Johannesburg inner city restoration shows steady progress

Posted On Thursday, 19 July 2012 18:48 Published by eProp Commercial Property News
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Johannesburg’s inner city and surrounds continue to show signs of regeneration. Slowly but surely the streets really are being taken back by a number of dedicated and insightful players.

Property-Housing-Residential

Johannesburg inner city has nearly a quarter of a million residents living in approximately forty thousand units. 12% are in the R15 000 a month income bracket; 80% earn R1500.00 or more. As many as 20% of inner-city residents are university graduates and some 35% have diplomas.

According to a survey by Trafalgar Property & Financial Services: the reasons given for choosing the inner city in which to live included affordability (22 per cent), proximity to work (11 per cent) and proximity to schools (11 per cent).

The goal of the Metro’s Inner City Regeneration Strategy is to raise and sustain private investment in the inner city, leading to a rise in property values. One strategy is “discouraging sinkholes", meaning, properties that are abandoned, overcrowded or poorly maintained, and which in turn "pull down" the value of entire city blocks by discouraging investment.  

There are two names that are certainly discouraging sinkholes in the inner-city and that’s Joshco and TUHF.

The Johannesburg Social Housing Company (Joshco) was established in 2004 by the City of Johannesburg to provide affordable rental housing to the lower income market and to help eradicate the housing backlog. At present, it manages more than 5 000 affordable rental accommodation units and has reduced default on payments from 87 percent to only 6 percent since it started operating in 2006.

In 2010 Joshco received the United Nations’ 2010 Scroll of Honour award for its holistic approach to providing shelter. It is the world’s most prestigious human settlement award; it recognises initiatives that have made outstanding contributions in various fields such as shelter provision, highlighting the plight of homelessness, and leadership in post-conflict reconstruction.

Joshco only provides rental accommodation to residents in the lower income bracket, and tenants can’t claim ownership or don’t become the legal owners of the property they’ve rented for a number of years.

The company intends expanding its housing portfolio to more than 10 000 units by June. Its aim is to develop over 11 000 housing units in Johannesburg. It currently manages about 7 600 rental units, of these, only 930 are instalment sale for ownership.

Recently eight buildings in derelict areas in the inner city have been refurbished by Joshco.Areas include: the CBD, Berea, Joubert Park, Hillbrow and New Doornfontein. These building were previously occupied by criminals and squatters.

The buildings were completely gutted and transformed into affordable communal accommodation. Rent is from as low as around R600 a month.

In an interview with the Star Joshco chief executive Rory Gallocher said: “Years ago the only thing property owners wanted to talk about was selling up and getting out. However, things have changed. On the occasions that we have been in the market to buy property in the inner city, we have experienced difficulty finding buildings that are priced at a level that would allow it to work for our market because of high demand."

The vision for individual buildings is “order and liveability” to replace “chaos and discomfort” through basic management. Joshco says it believes in proper management of buildings by implementing a well-informed and factually accurate plan, where rules are clearly stipulated.

Joshco is very mindful of the fact that inner-city residents are not middle or high income salaried people. A substantial amount are in low-wage employment and who are self-employed, either trading or doing domestic work. Many are small entrepreneurs whose activities function because of their location.

Gallocher believes that good management of buildings will attract business to the inner-city. The latest buildings are Casa Mia in Hillbrow, once a degraded residential hotel that was invaded; The Chelsea in Hillbrow; MBV in Joubert Park; La Rosabel in Hillbrow; Raschers in Loveday Street; Selby and Europa House in the CBD; and Lynatex in New Doornfontein, which is used for temporary, emergency accommodation.

On a slightly different tack is Johannesburg urban renewal property group TUHF (Pty) Ltd. TUHF provides commercial property finance to emerging and established entrepreneurs to buy and refurbish affordable rental housing residential buildings in the inner cities of Gauteng, Durban, Pietermaritzburg and Port Elizabeth.

TUHF is making a significant contribution to the purging of dereliction in the inner-city and the development of housing that is affordable and secure. So far TUHF’s footprint is R125m in equity investments.

TUHF has assisted entrepreneurs through financing and business support to purchase and refurbish 490 derelict buildings over the past nine years. The focus is on quality rather than quantity deals, to minimise the risk of bad debt.

The company has attracted equity investments from large and well respected organisations, namely the Public Investment Corporation (PIC) and the National Housing Finance Corporation (NHFC). The NHFC’s current investment is a debt equity conversion of R75 million converting R40 million for 20% of B shares and R35 million for preference shares in TUHF.

Futuregrowth’s Development Equity Fund, on behalf of its clients, has acquired a 12.5 percent equity stake in TUHF. TUHF, together with its investors,foresee an increase in investment in inner cities, and the stimulation of business which will lure companies to return, expecting a boon for the restaurant trade as well as eventually inspiring leading chains to scout out the area as well.

Futuregrowth was the first institutional investment manager to provide TUHF with a loan facility that has increased from R50m to R350m in a five year period. The Development Equity Fund is part of Futuregrowth’s suite of socially responsible investments.

TUHF previous success stories include: Pontebello in Hillbrow;Monis Mansions in Johannesburg’s CBD; Allenby Court in Highlands; Hollywood Heights in Hillbrow;Waverley Court in Hillbrow and Avon House in the Fashion District of Johannesburg. Most recently Dolphin Court, in Joubert Park was revamped with funding from TUHF.

Joshco and TUHF are making huge contributions to inner-city renewal in completely different ways. Propertuity, private developers of the Maboneng precinct have shown wonderful innovation and creativity, and there are other players too who have shown great commitment. In essence their work is complimentary and supplementary in a diversity that tackles renewal in overlapping housing/accommodation markets. With such confidence in mind the residential market in the inner city seems unexpectedly rosy given the slowness of the economy. One can’t help wondering how long it will take for the big banks and institutions to wake up and catch on.

Last modified on Wednesday, 14 May 2014 15:26

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