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Rabie Group appear to have snagged the good deal

Posted On Wednesday, 21 April 2004 02:00 Published by Commercial Property News
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Nedcor: sale of the Century

Colin Green Rabie Property GroupLOCAL property developers the Rabie Group appear to have snagged the good deal when it outbid two established property contenders to secure the property owning, construction and development business of Century City Ltd for R118m from bruised banking group Nedcor.

Cape Business News hears reliably that Rabie outbid retail property giant Hyprop and local boys Spearhead.

One assumes Rabie, the largest independent commercial and residential property developer in the Western Cape, got the nod after earlier establishing strong links with the Century City development.

Rabie has already launched a R400 million luxury sectional title project last year. Construction of controversial The Island Club is well underway on the North Bank of Canal Walk with first transfers scheduled for the middle of this year.

Cape Business News hears that Hyprop, which led a consortium in acquiring the Canal Walk Shopping centre for R1.2bn last year, were not terribly enamoured at being outbid by Rabie. Hyprop and consortium partners the Ellerine Brothers, were purportedly petitioning Nedcor over the Rabie deal at the time of going to press.

Naturally, the rights to develop the remaining land at Century City would have been useful for Hyprop, who no doubt would entertain plans to develop additional retail nodes.

One can understand Hyprop’s frustration at being outbid by Rabie, because current retail demand would have easily justified developing further retail space adjoining Canal Walk. Blue chip anchor tenants and long leases would have been a cinch.

Property sources in Cape Town describe the deal as a brilliant opportunity for Rabie, who clearly did not overpay for the assets and rights. One noted frankly: “At that price I would not be unhappy to get my hands on the remaining land and rights at Century City. This is a deal that can be unpacked at a huge profit over the years.”

It seems likely Rabie will use the available land for residential development as the rights to develop additional retail space rests with Hyprop.

Certainly there seems scope for Rabie to simply sit on the land, perhaps hoping that another property developer (perhaps Hyprop) comes along with a lucrative offer.

In terms of the agreement, which is subject to certain suspensive conditions being fulfilled, Rabie will effectively acquire all the undeveloped land and associated development rights at Century City.

Transfer is expected to take place within the next few months.

While it seems Nedcor unloaded the undeveloped land and rights at a bargain basement price, there is a backdoor clause allowing the banking group to retain options to participate in specific future development projects in a joint venture with Rabie. Nedcor will also be afforded opportunities to finance future developments.

Interestingly the land and buildings at the struggling Ratanga Junction theme park are included in the agreement and will be transferred to the Rabie Group within two years.

Notably the Ratanga Junction rides, which have operated in the summer months on a break-even basis, are not included in the sale. Last year Gold Reef City Casino and Resorts supposedly bid R1 for the Ratanga theme park rides.

Maybe the possibility exists that Rabie can later utilise the Ratanga land for further residential development if buyers for the theme park rides (replete with a new location) can be found.

The Rabie Group will also assume the future development of the Villa Italia apartment complex, which was pre-sold in record time by Century City Ltd late last year.

Rabie Group chairman John Rabie contends the group - with its specialized development background and its proven commitment and experience - is well qualified to take the Century City development forward and to realize its full potential.

“We are not assuming a short-term position. We are taking a long view and assure property owners and stakeholders that we will do justice to the unique urban design framework envisaged for Century City.”

In a press release accompanying details of the deal, Nedcor CEO Tom Boardman argued that “the sale was in line with Nedcor’s strategy of focussing on its core banking operations and disposing of non-core assets.”

Poor Nedcor inherited Century City from beleaguered banking group BoE, who in turn rescued former Century City owners from a dangerous debt trap.

Whether Nedcor should have hung onto the whole of the Century City development, which is technically still in its infancy, until optimal value was unlocked is worth debating vigorously. Certainly Hyprop - at least according to their latest financial report – is making a more than fair return from Canal Walk.

Gut feeling is that opportunistic Rabie will do even better.

Last modified on Monday, 17 June 2013 19:50

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