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PROPERTY FORUM ASK THE PROPERTY PROFESSOR an you distinguish your “cap rate” from your “discount The property market rate”, and when signing a lease are you sure that all also has its own parties understand what is included and excluded terminology. And to Professor Viruly Cin “operating costs”? Is the Consumer Price Index the this can be added correct defator to use in the rental escalation of leases? When signing concepts used in a lease do the land owner and tenant have a similar understanding of particular sub markets of the property market. Moreover, the property the responsibilities associated with a triple net lease? investor is confronted with an array of concepts that are of a legal, financial and technical nature. While a concept such as the net For the seasoned property investor property terminology is part of operating income (NOI) is common across investment classes, the a daily vocabulary and becomes second nature. But for the novice property investor has to understand the specifc characteristics of property investor the sector can feel not unlike travelling in a foreign the property cash fow. The net operating income of a commercial country with one’s limited understanding of the local language. It property investment is determined by the strength of the lease, should therefore not come as surprise that a clear understanding of vacancy rates, rental escalations and operating costs. In the important property concepts and terminology can have a profound retail sector reference is made to “turn over” clauses and “trading impact on the success or failure of an investment opportunity. This densities”. In the industrial property sector practitioners refer to the new column ofers you an opportunity to query concepts that you “eaves height “, and possibly a ‘cubic metre ‘of space. In the ofce may have come across in the South African property market. sector it would be normal to speak of “gross rentals and operating costs”. In South Africa reference is made to specific local legal Investment markets across the globe apply investment concepts concepts such as the “erf “, and “huur-gaat-voor-koop “. that are generally accepted and understood across diferent markets. Having a common understanding of investment concepts not only The practical importance of rigorously defning property concepts facilitates fnancial interactions across markets and countries, but also is illustrated by the fact that over the years a number of legal cases ofers a common framework for property investments to be analysed. have had to resolve disagreements regarding the interpretation of, for instance, the infation rate, operating costs and the size of a For instance, investment concepts such as the investment yield are property let. used across investment classes. Whether one is invested in cash, bonds, equity and property. There is little disagreement that the Being an active investor in an investment class is a continuing learning investment yield reflects the ratio between income derived from experience which includes fne tuning one’s knowledge of changing an investment and the value of the asset. The development of market instruments and practices. Even for the most experienced international accounting and fnancial standards has also played an property investor, entering a new property market can be daunting, important role in the harmonisation of terminology across national requiring a steep learning curve. boundaries. Yet, important country specifc terminology continues to exist. This column provides a platform ofering an opportunity to discuss the critical legal, fnancial and technical concepts used by property For example, the use of debt fnancing is referred to as “gearing” in investors in South African commercial and residential property some countries and, “leverage” in others. British investors acquire markets. Readers are encouraged to “Ask the Professor” questions properties based on a “year’s purchase”, while in South African about the market. investors apply a “capitalisation rate”. 50 July 2013 SA Real Estate Investor www.reimag.co.za
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REI Offshore US Housing Crisis Is Over Q1 Strong For Europe PIC Set To Expand Into Africa The infamous US housing crisis which The first quarter of 2013 saw high levels of The Public Investment Corporation (PIC) is spilled over into worldwide markets and was direct real estate investment across Europe, awaiting fnal approval to invest up to R12 billion a major cause of the 2008 global financial building on the momentum at the end of 2012, in commercial real estate in various countries crisis seems to finally be over in the US at as both international and domestic investors across Africa, the PIC’s frst foray into property least. Residential real estate prices released targeted real estate assets. markets outside SA’s borders. by S&P/Case Shiller recently show that the Transaction volumes in the large markets of PIC recently overtook JSE-listed Growthpoint US residential market has begun to recover UK, France and Germany grew as they retained Properties as the biggest player in the SA after 5 years of negative growth. Te results the bulk of investor attention. This resulted commercial property space, with real estate assets show that in the 12 months to February in London, Paris and Moscow all ranking in under management now at a colossal R62,5bn at 2013, US house prices rose by 9.3 percent. the top 10 global cities by volume, accounting March 31. Tat’s up from R25,7bn four years ago. This index is based on the property values for US $11.5 billion of the $40 billion total Lesiba Maloba, GM of PIC says given the in 20 major cities. Te largest gainers were investment. Over 50% of transactions in shortage of existing stock in most African Phoenix with 23 percent growth, followed by these three cities was cross-border, as overseas countries, the PIC is looking to partner SA San Francisco (19 percent growth) and Las investors sought to gain exposure in the largest developers, institutions and retailers to develop Vegas (18 percent growth). Te two largest European markets. Richard Bloxam, Head new properties. “We don’t want to be a passive US cities, Los Angeles and New York, also of European Capital Markets at Jones Lang investor in a property fund. We prefer to be both recorded price growth over the 12 LaSalle explained: “Buyers are scrambling involved directly on an operational basis.’’ month period. for opportunities in the largest European But Maloba concedes that Africa is still “virgin commercial real estate markets and this strong territory”, with such vast potential that the PIC’s competition for the best product means we have African investment strategy is not yet set in stone. Valuable Input seen a widening of search criteria, including location, asset class and risk level. Craig Illman, CEO, Michael Bauer, GM, Jenny Ellinas, CEO, Dr Andrew Golding, Andrew Rissik, Propwealth IHFM Cypriot Realty CE, Pam Golding Director, Sable FX “Invest to hold, not to “The introduction of “Cyprus is the only “ L on d on h a s a n “Now more than ever fip or on-sell. Property REITs to the South European countr y extraordinary track when using R ands is a slow wealth creation A f r ic a n p r o p e r t y offering Permanent record of rental and to make an offshore process with a 10-15 investment market is Residency without capital growth which investment, look for year outlook in London. a huge advantage as an prescribing that you makes it an ideal long- value in your purchase Buying UK property international property have to physically live term investment - and price. A weak Rand for cash flow is what investment vehicle for there.” infation hedge, not to and infated asset prices most savvy buy-to-let South Africans.” mention potentially a offshore can contribute investors are looking currency hedge - for a to some hefty losses in for, capital growth is a residential buy-to-let the event that the Rand bonus.” investor.” turns the corner.” www.reimag.co.za July 2013 SA Real Estate Investor 53
LONDON BY MIKE SMUTS Help To Buy London’s new housing scheme gainst the now all-too-familiar Sir Mervyn King recently said in an while supply is still very limited and we may backdrop of economic turmoil in the interview with Sky News that the Help To Buy very well see some very strong growth over AEurozone and the ongoing questions scheme was “too close for comfort” to the US the next year. regarding the speed and timing of the global mortgage guarantee schemes that triggered recovery – the London property market the fnancial crisis and must not be allowed to Te success of the scheme will however lie in continues to prosper. become permanent. the UK Government’s ability to use this impetus to encourage more housing starts by the UK’s Ofcial fgures from the Land Registry show The scheme, unveiled in the Budget, will house builders in order to relieve some of the that London house prices rose 6.2 per cent in see the Government guarantee up to 15% of a pressure on the supply side of the equation. the year to April to an average of £375,795. mortgage on properties worth up to £600,000 Te monthly increase from March was 1.4 per and is due to run for three years. Just as importantly they will need to keep tight cent, according to the Land Registry. control over were the Help to Buy funds fow to Help To Buy comprises two parts: shared- ensure it benefts First Time Buyers (FTBs) who The biggest jump was in the borough of equity loans and a mortgage guarantee. Te are crucial to a well-functioning housing market. Camden, with an annual rise of 11.8 per shared-equity part of the scheme has already cent. Prices in Merton rose by 11.4 per cent begun and offers a 20 per cent equity loan It is a well-known fact that First Time compared to last year, in Hammersmith and to anyone, not just frst-time buyers, buying Buyers are the lifeblood of the property market Fulham by 11 per cent and in Wandsworth by a new-build home, meaning they can do so but they also play a key role in economic 10.8 per cent. with just a 5 per cent deposit. development. It is estimated that for every one buyer who purchase a home for the frst time, a London property prices are still racing ahead Te guarantee part of the scheme starts in further six transactions are created further up of other UK regions, but according to analysts January 2014 and will incentivise lenders the housing ladder. UK house prices as a whole will surge by at to offer those with smaller deposits better least 8 per cent and could even reach 13 per mortgages, because the Government will Each such transaction creates economic and cent over the next few years. guarantee 15 per cent of the loan. employment opportunity for those working in the industry. These may be as direct as the Te average UK home was worth £167,912 But although there is insistence that Help to estate agents, solicitors, surveyors, mortgage last month, up 1.1 per cent on the previous Buy is not aimed at pushing up prices, experts brokers and banks working on each transaction year, but analysts at Morgan Stanley predict say encouraging frst-time buyers to take out or opportunities that are created indirectly for house prices will rise 8 per cent as a whole with mortgages with high loan-to-value ratios will furniture manufacturers and suppliers, moving increasing lending and driving up bank profts, do just that. Te Organisation for Economic companies, painters and decorators. aiding further recovery in the housing sector. Co-operation and Development (OECD) has warned that “without a sufcient supply For an economy like the UK, heavily dependent The figures come as leading economists, response, some measures could create upward on service sector industry, a well-managed “Help the outgoing Bank of England governor pressure on house prices”. to Buy” scheme may just be a helping hand for Sir Mervyn King and former Chancellor far more people than just those getting on the Alistair Darling are all warning that the There is of course always the potential property ladder. Government’s “Help to Buy scheme” could of pushing up prices in any initiative that RESOURCES fuel property prices. increase demand for housing – especially Smuts & Taylor 54 July 2013 SA Real Estate Investor www.reimag.co.za
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GLOBAL LISTED BY MIKE WATTERS Global Diversification With the international REIT market he term “global village” in investment Te answer lies in looking no further than the As South Africa has already joined this parlance is now as relevant to real estate listed environment of the quoted Real Estate international trend, the intimate workings of Tas it is with the other major asset classes Investment Trust (“REIT”). Tis vehicle is now the REIT vehicle will be assumed as a given such as equities, bonds and currencies. a fully-fledged, universally accepted mature for the purposes of this article. investment product that offers considerable Timing your investment Investors have an almost unlimited choice advantages over fxed real estate. when considering an investment in global Among these are: Having made the decision to invest in the real estate. Te overriding consideration, that • liquidity; international REIT market, the next decision “property is a local asset”, should however • real time pricing; is to consider the macro-economic conditions always be kept in mind. The conundrum for • professional management; in global sub-markets. investors in global real estate is therefore “how • local knowledge; can you safely invest in a global asset class that • diversifcation or sector specialisation; Property yields (and by definition prices) has very local characteristics?” • size; and are driven by numerous factors. The most • tax transparency. signifcant of these are considered to be: Even with today’s powerful • expected (real) growth rates; 6.0% internet search engines such as UK IPD All Property Yield minus UK 10 year Gilt Average • pricing relative to sovereign long Google, it would take a potential bonds; and 5.0% investor an inordinate amount • pricing relative to underlying net of time to analyse location 4.0% asset value. specific real estate opportunities Property looks cheap An additional factor in recent 3.0% in sufficient detail to make an times has been the quantitative informed investment decision. 2.0% easing (“QE”) programs initiated Tis could be achieved by working Property looks expensive by central banks which has become 1.0% with a trusted agent or middle a major infuencing factor of late. man and an experienced property/ 0.0% asset manager but as experienced Te graph on the left shows how property investors know, real estate -1.0% markets can swing between relative can be as much a liability as an over-valuation and under-valuation. -2.0% asset if not managed well. 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 In this example UK property prices soared to unrealistic levels up to 56 July 2013 SA Real Estate Investor www.reimag.co.za
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GLOBAL LISTED Performance history together with forecasts published by rated analysts should be used in determining who to back. How much to invest in ofshore real estate Te rule of thumb is considered to be between 10% and 20% of your portfolio should be in property and about 25% of this should be ofshore. Tis would equate to between 2.5% and 5% of your portfolio in ofshore real estate. This can be allocated to internationally focused SA property unit trusts (eg Oasis Crescent International Property, Metropolitan Global Property, Catalyst Global Real Estate); international property shares listed on the JSE (eg Intu Properties, Capital & Counties, Redefne International, Nepi) or international asset managers (eg Allan Gray Orbis, Coronation, Prescient, Cohen and Steers). The first two can be accessed by investing ZAR currency whilst the latter will require a direct foreign investment using your foreign investment allowance. The prognosis for investment returns mid-2007 before retreating significantly. UK • Ofce REITS; REITS around the world are currently property prices relative to 10 year gilts currently • Retail REITS; attracting significant income flows from sit at historic lows. • Industrial REITS; investor pools hungry for yield. The central • Storage REITS; banks QE initiatives are exacerbating these The South African and Australian listed • Medical and Healthcare REITS; flows by creating “easy money”. Investors sectors are currently considered very expensive • Residential REITS; need to be mindful that when the QE tap is whereas on the flipside other markets such • Student accommodation REITS; and eventually turned of, interest rates will begin as Singapore, Hong Kong and Canada are • Infrastructure REITS. to rise which may cause a negative re-pricing probably neutral at the moment. Japan has of REITS. had a good run, mainly driven by QE, and is If you are investing via an asset manager, expensive, whilst the UK, Europe and USA they will most likely do the analysis and This eventuality is however considered to have further to run. selection for you. be some-time away – markets are currently discounting that the Bank of England will Choosing your management team Once you have decided to invest and have only begin to raise interest rates in late 2016. chosen your desired geographical locations, Although property investment is a medium Te other side of the coin is that interest rates the next decision is picking the actual stocks to long-term game, one should be aware are only expected to rise once economic growth to invest in. Here you should look at the of short-term market f luctuations that rates return to historical norms. This will individual management teams and the sectors inevitably result from having a listed and inevitably result in rising rental levels that will they operate in. liquid security. Management teams can be counterbalance higher interest rates. battered by too much “short-termism” from Redefine International has a diversified analysts and shareholders. Investors should Te guide here is to choose REITS with low mandate meaning it selects the regions and look beyond the short term and support those to medium gearing levels, where the upside of property sectors to invest in. It makes the big management teams that invest for long-term rental growth will exceed the cost of higher decisions on capital recycling and deployment. performance. Eliminate managers that chase interest rates. One also needs to look at those If you are a sophisticated investor and feel quick fxes such as buying short-term income REITS that have long-term debt and long-term you are more experienced in making these or speculative development with capitalised fxes on their debt - a dose of infation could calls yourself, you should invest in the sector interest. Future capital expenditure on ageing send the prices of these REITS into orbit. specialists. In the UK these would include, portfolios must also be kept in consideration. RESOURCES inter alia: Redefne 58 July 2013 SA Real Estate Investor www.reimag.co.za
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STRATEGIES BY ANGELIQUE REDMOND Turning your Home Into a holiday home enting out your house for a short period If you are going to rent out your home for a here is a major social revolution which could of time, either during the tourist season short period of time, lock up or remove all your help tourism and many families keep afloat Ror during a worldwide event, like the sensitive information. through the next four or fve lean years.” Olympic games, is becoming more and more During a fnancial crisis popular and there are now even websites on Also increasingly popular, says Rawson, are the Internet dedicated solely to this endeavour. As has been widely reported, Greece, Italy, systems whereby families exchange homes at no While it can be a great way to make some extra Spain, Portugal and Cyprus have been especially cost to either. Tis, too, he says, is helping to money, there are risks associated with it. hard hit by the current Eurozone and US keep the tourist trade alive. financial problems and this has caused major The risks unemployment in these countries - and a serious Says Rawson, “Te secret of success is to tap When you are looking for a long-term lease, you decline in most property values. Tere have, of into an already busy holiday renting agency or do extensive background checks on potential course, been some exceptions, such as central to advertise in carefully selected overseas media tenants, but with a shorter lease, sometimes Paris, central London, Brussels and Monaco, on your own. Recent reports indicate that the you don’t have the opportunity to do your due but the majority of Eurozone homes are now still rentals obtainable on short-term holiday leases diligence. Without the proper check, you have struggling to get back to 2007 values. can be very satisfactory indeed, especially if these no idea who you are letting into your home. are in golf estates or on the Atlantic Seaboard. It How have hard pressed bondholders looks very much as if there is a growing trend for in these areas responded to the crisis? If you are renting out your house, even for a homes to be made available for several months short period of time, you may have to get a new Bill Rawson, Chairman of the Rawson a year while the owners revert to dual living or insurance policy, which will cover your renters. Property Group, says that one of the trends other means which enable them to vacate their Tis will raise your insurance costs and you will reported back to him by colleagues living in homes for two to fve months.” need to fgure out and factor in the costs when Europe is that in the more popular tourist areas, deciding if it’s worth your while. many people, particularly young couples, have While short-term renting is not for everyone it been prepared to move out of their homes and can be a quick fx in a time of crisis and provide One of the biggest risks to renting out your to live with friends or family for part of the year capital when you desperately need it, but there home for proft, is your belongings will be left – and then to rent their properties out on short- are signifcant risks to opening your doors to behind. Any documents or personal items you term leases to visitors. strangers and you need to consider the pros and leave behind are exposed and susceptible to cons carefully before making your decision. theft by criminals posing as short-term renters. Tis, says Rawson, has proved a huge blessing Depending on the documents you leave behind, to the tourist industry because tourists are now someone could extract enough information to able to hire complete homes or apartments for RESOURCES impersonate you and run up debt in your name. as little as R500 per day. “What we are seeing Global Property Guide 60 July 2013 SA Real Estate Investor www.reimag.co.za
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REI Lifestyle UPCOMING SACSC CONGRESS IPD INVESTMENT ROCKY HORROR PICTURE CONFERENCE SHOW IN CAPE TOWN Cape Town Sandton Convention Centre 18 - 19 July Johannesburg 11 - 13 September Now in its 11th year, the annual IPD Property How does retail remain innovative in a investment conference is widely recognised world where shopping is evolving apace? as the prime property investment event in Te latest developments in the competitive South Africa, attracting leading Investment and changing retail landscape will be charted and Real Estate executives. Unrivalled at the South African Council of Shopping content is presented by speakers from IPD’s Centres (SACSC) 17th Annual Congress, the international network and by South African continent’s premier retail event. thought-leaders, in a compact two-day format with signifcant networking impact. Nedbank Corporate Property Finance, the leader in corporate property fnance, is Tis year we invite property onto the red putting its considerable weight behind the carpet to showcase its intrinsic value. largest gathering of retail and retail property professionals in Africa. It will sponsor the DISCONNECT SACSC Congress 2013. Fugard Theatre Cape Town Opening 9 July THE INTERNSHIP Richard O`Brien`s THE ROCKY HORROR SHOW has travelled the World since making it`s humble debut performance at the Royal Court, London in 1973 and continues to fascinate audiences around the globe. Tis Musical romp, produced with an all local cast and crew by Te Fugard Teatre, opens at the Fugard Teatre in July for a limited season only. Tis saucy, racy musical, which features hits like “Science Fiction/Double Feature”, “Dammit, Janet!”, “Sweet Transvestite” Cinema Release 12 July Cinema Release 19 July and the infamous “Te Time Warp” and A comedy you can not miss Tis ensemble drama starring Jason Bateman, “Touch-a, Touch-a, Touch-a, Touch Me” Hope Davis and Alexander Sarsgard is tells the story of a newly engaged couple, bought to the screen by Murderball director Brad and Janet, getting caught in a storm and Billy (Vince Vaughn) and Nick (Owen Henry Alex Rubin and explores the pressures coming to the home of a mad transvestite Wilson) are salesmen whose careers have put on people in a modern world surrounded scientist unveiling his new creation, a muscle been torpedoed by the digital world. Trying to by the very technology meant to make their man named Rocky Horror. Tere they meet prove they are not obsolete, they defy the odds lives easier. With today’s technology and some of the strangest creations on the planet. by talking their way into a coveted internship gadgets, it is sometimes hard to connect with at Google, along with a battalion of brilliant other people. Disconnect is about a group Tickets are available through Computicket. college students. But gaining entrance to of individuals searching for a real human com OR the Fugard Teatre box ofce on this utopia is only half the battle. Now they connection. As their storylines intertwine, 021 461 4551... must compete with a group of the nation’s a shocking truth is exposed about how most elite, tech-savvy geniuses to prove that technology mediates and defnes not only our necessity really is the mother of re-invention. relationships, but even our lives. 62 July 2013 SA Real Estate Investor www.reimag.co.za www.reimag.co.za
UPCOMING EVENTS World Green Building Convention 16-18 October eing held on African soil for the first time ever – this year South Africa will play host to the largest international network Binfluencing the green building marketplace, comprising 92 global councils – making this the most distinctive sustainable building gathering ever hosted on the continent. Te WorldGBC Congress will run in parallel with the premier Green Building Convention at the Cape Town International Convention Centre making it an incomparable opportunity for global green building thought leaders, industry professionals, innovators, environmentalists and students to exchange ideas, build capacity and accelerate the green building movement. Connecting Minds – visionary speakers in line-up Already confirmed in this year’s line-up of impressive speakers are: Richard Fedrizzi, founding chairman of the US Green Building Council and current Chairman of the WorldGBC; Romilly Madew, CEO of the Australian Green Building Council – voted as one of Australia’s top 100 most infuential people in 2012; Gunter Pauli, entrepreneur, author and initiator of the Blue Economy concept - a plan to develop 100 manufacturing innovations with viable business models that could generate 100 million jobs in 10 years - all with zero emissions and no waste; Lewis Pugh, an ocean advocate, pioneer swimmer and explorer who was named as a Young Global Leader by the World Economic Forum for his potential to contribute to shaping the future of the world through inspiring leadership; and Cameron Sinclair, the co-founder and CEO of Architecture for Humanity, a charitable organization which seeks architectural solutions to humanitarian crises and brings professional design services to communities in need. “Te Green Building Convention is not only about knowledge-sharing – it’s also about like minds connecting,” says Brian Wilkinson, CEO of the GBCSA. “We have created plenty of opportunity for delegates to engage with captains of industry and key decision-makers and opportunity to browse stands showcasing the latest in green building innovation.” Building value – what to expect An engaging programme has been designed to both challenge and shift paradigms, which will be enriched by a world-class exhibition - created to encourage business to business opportunity, stimulate the green economy and inspire both our global network local and international colleagues. Underpinned by the ‘ReWire’ theme this year ofers several exciting new activities such as city walking and building tours. A Sustainable City Tour, will be led by the City of Cape Town, and showcases the sustainable initiatives that the city is currently rolling out. In addition to the walking tours, delegates will be able to undertake building tours of various Green Star SA rated buildings in Cape Town and see frst-hand what sets these buildings apart. www.reimag.co.za www.reimag.co.za July 2013 SA Real Estate Investor 63
GREEN MONITOR BY SUSAN WARD Simple Ways To Save By greening your business 25 percent; turning of the computers at 7. Finding a supply of paper with maximum hether you run a home-based business the end of the day can save an additional available recycled content. or a brick-and-mortar retail business, 50 percent. Wthere are simple, easy things you can 8. Choosing suppliers who take back do to go green. And operating a green business is 2. Encouraging communications by email, packaging for reuse. not only good for the environment but good for and reading email messages onscreen to your business’s bottom line because conserving determine whether it’s necessary to print 9. Instigating an ongoing search for “greener” resources and cutting down on waste saves money. them. If it’s not, don’t! products and services in the local community. Te further your supplies or 3. Reducing fax-related paper waste by using service providers have to travel, the more Here are just ten easy-to-implement ideas for a fax-modem and by using a fax cover energy will be used to get them to you. running a green business from the Department sheet only when necessary. Fax-modems of Foreign Affairs and International Trade’s allow documents to be sent directly from 10. Before deciding whether you need to Greening Operations guides that you can put into a computer, without requiring a printed purchase new ofce furniture, see if your practice right now to make your business a more hard copy. existing ofce furniture can be environmentally friendly place. refurbished. It’s less expensive than buying 4. Producing double-sided documents new and better for the environment. Whether you run a home-based business or whenever possible. A Green Business Starts With Small Steps a brick-and-mortar retail business an off-site 5. Not leaving taps dripping; always close enterprise, there are simple, easy things you can Environmentally friendly actions don’t have to be them tightly after use. (One drop wasted do to go green. And operating a green business large to have an impact. Consistently reducing the per second wastes 10,000 litres per year.) is not only good for the environment but good for amount of energy, water, and paper our businesses your business’s bottom line because conserving use can make a huge difference, both to the 6. Installing displacement toilet dams in resources and cutting down on waste saves money. environment and to our pocketbooks. How much toilet reservoirs. Placing one or two plastic Go green by: containers flled with stones (not bricks) paper would you save over the course of a year, for in the toilet’s reservoir will displace about instance, if you always ran doublesided copies? A 1. Turning of equipment when it’s not being 4 litres of water per fush - a huge reduction small easy way to go green - but a big result! used. Tis can reduce the energy used by of water use over the course of a year. 64 July 2013 SA Real Estate Investor www.reimag.co.za
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MY STORY BY ANGELIQUE REDMOND Dreams Do Come True Just ask Musa Hadebe usa Hadebe, the second runner up “I working as a technical advisor for Westbank with unemployment rife and growing each day,” in the Master Investor of the Year First Auto, but I had this idea that I needed to says Musa. He then decided to quit his comfort Mcompetition has overcome adversity work for myself, so that I could create jobs for zone and taking a risk he resigned and started a to get where he is today, with a keen eye for other people and gain fnancial freedom. I had tuck shop in Yeoville, JHB. Not long after this investing, he caught the judges attention and his brothers and sisters who were not working and I he spotted a shop in Joubert Park already under story catapulted him into the top three. could see how hard it was to fnd employment, ownership but not being utilized to it’s fullest 66 July 2013 SA Real Estate Investor www.reimag.co.za www.reimag.co.za
potential. Musa approached the owner with a stream of income. I also like the relationship that I will never forget in my life. He did not proposal to make the shop more proftable and between a tenant and the landlord as I am a want to criticize the methods that I am using, he agreed. “Tat actually turned out to be the big very hand on person,” explains Musa. “When he just said ok I will ask you this question and break on my life because I opened a supermarket I started buying properties as I have mentioned I need an answer. I said go ahead, he said you there and I had to close the take away sport and earlier I started with two fats and the concept have a shop right? How much do you buy a loaf converted it to a laundry business, as times goes that I was using or learnt was to buy a property of bread for? I told him R5.00, he asked me I was working hard and the place was very busy, and then put a tenant in it, and you can subsidise how much I was selling it for. I said R5.50, I also managed to buy the bottle store as well,” it for maybe two or three years. After that it will but he asked me why I wasn’t selling it for explains Musa. be able to pay for itself because rent goes up every R4.50? I explained I have to make a profit year. It was my frst time investing in property and he asked why I was doing the opposite But with that success came rent increases and and I enjoyed it , but as they say, ‘experience is with the property. Tat is a lesson I will never Musa began thinking of investing in property, a good teacher.’ I continued to learn about the forget, and he also told me where to fnd those having seen how his landlord was making money property business and asked people that I knew properties all around JHB and even how to get simply through owning the property turned questions about investing. Te nice thing about the tenants. Musa onto the idea of becoming a landlord this industry is that most of the people who are in himself. it are very easy to talk to and they freely give you From there I must say I did exactly as he information, and in much the same way I help said with all the properties that I bought and As he says, “what got me interested in property anyone who asks me for property advice.” they were all cash positive properties. I never is that I could see that if you have it and are looked back; today I am only interested in taking care of it, property can bring you lots of A major source of inspiration for Musa properties that are going to generate money money in the long run.” was Mark Anthony, a rental manager in the immediately.” Hillbrow/ Braamfontein area. He knew Mark He began reading SA Real Estate Investor from a business relationship between the two Knowledge and instinct play a key factor in Magazine and attending property seminars to when he ran a cleaning company that contracted Musa’s success, with little knowledge about the learn more about investing in property. It was out to his building. So one day Musa went to him industry he picked up on one of the key factors during the sale of his frst property that Musa and they sat down, “I told him that I have started to success, cash generating property and using leant he was a shrewd negotiator, “while I was buying properties because I liked what he was other peoples money to make you money. With looking for a property to buy I came across this doing and I want to learn from him, he was so a good instinct and the right knowledge Musa Estate Agent in Kempton Park, they were selling happy to give me few hours of his time and he has realised his dream of becoming fnancially a fat for R390 000, so they showed me the place asked me to explain to him what I have done and free and generating employment, “ Most of and I liked it. I came back afterwards to talk to how far I am. the information I needed I got from SA Real the tenant about the rent and other things that I Estate Investor Magazine,” says Musa, “ Some wanted to know, it so happened that the tenant I explained everything about the methods that of the people I look up to are Gordon Mackay told me that this 2 bed roomed flat actually I was using; from there he said something to me and the P3 Property Group.” belonged to the same agent and that he owned another flat in the same complex. Next day I called the agent and he and his wife came by and we discussed them selling both fats to me. Tey said if the price is right they would sell, so we negotiated. I ended up buying both fats for a good price, paying R335 000 for each, which was a very good price to pay.” With a 100% bank fnanced bond, Musa was now a property owner to not one but two properties. And he hasn’t looked back since that first sale. “ I currently have 10 properties and own my own company called Mthimkhulu Property, I buy, sell and rent property and do rental management, and my properties have a market value of about R7, 5 million.” “My fnance strategy has always been to apply for a 100% bond and if I don’t get it then I pay the deposit using funds from my business’s. My property strategy is to buy old houses, renovate them and rent them out, generating a steady www.reimag.co.za www.reimag.co.za July 2013 SA Real Estate Investor 67
AREA REVIEW BY ANGELIQUE REDMOND 5 Star Area Sea Point ticks all the right boxes ituated between Signal Hill and the Today residential property in Sea Point has Seaboard. The best time to visit this area Atlantic Ocean, Sea Point is one of the become more sought-after, which has led to a is during the summer, between November Smost densely populated and vibrant recent surge in the property values in the area. and April, when the weather is fine and hot. suburbs of Cape Town. Currently the average price of a house in Sea Winter tends to be cold and wet, but the storms Point is R 3 784 144. Tere are currently 434 around Cape Town are a sight to behold, Sam Wallis, a commander serving under properties on the market in Sea Point. especially when tucked up in your Sea Point Captain Cook, who camped with his accommodation on the beachfront. men there to avoid the smallpox epidemic Divided by Main Road, there are two Close By attractions sweeping through the Cape, named Sea Point areas of Sea Point. Above Main Road is the in 1776. By the early 1800s Sea Point had predominantly residential area of Sea Point Adelphi centre: Originally opened in 1974,this begun to develop as a residential suburb and with homes and guesthouses looking over centre on Sea Points Main Road has a plethora by 1839 it had connected with Green Point to Table Bay and Robben Island. Below Main of clothing shops, grocery stores, and boutique become one municipality. In 1875, a census Road exists the high-rise apartment blocks items for your tourism de lights. indicated that the combined population of and hotels, which face the sea. Te Sea Point Sea Point and Green Point was 1425, and by promenade is a popular tourist and local V&A Waterfront: This is a mall with a 1904 this number had grown to 8839. destination for jogging and walking dogs. Find difference; situated in a working harbour, the locals here on a Sunday playing an intense the Waterfront houses over 400 shops and Te liberal politician of the Cape Colony soccer match or walking their dogs restaurants. Located next to this mall is the and MP of Cape Town, Saul Solomon Two Oceans Aquarium. Tis is a must-see if inf luenced much of Sea Point’s early Sea Point is flled with locals from the area, you love marine life and / or have children. development in the 1800s. Solomon was Green Point, and Bantry Bay, but it also has Things to do near Sea Point perhaps best known for his fght against racial a strong tourist population. Find the young inequality in the Cape, although he was also and hip in this area, as well as a large working Right up the road from the Sea Point suburb known as the founder of the Cape Argus. population. Everything from schools to is Table Mountain the iconic flat-topped During 1862, the opening of the tramline nightclubs exists in Sea Point, drawing a large mountain for which Cape Town is so famed. in Sea Point further boosted the area’s crowd of vibrant people. You can take the rotating cable car up to the development with it gaining the reputation top or, if you are of the more adventurous sort, When to visit Sea Point? as Cape Town’s frst commuter suburb. On 1 take the tough hike through the forests and up December 1905, the railway line from Cape Sea Point is located just up the road from to the top. Either way, the views are stunning Town had reached Sea Point. the V&A Waterfront, both on the Atlantic and endless. 68 July 2013 SA Real Estate Investor www.reimag.co.za www.reimag.co.za
Settle for nothing less than a Sunday dinner home or want to proft from real estate, a house year. However, in 2008 the number of properties and live jazz performances at the Winchester for sale in Sea Point is an excellent investment. sold in Sea Point dropped to approximately 380. Mansions Hotel on any given Sunday. Here you While numbers of sales have stayed at the levels can experience a classy afternoon entertainment According to Lightstone figures, the area is seen in 2008, these are still much higher than with many other tourists and locals. popular among all age groups and buyer types numbers experienced in many other suburbs with around 30% of recent buyers aged between around the country. If you happen to be staying in Cape Town 50 and 64 years old, 28.57% aged between 36 Demand for property accommodation during the month of December, and 54 years old, 24.76% aged from 18 to 35 years take a break from the Christmas activities and old and 16.57%, 65 years old or older. He adds According to Goslett, the most sought-after real come down to Sea Point for the Festival of that the largest percentage of existing owners estate in Sea Point last year was property that Chariots. Te East-meets-West experience will (35.03%) are from the 65 years old and older age fell within the R800 000 to R1.5 million-price move you and inspire you as to the diversity of group, this group also accounts for 37.33% of bracket, accounting for 37.9% of all properties our country. those who have recently sold their property. sold in the area between April 2012 and March 2013. He notes that another popular price Getting around Goslett says that from 2004 to 2008 property bracket were properties priced between R1.5 Sea Point is on the Golden Arrow and Hop On prices in Sea Point saw steady annual increases, million and R3 million as 33.3% of homes sold Hop Off bus route, so you’ll always be at the however, in 2009 prices dropped for the first within the same period fell within this price centre of transportation. time. Te decline was short-lived and by 2010 range. Around 14.1% of properties were sold property prices had regained what they lost and for between R400 000 and R800 000, while Area property information hit record highs of an average of R3.2 million 12.5% were sold for R3 million and higher. Only Adrian Goslett, CEO of RE/MAX of Southern for a freestanding home and approximately 2.2% of properties were sold for under R400 000 Africa, says that due to the large number of R1.564 million for a sectional title unit. While between April 2012 and March 2013. high-rise developments, sectional title units in prices saw another dip during 2011, they have Sea Point outnumber freestanding homes by once again gained momentum and are currently Whether you want to live in Sea Point or buy approximately nine to one. Houses in Sea Point signifcantly higher than the prices seen during property for investment purposes, this area gets 5 range from modest to grand. Above Main Road, the peak of the boom period. stars from our property team, and is a great place one can fnd a large, exclusive villa or house for for long-term investment. sale, while below the road, one can find more He notes that property sales volumes were RESOURCES affordable options dotted between blocks of remarkably high from 2004 up until 2007, with RE/MAX fats. Whether you want to make the suburb your an average of around 600 properties selling per www.reimag.co.za www.reimag.co.za July 2013 SA Real Estate Investor 69
TECH TALK BY RUSSELL BENNETT Open-Source Is Back For Your Desktop ack in the late nineties and early noughties, managed to establish itself as a dominant force in Te fip side of course is that in Android, much when I was still deeply entrenched in mobile computing products, but while Microsoft of the fresh-faced idealism of those old Linux Bthe burgeoning technology journalism have been busying themselves tweaking and tuning distributions is gone. Android is not about game, open-source software (OSS) was one of the latest incarnation of Windows to be suitable freeing up your computing hardware to be used my pet “beats”. Specifically, the drive to get a competition, the Android explosion has been precisely as you want to use it without the big and Linux distribution capable of taking on the giant quietly slipping the other way, and is now making an bad corporate monarchy dictating what you can Microsoft in the desktop space. appearance on otherwise conventional laptops from and can’t do (and how many times a year they giant ICT providers like HP. need to be paid for you to do it). It’s more about In truth, this was a favoured topic for many tech simply shifting the crown from the head of the journos of the time. And why wouldn’t it be after Tat’s right, HP is producing an Android-powered decaying king and on to the less-wrinkled brow all, as who isn’t interested in reading about a way notebook called the SlateBook X2. Effectively of a new divine leader. which could drive down the purchase price of new identical to the Split X2, which sports Microsoft’s PCs by R1000 overnight, without compromising Windows 8 OS, the SlateBook enters the market Make no mistake, Android is still far more a whit on computing horsepower or component at 60% of the cost of the Redmond-based version. open to tinkering than the Microsoft platform, quality. And the big-hitters of the Linux world And even more importantly, it doesn’t sport a and remains at its heart dependant on a globally- were pushing just as hard to make this happen, clunky, difcult-to-use and strictly-for-techies user distributed development model, but it’s far for obvious reasons of their own. Until along came environment, but boasts the same sleek and friendly more controlled and constrained to traditional Mark Shuttleworth with the Ubuntu Linux distro, operating environment which many of us are already financial mechanisms than Linux was just a which still today is probably the strongest contender accustomed to using on our smartphones and tablets. decade ago. Maybe, from an ideals perspective, for desktop mindshare in the OSS world. not the perfect result, but without these core It’s an ingenious move, and whereas by the mid- changes the Linux market could never have However, despite all this media focus and massive 2000s I had realised that Linux in its existing achieved what Google is doing today with R&D spend, it never happened. Today Linux still favours was never going to be able to successfully Android. accounts for about 1% of global desktop operating muscle-in on the MS-dominated desktop space, systems, or a sixth of what self-styled niche player in this Google-backed incarnation the opposite Proof, perhaps, that in the modern world, the Apple can boast of OS X. Itself, incidentally, a sentiment is true. Driven by the groundswell it has old axiom about there being “No such thing as a desktop environment firmly rooted in UNIX. created in mobile computing, Android has more free lunch” is a more ruthless and absolute truth However, all that may well be just about to change... than just a chance of grabbing a healthy slice of than ever. Te days of idealism and free techie this shrinking pie. In fact, if moving to Android love may be no more, but the fruits of this fancy- Tis time, the drive is happening more quietly, has similar implications for the cost of laptops, free philandering are just about ripe and ready to but with probably the only tech company capable of notebooks, and the rapidly-receding PC, it’s just fall where they may. taking the fght to Microsoft at the helm. Google’s about a surety that the tide will shift very, very fast RESOURCES Linux-based Android platform has already for Microsoft’s fortunes. Linux 70 July 2013 SA Real Estate Investor www.reimag.co.za www.reimag.co.za
MOTOR TALK BY RUSSELL BENNETT The Future Not Te Present here’s one thing which is certain about control and you’ll shed kms of range like a going to solve any issues. It’s pure PR, a high- the Electric Vehicle (EV) today, even Russian stripper sheds fur overcoats. profile gift which will also serve as a rolling Tto die-hard petrolheads. Tey are the advertisement and nothing more. A gesture future. End. Of. Discussion. At this point, I have to say, it would be a lot designed to ease the fears of the average easier for me to join the hordes of motoring consumer without actually resolving the real As a vocal opponent of the EV movement, this writers who wholeheartedly support the EV reasons behind these concerns. A veritable is difcult certainty to swallow. But it doesn’t drive. After all, it’s the direction the entire celebration of the outright victory of marketing make it any less true. As soon as EVs can be industry is moving in, and swimming against over engineering a la the eternal Dilbert produced for a similar amount of money to more this tide is about as futile as the veritable cubicle-based battleground. conventionally-powered counterparts, and as breaking wind is against powerful natural soon as battery development hits a 500km range forces. The auto manufacturers would be Briefy, then, here are the conundrums which between recharges and a recharge time of under happier with me, the average reader would stop really need solving. A 100% charge real-world 10 minutes, the days of fossil-fuelled cars will lambasting me about being “out of touch with range of around 160kms, provided you leave be over. the real world”, and we could all continue to the climate control of. Batteries which actually careen headlong and blind into this Brave New need to be charged to only 80%, or else long- Which is probably why Nissan SA has just World of automotive propulsion. term degradation worsens dramatically. In supplied ten new LEAFs (it stands for Leading, other words, if you want more than 130kms Environmentally friendly, Afordable Family However, that would mean burying my head range from your EV, you’ll be shelling out for car) to our own power parastatal - ostensibly in the sand and ignoring the real issues at stake new batteries much sooner than the already- for testing. To assist with paving the way for here. Letting the hype wash away rationality ambitious projections. Performance which the EV in SA, to ensure that our infrastructure and carry us all along powerless on its crest, degrades as the charge is consumed, so while can handle the wave apparently poised to break to crash against whatever hidden obstacles your car might be able to keep up with trafc on upon it in the near future. To leverage the might present themselves blissfully unaware. In the way in to the ofce in the morning, it’ll be lessons learnt by Nissan from global rollouts of fact, opposition is all that will save the electric sluggish and tired in trafc on the way home. this innovative product and ease these teething car in the end. If, as is currently happening, problems for local consumers eager to jump on manufacturers are allowed to food the market On the supply side, for the equation to start the electric wagon. with an unfinished, unresolved product as making real sense, we need to increase the they are currently trying to do, when the real mix of clean energy sources over dirty coal Except that none of this actually eases the real problems become common knowledge the or even potentially catastrophic nuclear. Tat underlying problems plaguing the EV across technology may find itself shelved yet again is literally all Eskom could need to research the globe. Although in perfect conditions a never to recover. with the introduction of cars like the LEAF, brand-new LEAF may manage over 200kms and that’s a consideration which it should be range, in more typical driving conditions this Te EV needs more development before it’s taking into account already even without the tumbles dramatically. And heaven forbid that a viable alternative. Gifting R4-million worth EV in the picture, but is moving slowly and you may want to heat your cabin in winter, or of New Breed cars to a parastatal which hasn’t very ponderously on without any real will or cool it in the summer. Activate the climate thought about the future in two decades is not future vision. www.reimag.co.za www.reimag.co.za July 2013 SA Real Estate Investor 71
LESSONS BY ANN NUROCK In Business It’s all about hese days it’s hard to trust anyone. proven benefts. One of them is speed. In his In business, this means that leaders now Government, business leaders and even book, “The Speed of Trust”, Stephen Covey have to be more respectful; not only to their Tsportsmen have let us all down and trust talks about the fact that when there is trust in an employees but to their customers as well. It has now fallen to disturbingly low levels. organization or any business relationship, there is is more than just about the bottom line; it is collaboration, transparency and loyalty. And it is also about how you achieve it in terms of your Let’s take a look at South Africa: while we may true, because people recommend you more; they leadership skills and ethics. trust the institution of government, we don’t place more orders and employees want to work Social media trust government ofcials and the main reason for you. for this is corruption. No surprise there but what We live in a social, transparent and sharing world is surprising is that, South Africa aside, people in Relationships with trust are then based on that requires trust to function efectively. When the world simply don’t trust CEOs. In fact they commitment and everything speeds up … this it comes to brands, social media has given the would trust government ofcials more than they results in costs going down. Te reverse applies customer power. Tey can instantly tell if a brand would CEOs. when there is no trust. There is friction and is not authentic. It’s simple, if your brand does politics, and everything slows down … resulting not have the right intent, they won’t trust it. All over the world, the business sector with the in costs going up. And this means, your brand is vulnerable and lowest trust scores is a sector in which we should can be exposed by just one tweet. And through The new world order trust the most – fnancial services. People do not careless messaging, a familiar brand can lose the trust the very institutions where they put their People are fast realising that what they used trust it has built up over years - the consequences money? Shocking! Now, in South Africa, we’re to trust and their reasons for doing so have of which can be severe, if not fatal. lucky that regulations are so strict that it has changed. They don’t have to trust the same Trust is no longer a ‘nice to have’ … it’s almost forced a trust culture of fnancial services. source, the same opinion formers, and the same an absolute imperative leaders. Tey can form their own opinions based What I found so enlightening from all the on the shared experiences of like-minded people. People want to work for and with people who research and with working on some of the world’s have the competence and who can deliver. leading brands, is that trust is not some elusive, Statistics show that 93% of people trust people Results are not only the reason why we are in intangible concept. Trust is a basic instinct. It can just like themselves more than anyone else and, business, but also serve as one of the greatest be taught, established, built and restored. Trust even more surprising, 70% of people now trust motivators of trust. But these days it’s also about holds every relationship together. We know that the word of strangers more than anyone else. how we get to those results that matter. It is about without trust, there is nothing, be it business or Take a look at how we get our information today your intent, your integrity and how you treat your personal! – from people we don’t know on Twitter. We go employees and customers. to ‘TripAdvisor’ for holiday advice from strangers RESOURCES Why is trust important in business? and when we want to recruit someone, we use Relationship Audits and Management When you have trust, you have a whole load of LinkedIn for recommendations - strangers. (RAM) 72 July 2013 SA Real Estate Investor www.reimag.co.za
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