Commercial & Industrial Property News | March 2017 · Commercial & Industrial Property News | March 2017 Africa’s cities need to brace themselves for millions more people over the

Commercial & Industrial Property News | March 2017


Africas cities need to brace themselves for millions more people over the next few decades, with the continent having one of the fastest urbanisation rates in the world. This is according to the Royal Institution of Chartered Surveyors (RICS) Africa Summit in Sandton Central, Johannesburg.

Better urban planning and massive investment in infrastructure is needed to cater for the influx of people looking for job opportunities, higher salaries and urban lifestyles in Africas burgeoning cities.

Bennet Kpentey, chief executive and managing consultant at Ghanaian-based Sync Consult Management Consultants, highlighted the rapid pace of urbanisation in Africa.

Kpentey said: Cities in Africa with more than a million people increased from 52 in 2011 to 65 in 2016. This rate of urbanisation is on par with Europe and higher than India and North America. With 40% of the population living in cities, Africa is more urbanised than India (30%) and almost at par with China (45%). By 2030, Africa will have 760 million urban residents, increasing to 1,2 billion by 2050, according to the African Economic Outlook 2016 report.

Kpentey added that while Africas rapid urbanisation presented infrastructure challenges for its major cities, this was also a sign of a prospering continent. With Africas upward mobility, high urbanisation and continued economic growth, there was an increased number of mega infrastructure projects in Africa. However, he said the continent needed to accelerate infrastructure development through innovative means such as public-private partnerships.

In his keynote address, Jacob Mamabolo, Gauteng MEC for Infrastructure, said as the economic powerhouse of Africa, Gauteng attracted 300 000 people annually from the rest of South Africa and other African countries. He said the rollout of infrastructure in the province was no easy task, given that Gauteng was the most populace province and continued to attract more people.

We have prioritised infrastructure investment in Gauteng. In the last three years between 2013 and 2016 Gautengs infrastructure investment amounted to R30 billion. This translates into an average annual growth rate in infrastructure spending of 20,7% the fastest growth rate for any province in the country, said Mamabolo.

He added: Over the next three years, a further R42 billion will be spent on infrastructure in Gauteng, while nationally almost a trillion rand will be invested in infrastructure. The benefits of prioritising infrastructure spending cannot be underestimated.

Africas rapid urbanisation tops agenda at RICS Africa Summit

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ContentsMarch 2017 Volume 13 Number 1

2

Cover storyEgoli Gas .......................................................................................... 4

Property brokersTransforming how property brokers do business ............................. 6

Business intelligenceTransformation through innovation and agility .................................. 7

Employee healthLeading-edge approach to employee health .................................... 8

GreenGreen building growing fast .............................................................. 9

Facilities managementNext-gen air-con ............................................................................... 10

Training

Earn ECSA CPD credit ................................................................... 11

Water-efficient training .................................................................... 12 25 Dereks desk

........................................................................................................13


March 2017 Volume 13 Number 1

3

Property managementSAPOA reappoints Rates Watch .............. 14

Legal

Mediation with foreign investors ............... 15

Utility bills ................................................. 16

Fixed-term contracts ................................. 17 Logistic

Project delays costs.................................. 18 Finance

Tough taxes ahead ................................... 19

Fairvests strong performance .................. 20

Community Property Fund........................ 22

Global real estate transactions ................. 23

Growthpoint results................................... 24 New devlopments

Fortress launches Louwlardia................... 26

Bridge City ................................................ 28

Sandton grows.......................................... 30 Asset management

Holistic success ........................................ 32


Rarely is a secret kept in Johannesburg, but there is a secret that has been kept away from Johannesburgers. That is about to change. Egoli Gas, a company that has been in existence since 1892 known with so many names before, like Metro Gas, Water and Gas Works of the Johannesburg Council, has a well-established gas reticulation pipeline network under the city.

The company evolved from a 100 m gas pipeline that supplied street lights at President Street, to a 1 200 km gas pipeline that supplies domestic, multi-dwelling, hospitality, industrial, Gauteng Provincial Health institutions and power generation (gas to power) customers. Egoli Gas network is divided into three networks; those being Nancefield on the south west of Johannesburg, Aeroton next to the Southgate Mall and the biggest being the inner network. The inner network covers the south of Johannesburg to Alexandra in the north, from Bruma to 14th Avenue.

The size of Egoli Gas indicated the importance and contribution it makes towards the energy sector and the economy.The company has been a player in the economic

development of natural gas and economy of the city. According to the Gas Act, Egoli Gas is classified as a reticulator, because the company operates a network that is below 200 kPa (2 bar), and therefore it is licensed by the Johannesburg Metropolitan Council. Licensing of the company also reinforces the relationship that existed between the Council and the company before the company was privatised in 2000.

When Egoli Gas was part of Johannesburg Council and before the privatisation, the company produced its own gas from coal until 1989, when the factory was closed. The process by which the company produced gas is known as coal gasification. Most people would remember when their parents would get fertiliser (mainly ammonia), which was a byproduct of the coal gasification process from the factory.

Others remember Egoli Gas by the gas storage tanks that have been part of the Johannesburg skyline, which is about to change. Even though the factory was closed, Egoli Gas had to continue supplying gas to its customer base of 8 000 (6 500 domestic) and industrial (1 500 customers). The company received hydrogen gas from Sasol

for about 13 to 14 years, until the discovery and development of natural gas from Mozambique.

The discovery of natural gas meant that around 2004 to 2005, Egoli Gas had to convert the hydrogen equipment of customers to natural gas equipment. A major task, if one considers the number of customers Egoli Gas had in their books. Some of the customers opted out of using gas. Again, the dedication and commitment of the companys employees and contractors was brought to the fore. The conversion project was a success. Our success stories consist of our customers like Mrs Liebman, a domestic customer whom has been using gas since 1944, and still continues today.

Nunus Portugese Restaurant in Melville, nominated twice as the best prawn eatery in the country, uses Egoli Gas. Gas is not only for domestic use and restaurants. St Johns College in Houghton uses Egoli Gas to heat the water in the polo swimming pool to maintain a constant 26/27o

throughout the year.

The main component of natural gas is largely methane gas, even though

Cover tory

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egoli Gas: best-kept secret in Johannesburg

Commercial & Industrial Property News | March 2017 5

Cover story

small percentages of other gases like carbon dioxide and hydrogen, nitrogen and other alkenes are found. Natural gas used by Egoli Gas comes from the Mozambican gas fields, via an 865 km pipeline to Secunda, where a small percentage of sulphur is added for ease of identifying a gas leak because in its natural state, natural gas is odorless.

Natural gas is a fossil fuel source of energy used for cooking, heating, power generation and as a fuel for vehicles. Due to it being a fossil fuel, natural gas is a non-renewable energy source. Of all fossil fuels, natural gas emits lower carbon emissions, compared to other fossil fuels.

Through the years, the company has changed hands (and names too) from being owned by the Johannesburg Council to the Egoli Gas Consortium (a joint venture between US-based Cinery Global Power and Egoli Gas Empowerment Holdings) in 2000, resulting in what is now known as Egoli Gas (Pty) Limited, to Reatile Group through Reatile Energy, when the latter first bought 25% of Egoli Gas in 2010, to be wholly owned by Reatile company by July 2013. Reatile is a 100% black owned company.

Egoli Gas has approximately 120 employees and prides itself as a company that strives to focus on its customers and employees. Since being taken over by Reatile, the company has ushered a new

culture of recognising excellence, thus improving both the relationship with the employees, as well as the performance of the company.

In 2015, the company held its first Staff Recognition and Excellence Awards evening, where employees brought their spouses/partners. This being a formal event, employees do not bring their children along. It is on this basis that the company introduced a Family Day, where employees bring along their families. This particular event serves two purposes for the company, one to meet the family of the employees and secondly to extend a hand of appreciation to the family.

Being a founding member of the Southern African Gas Association, Egoli Gas seeks to maintain the highest levels of safety in all its operations. During the pipeline construction, the company ensures that all necessary approvals and permits are obtained.

For the first time in many years, the company constructed an 8 km pipeline from Robertville Industrial area through Florida to 14th Avenue, Fairlands, Johannesburg, to strengthen the network. This project does not only

strengthen the network, but also inspired Egoli Gas to open new frontiers.

With half of the Johannesburg development being in Sandton, it was only a matter of time before this area was identified as the next area for the Egoli Gas network to extend to. Even though the network covers a small area under the Johannesburg area, the company is licensed from Orange Farm in the south to Midrand in the north, from Bruma in the east to Roodepoort in the west.

Egoli Gas started with pipeline construction to Sandton CBD, while in the process of seeking approvals for construction to the Randburg leg that will serve Mintek. The pipeline extension provides temporal employment to the citizens of Johannesburg, further contributing to the economy of the city.

With clearly marked vehicles, Egoli Gas personnel will be found around the streets of the city, repairing the pipeline and also conducting leak detection as required by regulations.

Now Johannesburgers know that they have the convenience of piped natural gas at their doorsteps. The convenience of never running out of gas is immeasurable, the natural alternative is here for your energy needs. To confirm gas availability in your area, contact 011 356 5000 or [email protected]


Property Brokers

Positioning itself at the cutting edge, Fieldspace Property Group is transforming the way property brokers and potential tenants view our space to let. We believe that the local property industry has not yet made full use of todays technological capabilities and we are injecting innovation into the way we do business by means of three solutions.

We know that one of the most difficult tasks for a broker is taking a potential client into a space and convincing them that it will meet their unique requirements. We are giving brokers the opportunity to show their clients

a view of a fully refurbished space using the latest virtual reality technology.

All the broker needs to do is to spark an idea in their clients mind that will enable them to imagine the possibilities in the spaces we have to offer. We dont just want to sell, we want to take our clients on a journey. We demonstrated this to a stream of property brokers in Midrand. Each broker took home their own Fieldspace Viewer to make use of at their own leisure and for future visits to our vacant buildings.

Should a broker wish to travel to one of our select spaces to let in comfort and style, we have launched our very own broker concierge service. Accompanied by our broker liaison Rebecca Fawcett, brokers with up to four clients will be collected from their office and driven to our relevant space to let in Fieldspaces very own Mercedes Benz V-Class, equipped with cold beverages and free wifi on board. The service will be booked through our leasing team [email protected] / 0790721751

For those who prefer to avoid the commute, 360 tours of certain Fieldspace properties are available on our website.

This gives potential tenants the ability to experience a virtual tour of the premises without commuting to the actual building. This is common practice in the residential market overseas, however the South African commercial property market has not yet capitalised on this functionality until today.

We constantly strive to improve our offering and give potential tenants everything they need to assist them in the decision-making process. We understand that its hard to visualise your perfect space when looking at an empty shell, and we want to assist with that process as much as possible, said Scott Field, CEO of Fieldspace Property Group.

Fieldspace Property Group is an amalgamation of property owners and managers who have merged to establish one strong brand equipped for growth. Our portfolio comprises R2 billion in assets which spans across 235 000 m2 of commercial, industrial and retail space. We focus primarily on A/B+ grade properties, occupying local and international blue-chip companies in Gauteng, with some representation in KwaZulu-Natal and Cape Town. www.fieldspace.co.za

transforming the way property brokers do business


Innovation and agility key to business intelligence

Across Africa, business culture is shifting from total autocracy - where only EXCO had access to business intelligence data to a democracy, where the entire workforce works together, with the correct information at hand, to improve performance and bolster the bottom line. With this shift comes the need for visual data that is easy to access, and is innovative in its agility to answer multiple questions on demand.

Wolfgang Kobek, Qliks regional vice-president: EMEA, confirms that this means business intelligence (BI) tools must remain relevant. Africa is changing the way it does business. When BI first arose, management didnt want their employees to analyse data. Now we are seeing a cultural shift in giving employees more responsibility. If they are the experts in their fields, it is essential to give them the chance to apply their expertise to data analysis. This will result in business improvements, allowing employees to make better decisions, faster. The more you empower your employees, the more loyal and committed they are.

It is important, however, that these employees have the ability to understand what is happening in the data. Ease of use is one of the most important factors when clients are selecting BI and analytics solutions today, stresses MEA regional country manager, Kerry Koutsikos. Clients used to deploy BI solutions to the companys management to help them

in making decisions, then we moved to guided analytics, where applications were built and deployed across the enterprise. Today, clients want self-service analytics, allowing users to build their own applications anytime, anywhere.

As such, the BI tools utilised must offer ease of use, mobility and visual representation of the data. The relationship between different data elements can reveal hidden insights, offering employees more information in order to make better decisions, believes James Fisher, vice-president: Global Product Marketing. Hidden insights are really informative and allow the business to identify and enter untapped markets. In order to discover these insights, you have to be able to look at the data. This is where traditional BI tools can fall short; if a

predefined structure is utilised, you will miss the insights that exist in related data elements.

With every passing day, data becomes exponentially more voluminous and complex. This was perfectly illustrated at the Qlik Southern Africa Summit 2017, where head ranger: Ranger Services, Ken Maggs addressed delegates, explaining how data analytics tools are being utilised to fight the war against rhino poachers. To move from reactive to proactive, intelligence is essential. With this solution, we can collect and manage all of the information we have (meaning the statistics), allowing us to perform predictive analyses, confirmed Maggs. It is crucial to the disruption of organised crime. At the summit, it was announced that for every delegate tweeting the hashtag #SAQliksavesrhinos, R100 would be donated to Rhino Orphanage. This initiative was very well received, and R16 500 was raised for the war on poaching.

Data analytics must be used to prepare for the future and if used properly, it can be used to shape the future that businesses (and people) want to realise. All the futurist trends have data underpinning them and rely on analytics to give feedback, allowing us to capitalise on trends and make them successful, concludes Thomson. Similarly, businesses need to be able to react to their changing circumstances a lot quicker than theyve done in the past; and the right data analytics will help them do that.

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Business intelligence

Wolfgang Kobek


employee health

the 2017 Employee Health and Wellness Conference was held in Sunninghill, Johannesburg, and a common thread resonated through the proceedings: the need to approach health and wellness in a new way.

Liane McGowan, happiness guru, founder of Happy Monday CC and speaker at the event, offered a unique perspective on employee health and wellness for the 21st century. McGowan explored the physical and emotional work environments, considering how these concepts interplay to either improve or destroy productivity and the importance of incorporating both aspects to create an effective health and wellness strategy. With a focus on changing corporate culture with the science of happiness, McGowan shared key tips on mental wellbeing and happiness in the corporate space.

Richard Branson once said There is no magic formula for great company culture. The key is just to treat your staff how you would like to be treated. This concept is so simple, yet in practice it can be incredibly complex; especially when it comes to staff interaction in this day and age, said McGowan.

She added that part of the challenge in creating happiness at work is that, to date, there is no universally known or fully agreed upon definition of an employee wellness campaign. In the United States, for example, research can

be found on the benefits of employee wellness campaigns spanning many years, whereas in developing countries (including South Africa), it is one that is under-researched and very unknown. This despite the fact that these campaigns are not a new concept, or a passing phenomenon.

McGowan believes that, when campaigns are poorly attended, your employees are trying to tell you something. They see no value in what is being offered. To address this, we must strive to target the emotional aspect of employees lives, giving them added benefits that encourage laughter, fun and happiness within their workspace, developing good communication and social skills.

However, the approach cannot be that of a copy and paste campaign. This should rather be unique to each company and group of people, depending on the current state of their company culture, concludes McGowan. The science of happiness is changing the way we work, think and live but if employees are not exposed to it, they cannot benefit from it. A comprehensive campaign is the only effective way forward for corporate South Africa.

Happy Monday CC offers the first South African wellness campaign that focuses on mental health and happiness at work, delivering employee wellness campaigns that make the difference. For more information

please visit www.happymonday.co.za or contact Liane McGowan at [email protected].

Happy Monday CC was founded by happiness guru, Liane McGowan. She obtained a degree in Psychology through UNISA in 2012. Liane has worked as an operations manager with Currint Events for over 12 years, working directly with medium and large corporates in South Africa. During these years, Liane identified a need for a mental wellbeing focus and began researching the topic of happiness within the corporate space. Liane conducted her honours research report in 2010 on the prerequisites for successful retirement for adults over the age of 60, where she found that happiness in retirement was linked to happiness in the workplace.

Leading-edge approach to employee health and wellness

Liane McGowan


Green

Green building is growing fast

the Green Building Council South Africa (GBCSA) is gearing up for an exciting period as the local green building movement takes an exponential growth trajectory, one that is different in scale and scope from anything seen so far.

As it enters its tenth year with sustainability expert Dorah Modise as its new CEO, the GBCSA is preparing to usher in a new era. It has identified its next areas of big impact as the residential and public sectors and is expanding its vision to include entire green communities and cities.

This is an exciting time to join the GBCSA, says Modise. It is already well established and has made great strides. It is in an excellent position to continue to grow and expand its areas of influence. GBCSA will continue to educate, advocate and certify while adding to its offerings and adapting its systems.

Founded in 2007 as part of a larger global network of Green Building Councils, GBCSA champions the movement to design, build and operate properties in an environmentally sustainable way in the South African property sector. So far, more than 230 formal green building certifications have been achieved in South Africa, mostly in the commercial property sector.

Green building continues to gain even greater momentum in the country. It is clear from the increasing number of green star-rated buildings that it makes good business sense. The property sector gets it. This amazing community is leading green change and has given us all good cause to celebrate.

We believe the impetus in the commercial property sector will continue to grow because market forces support the clear business case for green building you can do well by doing good. Now, we want to share this message across even more sectors, so they too can see how simple it is to enjoy the many benefits of green building.

Modise took up the reins at GBCSA on 1 February, but has been a non-executive GBCSA board member since 2009, and is intimately familiar with its strategy and goals. During her first 100 days at its helm, she will focus on preparations to scale its growth significantly, especially in the residential and public sectors; and ensure it has the capacity, relationships and resources to deliver on this growth.

Explaining the benefits of green building for the public sector, Modise says: Government is a property investor, landlord, tenant, accommodation provider and employer. These are all touchpoints that can benefit hugely from green building. Our metros, cities and towns can achieve big wins with green building financially, economically and environmentally. Its straightforward, and were here to show them how.

Modise has unique insight into the massive impact that green building has on the bottom lines and delivery of municipalities. Before joining GBCSA, she was the Strategic Executive Director of City Sustainability at the City of Tshwane, where she played a key role in transforming Tshwane into the greenest and most sustainable city on the African continent.

We can support municipalities in developing clear policies, making their properties more efficient, optimising their infrastructure, enhancing their income streams, attracting and securing development, appealing to the economically active population, and boosting the productivity of their staff and departments. We can help them create great places for people to live, work and visit, says Modise.

Dorah Modise


Facilities management

Large buildings can now be supplied with heating and cooling plants that occupy the minimum space, while offering the best possible efficiency, thanks to the latest variable refrigerant flow (VRF) technology from Toshiba Air Conditioning of Japan.

This next-generation air-conditioning technology has been introduced locally by AHI Carrier South Africa, the official distributor for Toshiba Air Conditioning of Japan in Southern Africa. Toshiba brand manager, Philip Theunissen, explains that the Toshiba SHRM_e (an acronym for Super Heat Recovery Multi, with the e standing for evolution, efficiency and expansion), represents the latest iteration of VRF technology.

It can feed multiple indoor units from modular outdoor units, situated usually on building roofs or in strategically located plant rooms. Up to an astonishing 528 indoor units can be controlled centrally by building or facility managers, in conjunction with the relevant building management system (BMS).

The system uses intelligent flow technology, based on independent pulse motor valves (PMVs), to control the flow of refrigerant to each indoor unit. These deliver a carefully calibrated refrigerant flow to each indoor unit to create, and then maintain, optimum comfort conditions, utilising three sensors per indoor unit.

This means that while a buildings air-conditioning system can comprise multiple units, in those instances of low demand, such as after hours or over a weekend, the Toshiba SHRM_e can achieve this without having to start up the entire plant, as is the case with conventional centralized plants.

Instead, building and facility managers and service technicians enjoy immediate and/or remote access to all system parameters, while end users benefit from a host of additional features and benefits associated usually with high-tier air-conditioning systems.

Theunissen points out that Toshiba is a long established leader in VRF technology. A multitude of Toshiba VRF systems are operating globally, including Europe, the Far East, the Middle East, Africa, the Americas, Australia and New Zealand.

The next-generation Toshiba SHRM _e technology sets a new benchmark in energy efficiency and performance, as all outdoor units exceed 7 ESEER (European Seasonally Adjusted Energy Efficiency Rating).

It is important to reiterate that Toshiba SHRM_e VRF systems require maintenance by experienced and qualified technicians. This can vary from simple filter washes to more technically involved major services, Theunissen adds.

Toshibas Wave Tool Technology (WTT) is a wireless commissioning and performance validation tool that enables engineers to read and write data to and from the condensing unit using a smartphone, without making physical contact. It enables testing and commissioning to be carried out without taking the covers off the unit, another industry first.

This uses near field communication (NFC) technology to transmit data between the outdoor unit and the engineers smartphone. The tool allows service and commissioning engineers to instruct and obtain key system information simply by touching their smartphone onto the NFC tag on the outdoor unit.

The technology simplifies commissioning, as well as reducing the time spent on-site, giving the service engineer the ability to quickly and easily send key system data via email back to the office for analysis.

Theunissen concludes: We have strived to introduce the latest cutting-edge Japanese technology, offering the highest possible quality, efficiency, and reliability, in tandem with the benefits associated with luxury air-conditioning. Many applications in the South African air-conditioning industry will call for the Toshiba SHRM_e system.

next-gen air-con tech can centrally control hundreds of indoor units in large buildings

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training

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the South African Institute of Electrical Engineers (SAIEE) has granted one Engineering Council of South Africa (ECSA) Continued Professional Development (CPD) credit for persons taking the international Association of Energy Engineers (AEE) examinations to attain international certification status as a Certified Energy Manager (CEM), Certified Energy Auditor (CEA), Certified Measurement and Verification Professional (CMVP), and Certified Renewable Energy Professional (REP).

Persons wishing to sit the AEE examinations are required to attend the CEM, CEA, CMVP or REP training at a recognised training partner of the AEE, which for the Southern African region is the Energy Training Foundation (EnTF). EnTF has been training and conducting AEE examinations since 2002 and facilitates the certification applications and renewals of certification on behalf of the AEE for the African continent at large.

AEE training modules are short learning periods from two to five days, whereafter an examination is written which requires solving problem and solution statements. AEEs Certification qualifications training modules are not designed for beginners in the industry although it gives the most comprehensive overview to introduce you to the fact that it is an industry not to be taken lightly. For attaining the qualification, the syllabus is designed to culminate in

all the disciplines in the engineering fields to enhance and build on the experience candidates already have in the industry to form a holistic understanding of energy and its bigger picture.

The success of the AEE qualification programmes comes in that it requires working experience, more so than existing qualifications and of course passing the examination with 70%. But the most important aspect is that you need to keep that experience current, and the certification requires renewal every three years, giving a reasonable amount of assurance to clients and employers that an individual that carries the qualification is keeping abreast of the industry trends.

Many other schemes exist but few as large and successful with so much peer review to accept candidates for certification. In our region, there is a board for the African continent that reviews certification applications and renewals, whereafter a similar review process is done internationally. Each applicants CV and project descriptions are peer reviewed before certification is granted.

EnTF presents its regular public courses, as well as EWSETA modular training which creates a pathway to AEE training, to organisations as in-house sessions combined with facilitated learning and mentorship to ensure training aligned to the clients requirements and the outcomes required for the trainees.

All EnTF courses carry CPD credits for ECSA awarded by the SAIEE. EnTF courses that carry CPD credits include:

CEM: 5 CPD credits plus 1 for taking the examination a possible 6 creditsCEA, CMVP and REP all carry 3 CPD credits plus 1 for taking the examination a possible 4 creditsThe following courses are not AEE courses and do not have examinations but are presented as pathway training towards AEE qualifications, or additional training for AEE professionals:

Building Energy Auditor Training (BEAT) carries 5 CPD credits

Fundamentals of Energy Management Training (FEMT) carries 3 CPD credits

Measurement and Verification Standard Training (MVST) carries 3 CPD credits

For more information about energy training qualifications in Africa, examinations, costs and dates, visit our website www.energytrainingfoundation.co.za

earn an eCsA CPD credit for taking an international energy exam


our country is blessed with many companies and persons implementing water savings. The Energy Training Foundation (EnTF), this year, is launching the Certified Water Efficiency Professional (CWEP), the International Certification Body, the Association of Energy Engineers (AEE) qualification programme.

AEE programmes are designed to distinguish persons in various fields of sustainability through its certification programmes, which recognises current knowledge and work experience largely as an eligibility requirement to successfully obtain, and maintain, such a qualification. The CWEP two day training session consolidates the experience gained during the years, with a four hour examination on the third day which has to be passed with 70% in order to attain the last eligibility requirement for the qualification.

Implementing water-efficient technologies or techniques often involves individuals with varied backgrounds, responsibilities, and levels of expertise. CWEP is designed to help educate those who have responsibilities in the

sustainable or utility efficiency field on best practices for maximizing results and understanding water efficiency basics.

The training will teach technical and organisational strategies, including how to conduct a water efficiency site assessment, understanding water billing/costs, use of terminology, regulatory and international mandates and policies, efficiency technologies and application techniques, as well as water measurement and verification needs.

Key areas and sectors covered include commercial kitchens, laundries, cooling and heating systems, domestic plumbing system, filtration, softening, landscaping and irrigation systems, industrial processing systems, pools, hospitals, medical and laboratories, storm water management, HVAC and mechanical equipment, and more.

The training is ideal for person in the following professions:

Water services and management professionalsProvincial/state and municipal plannersGovernment resource efficiency managers

Certified energy managers (CEMs) Energy and water administrators Utility professionals Water, energy and facilities champions Certified energy auditors (CEAs) Sustainability professionals and energy professionalsCertified sustainable development needing water efficiency strategies professionals (CDSPs)Government resource efficiency energy and water administration managersContractors and maintenance managers, technicians and operatorsGovernment facility managers, building technicians and operatorsEntrants into the water building owners and property efficiency fieldEnergy management professionals needing water efficiency strategies

CWEP launches on 12 to 14 July in Johannesburg this year, with a second course running straight after the Southern African Energy Efficiency Convention 2017 from 16 from 18 November, and in Kenya some additional modules will be added to CWEP running from 12 to 15 September with the exam on 18 September 2017.

training

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Water-efficient technology training


From Dereks desk

Why income splitting is a bad idea

there are those who claim that income splitting is a great way to save tax. It works like this

Income earned by the trust would normally be taxed at a flat rate of 41%. In order to avoid this the income is distributed, before the trusts February tax year end, to beneficiaries who are on a lower marginal tax rate. The income flows through a pipe or conduit and does not touch the trust, but instead is taxed in the hands of the beneficiaries as if the trust did not exist. So what is wrong with that?

We need to go back and ask ourselves why we formed the trust in the first place. It was to grow wealth that

could not be attacked by our personal creditors and to avoid the heavy taxes arising upon death. If we syphon the income out of the trust, then we are defeating the object of having formed it. The proponents of income splitting then go on to say that they overcome this problem by having the beneficiaries lend the money back to the trust for further investment. That doesnt work either

In this example, the R450K cash that the trust now has is cancelled by its liability of R450K to the beneficiaries, so its wealth has still been depleted by R500K.

Derek Springett is the CEO of Harbour and Associates Management Services, a firm of Chartered Accountants and Registered Auditors.

www.harbourassociates.co.zaPrevious articles will be send on request to [email protected]


Rising municipal rates and taxes is a hot-button issue one that negatively affects not only operating costs and gross rentals, but also makes demand on property management resources. To this end, the South African Property Owners Association (SAPOA) has reappointed specialist consultants Rates Watch on a five year contract to monitor rates policies.

Rates Watchs mandate from SAPOA will continue to focus on unearthing municipal budget information on key property related costs, like rates and taxes, electricity, or water in SAs eleven

largest municipalities. They will monitor rates policies in the following cities: City of Cape Town, Nelson Mandela Bay Metro, Buffalo City, Mangaung, eThekwini, Msunduzi, Ekurhuleni, City of Johannesburg, City of Tshwane, Polokwane and Mbombela respectively.

They will be responsible for identifying, analysing and collecting information on relevant municipal policies and legislation, as well as the municipalities Medium-Term Revenue and Expenditure Frameworks, at 11 of the largest metropolitan municipalities throughout SA.

SAPOA represents companies and organisations in the commercial property sector, and, as CEO Neil Gopal points out, SAPOA members contribute significantly to the rates base, and we believe it to be in the interest of both ourselves and municipalities across SA to partner on this matter. As a sector, commercial and industrial property wants to contribute in a positive way towards the efficient functioning of municipalities.

SAPOA has, in the past, been vocal in challenging the legality of increased municipal rates charged to its members. Our primary goal is to alert our property owner and investor members to changes in property-related municipal costs that could impact them, says Gopal.

sAPoA reappoints Rates Watch to monitor rates policies

Property management


Legal

sAPoA welcomes proposed mediation with foreign investors

sAPOA represents the economically significant property owning sector of the economy and good relations with foreign investors is important to our members. The recently announced mediation process in the Protection of Investment Act draft regulations is, therefore, a welcome proposal.

The first step to resolving any dispute should be mediation, as the Act and regulation proposes. The fact that the law requires mediation using qualified mediators of high moral character and recognised competence who are appointed by agreement between the government and the foreign investor greatly improves the chance of international investment disputes being resolved.

SAPOA rejects recent criticism of the process in the media complaining that government has a veto over any referral to mediation. Every mediation requires positive input from all parties to the mediation.

The parties will be required by the regulations to act in accordance with the rules of the mediation and the reasonable directives of the mediator in a spirit of cooperation, with a view to actively seeking resolution of the dispute. It is highly unlikely that, with this opportunity in hand,

government will churlishly veto a request for mediation by an unhappy investor.

The regulations include a careful process for declaring the dispute and discussing the issues at stake. The guidance of an experienced mediator is a positive approach. This is especially so because the mediator must maintain good institutional and personal relations between the parties to the dispute.

International arbitration of disputes has been notoriously slow and expensive, with often unsatisfactory outcomes.

Mediation under the regulations is not, as has been suggested, a substitute for arbitration. The Protection of Investments Act leaves the road to arbitration open and government must adopt a fair administrative process according to the Bill of Rights, if it does not want an unsuccessful mediation resulting in arbitration proceedings.

SAPOA, therefore, does not agree with the criticism of the proposed mediation process in the draft Protection of

Investment Act regulations and urges all parties to adopt a constructive attitude to encouraging foreign investment and good relations with investors generally.

15


on 13 February 2017, in the Gauteng Local Division of the High Court, Judge S Yacoob handed down an important judgment which many property owners will consider a much needed victory. The decision grants relief to property owners who have received exorbitant utility bills after a number of years.

Facts of the case: For approximately five and a half years, Argent was charged for their estimated water consumption. Argent duly paid these charges. During this period, the Ekurhuleni Municipality failed to take actual readings of the water meter. In 2015, Argent received a bill for the difference between its actual usage and estimated consumption amounting to R1 152 666,98. Relying on prescription, Argent claimed that they were not liable for discrepancies in the costs, which were older than three years at the time when they finally received the bill.

The municipality challenged this argument on the following grounds:

That the excess water charges, older than three years, had not prescribed because the prescription period only commenced when the client was billed by the municipality; and

The fact that the consumer regularly made monthly payments, based on their estimated consumption, amounts to an acknowledgement of its debt and, as such, it interrupts the prescription period.

The municipality lost on both of these points.

Precedent set by this judgment:

If a consumer receives a utility bill citing,

for the first time, charges older than three years, they cannot be held liable for such amounts, as the charges have prescribed.

Where a consumer has made regular monthly payments based on their estimated consumption, their monthly payments do not interrupt the prescription of the actual water consumption.

It is not the duty of the consumer to read meters and determine their actual consumption. A consumer will not be considered to have acknowledged a debt of which they do not know the particulars. In other words, a consumer cannot acknowledge a debt when the creditor withholds particular and necessary details of the debt or when only the creditor has the ability to quantify the debt and fails to do so.

The prescription period commences when the municipality should have become aware of all the relevant facts,

such as the actual water consumption, which give rise to its claim against the consumer and not only when the municipality read the meter and the invoice was issued. The municipality could have taken an actual reading of the meter at any time.

This means that the prescription period commences when the municipality should have taken actual readings and invoiced the consumer. Judge Yacoob held that the municipality has a duty to carry out such readings and invoice consumers at its convenience but at reasonable intervals.

Where no records of regular actual readings are available to ascertain how much of a bill for several years has prescribed, the industry standard should be applied: average the consumption out over the months between the two readings and then use that average to calculate the consumers liability for the remaining period.

Legal

Victory for property owners receiving exorbitant and delayed utility bills, by Nicholas Gangiah and Fatima Gattoo, Cliffe Dekker Hofmeyr


Legal

Can you justify your fixed-term contract? by Zola Mcaciso and Samiksha Singh, Cliffe Dekker Hofmeyr

since the implementation of the amendments to the Labour Relations Act (LRA) in 2015, there have been several interesting judgments dealing with the justification for concluding a fixed-term contract of employment. Earlier this year, Judge Steenkamp delivered judgment in the matter of AMCU and Another v Piet Wes Civils CC and Another (J2834/16, J2845/16) (2017), which further assists in clarifying the issue of fixed-term contracts.

Two employers, Piet Wes Civils CC and Waterkloof Skoonmaakdienste CC contracted with Exxaro Coal (Exxaro) in order to provide various services to Exxaro until 2021. The employers then contracted a number of employees, on fixed-term contracts of employment, in order to carry out these services to Exxaro. The fixed-term contracts of employment included a clause which provided for automatic termination in the event that the commercial contract between Exxaro and the employers prematurely terminated.

This meant that the fixed term contracts of employment would be in operation for as long as the contract with Exxaro remained in operation. By inclusion of this clause, the employers were of the view that these employment contracts constituted fixed-term contracts of employment.

During November 2016, Exarro terminated the commercial contracts with the employers by giving them one months notice. The employers then relied on the automatic termination clause in the fixed-term contracts of employment and terminated the employment relationship with their employees.

The Association of Mineworkers and Construction Union (AMCU), which represented the employees, launched an urgent application to the Labour Court in terms of s189 (13) of the LRA. AMCU contended that the employees were dismissed for operational requirements as envisaged by s189A of the LRA (retrenchments), and accordingly, the employers were under an obligation to consult with the employees prior to termination of the employment relationship. In its application, AMCU requested the Labour Court to order reinstatement, therefore forcing the employers to engage in consultation with the employees as envisaged in s189 of the LRA.

The employers argued that the employees were employed on fixed-term contracts, which was terminable on the occurrence of a specified event, namely the early termination of the commercial contract with Exarro, and as such s189 and 189A of the LRA was not applicable. The employers further argued that the

fixed-term contracts of employment were governed by s198B of the LRA, which provides that employees may be employed on fixed term contracts or successive fixed-term contracts of employment for longer than three months if the nature of the work is for a limited duration, or that the employer can demonstrate a justifiable reason for fixing the term of the contract.

The Labour Court found that the employers failed to demonstrate justifiable reasons as contemplated in s198B of the LRA, as the fixed term contracts of employment were not for a specific project that had a limited duration.

The Labour Court reaffirmed the position that employers cannot terminate an employment contract at the behest of a third party, as this undermines the employees right to fair labour practice entrenched in our Constitution. Consequently, the Labour Court concluded that these contracts of employment did not constitute fixed-term contracts in terms of s198B of the LRA and that s189A was applicable, as there may be justifiable grounds for dismissing the employees for operational requirements. The Labour Court ordered the reinstatement of the employees and that the employers consult with them in accordance with the procedure prescribed under s189A of the LRA


Logistics

Redefining the impact of project delays on cost, by Dr Hendrik Prinsloo, course facilitator, The Association of South African Quantity Surveyors (ASAQS)

When it comes to delays and the assessment of delay claims, there is limited guidance available. In fact, there is no clear path in terms of managing the issue, establishing process or determining who is ultimately responsible. The result is that many unexpected delays end in disputes, which can potentially impact on relationships and the success of a project. There has long been a need for the industry to have access to a simple, standardised process which walks all parties through the claim and finds equally simple answers to the problems.

This need inspired the development of the Decision Support Framework, a tool designed to assist in the assessment of claims from the start, eliminating indecision and uncertainty, and providing users with a clear route to resolution. The framework was crafted over a number of years, and was designed to be easy to understand and capable of managing claims across industry and incident.

The Decision Support Framework is currently being integrated as part of the Association of South African Quantity Surveyors (ASAQS) member toolkit via continuous professional development (CPD) training courses, which are being offered around the country. The intended outcome is to assist quantity surveyors in making accurate assessments, determining root causes and, ultimately, saving customers money.

Alongside supporting the more accurate and efficient assessment of delay claims, the tool adds a sense of fair play the standardisation of process and procedure, allowing all parties equal

say. Often, there is no small measure of uncertainty when it comes to claim assessments, so if all parties are using the same resource, it ensures that both client and contractor have the same input, see the same results and have their concerns acknowledged. This can also have a positive impact on time spent with claims, reducing disputes and saving on costs.

The goal is to complete the project, not become embroiled in lengthy debate or lose money as the days tick by and the build remains dormant.

In any industry, time is money. More so in the construction industry, where time-delayed decisions can result in a cost per day impact. Likewise, a delay in the delivery of materials to site can impact costs. By identifying delays and ensuring swift resolution, the Decision Support Framework can have immediate and long-term cost savings. The quantity surveyor can assist in determining the delay far more efficiently and this

can significantly lower the financial implications, which normally come hand in hand with any delay claim.

The Decision Support Framework sidesteps the usual problems by taking the user through four primary decision making processes. Each of these has been carefully researched to fit alongside the extension of time claims, and each one uses a process to allow for deliberation and careful resolution.

Dr Prinsloo


Lew Geffen, Chairman of Lew Geffen Sothebys International Realty, says anyone still viewing the countrys medium-term economic outlook through rose-tinted spectacles had them rudely ripped off by the Finance Minister during his Budget speech.There are unquestionably harsh times ahead.

Were immensely grateful there was no increase in VAT, but the new super tax bracket of 45% for individuals who earn more than R1,5 million isnt good news for the upper end of the residential property sector.

And while we applaud the raising of the property transfer fee threshold to

R900 000 from R750 000, in reality it will only provide relief for low to lower-middle income households.

Minister Gordhan uttered the word transformation more than 50 times in his 29 page speech. He is not wrong that transformation is needed in South Africa, but not at the expense of the tax payers on whose backs the economy is built.

With an unemployment rate of more than 26% in the last quarter of 2016, businesses big and small need all the help they can get from the government right now, and in this budget they were largely ignored. Thats bad business for the economy, for consumers and for home owners.

19

Realty magnate warns of tough taxes ahead

Finance


Finance

Continued strong performance from Fairvest

Fairvest Property Holdings Limited (Fairvest) announced another set of strong results for the first six months of the 2017 financial year, with distributions increasing by 9,57% year-on-year. Successful capital raises of R206,7 million, attractive acquisitions and steady growth in property valuations contributed to a net asset value increase of 20,8% to R1,60 billion at 31 December 2016. Net asset value per share increased by 1,9% to 205,52 cents per share, relative to a current share price of 185 cents.

The company said that annualised net property income increased by 10,4% compared to the previous year, a function of low vacancies at 4,1%, selective acquisitions, cost containment, as well as gross rentals that trended upwards across the portfolio.

Fairvest declared an interim dividend distribution of 8,953 cents per share

for the period, which was within the issued guidance range of 9% to 10% growth.

CEO Darren Wilder says: We are pleased that Fairvests consistently good performance over the past few years is providing shareholders with the type of returns that has positioned the company as one of the top performing property funds over the past 12 months. Our focus is to steadily deliver on key performance metrics, which includes solid distribution growth, value adding acquisitions and a strong emphasis on operational excellence.

Fairvest is a real estate investment trust (REIT), with a unique focus on retail assets weighted toward non-metropolitan and rural shopping centres, as well as convenience and community shopping centres servicing the lower LSM market, in high-growth nodes, close to commuter networks. The Fairvest property portfolio is geographically diversified across South Africa and consists of

41 properties, with 193 580 m of lettable area and valued at R2 082,1 million.

The portfolio features a high national tenant component of 76,6%, tenant retention of 79,1% and a weighted average lease term of 40 months. Revenue grew by 20,6% to R162,2 million, due to income growth in the historic portfolio, as well as the acquisitions during the period.

Darren Wilder


Finance

Weighted average gross rentals increased by 3% to R102,36/m at 31 December 2016, compared to R99,40/m at 30 June 2016.

Costs were well-contained, with the net property expense ratio (expenses net of recoveries) improving to 16,3% compared to 17,3% for the previous financial year. The pleasing improvement was supported by a continuous strong focus on cost containment, as well as more efficient recoveries of municipal charges.

Distributable earnings increased by 29,8% to R69,8 million.

Wilder said that the property portfolio value increased by 8,2% to R2 082,1 million, aided by a R111,9 million acquisition during the period and capital expenditure of R17,9 million. This was offset by the disposal of the SASSA House asset for R40 million. The historic portfolio increased by 4,1% compared to 30 June 2016. The average value per property increased by 2,9% to R50,8 million, while the average value per m2 increased by 3,9% to R10 756/m.

Fairvest transferred three new properties during the period, which included the Mqanduli and Tabankulu Boxer centres in the Eastern Cape, as well as the Macassar Shoprite in the Western Cape. The company also pursued further value enhancement projects, with R16,2 million spent on projects at Parow Valley Spar, Nyanga Junction and Shoprite Macassar, amongst others. Fairvest also announced the acquisition of Shoprite Empangeni for R172,7 million. Wilder said the attractive property is ideally suited to the companys investment niche of acquiring retail assets that target the underdeveloped and high growth, lower LSM consumer market. During the period under review, 32 new leases were concluded on 7 077 m.

Renewal activity was positive with a 7,9% positive reversion achieved on the 16 107 m of leases that were renewed during the period. Fairvest remains conservatively geared with a loan to value ratio of 23%,

which provides headroom for further expansion. The portfolio is sufficiently hedged to minimize the impact of potential interest rate increases. As at 31 December 2016, 89,7% of the debt was fixed either through swaps or fixed rate loans, with a weighted average expiry for the fixed debt of 24 months.

Wilder said: Fairvest has delivered a compound annual growth rate of 31% in net asset value and 18% in distributions since 2013. This performance is the product of a single-minded focus on both our investment proposition and on operational excellence. Given our robust balance sheet and a quality portfolio with strong fundamentals, we remain confident that Fairvest should be able to achieve distribution growth of between 9% and 10% for the 2017 financial year.

The Fairvest property portfolio consists of 39 properties, with 185 937 m of gross lettable area (GLA) and valued at R1 925,1 million.

The portfolio is predominantly focused in the retail sector (92,4%), with selective exposure to office properties (7,6%). Fairvest is well-diversified across the main provinces of South

Africa, with a regional income split of KwaZulu-Natal (24%), Western Cape (19,1%), Gauteng (16,1%), Free State (14,9%), Northern Cape (11,7%), Limpopo (7%), Eastern Cape (3,7%) and Mpumalanga (3,6%).

Its vision is to be a dynamic real estate investments trust listed on the JSE, investing in quality retail assets with sustainable income streams and thereby maximising stakeholder value. It is committed to enhancing its built environment by collaborating with the communities it operate in and it strives to be the landlord of choice, treating its tenants with respect and understanding.

Fairvest seek out mutually beneficial, strategic partnerships to gain critical mass and reduce operating costs by sharing excellent resources and the latest technology. It also aims to create a work environment that is conducive to innovative thinking, efficiency and growth.

It has an experienced driven team, who brings fresh thinking to its deal making, always geared to maximising profits and enhancing its built environment and in so doing, generate superior sustainable returns for its stakeholders.


Finance

2222

Futuregrowth Asset Managements Community Property Fund (CPF) performed extremely well for the second year running, delivering 24,3% for the 12 month period ending December 2016, compared to SAs listed property sectors return of 10,20% for the same period.

The CPF, which has been running for over 20 years, acquires shopping centres in townships and rural areas on behalf of investors.

Portfolio manager, Smital Rambhai, said there are a number of key drivers behind the improved returns. The main factors are strong rental income growth, a reduction in vacancies, better control of expenses and additional sources of income from promotions and advertising.

Weve also seen an improvement in the quality of the tenants, which reduces risk for the investor. Demand for rental space in our centres is strong, and we are planning to expand some of our centres due to this strong demand from tenants.

The unlisted fund has a low correlation to financial markets and experiences less volatility than the listed sector. This makes the fund suitable for pension funds seeking consistent, long-term, risk adjusted returns for their members.

People will always need to buy food, clothing and household items and have access to key services, said Rambhai. Our shopping centres cater for these basic needs, and because they are conveniently located close to transport nodes,

consumers are likely to continue spending their time and money here.

New property managers were appointed in 2015 and have been able to extract better value from the properties, which is demonstrated by the funds outstanding performance over the last two years.

The fund currently owns 18 shopping centres across South Africa and has delivered significant social benefits to the surrounding communities.

Weve come a long way in the last 20 years, said Rambhai. In 1996, when the fund was launched, no one was interested in financing township shopping centres and they were a no-go zone for developers. Things have changed since then, and Futuregrowth continues to reap the benefits of being among the first to invest in the township and rural sector on behalf of its clients.

Community Property Fund outperforms listed property

Bridge City

Diepsloot Mall

Kamaqhekeza Motherwell


Finance

23

Knight Frank Wealth Report: 27% of global commercial real estate transaction attributed to private buyers

Commercial real estate remains an important asset class for private investors, with 27% of global transaction volumes attributed to private buyers in 2016. The 2017 Knight Frank Attitudes Survey data shows that a full quarter of private client wealth is held in real estate investments (excluding their primary residence and second homes). This varies significantly from region to region, with Middle Eastern investors holding the highest proportion (33%) and North American investors the lowest (11%).

According to the Knight Frank Investment Trends Survey, the majority of investment into commercial real estate was primarily driven by the want of diversification, with real estate being used in portfolios to provide variation from both domestic economy and across asset classes.

The survey identified office property as the most popular sector in investors portfolios at 54%, a finding borne out by both long-term global transactions data and the results of the attitudes survey.

Survey sentiment strongly shows that real estate continued to provide a safe haven for capital and a stable and secure income return in a low growth environment. A sentiment reflected in the surveys interview with Ian Bremmer, and the significance of safety of capital over size of returns. Despite an element of caution expressed from some parts, investors have a healthy appetite for further commercial real estate investment in 2017. Most survey respondents talked in terms of large double-digit percentage target increases in the level of assets under management.

The survey shows the majority of investors still feel underinvested in property and are looking to rebalance overall portfolios. Typically, respondents were looking to secure lot sizes from 20 million to 50 million, although a number talked of scaling up to over 100 million. Respondents preferred locations varied considerably depending on their domicile, with Australia, Africa and the US all cited as investment targets for 2017. The majority, however, continue to look to Europe for their

allocations, the UK being the most popular individual country. The reasons cited for this include the scale of the market, relative liquidity and the depth of opportunities available.

The findings also show that logistics real estate is becoming increasingly attractive, with 15% already invested and 22% looking to invest. Retail property is being affected by a huge shift in consumer behaviour; specifically, urban logistics, as part of the new ecommerce supply chain is seeing the biggest step-change in how property is used and where it is located. It is in these urban, local facilities that are seeing the greatest potential for private investors seeking secure long-term returns, and looking to tap into the growth opportunities created by the rise of cities and increasing urbanisation.

The results of this first Investment Trends survey clearly show that family offices relationship with commercial property will only strengthen further over 2017.


Finance

Growthpoint delivers 6,1% half-year distribution growth

Growthpoint Properties Limited reported distribution growth of 6,1% for its six month interim period to 31 December 2016, delivering performance comfortably in line with market guidance. Growthpoint achieved an increase in total distributable income of 10% from its prior half-year. It improved portfolio vacancies from 5,7% to 5,4%, and boosted the value of its property assets to over R120 billion.

It also continued its internationalisation strategy through its investment into London Stock Exchange Alternative Investment Market-listed Globalworth Real Estate Investment Limited (Globalworth) and expanded its investment into Growthpoint Properties Australia (GOZ), as well as growing its funds management business to launch a healthcare real estate fund.

Norbert Sasse, CEO of Growthpoint Properties Limited, attributes the positive distribution growth to the continued

performance of Growthpoints South African property portfolio, a strong contribution from its V&A Waterfront investment, and growing distributions from Growthpoints 64,3% holding in GOZ that were enhanced by a successful currency hedging strategy.

Shareholders can expect this solid performance from Growthpoint to continue, despite a persistently challenging domestic operating environment. Growthpoint is on track to

deliver similar growth in distributions to shareholders for the full year to 30 June 2017, says Sasse.

Growthpoint is the largest South African primary listed REIT and the 26th largest company on the JSE. Over the period, an average of R3,8 billionn in Growthpoint shares was traded a month. This makes Growthpoint the most liquid and tradable way to own commercial property in South Africa.

Growthpoint is a Top 5 constituent of the FTSE Russell EPRA/NAREIT Emerging Index and has been included in the FTSE/JSE Responsible Investment Index for seven consecutive years.

It owns and manages a diversified portfolio of 533 properties, including 473 properties in South Africa, 59 properties in Australia through its investment in GOZ and a 50% interest in the properties of the V&A Waterfront, Cape Town. It now also owns an initial 26,9% stake in the 1 billion property portfolio of Globalworth,

Norbert Sasse


Finance

the largest owner of office space in Romania.

Growthpoint closed the half-year with a conservative loan-to-value ratio of 36,7% which, while moving higher during the period, remains well within its own mandates. The increase is largely as a result of using bank funding for the acquisition and further investments in its international investments.

During the period, Growthpoint diversified its sources of funding even further. It recorded a 48,8% increase in its unsecured debt. It also reported a R2,2 billion, or 59,5%, increase in bonds issued, with more banks holding Growthpoint bonds as high-quality liquid assets, because it is one of only a handful of SA companies with a Aaa.za national scale credit rating from Moodys. It also continued to use cross currency interest rate swaps to fund further investment into GOZ, and has now introduced euro debt and euro cross currency interest rate swaps for its European investment.

Growthpoints debt was well hedged with 80,5% of interest rate exposure, fixed with a weighted average term of 3,5 years. It has lowered its average interest rate to 7,6%, down from 8,5% at FY16, including foreign denominated debt

Growthpoints South African property portfolio contributed 75,4% to its distributable income. In its South African portfolio, it improved its lease renewal success rate to 70,3%. However, both its renewal rental growth rates and future escalations on renewals were down slightly at 0,8% and 7,6% respectively. Arrears and bad debts crept up marginally. Still, keeping expenses well under control, its cost-to-income ratio stayed largely unchanged at 27,1%.

Optimising its South African portfolio, Growthpoint disposed of R259,1 million, held for sale R967,5 million and acquired R1,2 billion of properties during the half-year. It also made commitments of R2,4 billion and invested R1,1 billion in development and value-enhancing

improvement projects during the period. Its largest development project, in partnership with Zenprop, is the landmark new Discovery head office in Sandton Central.

Looking to the future in South Africa, Growthpoint expects property fundamentals to weaken on the back of insufficient economic growth prospects. Dynamics include greater competition between shopping centres, a soft office market and higher costs of attracting new tenants and keeping existing ones. However, Growthpoints strategic initiatives support its domestic business.

Distributions from Growthpoints 50% stake in the V&A Waterfront, Cape Town, made a strong 8,7% contribution to its distributable income. The development of the V&A Waterfront Silo Precinct is almost complete and progress on its Canal District development is continuing. During the period, Growthpoint invested R311,8 million in development and capital expenditure at the V&A Waterfront and made commitments to a further R363,9 million of investment.

It is Growthpoints goal to grow its distributable income from international investment to around 30% over the next five years. During the half-year, it made tangible progress in this regard. In fact, almost all its growth was made internationally during the period.

GOZ, Growthpoints Australian investment, continued to pursue growth, successfully acquiring the GPT Metro Office Fund (GMF), while also reweighting its portfolio in favour of offices and geographically to New South Wales.

During the period, GOZ acquired properties valued at R5 billion, sold five industrial properties valued at R1,6 billion, invested R393,6 million in development and capital spend, and committed to portfolio growth of R217,8 million. Supporting this, Growthpoint invested a further R1 billion in GOZ.

GOZ contributed a solid 15,9% to

Growthpoints total distributable income. It has forecast to grow its distributions per share in AUD at 4,9% for FY17. However, even with its successful currency hedging strategy, the strengthening ZAR to AUD could have a negative impact on the unhedged distributions received from GOZ.

Expanding its international investment into new territories, during its half-year Growthpoint launched its Central and Eastern European investment strategy by investing 186,4 million (around R2,8 billion) in an initial stake of 24,3 million shares in Globalworth. This is a conservative market entry point to a high-growth investment platform.

Globalworths 1 billion property portfolio includes mostly modern A-grade offices, industrial properties, a residential complex, as well as developments. Its portfolio is concentrated in Bucharest, Romania, and underpinned by Euro-denominated leases with many blue chip global brands.

With its Globalworth investment, Growthpoints significant capital injection into the company will provide the key to unlocking exciting new growth strategies and prospects for Globalworth. This includes refinancing its current debt at around 5%, to levels between 3% and 4%. Cap rate compression of 100 bps to 150 bps is also expected. Growthpoint forecasts EUR0.22 dividend per share from Globalworth for FY17.

Creating a meaningful new revenue stream for Growthpoint through its funds management strategy, Growthpoint has set its sights on building a R15 billion funds management business over five years. During the period, Growthpoint acquired two hospital properties valued over R1,1 billion for the launch of its new Healthcare Fund. Another asset was acquired post half year end and it will transfer two existing assets into the fund.

Capital raising for Growthpoints third-party institutional pan-African real estate business in several African markets outside South Africa is also in progress.


the JSE-listed Fortress Income Fund has officially launched the Louwlardia Logistics Park, a R650 million A-grade logistics facility that is under development alongside the N1 in Centurion.

Speaking at the launch, executive director Andrew Teixeira said that Louwlardia was part of the 1 million m2 of warehousing that is due to be developed by Fortress over the next five years. This equates to a combined investment of an estimated R8 billion in South Africas logistics sector during that period.

Fortress Income Fund has become a powerhouse in the South African property industry since listing in 2009. Innovative asset management and a diverse property portfolio has seen the fund showing positive growth every year.

The fund focuses on development of prime logistic warehousing, retail centres and strategic offshore investments. Fortress owns 336

investment properties valued at R28,7 billion at the end of December 2016 and has one of the largest logistics property development pipelines in South Africa.

Louwlardia, which will see approximately 90 000 m2 of warehousing developed on the 16,7 hectare site, is expected to be completed within the next 24 months.The first phase, which comprises a 21 785 m2 warehouse with 1 843 m2 offices, is complete and ready for

occupancy. It has already drawn a great deal of interest from prospective blue-chip tenants.

National leasing manager, Grant Lewington, said that Louwlardia was an example of the Grade A logistics facilities that the fund is developing in three major nodes - Gauteng, Cape Town and Durban. The Fortress Income Funds portfolio is strongly weighted towards logistics facilities located in prime locations. These are let to corporate tenants on long leases.

The focus on logistics is due to ever increasing demand for these sorts of facilities from companies operating in a highly competitive economy that is driven by imports, primarily through Africas busiest container port, Durban.South Africas economy is transport intensive and imports destined for South Africa as well as neighbouring countries are expected to grow. Already, logistics is one of the fastest growing service sectors in the economy, ensuring a strong income stream for the fund going forward.

new development

26

Fortress Income Fund launches R650 million Louwlardia development

Andrew Teixeira

Louwlardia (artists impression)


Planning

from page 23

27

Teixeira emphasised that, as long term holders of property, Fortress is focussed on delivering a quality product and was setting new trends in the development of logistics facilities in South Africa.

In a tough economy where cost containment and efficiency are king, we are actually providing A-grade logistics at a lower cost. With properties that offer high-tech design that includes the likes of solar and natural light to reduce power consumption, strategic locations that make for more efficient distribution and properties that provide easy access and better turnaround times, we are effectively lowering the cost per pallet, he explained.

Lewington noted that Fortress continued to strengthen its position as the preferred developer of logistics warehouses by delivering a technically superior product that, together with the groups strategically

located land, would ensure a sustainable development pipeline.

He emphasised that all of Fortresss parks were developed according to global best practice and to the highest standards. They include the provision of adequate internal height, flat floors, large loading areas with hard wearing concrete surfaces as well as good access to freeways and arterial routes.

The newly launched warehouse at Louwlardia has a height of 13,5 m to the underside of the eaves, which offers efficiencies of scale and an FM2 floor which provides a solid platform for the erection of racking and easy movement of mechanised machinery with a 38 m yard.

It also provides a secure park environment with 24 hour security, a central gate and electric fence as well as a fire system with central pumps and tanks that will serve the entire park.

Green building best practice is incorporated via features such as low maintenance indigenous landscaping that is fully irrigated and buildings that can accommodate photovoltaic cells for the production of electricity.

However, the key draw card remains Louwlardias prime location, with excellent highway visibility and accessibility to road, rail and domestic and international air freight hubs.

It is well situated adjacent to the N1 highway between Johannesburg and Pretoria with access from the N1 via Brakfontein and Nellmapius Roads. It is also well-connected to two major alternative routes (the R21 and N14) and provides easy access to both the OR Tambo and Lanseria Airports, as well as major centres, he explained.

He added that the N1 frontage was a prime location with excellent highway visibility for signage and branding.


new Development

Development at Bridge City is gathering momentum in 2017, according to Brian Ive, a development executive at Tongaat Hulett Developments, which is driving the evolution of this ground breaking mixed-use precinct to the north of Durban.

To date, 65% of the 53 hectare development area has been sold to a mix of public and private sector investors, while 360 000 m2 of bulk is still available for purchase in Bridge City. Ive is confident that the remainder of this development will be sold out within the next three years.

A number of new developments including a petrol filling station (PFS)/retail facility and a mixed-use development to the value of R220 million began in March 2017. The Environmental Impact Assessment (EIA) for the first phase PFS is underway, while the second phase of this mixed-use development is expected to begin construction towards the end of 2017.

Ive added that construction of the third phase of the combined medical and

retail centre adjacent to the Bridge City shopping centre was already well underway and due for completion by the end of June 2017.

Construction of the Dr Pixley ka Isaka Seme Memorial Hospital, a 500 bed regional state facility, is proceeding well. Now that the structure is complete, contractors are focussing on finishing the interior of the building, ahead of an envisaged opening in 2019.

At the same time, earthworks for the 150 bed private hospital that is also to be located at Bridge City have been completed. Work on the top structure is scheduled to commence in March and the hospital is expected to open at the end of 2018.

Ultimately, Bridge City is expected to attract upwards of R10 billion in investment once it has been completed. En-route, it is expected to create thousands of construction jobs whilst also facilitating a wide range of skills and enterprise development opportunities across a plethora of sectors.

Our vision for Bridge City is one that combines a mix of public sector

facilities, services and infrastructure with a wide range of private investment opportunities. At its heart, it will have a world class, inter-modal transport system that links the areas of Phoenix and Inanda, Ntuzuma and KwaMashu (INK) to the CBDs of Durban, uMhlanga, Cornubia and Pinetown. This will become a bustling, mixed-use urban hub that offers attractive investment opportunities in a professionally managed, integrated and dynamic development node, said Ive.

He added that the recent completion of the new half diamond interchange off the M25 that provides dedicated access to Bridge City for road users and later this year, for the R20 billion GO!Durban bus rapid transport network (BRT) which will mark another important milestone for the development of Bridge City.

Increased accessibility and good public transport make this a location of choice for logistics businesses and distribution centres as well as labour intensive businesses such as business call centres.

Bridge City is the second leg of the highly successful Effingham

Development momentum builds at Bridge City


new developments

Development Joint Venture public-private sector partnership between Tongaat Hulett and the eThekwini Municipality. The first leg, the Riverhorse Valley Business Estate, which was sold out in 2015, was highly successful for similar reasons. However, whereas this was primarily industrial and offices, Bridge City is a true mixed-use development.

From its earliest days on the drawing board, it has included residential, retail, recreational, medical and commercial facilities, as well as a 13 hectare business park that is likely to appeal to both established businesses and entrepreneurs.

Ive said that Bridge City was particularly attractive to businesses, as all sites were fully serviced and ready for development, cutting through potential red tape and delays in other areas.

The INK (Inanda, Ntuzuma and Kwa Mashu) area has the largest residential concentration of about 800 000 people in the eThekwini region, ensuring that Bridge City is likely

to have one of the largest impacts on improving the livelihoods of residents and boosting the metro economy.

Bridge City completely redefines how people will live, work and play in formerly neglected and marginalised townships. Through the creation of job opportunities, residential accommodation and lifestyle choices, Bridge City will have a major economic impact on both the immediate INK area and its surrounds, he said.

A deal about to be concluded will deliver 348 affordable housing units and will play a key role in attracting new entrants into the retail property development space. Through the creation of a dynamic mixed use precinct, the reduction of management association levies for residential use and reductions in transfer duties by government for entry level buyers, he said that more property owners were also likely to enter the as yet under invested township real estate market.

Ive said that the eThekwini Municipality was finalising the investment of

approximately R84,5 million in six sites at Bridge City. Five of these are in the town centre. Of these, three are earmarked for social housing and two for GAP (affordable) housing.The sixth site purchased by the municipality located within the business estate precinct will be developed into a business incubator.

Ive pointed out that improved commuter transport via the GO!Durban BRT is also expected to boost retail development. Bridge City is likely to be the second busiest commuter exchange in the Durban area and the GO!Durban terminal is expected to accommodate in excess of 100 000 daily commuters on completion

He noted that the Bridge City shopping centre, which was completed in 2009, is already regarded as a major retail hub and has extended its pool of shoppers from the immediate vicinity to surrounding areas. Shopper numbers increased during 2016 and the mall currently has a 3% vacancy rate, which is far lower than average.

Bridge City


sandton is home to half of SAs current commercial property development

nearly half of all the office development taking place in South Africa right now is happening in Sandton. Sandton Central is the epicentre of this development, which includes many of the most cutting-edge, exciting and innovation new buildings on the continent.

The latest research in the South African Property Owners Association Office (SAPOA) Vacancy Survey for Q4:2016 shows that 48% of new offices being built are going up in Sandton. What makes this figure even more extraordinary is that no other area in the country comes close to it, with the closest contender below 9%.

Sandton Central is well-established as Africas financial and business capital and continues to grow with developments that embody its vibrant, high-energy live, work, play environment.

Supporting the billions of rands being invested in these new developments is the fact that Sandton Central strives to offer a well-managed orderly space that provides all the necessary infrastructure to support the growing district. Transportation is a particular focus of the Sandton Central Management District (SCMD).

Boosting all modes of transport and easing traffic flows is part of an ongoing programme in Sandton Central, with the Sandton Gautrain Station at its heart. This includes the City of Johannesburgs expanding Bus Rapid Transit (BRT) system, which will see Rea Vayas fast, convenient and affordable bus service to Sandton Central begin

Documents

Commercial & Industrial Property News | March 2017 · Commercial & Industrial Property News | March 2017 Africa’s cities need to brace themselves for millions more people over the