Prasa looks to property to end reliance on subsidies

Posted On Thursday, 11 April 2013 09:52 Published by eProp@News
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THE state-owned Passenger Rail Agency of South Africa (Prasa), which operates commuter rail service Metrorail, is to spend R1.5bn in the next three years to buy back lease agreements on property it holds to boost earnings from its property portfolio and cut dependence on subsidies.

The agency’s CEO Lucky Montana said the agency had been given a R3.7bn subsidy by Treasury for this year which will largely go to loss-making Metrorail.

Prasa, through its Corporate Real Estate Solutions and Intersite property units, owns a property portfolio including 374 rail commuter stations which account for a small portion of 4,475 properties registered in its name and 4,200ha of land spread across Durban, Johannesburg, Cape Town and Pretoria.

Through the development and sale of some of its property, Prasa expects to generate R700m from its portfolio in 2015-16 rising to R1bn a year from 2018. In December the Prasa board approved the allocation of R450m to allow the agency to buy back development leases on high-yielding properties.

The average lease period on these contracts was between 40 and 50 years, according to a document prepared to secure approval for the programme. The leases allowed Prasa only to collect "base" rental for a property and not "full market" rentals as achieved by the leaseholders, it said.

"We have a lot of leases but the money doesn’t come to us," Mr Montana said in an interview on Tuesday.

"Where some of these properties are generating R700m in rental we are getting only R100m."

Nationally Prasa has identified 95 development leases it could potentially buy out, according to a Prasa strategy document. Most of these leases (79) are in KwaZulu-Natal. The agency had so far made 12 offers worth a cumulative R300m, Mr Montana said.

"I can’t go into the details of the properties, but we are pursuing this and we hope that by the end of April we will have firm offers," he said.

Part of the restructuring of its property portfolio was the disposal of residential properties, he said.

Part of the broader programme was the agency’s station renaissance programme. Under this plan Prasa was borrowing from the experience of rail operators in Japan and Europe where stations were designed with a focus on aesthetics and functionality.

Station precincts are planned and developed as pedestrian-friendly mixed developments moving the station beyond being a point of arrival and departure for a train journey. Such developments include shops, banks and restaurants and conference venues in much the same way as modern airports do.

Prasa has identified 25 of its stations for upgrading.

Over the medium term Prasa plans to spend a total of R5.5bn on the development and commercialisation of its properties.

Of this R3.2bn will be invested in new developments, which would include private developers, and R822m will be invested to bolster revenue generated by CRES "internal initiatives".

"The aim is to ensure that we strengthen Prasa financially and make it commercially viable for the future," Mr Montana said.

The agency, he said, was obliged to exploit income from its assets.

Source: BD


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