely with our clients to ensure that the true development potential of any

Delta Mall in Warri, Nigeria

site is maximised in terms of product, quality and return for the investor. We partner with our clients to ensure that we manage their risk from start to finish.” Profica’s green expertise is also paying off in Africa. “A shortage of readily available resources such as power and water is influencing a mind-set change around being green – with developers taking this into consideration from building to final fit-out,” says Giannone.

Go West Profica’s Nigerian operation is a success story of ever-expanding growth and delivery. “We know the region intimately as we have been operating in Nigeria since 2006, with a full-time office for the last four years,” says Managing Director of West Africa Chris Titmas. “We don’t parachute in per project. Our West African office has 10 live projects at the moment, with more in the pipeline. Some of these are projects by South African and Nigerian investors, developers or funds; others are being done by international companies such as Actis.” Titmas cites finding the right internationallevel skills and transferring knowledge as critical success factors. “Skills are in short supply and many clients appoint international consultants to do a great deal of the design and other professional work on infrastructure and building projects,” he says. “We do bring international skills and gel these with local conditions; this doesn’t compromise service levels or delivery, but is about adapting. We’ve learnt, for example, to ensure that our teams can speak the local language, and we’ve become known for our capacity in French-speaking Africa. “Profica has further developed a local team in our Nigeria and Ghana offices who are being exposed to new types of projects and international ways of working. Skills transfer is a deliberate and timeconsuming process and you have to be there, working with people on the ground.

We have been growing local talent into leadership positions over time, and we’re finding that this is really paying dividends.” Finally, says Titmas, companies that are successful in Africa must be dynamic, adaptable and flexible. “Things change on a weekly basis, so you have to be very agile,” he adds. “That has to apply to everything from the structure of your company to your resourcing and more.” “We know Africa,” says White. “Our local knowledge, company culture and investment in the right people, processes and technology continue to get the best results for our clients. Delivering at home or elsewhere in Africa enhances our track record and the comfort our clients have to appoint us in other regions. We are excited about the future and look forward to growing with our clients throughout the African continent, as they place their trust in our world class delivery. It’s a trust we know we’ve earned.”

Service offerings Profica is a leading construction and property-solutions company that provides expert development, project and construction management services to high-profile clients. We operate across many sectors on the African continent, and have built an impressive track record for global expertise, local knowledge and service excellence.

PROFICA - PROPERTY & CONSTRUCTION SOLUTIONS - AFRICA

t: +27 (0)11 234 5828 e: info@profica.co.za w: www.profica.co.za SOUTH AFRICAN PROPERTY REVIEW

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feature

The complexities of the lease agreement A lease agreement is synonymous with many transactions where two parties enter into a buy, sell or lease agreement on moveable or immovable property or goods By Tony Stokes

wners entrust a lot of responsibility to property/business managers, and as the bulk of commercial properties are run from rented buildings, the lease agreement is a very important document to understand. The lease agreement is a crucial document that forms the relationship between the landlord and lessor. However, only a small percentage of lessees really read the content of the document in detail because it may be too long and the legal terms (jargon) are too complicated to interpret. The urgent need to sign the deal and get on with the business often leads to leases being signed without being read, and with little understanding of the importance of the lease agreement. This is a serious oversight on the part of the lessee, which often backfires and turns into a battle between the landlord and the tenant. Other leasing issues are that some landlords do not pay attention to tenants leaving premises on lease termination; this results in the next prospective tenant having to deal with the conditions of occupancy where the premises are left in an undesirable state. This is avoidable in all cases in which good take-back procedures are in place to eliminate unnecessary costs for the landlord.

Tony Stokes

The “as is” condition

If you are dealing directly with a landlord, be sure to communicate with an experienced person who has good knowledge of the premises and who fully understands lease agreements and property management 50

The landlord may refuse to spend capital on repairs and opt to rent the premises “as is”. This condition is then part of the lease agreement, and both parties have consensus on signature of the document. This could be a disaster, especially if the details of “as is” are not clearly defined in an annexure. Some “as is” conditions could be: ●● Non-operational air conditioners ●● Bare floors ●● Walls not painted ●● Suspended ceiling in poor condition ●● Defective lighting ●● Cracked window panes ●● Defective plumbing ●● No fire equipment ●● Shopfronts not in a good state of repair.

A non-negotiable is the electrical supply where there is a distribution board – in terms of the Electrical Installations Regulations there must be a COC certificate to ensure that the electrical system is safe and operational. If you as a prospective tenant have been well informed of the conditions and you are prepared to spend on the installation costs, good for you – and good for the landlord too. Just be sure to include all of the above and more in the lease agreement. It’s no good for either party to come back after occupation. Many landlords adopt this offer as it lessens the burden of installation costs and, in turn, can offer reasonable and competitive rental rates, which can be to the advantage of both landlord and tenant.

Procedural learning process when viewing premises ●● Inspect the premises thoroughly. ●● Ask as many questions as you see fit, and get the right answers. ●● Where there is a property management company, a broker or an agent entrusted to let the property, ensure that you have all the specifications in detail as to what the expectations of the landlord are. ●● If you’re dealing directly with the landlord, communicate with an experienced person who has good knowledge of the premises and who fully understands lease agreements and property management. ●● Another important idea is to take pictures and make notes in as much detail as possible, especially where there are visible defects. This is good for record purposes.

Signing the lease The signing of the lease binds both parties to the conditions therein, and the following should be taken into account when your initial or signature is required: ●● Date of beneficial occupation (this is when you have access to the property to carry out your fitment installation). ●● Date when you have agreed to commence trade. Be sure that

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feature

●● ●●

●●

●● ●●

you understand this clause clearly as penalty conditions may apply). Agreed basic rental, which could be based on a square-metre rate or a flat rental rate. Agreed percentage of turnover clause, if applicable. In all cases this is applied when rental agreed is lower. This must be agreed to, provided that the lessee fully understands the conditions. Agreed percentage of escalation. Be sure to understand the economic trend to avoid unrealistic increases. What the expected deposit is. This could vary and is dependant on credit vetting, and your/the company’s financial standing. The cost of the administrative fee. What additional costs you will be responsible for.

While it is not itemised in the lease agreement, it would be good practice to request the expected charges apportioned to each tenant’s retrospective to the area the tenant occupies for refuse removal, sewerage, electricity, water, rates, insurance as well as marketing and signage display. A regular request in the agreement is the debit order, which is activated by the landlord on your authority and is usually on the last day

of the month, having the payment reflected in the landlord’s account in the first week of the following month. This is not a condition of lease other than a convenience for the landlord, ensuring payment on a specific date – but you can never be forced into signing a debit order. Only a judge or magistrate c an enforce this in a court of law.

The golden rule with a lease agreement Never be coerced or pressurised into signing a lease. Once you are happy, insist on a copy of the lease, even if you make a copy yourself as in the case of landlords it may take time to have a complete signed copy. What is important to remember is that the lease was

sent to you by the landlord or by a property management company, so all conditions should be clear. Requesting a copy of what you have signed for is good business. ●● Never sign a lease agreement if you are in doubt about the conditions or clauses. ●● Do not take verbal conditions as an agreement. ●● Ensure that you view the premises prior to your beneficial occupation. ●● If you are dealing with a property management company, be sure to have a landlord agreement as well. ●● Never take occupation until you are confident that all conditions of the lease are completed.

The Consumer Protection Act, compiled by the DTI The Bill of Rights enshrines the rights of all South Africans – including consumer rights. The Consumer Protection Act further outlines key consumer rights, of which all South African consumers should be aware. These include the following: 1. Right to equality in the consumer market and protection against discriminatory marketing practices;

2. Right to privacy; 3. Right to choose; 4. Right to disclosure of information; 5. Right to fair and responsible marketing; 6. Right to fair and honest dealing; 7. Right to fair, just and reasonable terms and conditions; 8. Right to fair value, good quality and safety; and 9. Right to accountability by suppliers.

PARQUBE We are an ISO 9001 Certified Company

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frankly speaking

Artistic Brigitte in living colour

She is an executive for Promac Paints and a member of SAPOA for almost two decades. We ﬁnd out what’s so colourful about this phenomenal woman By Nthabi Nhlapo

Q Would 12-year-old Brigitte

Q You’ve been in the building industry

Yes she would be. But it isn’t all about the success I that have achieved; rather the person I have become. I have built my life on the principles of love, trust and respect. I always have a positive attitude and “can’t” is not part of my vocabulary. My favourite saying is, “Nothing is impossible. Impossible just takes a little longer” by Winston Churchill.

Studying. I don’t think there has been a period since I left school that I was not enrolled in one course or another in order to better my skills. Also, I have been a member of SAPOA since 1998.

be proud of you today?

Q Did you have an easy life?

My journey has not been without its many challenges and crossroads where I have had to make hard choices on the path forward, ensuring that I do not betray my principles in order to achieve my goals.

for more than 30 years, and more than 20 in painting. What other things have you had such commitment for in life?

Q What do you do in your spare time?

Besides spending as much time as possible with my family, I spend some of my “me-time” reading, colouring and pencil sketching. Books are my greatest passion. I have a big library of books at home.

Q Name five uses of an empty paint tin.

Q If you weren’t a business executive,

Container for storing water, a plant pot, punched can lantern, door stopper, a holder for nuts and bolts.

I would be mentor. In my career over the years I’ve been very fortunate to have had some of the best people imparting knowledge from their experiences to me. As a result of this – and to honour them – I’d like to do the same for the next generation. I’d like to combine my experiences and knowledge in order to assist the next generation in building up their skills and their knowledge bank so that they too can be successful.

Q If we gave you a bicycle to ride to

Q You hold an MBA degree. Other

I don’t believe that “lucky” just happens to a person. I believe that we create our own luck through dedication, passion, surrounding ourselves with good people and a good attitude towards life.

what would you be and why?

than academic qualifications, what other activities do you master?

I have a sound knowledge of the technical side of paint, and the assessment of buildings and the development of paint systems (specifications). I’m also good at problem solving and building very successful teams of people around me.

work every day for a year, would you?

It would not be practical as I am not officebound. I visit customers and sites that are situated both in Johannesburg and Pretoria every day.

Q What is the best advice you ever got from a child?

A big hug will make it better.

Q How lucky are you – and why?

Q What fascinates you about life? How man and structures have evolved over time. I’m waiting in anticipation to see what the future brings.

Brigitte Prior has been in the building industry for 30 years and in the coating industry for the past 20. She specialised in the coating of buildings with value-adding coating solutions for all substrates (new and old) through innovation. She is currently an executive at Promac Paints (Pty) Ltd, which has grown signiﬁcantly since its founding in 1992. She takes a great interest in historical buildings and research to see how a new coat of paint can transform a building with a “face lift” and bring these “Grand Ladies” to sought-after status again. Promac Paints (Pty) Ltd’s differentiation in the marketplace is strategic partnerships, continuous innovation, knowledge and experience, with no compromise on quality.

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UPCOMING

EVENTS

2016 March

Region

Date

Event

Gauteng

4 March

Method for Measuring Floor Areas in Buildings workshop

Gauteng

14 a nd15 March

Property Financial Programme (Basic)

Gauteng

16 to 18 March

Introduction to Commercial Property Programme (ICPP)

Port Elizabeth

16 March

Power Hour Breakfast

East London

17 March

East London Networking Event

Gauteng

22 March

Lease Agreement Workshop

Gauteng

March to November

Property Management Course (Wits University)

Port Elizabeth

TBC

Legal Breakfast

Limpopo

TBC

Limpopo Breakfast Seminar

April Region

Date

Event

East London

7 April

Power Hour Breakfast

Mpumalanga

8 April

2016 SANS 10 400

Gauteng

13 and 14 April

Negotiation Skills Masterclass Programme (NSMP)

KwaZulu-Natal

13 to 15 April

Introduction to Commercial Property Programme (ICPP)

Gauteng

26 April

Sectional Title Workshop

Gauteng

TBC

Gauteng Golf Day

May Region

Date

Event

KwaZulu-Natal

10 May

KZN Golf Day

Port Elizabeth

18 May

PE Networking Event

Gauteng

23 to 27 May

Property Management Programme (UJ)

Port Elizabeth

25 May

Lease Agreement Workshop

KwaZulu-Natal

TBC

KZN Research Breakfast

Gauteng

TBC

Research Breakfast

Dates are subject to change. Please see Sapoa.org.za for regular updates.

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off the wall

If the

shoe fits

At first glance one cannot help but think that it is a monument to fairy-tale princess Cinderella. But this massive structure has a more divine purpose than just appealing to the hearts of little ones in Taiwan

here are few things that women love more than shoes – especially high heels. Taiwan’s Chiayi Province knows this all too well; in fact, they know it so well, they now have their own blue glass shoe. It is a shoe like no other, and certainly too big to fit any would-be Cinderella. The building is made out of more than 320 tinted glass panels and cost about US$686 000 (about R11-million) to build. It’s almost 17m tall at the top of the heel, and 11m wide. Based on that and guessing it’s about 24m from toe to heel, we’re calling it a size 880. The building is made out of blue seethrough glass and includes an open blue stage with spotlights. The shoe building is actually a church meant to attract women – it apparently has a hundred female-oriented features such as maple leaves, chairs for lovers, biscuits and cakes. The building was created by local government officials in the Southwest Coast National Scenic Area, a prominent tourist area in Taiwan, which decided to build it last June. The shoe-shaped church was created to honour the memory of a local 24-year-old girl surnamed Wang from the impoverished region who suffered from Blackfoot disease. Both of her legs had to be amputated, leading to the cancellation of her wedding which was already in the planning stages. This tragedy meant the would-be bride remained unmarried and spent the rest of her life at a church. Although the shoe building is a church, it will not be used for regular services but rather for wedding ceremonies and wedding photoshoots. Since the church’s opening, locals and tourists from around the country and abroad have come to view the building and marvel at its “feminine” features. Social media has also been abuzz, with people going to Chiayi Province to have their picture taken next to the shiny shoe and post them on social networks. If the shoe fits, we guess all brides from Taiwan and across the globe will get married in it. We patiently await the building that will be erected to attract men…

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