News/Insights

Situated in the heart of Observatory, Mitra Mews merges history with contemporary design in a beautiful, privately developed small mixed-use precinct, with a retail shop and short and long-term accommodation rentals.

Owned by the husband and wife architect duo Alastair Rendall and Gita Goven, construction of Mitra Mews was completed at the end of last year. The precinct features a complex that offers both short-term and long-term rental options – with nine fully furnished units, including fibre Internet connectivity and smart televisions. Four of the units are duplexes with four-bedrooms and a bathroom on each of the two levels, and five of which are two-bedroom units both with en-suite bathrooms.

The 840sqm site has parking for 11 cars and includes a convenience store, a music studio, letting office, and laundry, as well as a completely refurbished Victorian house which is part of the Observatory Heritage protection Area containing many of the remaining Victorian and Edwardian architecture buildings in South Africa. The precinct is also within walking distance of more than 20 different restaurants and bars as well as the metrorail station, bus stops, and two shopping centres.

Alastair Rendall says, “My wife and I have been in the rental business for 26-years and were looking for an investment that would ultimately allow us to reduce our dependence on our professional service business and generate an income from the rental property. This would free us up in generating innovative solutions to mixed income inspiring settlements. Considering this property was in front of our home it made sense for us to purchase it when it came on the market. It was also small enough to make the development manageable for us without requiring the services of a massive third-party developer.”

Both Alastair and Gita are passionate about designing everything using sustainable materials and making their developments as water and energy efficient as possible. To this end, the complex has been constructed using eco-friendly green-lite concrete blocks, and water supplied by a borehole that is fully filtered and purified on-site. For energy, the development relies on a photo-voltaic water heating and electricity generation system, with heat pump back-up, to help make it as eco-friendly as possible. There is also a predominantly edible urban courtyard landscape with 24 fruit trees and medicinal, herbal and culinary plants. We are also building relationships with our local community to bring events and opportunities that our guests can enjoy as a distinct OBS experience.

“We both feel it is important to build something up in the city without taking it outside of Cape Town. Because Observatory has a high density of Victorian houses and falls in a protected area, it was quite a challenging process to get all the required approvals for the renovation of the house and the construction of the units. The shop front had a canopy over the sidewalk which I wanted to retain as it is quite a feature on the street,” adds Alastair.

Even though Mitra Mews was receiving good online reviews and started building momentum on the rental front, the recent lockdown as part of the COVID-19 containment measures has meant that the owners required to rethink their short-term plans.

“While there is still a lot of uncertainty in the market, we are exploring making the units available to health professionals as we are within walking distance of a hospital. There is also a possibility of continuing with the long-term rentals targeting foreign and local students, but with the second half of the year is difficult to predict as universities will likely continue with online education we are keeping all options open at this stage,” indicates Alastair. Mitra Mews received R11 million in funding from TUHF.

“It has been a great experience working with committed clients like Alastair and Gita. Not only have they followed through on what they promised to accomplish, but they also produced quality work in the development of Mitra Mews. This goes a long way in establishing the foundation of a strong client relationship,” says Anne Meiring, Credit Analyst at TUHF.

“From our side, we are heavily invested in this project on a personal level. My wife and I had to furnish all the units ourselves. Our youngest son is a photographer, so we printed some of his photographs to put in the units as well. Our older son is a musician and is using the music studio to produce his music. He is getting ready to launch his first album globally soon. This adds to us being embedded in the project and doing everything we can to manage the short-term complications of the lockdown by taking a more long-term view of its potential,” says Alastair.

Given the picturesque location and the quality of the development, it certainly does bode a lot of potential that will benefit its owners and tenants well into the future.

“TUHF has created an impact in Cape Town by giving great attention to the Bellville, Parow, Observatory, Goodwood and areas within the Voortrekker Road corridor. Through providing financial backing to private developers, TUHF has assisted in uplifting these formerly neglected and under-invested arears which were regressing rapidly, by improving safety, quality of life and the socio-economic situation,” says Dihedile Mphachoe, Portfolio Manager at TUHF.

Facts

• Location: 31 Station Road, Observatory, Cape Town, 2935
• TUHF Product: Mitra Mews
• Original configuration: Victorian house with old sheds and a shop
• Configuration upon completion: Green townhouse security complex with nine apartments (four 4-bedroom apartments each with two bathrooms; five 2-bedroom apartments each with en-suite bathrooms), shop, music studio, and refurbished Victorian House that contains a 2-bed ground floor apartment, letting office and laundry

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There is vacancy for Operations Intern within TUHF based in KZN.
REPORTING LINE: Regional Manager
Role Requirements are:
Qualifications
 A minimum of a BCom Finance / Accounting

Skills
 Excellent numeracy, literacy and verbal skills

The key areas of responsibility for the incumbent will be as follows:

Key Performance Areas	Activities
Deal Management	Client Relationship Management  Meet with walk-in clients where necessary  Deal with telephonic queries from prospective clients where necessary; Feasibility Assist the Portfolio Manager (PM) and Assistant Portfolio Manager (APM) in completing the feasibility assessment. Loan Proposal  Assist the PM and APM in developing a loan proposal that complies with TUHF’s loan and credit policy  Capture Financials and Management Accounts.  Collate comparative market data for new and existing properties  Prepare Borrower’s Limit Exposure Report  Prepare Portfolio Management Reports Administration  Maintain comprehensive and complete records on LCMS  Assist PM and APM in preparing Authorizations  Assist PM and APM in preparing Memoranda  Prepare Audit Reports  Capture new loans on LCMS  Open a new physical file for all loans  Compile FICA pack for new loans  Prepare withdrawal notices for deals that are no longer proceeding  Assist with resolving all LAS issues  General Reporting and minute taking where necessary
Loan Portfolio Management	 Populate Project Review forms  Complete Valuation comparison forms  Follow up on outstanding compliance documents and ensure that they are received by Legal and Compliance department  Prepare and maintain monthly portfolio fluency reports – Assist in managing clients’ utilities arrears and clients’ loan arrears  Actively assist in managing the PM’s disbursements – closing report  Ensure that cyclical processes are completed within deadlines, accompany PM/APM on-site inspections and preparing valuations.
20%	 Whatever it takes

KEY INFLUENCES:
Internal
 Portfolio Managers
 Portfolio Compliance Analyst
 Administration Assistant
 Regional Manager
 Legal and Compliance

External
 Clients
 Client’s Auditors
 Bond Attorneys
 Banks
 Service Providers

Suitable and qualified applicants who meet the above requirements should forward a complete CV to Palesal@tuhf.co.za

The TUHF Eastern Cape regional team highlights the differences in the nodes of East London and Gqeberha (formally Port Elizabeth) and how there are still opportunities to capitalise on despite the challenges brought about by the pandemic.

Despite less than 300km separating the Eastern Cape cities of East London from Gqeberha (formally Port Elizabeth), the contrast in the residential rental property market could not be more significant. The areas these cities cover create a multi-polar economic situation that is shaping the future of development in the province.

“In the pre-pandemic days, East London had an active retail economy. This is hardly surprising given that the former has three levels of government based there – provincial; district; and metropolitan. And even though East London has a good base of government employees, the manufacturing sector has also been driving investment growth – with Mercedes Benz producing its C-Class vehicles for right-hand drive markets there,” says Letlatsa Lekhelebana, portfolio manager for the Eastern Cape at TUHF. “For now, the demand in East London seems to be holding. But we will only get a clearer picture once new stock becomes available.”

Gqeberha, by contrast, was already experiencing a shutting down of economic supporters in the area. Examples include a tyre manufacturer that closed, Aspen Pharmacare reducing its production lines, and one of the big five accounting firms closing its offices. Sadly, things have been exacerbated in the wake of the pandemic.

“This certainly has negatively impacted the rental market resulting in high churn as people have to vacate their flats due to the economic pressures. Though, as the Transnet National Ports Authority is planning to move its head office from Johannesburg and Durban to Gqeberha it is expected that this will bring approximately 400 new families into the city that will provide a significant boost to the rental market – and hopefully is a sign of more things to come to the city,” Lekhelebana adds.

Velda Derrocks, regional manager for the Cape region at TUHF, says that despite the challenges in Gqeberha, with a new coalition government that has been established in the lead up to the pending municipal election, there appears to be a lot of optimism brought about by the change. “Town planning for the area has always been effective, but like all municipalities, things were a bit slow due to people working from home in the earlier phases of the lockdowns and COVID-19 restrictions.”

“Contributing to this optimism is the potential for student rental accommodation in Gqeberha, as the demand for student rentals in Gqeberha remains as high as in East London,” says Derrocks. “East London on the other hand continues to have good demand for residential units, and it is worth noting that we have achieved 100% let-up of a 46-unit development in Belgravia, essentially at the peak of the second wave of COVID-19 infections. This clearly indicates demand for well located, well-operated, clean and affordable housing units. In fact, we are also working with a client on a new development in East London that will be completed soon and offering approximately 108-units. Once completed, the pace of let-up of this development will also tell us exactly what the market demand is now – and towards a post-COVID future.”

Harnessing opportunities

“Furthermore, developments in the inner-city will continue to be driven by demand for student residents. As such, the local government must do everything it can to ensure it is an attractive space for students by getting rid of vagrancy and reducing the amount of crime in the area. We also anticipate demand in areas closer to the industrial districts like Sydenham and Sidwell,” says Lekhelebana.

Additionally, TUHF will be looking at other development corridors closer to the universities and campus areas such as the Medical School of the Nelson Mandela University and other areas such as Algoa Park.

“From an East London perspective, we will continue to operate in those areas that have offered us solid opportunities. Other potential areas for development include the West Bank, Chiselhurst, and Cambridge for residential units,” adds Lekhelebana.

Embracing innovation

Lekhelebana says that in these unusual times, TUHF remains committed to keep on engaging with clients and developers. “Despite the challenges that physical and social distancing requirements can pose on being able to regularly engage with clients in a face-to-face setting, for example, as a business we were able to quickly adapt to working remotely and conducting our daily operations and client engagements etc. through more digitally driven means.”

“We used to host functions for our clients in the Eastern Cape and invite associated professionals like engineers and quality surveyors to expand our network in the market. Obviously, this is not possible now, at least not on the same scale, and we have turned to using online video conferencing to overcome the limitations of lockdown regulations. Of course, we will always be reliant on word of mouth and the relationships we have in place with a myriad of professionals in the area,” says Lekhelebana.

The key message TUHF wants to get out is that it remains open for business despite the external forces shaping the market.

“We are a sensible, profitable business anchored on the concept of massive-small, where we accommodate small players in the sector with a significant amount of residential stock. We will continue to do business but will remain mindful of the new conditions and requirements that this will entail,” he says.

Derrocks agrees. “For both East London and Gqeberha our message is clear. We will always look for potential and scope the business case according to the requirements of the specific residential node. Again, this is where our ethos of massive-small comes in to play. TUHF will never concentrate its risk in one area, but rather do several smaller projects that collectively have the potential for greater or massive impact. We will continue to back entrepreneurs with solid business plans and give them the scope to grow where there is market demand. As long as the entrepreneurs show an ability to execute, we will support them,” she concludes.

The TUHF Group of companies is excited to announce the launch of TUHF21 as a “separate but connected” operation from the Group. The objective is to enable TUHF21 to more rapidly explore other markets, particularly in townships, while growing its existing product portfolio and developing innovative new ones. It will remain connected to the overarching TUHF ethos of ensuring that access to finance for property entrepreneurs is optimised, urban regeneration, densification and management is scaled, and that training and mentorship of clients continues. TUHF21 will also manage all the Corporate Social Investments (CSI) activities which are an important focus of the Group.

Essentially, TUHF21 will focus on three pillars to harness fresh opportunities:

• Managing and growing its Intuthuko, uMaStandi, and other products.
• Developing new solutions based on relevant and practical research.
• Providing impact tracking and reporting services for the Group to ensure the development impact activities continue in a financially sound and highly governed manner.

“As a non-profit organisation, TUHF21 remains proudly not for loss. Financial sustainability will be at the core of our future operations. It will receive an injection of capital through the sale of a portion of our shares in TUHF Holdings and will continue to accrue dividend income from its remaining shareholding. As a founding shareholder and incubator of the well-known TUHF Limited brand which operates in inner-cities and has a successful 18-year track record, TUHF21 now wants TUHF Limited to go into the world on its own and to free up TUHF21 to focus on its newer products. To this end, TUHF21 can now attract new stakeholders and grow its recently developed uMaStandi sub-brand in township markets, among other exciting products and programmes in its stable,” says Lusanda Netshitenzhe, CEO at TUHF21.

This will see the uMaStandi core lending programme driving aggressive targets to reach profitability, and all other programmes will be managed on, at minimum, a cost-plus-margin basis. The research, development and innovation work will be performed in a focused manner with clear lines of funding to each result area to ensure that applied research becomes the driver of any new products that will be brought to market.

Changing lives

It comes down to making an inclusive impact and affecting real change to people’s lives. The inner-cities and townships are not easy markets. But it is in this challenging environment where TUHF21 wants to make the most impactful contributions.

“We want to be able to scale uMaStandi in markets where we see opportunity, and really focus on the development work needed in the country. TUHF Limited will still be assisting us with some of the infrastructure, technology, and policies we built up over the years to ensure that TUHF21 is able to leverage on this long track record,” adds Netshitenzhe.

With a philosophy of creating impact through collaboration and innovation, TUHF21 will build, develop, and incubate financial services solutions that serve urban development needs. And, while each TUHF company will have its own focus areas, they will be collaborating with TUHF21 to drive a more sustainable and resilient urban development agenda that goes beyond the traditional inner-city focus of the Group to include South Africa’s townships.

Urban renewal and management

In many respects, TUHF21 will be the ‘insider/outsider’ to TUHF Limited. It will optimise the urban renewal efforts of TUHF Limited and assist it better manage contributions to urban management, regeneration, and collaboration with communities and local government.

“It is about providing honest input on the regeneration efforts and identify ways to improve on our past efforts. The benefit is now that we are on the outside looking in, we can better see the gaps that exist and look to enhance and advance the work being done,” says Netshitenzhe.

Expanding market

The planned main product line of TUHF21, uMaStandi, will continue to target entrepreneurs and resident landlords who provide backyard accommodation in the townships. It uses the property as equity to fund a rental enterprise where the owner or entrepreneur gets the peace of mind that construction on the property to increase its revenue potential will be professionally designed and built according to the required planning permissions.TUHF21 will seek to further grow and commercialise this innovative initiative that builds on the pillars of all TUHF funding initiatives; such as ensuring that the product is scalable and able to grow rapidly, and that the product is replicable so it can be launched in all major townships across the country, sustainably.

Another product TUHF21 will drive is the Intuthuko Equity Fund (IEF). Established in 2004, this is a unique inner-city property finance initiative supporting previously disadvantaged individuals who want to enter the property investment market but face equity and/or deposit constraints in accessing the finance required to do so.

Netshitenzhe states that the IEF uses individual TUHF Portfolio Managers to provide extensive handholding with the entrepreneurs it funds. “They are training them in the areas where they might lack sufficient knowledge. And if more specialised skills are required, Portfolio Managers match those needs with the relevant external training and mentorship stakeholders. It is all about giving the hands-on training necessary to empower IEF clients with the means to get the most value from their property investments.”

“The central mandate driving TUHF21 will be to incubate businesses through its subsidiary companies like uMaStandi and IEF, rather than having direct contact with entrepreneurs. Its main objective is to ensure that the financial solutions developed have business continuity and are sustainable while always looking for new and innovative ways to provide real development impact,” concludes Netshitenzhe.

Our client, RM, bought a vacant piece of land in Birchleigh on auction in 2016. Now, Nhlulo Maison – meaning The House of Triumph – is home to eight happy families.

“I saw the auction sign on the vacant lot on my way home from church one day. So, I took a chance and went to the auction, buying the land with a bond from one of the four major South African banks,” RM says.

“My wife and I were both employed full time, but we knew we wanted to develop the property to generate income and service the bond,” he says. Unfortunately, the couple weren’t able to secure a building loan, and had to resort to personal loans and credit cards to start building.

“It was a good thing to take a stab – I think the fact that there was development happening on the property showed TUHF that this was a worthwhile project to fund – but that personal debt was very painful to carry.”

While looking for ways to ease their debt burden and finish the development, RM approached TUHF with rough calculations of what it would cost to complete his vision. TUHF did a site visit and a feasibility study, then assisted to complete the documentation needed to apply for loan finance.

“We were about halfway at that stage,” RM says, “but couldn’t finish the project and could only service the existing loans through our personal salaries. TUHF approved our application in 2017.”

Work to finish the build started in 2018, and by November 2020 eight brand new, 2-bedroom units, with carports, were ready for occupation. The ground floor units were put on the market at R 6 000 per month, and top floor units at R 5 800. By January 2021, Nhlulo Maison was fully tenanted.

“Working with Mahlatse was very informative. He helped me every step of the way and taught me a lot I didn’t know, such as the importance of involving a quantity surveyor in developing the project cost estimates,” RM says.

RM also completed the TUHF Programme For Property Entrepreneurship (TPPE) and appreciated having Henry Chitsulo from Bold Moves as his mentor. “We did a practical exercise as part of the course, where we visited a building in downtown Jozi to do the calculations for refurbishing it, and it was a real eye-opening experience, and inspiring,” RM says. “I almost wanted to tackle that building on my own!”

The original loan from TUHF was for R 1.9 million. Though the first tenant had signed up in May 2019 – a promising sign for quick return on the investment – South Africa’s hard lockdown did create some challenges for RM both in terms of signing up tenants and in terms of keeping up to date with payments to the contractor. “I got a lot of support from Mahlatse at TUHF, though. For example, during the lockdown Mahlatse assisted on a call with the contractor to come to agreement on when funds would be available to pay the account, which allowed us to continue and complete the build.”

“It’s so amazing. Every time I visit Nhlulo I love what I see. My wife and I started from scratch and it’s great to see what we’ve managed to achieve on a vacant lot. The tenants have also formed a close community where the kids all know each other.”

Nhlulo Maison is close to Birchleigh Primary and High School, a park with a jungle gym, and a shopping complex which makes it ideal residential space for young families. It’s also near Glen Marias’ developing business hub.

When asked for his advice to aspiring property entrepreneurs, RM says: “Understand the bill quantities! For example, the original costing for this project didn’t include paving for the full area, so we had to approach TUHF to make up the short fall. But working with TUHF means that, as long as you do your homework properly, you don’t need to be fearful of the funding side. TUHF can help you to make it work.”

TUHF21 is embarking on a bold new journey, building on 18 years of development impact in inner cities through the TUHF Group to explore other markets, grow its existing product portfolio and develop innovative new ones.

The success of the TUHF Group lays a solid foundation for TUHF21 to build on the ethos of ensuring that urban regeneration, management, and training and mentorship of clients continue while having an independent view of the broader business activities across the group.

Essentially, TUHF21 will focus on three pillars to harness fresh opportunities:

• Managing and growing its Intuthuko, uMaStandi, and other products
• Developing new solutions based on relevant and practical research
• Providing agency services to TUHF Limited to ensure the development impact activities continue in a financially sound and highly governed manner.

TUHF21 has charted the course for its next phase of development and growth, ensuring that its members – Luhlaza, uMaStandi and Intuthuko – become viable Social Enterprises in their own right.

Geographic Expansion for uMaStandi

Due to the demand for the uMaStandi product, uMaStandi has expanded to include new areas of finance.

Current areas of finance:

• Gauteng – Soweto, Spruitview
• Cape Town – Khayelitsha, Delft, Mandalay and Montclair

New areas of finance:

• Pretoria – Atteridgeville and Mamelodi
• Ekurhuleni – Vosloorus and Tembisa
• Johannesburg South – Lenasia and Eldorado Park
• Cape Town – Langa, Gugulethu and Blue Downs

Values and Principles

Its values and principles are at the core of ensuring its success. They are:

• Impact through Strategic partnerships and collaboration 
• Sustainable & scalable social enterprise
• Innovation, creativity and continuous learning
• Integrity, accountability and ethical conduct 
• Teamwork, professionalism and high performance 

TUHF21 will focus on incubating businesses rather than having direct contact with entrepreneurs. It is ensuring that the financial solutions developed have business continuity and are sustainable, while always looking for new, innovative ways to provide real development impact.

The Johannesburg Stock Exchange (JSE) is excited to welcome the first listed Social Bonds in South Africa to its Sustainability Segment. The four social bonds valued at R609 million are listed by TUHF Limited (“TUHF”) in partnership with Standard Bank through a securitisation vehicle, Urban Ubomi 1 (RF) Limited. 

TUHF is a specialised commercial property and non-bank financial services company that finances micro-developers in inner cities. The company raises funds through the capital markets and provides these funds to property entrepreneurs who redevelop buildings in urban areas with the aim of supplying high quality, affordable rental housing.

“It is encouraging and inspiring to see South African businesses taking the Sustainable Development Goals (SDGs) to heart, and utilising the JSE Sustainability Segment to drive inclusive economic growth. As the biggest stock exchange on the continent, we are excited to list our first Social Bonds that will enable TUHF through Urban Ubomi to drive sustainable development through the provision of affordable housing and improved access to funding for property SMMEs and entrepreneurs,” says Sam Mokorosi, Head of Origination and Deals at the JSE.

In line with the 2030 Agenda for Sustainable Development, the Sustainable Development Goals were adopted by all United Nations Member States in 2015, and they serve as a shared blueprint to achieve a better and more sustainable future for all.

“The work that will be implemented through the capital raised by Urban Ubomi will significantly contribute to several of the SDGs, and the JSE is honoured to provide an environment that enables social development and financial inclusion in line with the SDGs,” concludes Mokorosi.

The JSE launched the Sustainability Segment in June 2020 with the aim to provide a platform for companies to raise debt for green, social and sustainable initiatives. The segment makes it accessible and easier for companies to list and trade sustainability-related instruments to raise funds for activities directed at sustainable development.

Residents of Johannesburg are usually divided along clear lines with regard to their affections for the city. Some love it with a passion, while others entertain a love-hate relationship with the inner workings of the City of Gold. However, despite the increasing number of potholes and overgrown pavements that characterise Jo’burg’s infrastructure, now and again there seems to be news of a development that causes the doubters among the investors to give the city the proverbial second chance. First it was Maboneng, and now it’s Jewel City.

Crossing the road from the Maboneng retail precinct to Jewel City on foot is a bit like entering one of the then recently completed London Docklands developments. Only launched in September 2020, it is a pedestrian precinct, clean, colourful, spacious and contemporary in design.  

There was a similar positive vibe around Maboneng when it launched roughly 12 years ago. As financial commentator Sinesipho Maninjwa wrote in a 2019 Biznews article, “Maboneng was the fruit of (the young investor, Jonathan) Liebmann’s labour. It attracted investors, trendy galleries and artisanal shops and, in a nutshell, became a shining example of how property development can combat urban decay.”

However, Liebmann’s company, Propertuity, ultimately collapsed. It was a tale of various challenges, including corporate governance and personalities, and accommodation offerings not speaking to the correct market – people who worked in town.

With the pedestrianised Jewel City, however, it appears as though the investors may have arrived at a model for inner-city development success. It is a physical continuation of the Maboneng Precinct, which is a perfect fit for the pedestrianised younger sibling across the road.

Live, work, play

Carel Kleynhans, CEO of Divercity Urban Property Fund, which is responsible for the development of Jewel City, speaks with pride about the “work, live, play” concept that his company has crafted in its development. “We believe in the fundamental value of living close to where you work. The Johannesburg inner city remains a major employment node of southern Africa and is also physically right in the middle of greater Johannesburg, with excellent access to transport. As such it remains very well located, especially for households who do not have private cars.”

Kleynhans says that Divercity, joint-owned by Atterbury Group, Ithemba Property, Nedbank Properties and RMH Property, has so far invested R1-billion in the Jewel City development. Divercity announced in October 2018 that it would be spending R2-billion on Jewel City.

“Contrary to widely held beliefs, there are many South Africans who value a city lifestyle of living within walking distance of amenities,” says Kleynhans. “Maboneng (across the road from Jewel City) still offers this and remains a popular place…”

Maboneng continues

Indeed, the Maboneng Precinct has seemingly morphed in purpose. From being a weekend outing for tourists and visitors from Jo’burg’s northern suburbs and beyond seeking food and arts, it now appears to be an attraction for locals, many of whom will live in Jewel City.

Arts on Main, a heritage building and the first Maboneng Precinct revamp, was home until 2018 to a food market and art and fashion boutique stores. While it is ghostly quiet inside today, a few quality shops and stalls on the Fox Street periphery of the building keep a sense of life and business alive.

“Maboneng has changed, but it doesn’t need to be resurrected,” says Kleynhans. “If anything there are more people in Maboneng now than ever.” Kleynhans’s office is a five-minute walk from Maboneng’s Arts on Main, in Jewel City itself, far from Sandton, where one might expect a booming property fund to position itself.

According to its website, Divercity is a for-profit property fund that is setting a new standard for socially responsible, environmentally sustainable and economically productive urban development, while delivering attractive returns for its institutional investors.

A national imperative

Paul Jackson, CEO of the Braamfontein-based Trust for Urban Housing Finance (TUHF), a specialised commercial property financing company that finances property investors exclusively in inner cities, says urban densification is a national imperative.

“It is happening as part of a natural demographic trend that happens as countries develop,” Jackson says this densification is happening at a much larger scale than people may believe. “According to the Centre for Development and Enterprise, 70% of South Africa’s population will be urbanised by 2030, with more than 60% urbanised already.”

In a word of warning, he says the current approach to urban development and housing investments “has contributed to enormous and unsustainable urban sprawl”, as people flock to urban areas and inner cities. Jackson speaks of the need to manage urban densification carefully, in order to avoid creating urban decay in the process.

Urban sprawl and improvement

Evidence of such warning is found in the hijacked buildings and decay evident when driving through the Jo’burg city centre en route to the six Fox Street blocks that play host to the “pristine” Jewel City.

Kleynhans says they are working with the Johannesburg Development Agency (JDA) to continue the pedestrianisation of Fox Street between Jewel City and Absa, and to connect to the recently upgraded Main Street link between Absa and Gandhi Square.

“I believe a contractor has already been appointed by the JDA and works are expected to commence soon,” he says.

“The City of Johannesburg, across administrations, has been very supportive of the kind of development we do. Our primary engagement with the City is through City officials, who are not political appointees but rather career public sector professionals.”

The oOfice of the Executive Mayor of Johannesburg, Moloantoa Geoffrey Makhubo, stresses the important role the business community has to play in helping the city to attain the goal “of an economically prosperous, safe and liveable City of Johannesburg”.  

Key to the City’s constructive relationship with Divercity is the latter’s commitment to addressing past legacies and iniquities, in line with the City’s own commitments. When asked about envisaged return on investment (ROI), Kleynhans’s answer is telling.

“While we deliver market-related return on equity for our shareholders, we also measure ROI in the form of the significant contribution our business model is making towards the undoing of apartheid-era spatial segregation, improved overall sustainability and access to high-quality, empowering living environments for our tenants.”

A different view

However, Jo’burg city property investor Gideon Mendel, whose property investments are just a few streets away from the precincts, disagrees that the City has the business community’s interests at heart, with security and basic services just two of his primary concerns. Mendel first invested in Jo’burg’s inner city in about 2002, focusing on the City and Suburban area west of what became known as the Maboneng Precinct.

“It was considered high risk, high reward,” he says, adding that in the last five years the cycle had started to reverse.

“My returns started dropping,” he says, adding that investors who look to invest in the city with the hope of establishing a good public-private partnership with the City are being let down.

“There is no consistency in security, sewerage, lights and water, and as a result rentals are going down,” says Mendel. “The City is killing our business model …”

Speaking to these concerns, Mayor Makhubo confirms that City Power has revamped and maintains the street lights to ensure safety at night, rating its performance “at about 75%”, attributing the shortfall to damage to poles by third parties and theft of aerial bundle conductors. He refers to “intelligent-driven and proactive operations … conducted on a daily basis to ensure safety and security, joint operations with other law enforcement agencies and static deployments … to counter street robberies, prostitution and vehicle-related crimes including business robberies”.  

Makhubo speaks of a “24/7 Undercover Unit” apparently at work in the area, with foot patrols and stop-and-search operations conducted in daylight hours. The “area” referred to could be crucial here, as the mayor speaks of the Maboneng Precinct being in Ward 61, “a vibrant area of the CBD”, with anything outside of it possibly being excluded from the special treatment described.

Two-weekend visits over four weeks revealed a visible private security presence in the Jewel City precinct, but no SAPS.

Mendel also speaks of his concern about slumlords. “There are some good builds in the city, but the problem is they have slums next to them.” David Mayers, MD of Quorum Holdings, one of the early investors in Propertuity and with a passionate belief in downtown Johannesburg, echoes his concerns.

“What is Jo’burg without potholes and hijacked buildings?”

Makhubo says Metro police officers who come across “bad buildings and dilapidated buildings” on patrol have instructions to report them to the “regional director’s office and Group Forensic and Investigation Services for further investigations”.

Evidently the Quorum MD requires more convincing, as he says he finds doing business in downtown Johannesburg challenging. “Anything City-related is a struggle, unfortunately… (Former mayor) Mr Mashaba was a breath of fresh air. His interest in the revitalisation of the inner city was evident in his and his team’s approach to developers.”

Regardless, Mayers has R800-million invested in the city, with R500-million in the Maboneng and City and Suburban area itself, and he’s not taking his money anywhere.

“There will always be a need for the Jo’burg CBD. Its location and superior transport networks will always render it as having a place in the larger city landscape. We have invested heavily, and continue to do so.”

Kleynhans says Divercity would “welcome a stronger City in terms of service delivery”, yet says he’s confident his company can work with the City “to continue delivering an excellent urban environment in and around Jewel City …”

A win for all, in Mayers’ eyes, “would be to see the various stakeholders – banks, city council – acknowledge the CBD and the developers who play within it as key to its ultimate turnaround”.

Discussing the Central Johannesburg Partnership’s plans in the mid-1990s to restore Johannesburg’s inner city, I ask Mayers why he feels it hasn’t happened.

 “There have been pioneers, like Mr Olitzky, Afhco and Ithemba, who have had great success. I think the issue with this ‘vision’ is one must appreciate the sheer scale of the Jo’burg CBD. Look at Jewel City, R2-billion but a mere blip on the map.”

TUHF’s Jackson pares it down to the bare essentials.

“People are already investing in inner cities, financing … urban development to create urban densification projects … The market trend is extraordinarily positive, and for government and private investors, the opportunity lies in helping to ensure that these investments are regularised and contribute to inclusive wealth creation.”

Amid the urban squalor and potholes tearing up the downtown streets and pavements, in its funky Maboneng and slick downtown Jewel City precincts, Johannesburg — this time with finance and appropriate thought behind it ­— is once again offering a glimpse of what is really possible.

What was once three apartment blocks managed through a family-owned trust in downtown Bloemfontein, is planned to become innovative shared accommodation catering for up to 300 residents to help meet the increasing demand for cost-effective, secure, and multi-purpose living in one of South Africa’s rapidly growing student towns.

Five years ago, two friends founded Dimatone PTY LTD and purchased a house in Bloemfontein close to the university. Ruben Moggee and Theuns Myburgh converted it to student accommodation and the rest, as they say is history.

“We began looking for other opportunities to develop more properties specifically focused on shared rooming and student accommodation. This is one of the key industries in Bloemfontein, and by 2020 we had already purchased and converted five properties catering for 50 students,” says Moggee, a director in the company.

However, the duo wanted to take on a larger accommodation project and when they came across the three apartment blocks up for sale, they recognised a keen opportunity to further their ambitions. The three apartment blocks had been with the same owners for 30-years with some tenants living there for the past two decades.

“While the apartment blocks presented us with an incredible opportunity, we felt it was too large a transaction to bite off on our own. Using our existing properties as collateral, we partnered with TUHF for assistance. In such a short space of time, and despite the challenges posed by the COVID-19 pandemic, we are aiming to launch the accommodation in March this year,” says Moggee.

Focused renovations

The three apartment blocks are next to one another and situated next to the renovated SARS offices. With joined off-street parking access behind the buildings, the site offers a perfect location to echo the revamping process currently underway in Bloemfontein.

“Existing shared- rooming, student accommodation and new builds are extremely small. These apartment blocks feature large rooms that can be utilised to create a nice atmosphere for young professionals as well as students,” says Moggee. “As part of the product, the apartments are offered as furnished and also comply with specifications received from the tertiary institutions, each apartment has to feature breakout and recreational areas and provide a unique onsite living experience. This fits the mixed-use zoning and character of the blocks perfectly as minimal to no configuration changes are required.”

To this end, Dimatone examined how best to optimise the 78 apartments to reflect modern furnishes and shared living that fits the commercial tenants on the ground floor. The bulk of the project has consisted of internal renovations and fit outs, ripping out the old carpets and restoring the original parkay flooring to its former glory.

As part of the renovation process, each apartment will be fully furnished, including a fridge, microwave, stove, beds, desks for studying purposes, and even storage spaces for books. There will also be uncapped Wi-Fi throughout the buildings, so tenants would just need to bring their bedding and clothes and move in.

“There will be a combination of bachelor/one-bedroom flats, two- and three-bedroom apartments. We are also in the process of establishing several recreational areas for residents that will feature televisions, a pool table and table tennis, as well as an outside braai area. The blocks will also have a common laundry area for tenants to do their washing and drying. Of course, security is critically important to give tenants peace of mind. As such, we have introduced physical access gates, cameras throughout the buildings, and will be installing biometric scanners for access control prior to opening,” adds Moggee.

Growth opportunities

The existing tenants were given preference to stay, where some have chosen to remain and embrace multi-purpose living, while those who wanted to find alternative housing were given as much time as they needed to move out during last year.

“Our existing team of managers will oversee the rental aspect of the accommodation while we focus on the renovations. We also have a close working relationship with NSFAS (National Student Financial Aid Scheme) so that we know exactly how to structure our agreements to benefit students from a rates perspective,” says Moggee.

He says that they want to create an atmosphere where tenants will feel comfortable. “It really needs to be a home away from home”, feels Moggee.

Moggee says that without the assistance of TUHF, none of this would have been possible.

“Our relationship with TUHF is not a traditional, transactional one. Instead, it is a true partnership where they have been supportive and understanding of the challenges posed by the pandemic. This will definitely not be our last project with them,” Moggee concludes.

Over the past three years, the KwaZulu Natal (KZN) property market has enjoyed unparalleled growth, outperforming other provinces as an investment destination. And yet, it is still considered one of the best kept secrets in the country!

“Going forward, there are three major trends that I believe have the potential to significantly change the positioning of KZN and see the province likely experience a surge in investment. Firstly, micro-units are becoming more popular as people are downsizing as a direct result of the economic impact of the COVID-19 pandemic. Secondly, many are looking for more communal living areas with their families instead of staying at the outskirts of the city. And finally, there is a short supply of quality student residential offerings in and around Durban. With the city becoming a hotspot for tertiary education, there will be a growing need to house out-of-towners around the universities,” says Moodley.

Urbanisation drive

Tying these three trends together is the fact that the urbanisation of the CBD is expanding into other areas beyond Durban property. This, according to Moodley, means people are becoming more open to the potential of living, working, and playing in a centralised area.

Moodley indicates: “Even though some investors are cautious about the commercial property industry in the CBD due to subdued performance in recent years, it is essential to take a long-term view of the opportunities. Many large, listed organisations and investors who own properties in the CBD are either looking to sell or transform their building stock into residential or mixed-use developments.”

Entrepreneurs can capitalise on the new normal trends around remote working spurred on by the pandemic. For instance, companies in the CBD are considering sub-letting the large office space no longer required given how many employees are working from home.

“This opens the potential to convert these old office buildings into residential or mixed-use units. These commercial buildings have been built with large-scale occupancy in mind. Looking beyond possible first impressions based on the façade and physical appearance – such buildings can have the capacity to house up to 400 people, while adhering to safety regulation such as having fire escapes in place and adequate plumbing able to deal with this number. The large corporate buildings have had this in place since they were built so it presents a soft landing for investors looking to convert these into residential properties,” he says.

All-inclusive living

Furthermore, there is potential to take these properties and make them accessible to a lower income earning individuals and families, and cater for a broader range of customers.

“It is about applying the work, life, play concept to be more inclusive to those that might traditionally have had difficulties in affording renting mixed-use properties. By expanding the base, it also creates more opportunities for local SMEs to be set up to create a self-sustaining ecosystem,” adds Moodley.

He indicates that KZN has an incredible amount to offer both from lifestyle living and business investment opportunities. It is an important geographic hub for the country, while in a post-COVID-19 landscape people will increasingly migrate to the coastal towns and cities to benefit from the quality of balanced lifestyle on offer, as concurred by transfer based data released by Lightstone in September 2020.

“In other coastal areas, cost of living may not be as accessible while weather fluctuations are quite extreme when compared to the affordability and year-long reliable climate of Durban. And when it comes to matching salary levels from other, traditionally wealthier parts of the country, Durban has grown in the past five years to come within 5% of what people earn in Johannesburg, for example,” says Moodley.

Companies in KZN are no longer afraid to pay for talent. Durban has already become one of the largest call centre hubs in the southern hemisphere. Furthermore, many specialist physicians are moving to the coastal towns and cities, with other professional people choosing to live at the coast and commute to Johannesburg for example.

“It comes down to the quality of life and the opportunities provided through a more innovative mixed-use property environment. With the repo rate being the lowest since the system was introduced in 1998 and the ability to find the right project at the right price, KZN will start attracting significant investor interest in the coming months,” concludes Moodley.