Author Archives: Staff Writer

The International Finance Corporation (IFC) – a member of the World Bank Group – says it has partnered with FirstRand Bank to support and scale the availability of green building and green home loan finance for South Africans, stimulating economic growth and boosting climate resilience in the country.

IFC will provide a $250 million

(R4.6 billion)

senior loan to FirstRand, South Africa’s second largest bank by balance sheet, to further scale-up the bank’s lending to property developers and home buyers for green buildings.

Designated portions of the home loan portfolio will be specifically allocated to the affordable housing segment and to women.

The investment comprises an IFC loan of up to $200 million, and a loan of up to $50 million from the Managed Co-Lending Portfolio Program, IFC’s syndications platform for institutional investors.

The lender said it will also provide capacity building to FirstRand’s appraisers, loan officers, and internal teams, and to its construction partners. IFC will advise on FirstRand’s product development, as needed.

“We are pleased to continue to partner with IFC to deliver sustainable financing solutions particularly anchored to developers of green buildings, affordable housing, and women borrowers,” said Bhulesh Singh, FirstRand Group Treasurer.

“IFC’s partnership with FirstRand will not only provide vital funding for access to housing but also expand green-certified construction loans and home mortgages in South Africa, helping the housing sector become more climate friendly and resilient,” said Cláudia Conceição, IFC’s Regional Director for Southern Africa.

FirstRand will allocate the PBI grant to eligible developers and buyers constructing green buildings or purchasing green homes.

Green homes are residential properties that are certified for reducing water, energy, and or materials use under an eligible green building certification program, including IFC’s EDGE. Green home loans are used to finance the purchase of houses that meet equivalent green building standards.

Under the Paris Agreement, South Africa aims to reduce its GHG emissions by 42 percent by 2025, with green buildings designated as a major part of the solution to meet its targets.

Since 2020, IFC said it has invested $1.5 billion in green and sustainable investments in South Africa through its financial institutions’ partners, with a focus on renewable energy and green buildings.

Is your commercial property broker representing your business or your landlord?

According to a recent report by Savills, while strong demand for top-quality spaces continues to underpin prime office markets around the world, in some markets landlords are having to work harder to attract and retain tenants, with concessions and incentives being used to help offset rising costs to occupiers.

Says Alex Oberholzer, head of the occupier services division of Swindon Property, Savills’ commercial property associate for in sub-Saharan Africa: “Globally, as stated in Savills’ report, in recent years, concessions and incentives have become increasingly important to attract and retain tenants in a competitive office market. “

He said that work-from-home and pandemic-era trends such as hybrid working and hotdesking have made a lasting impact on the leasing environment.

“Demand for fully fitted turnkey space in prime locations has grown. This type of space is desirable to tenants for its ‘plug-and-play’ benefits, allowing quick move-in and set-up times for new tenants. “

Occupiers increasingly demand high-quality, fully built-out space without needing to invest time and money into planning and executing the design themselves.

“Increasing fit-out costs are rising due to a variety of factors, including a general increase in labour and material costs, as well as inflationary pressure, which is true in South Africa as well as internationally.

“This creates a challenge for both landlords and tenants – for landlords, it means that it will likely be harder to market undeveloped space and more expensive to commit to turnkey developments. Tenants, on the other hand, may be forced to account for these prices in their office footprint decision process.”

Rent-free periods are another popular means of incentivising leasing activity in a building, especially in light of higher fit-out costs.

“Over the past five years, the global average duration of these rent-free periods has increased from approximately 7-10 months over the typical lease term, particularly in markets facing higher vacancy,” he said.

In some markets, landlords are going above and beyond the standard amenity provision. In addition to gyms and conference centres, ESG (Environmental, Social & Governance) credential upgrades to buildings and even sports facilities such as basketball courts have become additions.

So what are key factors and amenities which tenants look for today in a commercial property to rent?

According to Swindon Property, these are top of the list among commercial property tenants:

Location

: Accessible and convenient locations with proximity to transportation hubs, major road networks and amenities such as restaurants, shops, and banks are highly desirable.

Safety and Security

:

Tenants prioritise properties with robust security measures.

Quality of Infrastructure

: Modern and well-maintained buildings with reliable infrastructure, including electrical systems, HVAC, telcos, and even back-up water is becoming another key imperative.

Flexible Space Design

: Tenants look for flexible space layouts that can be easily adapted to their specific needs, whether it’s open-plan offices, modular workstations, or customisable floor plans that accommodate future growth or changes in business requirements.

Energy Efficiency and Sustainability:

Increasingly, tenants prioritise environmentally sustainable buildings with energy-efficient features such as LED lighting, solar panels, green roofs, and water-saving fixtures.

Amenities and Facilities

: Properties offering on-site amenities and facilities such as cafes, gyms, conference rooms, co-working spaces, childcare facilities, and outdoor recreational areas.

Parking and Accessibility

:

Sufficient and secure parking facilities, including both on-site and off-site parking options, are important.

Cost-Effectiveness

: While tenants seek quality amenities and facilities, they also prioritise cost-effectiveness.

Van Schoor said that apart from the above factors, tenants are also advised to take into account the following when looking to lease space:

“Primary common areas are those that all the tenants have use of, with costs split on a pro-rata basis among all the tenants, while upper floors would also have a secondary common area such as a first-floor lobby, the costs of which are split between only the first-floor tenants.”

In its latest monthly letter, the editorial team from financial services firm UBS discuss the key opportunities for investors as inflation falls, AI investment booms, and the global equity rally broadens.

Sometimes it can be all too easy to get lost in the details and miss some of the big trends that are impacting markets:

Alternative investments continue to form a significant part of portfolios providing an additional source of diversification and returns. In the medium term, family offices are most concerned about the danger of a major geopolitical conflict, climate change and high debt levels.

What do they mean for investors?

According to UBS, lower inflation and lower interest rates should support stocks and bonds. Higher interest rates have led many investors to hold more cash or money market investments than usual.

“Lower interest rates will likely lead at least some of that money to a new home. Fixed income is a natural destination, while carry strategies using currencies are likely to rise in appeal. We also expect stocks to benefit, especially if the US economy achieves the soft landing we envision, it said.

UBS said that increasing investment in artificial intelligence capabilities by technology firms will contribute to significant profit growth in the “enabling layer” of the AI value chain—notably in the semiconductor industry.

“Eventually, artificial intelligence should lead to value creation across a broad range of industries and applications. For now, we see “AI enablers” as the most tangible and profitable opportunity for investors.”

UBS said the broadening of the equity market rally—both in terms of earnings and performance—should widen the opportunity set for investors looking to diversify sources of return beyond technology.

“Investors need to be cognisant of the potential for political and geopolitical risks to drive volatility and impact markets as the year progresses,” it said.

How to position?

Fixed income remains the preferred asset class of UBS.

“In equities, we see modest upside overall, and focus on capital preservation strategies and selectivity. In technology, positioning for upside via options or structures can be an effective way to manage sentiment, valuation, and idiosyncratic risks.”

“At an index level, such strategies can also help investors mitigate potential policy and geopolitical risks. Looking beyond tech, we like exposure to some more lowly valued parts of the equity universe, including the UK market and US small-caps.”

The current uncertainty faced by South Africa’s property market is no cause for alarm, experts say. This phenomenon is quite common in real estate markets across the globe.

Greg Dart, director of High Street Auctions, explains that there is a rhythm to election cycles well known to the global property market.

“The effects of elections on real estate markets vary, but some common trends have been observed in multiple countries, including South Africa,” Dart said.

“As an investor if you understand the cycle, it becomes less disconcerting – especially during election periods like we’re experiencing when the headlines scream words like ‘critical’, ‘pivotal’ and ‘game-changing’.”

Election-related jitters can start up to a year in advance, often leading to a slowdown in market transactions as potential buyers and sellers adopt a cautious, wait-and-see approach.

This reduced activity can cause property prices to stabilise or even decline slightly due to decreased demand. Investors might also postpone significant decisions or new projects, anticipating potential changes in policies that could impact property taxes, regulations, and economic stability.

Typically, the real estate market adjusts and recovers in line with the new political landscape, regardless of the election’s outcome.

Dart stressed the importance of South Africans voting for leaders who prioritize the country’s overall economic well-being.

“That’s not just a nice sentiment; we only have to look at polls from two countries last year to understand how important it is to vote.

“Voters in Argentina and Greece last year elected pro-market leaders, who introduced economic reforms that led to a significant market upswing. In Greece an MSCI gauge of Greek equities show them soaring 48% that year, while the index for Argentina rose 67% in dollar terms.”

Property investors were anxious leading up to the US election in 2020, but the market experienced a strong rebound due to low interest rates and economic stimulus measures that boosted market confidence.

“The South African economy has suffered in recent years, in large part due to bad policies, a lack of will to follow through, corruption and grid instability,” Dart added. “But through all of this, property has remained a stable long-term investment. That won’t change anytime soon,” said Dart.

He said that investors need to understand election cycles and know that following the elections we will be seeing a rebound in the market – especially if the results are perceived to bring economic stability or favourable policy changes.

“Between that and the expected drop in interest rates coming this year, the prospects for the property market are more bullish than they have been for some time,” Dart said.

South Africans will head to voting booths across the country on Wedensday, 29 May.

Exemplar REITail, a specialist in rural and township retail, has published its financial results for the year ended February 2024. Despite a challenging economic environment, the company has declared a final distribution and reported significant performance highlights.

Final Distribution

Exemplar declared a final distribution of 74.66425 cents per share for the six months ended 29 February 2024. This final distribution includes a dividend of 57.03275 cents and a return of contributed tax capital of 17.63150 cents, marking a 3.1% increase from the same period last year.

Combined with the interim distribution of 64.27220 cents per share for the six months ended 31 August 2023, the total distribution for FY2024 stands at 138.93645 cents per share, a 1.5% decrease from the prior year.

Portfolio

Exemplar, a listed Real Estate Investment Trust (REIT), owns and manages 26 retail assets with a combined Gross Lettable Area (GLA) of 414,530 square meters across five provinces in South Africa.

The company’s core focus is providing and managing retail services in previously underserved regions.

Key Financial Metrics:

Tenant Performance and Lease Renewals

The trading densities of anchor tenants improved by 2.6% to R4,847 per square meter, reflecting a below-inflation increase consistent with the recent results of food retailers indicating volume decreases in sales.

Despite the major food anchors opening new stores, which results in some cannibalisation, the depressed economy and high-interest rate environment continue to negatively affect consumer spending.

On renewal of expiring leases, a weighted average increase in base rental of 4.1% was achieved. During FY2024, a GLA of 90,889 square meters expired, of which 77,680 square meters were renewed.

Tenants occupying 5,018 square metres chose not to renew, and 3,106 square metres of this space have been re-let.

Negotiations are ongoing for the remaining expired leases.

Vacancies and Operating Costs

The vacancy rate slightly increased to 3.51% from 3.35% the previous year. Property operating costs rose by 22.7%, outpacing the 17.6% increase in rental and recovery income.

This rise in costs was mainly due to a significant bad debt expense of R16.8 million compared to R2.4 million in FY2023. Excluding this bad debt expense, the increase in operating costs would have been 18.5%.

The bad debt expense is largely attributed to a few tenants, with the Post Office being the most significant, accounting for R6.2 million.

The Post Office was a tenant in 11 of Exemplar’s centres, and most of these leases have been cancelled.

Replacements have been found for five locations, two are pending board approval, and negotiations are ongoing for the remaining spaces.

Development Projects

Exemplar is progressing with several key developments. The Mbhashe LG Mall is currently under construction and scheduled to open on 27 March 2025.

The expansion of Theku Plaza, to be renamed Theku Mall, is also underway, with a scheduled opening on 31 October 2024.

Income Growth Drivers

Rental and recovery income increased by 17.6% to R1.21 billion. This growth is partly due to the acquisition of Mamelodi Square in February 2023, the opening of KwaBhaca Mall and Bizana Walk in October 2022 and December 2022 respectively, and the completion of the Edendale Mall rebuild in April 2023.

Collins Property Group published its audited consolidated financial statements for the year ended 29 February 2024, highlighting a year of significant restructuring and robust performance despite challenging economic conditions.

The listed company recently rebranded from Tradehold and was approved as a Real Estate Investment Trust (REIT).

During the year under review an extensive restructuring of the business was successfully implemented

both in South Africa and beyond its borders, in order to convert Collins to a REIT.

The company’s property portfolio boasts a gross lettable area of approximately 1.5 million square meters, with 50% located in Gauteng, 40% in KwaZulu-Natal, and the remaining in the Cape.

Of the Group’s South African (“SA”) portfolio of just over 1.4 million square metres of lettable area, 81%

consists of industrial warehouses and distribution centres.

“This is a sought-after asset class in difficult economic times because of its defensive nature as a result of being linked mainly to long-term leases entered into with national tenants.”

The balance of the SA portfolio is made up of convenience retail properties (13%), an increasingly popular asset class, and offices (6%).

The portfolio’s strength is underscored by its large national tenants, which generate 78% of the income. Major tenants include Massmart, Unilever, Pepkor, Nampak, Aveng, and Sasol.

Operational Performance

The restructuring to convert into an industrial REIT involved significant changes, including a swap-up ratio with a minority shareholder in the South African business and converting debt to interest-only profiles.

This restructuring aimed to enhance efficiency and tax effectiveness. The company’s assets are diversified, with 83% in South Africa, 6% in Namibia, 7% in Austria and the Netherlands, and 4% in other parts of Africa.

Key financial metrics for the year include:

Revenue increased by 6.3% compared to the previous year, reaching R564 million before tax. However, profit before tax decreased to R564 million from R734 million, mainly due to increased finance costs and a lower fair value adjustment to investment property.

The conversion to a REIT also led to a significant deferred tax write-back, resulting in a net profit of R1.14 billion, a substantial increase from the prior year’s R158.5 million.

Strategic Developments

Collins Property Group has focused on growing and upgrading its portfolio by divesting non-core assets to free up capital for future growth, particularly offshore.

The group sold eight properties for R65.6 million and is in the process of transferring five more properties valued at R150 million.

The Namibian portfolio strategy is under review, with announcements expected soon. The company has also completed the sale of its last properties in Zambia and is selling its remaining properties in Mozambique.

Future Outlook

Looking ahead, the group said that despite the uncertain political landscape and challenging economic environment, the group’s predominantly industrial property portfolio offers a defensive advantage.

Shares in the group are up 9% over the past year.

Discovery Bank today introduced its new Home Loan product, offering clients competitive, personalised interest rates based on their individual risk profiles.

Leveraging its established Shared-value Banking model, clients can reduce their interest rate by up to 1% by effectively managing their finances with Vitality Money and securing their home loan and property with Discovery’s insurance products.

Discovery Bank clients can secure a market-related rate upfront and further reduce their interest repayments over time by managing their finances wisely, resulting in long-term savings.

This shared-value approach could enable the current Discovery Bank client base to save up to R2.8 billion in interest repayments on existing loans, while South Africans as a whole could save up to R12.2 billion annually with this model.

“This is a highly anticipated milestone for us as we open the virtual doors to our home loans ecosystem. Those looking to buy a new home or wanting to upgrade their home, can enjoy a full ecosystem of benefits and tailor-made services in the Discovery Bank app,” said Hylton Kallner, CEO of Discovery Bank.

“Our clients have comprehensive homeowner support alongside our home loans, with protection products for their homes and family, access to additional financing of energy solutions, and various rewards.”

Discovery Bank offers home loans up to 100% of the value of properties, with personalised interest rates over a range of repayment terms up to 30 years.

In addition to financing for new home purchases, Discovery Bank clients can also switch their existing home loans, or refinance their homes with this new offer.

With both switching to Discovery Bank and refinancing unbonded homes, clients can unlock equity in cash based on the value of their homes.

Home Loans meets Shared-value Banking

As clients manage their money well, they reduce risk and increase value for Discovery Bank. Rewarded behaviours include saving, maintaining adequate insurance, investing for retirement, and paying off home loans faster.

The bank shares the value generated from these financial behaviours with clients through better interest rates and additional rewards linked to the Vitality Money program.

The better clients manage their money, the higher their Vitality Money status and the greater their rewards. By combining Vitality Money, the Home Loan Protector, and Building and Contents Cover, Discovery Bank home loan clients can lower their interest rates by up to 1%.

All clients who take out new home loans, switch home loans, or refinance their homes with Discovery Bank qualify for the Shared-value Interest Rate discount.

“We feel motivated to change the landscape of homeownership. The unique nature of home loans means client and asset risk typically reduce over time. With high costs negatively impacting repricing or switching to a different bank, the result is that an estimated 60% of our clients are overpaying on their existing home loans today,” Kallner said.

“The solution is not only a once-off credit reassessment, but a client controlled dynamic interest rate that adjusts based on real-time changes in financial behaviour. With Discovery Bank home loans, clients can be certain they will get accurate risk-based interest.

“This ecosystem will give Discovery Bank clients a personalised home-loan preliminary offer in under 5 minutes, and a completely digital application process on our award-winning Discovery Bank app.”

Pick n Pay CEO Sean Summers pointed to a new six-point strategy to restore the Group’s core Pick n Pay supermarket business to profitability following a disappointing full year performance for FY24.

The Group delivered a weak FY24 result to 25 February 2024, driven by a substantial trading loss in the Pick n Pay business, which more than offset a strong performance from Boxer.

Trading profit declined 87.4% to R385.0 million, reflecting a R1.5 billion trading loss for Pick n Pay.

The result was further impacted by a significantly higher interest charge resulting from increased gearing and a R2.8 billion non-cash store asset impairment in the Pick n Pay business.

The new Back-to-Basics strategy has six priorities and will focus on simplicity, quality, affordability and sustainability to help the iconic brand reclaim its former glory.

Given the market environment, it is a reasonable and actionable plan. More importantly, the right operational team with the right experience is now in place to execute it.

Important parts of the plan have already been implemented, some in place since February, with encouraging early results. For the first 10 weeks of FY25, positive like-for-like growth has been recorded by Pick n Pay, alongside a consistently strong performance from Boxer.

The six strategic priorities are:

“This is a three-year turnaround programme. We will work with vigour, energy and passion to get it right. We have a strong operational leadership team to help us set the business on a path of long-term sustainability,” said Summers.

Reset the store estate

To create a more sustainable supermarket business, the Group is resetting its store estate to minimise losses by creating a smaller but more profitable Pick n Pay store estate.

The plan is to leverage the strength of its multi-format model with strategic conversions to lift store profitability: selected Pick n Pay stores will be converted to Boxer, where customer demand and demographics call for it, while experienced franchisees will be secured for other stores given benchmarks prove that franchisees typically achieve greater trading density, largely as a result of trading areas being notably smaller than company-owned stores.

Multi-year loss-making stores that are unsuitable for conversion to franchise or Boxer will be closed.

This will allow the Group to create a Pick n Pay store estate of the future – with effective, modern, well-positioned stores targeted at middle-income and more affluent customers.

Improve offer to drive sales

The reset store estate will be supported by a refocus on products and services to improve the offer and drive sales. The aim is to reinstate a more competitive offer matched to customers’ needs.

Restructured commercial teams – under new senior leadership – will aim to win back customers by resetting and closing the gaps in the ranges matched to customer preferences, particularly the fresh produce ranges and private label, which already deliver consistent value.

This will be strengthened with consistent competitive pricing and promotions across the business, supported by the Smart Shopper loyalty programme.

Stores will improve customer service with strengthened store management teams and staff training, including using multi-skilling to redeploy staff to customer-facing roles during busier operational periods.

The key impact expected is like-for-like sales growth to unlock incremental annual profit.

Optimised operating model

An optimised operating model will focus on minimising waste, simplifying processes, driving execution, and improving staff productivity. This refocus will deliver a more efficient head office, store estate, and supply chain.

On-the-ground regional leadership will underpin this priority as the Group refocuses on fixing productivity and service levels.

About R1.3 billion worth of benefits are targeted over the next three years by reducing costs through better processes, execution, and planning.

Recapitalisation

Critical steps have been taken to recapitalise the business, allowing the Group to invest in its estate, rebuild profitability, and settle debt.

The Rights Offer is expected in mid-2024, and the listing of Boxer is planned towards the end of this year.

The Group plans to release working capital, reduce grocery inventory and realise additional benefits from store conversions and disposals.

Through this recapitalisation plan, the Company targets more than R500-million in annualised interest savings and more than R1-billion from working capital optimisation and a once-off cash inflow from store disposals.

Leverage strength of partnerships

The plan’s success hinges on the Group’s ability to strengthen its relationships with key its stakeholders.

Pick n Pay has strong entrepreneurial franchise partners, and it will work closely with these partners to grow its brand and its franchise network, unlocking benefits for all.

Regular engagement and training with staff will create the capable, engaged, passionate, and empowered team needed to deliver on the plan successfully.

At the same time, the new Head of Buying is focused on vendor collaboration to ensure the Group provides the right products at the right price for customers.

Said Summers: “While focusing on our stores and future-proofing the Pick n Pay supermarket business, we will continue to grow those parts of the business which are enjoying significant success – our Boxer, Online, Clothing and Value-added Service businesses.

“We will continue to invest in innovation and convenience to make our customers’ lives easier. We are also strongly focused on growing Pick n Pay Clothing’s market share, which continues to report positive growth year-on-year.”

Shares have declined some 33% over the past year.

Imagine stepping into a luxurious duplex penthouse inspired by the elegance and sophistication of a yacht.

This residence

in Sea Point showcases international finishes that exude style and glamour. From double-volume ceilings to imported, custom-made furniture, every detail speaks of opulence.

Double-glazed windows, a retractable roof over the pool, inverters, backup generators with solar power, and more contribute to the lavish amenities.

The penthouse boasts five bedroom suites, each with its own unique charm. The crowning jewel is the glamorous master bedroom, featuring a spacious walk-in dressing room.

The true showstopper lies upstairs: a pool and jacuzzi area designed for pure relaxation. This space includes a second kitchen, bar, braai area, sauna, and a full bathroom for guests. It’s perfect for hosting unforgettable gatherings and enjoying the breathtaking views.

Fully furnished and offering unobstructed panoramic views, this penthouse is is POA but is likely to be priced towards the R150 million mark.

Monument House in Franschhoek played host this week to the 2024 Luxe Restaurant Awards, an illustrious celebration of South Africa’s finest culinary talent.

Among the evening’s highlights was the announcement of La Petite Colombe as the Restaurant of the Year. Nestled in the heart of Franschhoek, La Petite Colombe has consistently dazzled with its innovative cuisine and impeccable service, making it a deserving recipient of this prestigious accolade.

Callan Austin was honoured as Chef of the Year, a testament to his exceptional culinary prowess and dedication to his craft. Austin’s creative vision and commitment to excellence have set a new benchmark in the industry, earning him this well-deserved recognition.

List of winners:

Post and Pepper

Vuur

Mertia

11th Floor

Tempo