Acquiring a taste for affordable rental development

For most of its long history, Rosettenville, south of the Johannesburg CBD, has been the first port of call for tens of thousands of Portuguese-speaking migrants seeking new lives in the City of Gold.

To this day, Rosettenville retains a distinctly Portuguese flavour – a flavour now known around the world thanks to the worldwide fast food phenomenon, Nando’s, the chain of peri-peri chicken restaurants that first opened in this suburb in 1987.

Traditionally a white working class area, this southern suburb has seen the demographic changes that have swept Johannesburg in recent decades leave their imprint, as the city’s population swells and demand for accommodation grows.

Accommodation in the area is mostly low density, consisting of a mix of free-standing and semi-detached houses and smaller, low-rise apartment blocks, making Rosettenville attractive to individuals looking for a less crowded option while still enjoying easy access to the Johannesburg CBD.

The City of Johannesburg’s 2040 long-term plan will likely serve to enhance the suburb’s appeal, as it includes densification and mixed-use development, encompassing retail, commercial and residential developments as well as improved rail and bus access.

Architect Jason Berchowitz is among those who have recently come to appreciate Rosettenville’s appeal to low-income would-be tenants and its potential for urban renewal. Berchowitz, whose practice is based in Glenhazel, explains that a good friend of his recently asked whether he would be interested in buying two small properties that had just been auctioned. The friend had bought the two double-storey properties, on Garden St, consisting of eight large one-bedroom units, at the auction but then realised that they did not fit in with his, by then, very substantial portfolio of larger low-income rental accommodation.

Berchowitz is no stranger to the inner city’s low-income rental market, having consulted with a number of clients (his friend included) on several renovations. Some of these projects consist of just a handful of units and others of hundreds of flats. When his friend offered to sell Berchowitz the two properties, he recognized their potential value and agreed to purchase them at a total of R1.5 million.

By mid-2014 Berchowitz had invested a further R1.8 million in renovations and the addition of four units to the rear of each property. All told, including an additional R200 000 in legal and transfer fees and other costs, the architect (and now property developer) was now invested in Rosettenville to the tune of some R3.5 million.
Since the face brick properties were in a reasonably good condition, refurbishment consisted mainly of upgrading the interiors, painting and installing new kitchenettes and fittings. The new-build apartments cost some R4,000/m2. Building and renovations were carried out by contracting firm, Chargeprop, with six employees permanently on site and as many as 20 workers, including subcontractors working at any one time.

The 24 units will be leased as two-bedroom apartments of 45m2 for rentals of R3300 per month.

Another selling point for Trilby Court and Caroline Court, as they have been respectively named, is the fact that Berchowitz has invested R150,000 in a 50,000-litre heat-pump hot-water system, which he predicts will mean water heating bills amounting to just 20% of conventional electricity costs. Once let, the properties will be managed by a local agent.

Berchowitz, who has three young sons, says he considers his first foray into property development an investment in his family’s future, an opportunity to earn annuity income when he retires one day and stops earning a fee-based professional income. But he stresses that his investment probably won’t be assured unless he and his team do their bit to uplift not only Garden Street but also the surrounding area. “What we’re doing with our properties will have a knock-on effect,” says Berchowitz. “We also hope to buy other properties nearby, do them up and create decent living spaces for our tenants, and create, property by property, a greater and greater positive knock-on effect in the community of Rosettenville.”

Explaining that he turned to TUHF because other banks saw only the negative in suburbs like Rosettenville “and none of the positive”, Berchowitz says there is a huge and growing demand for accommodation in the area. “Right now, Rosettenville is a pretty good place to live; Bit by bit, people like us are going to make it a great place to live.”

From our 2014 Annual Report

Acquiring a taste for affordable rental development