Shrewd property practitioners are snapping up opportunities in the management and development of mine land and buildings. But sceptics say there aren't many success stories, and that new entrants often trip up on unexpected heritage, geotechnical or environmental obstacles.

In a deal to be announced this week, property services group Broll has acquired 50% of Oasis, a residential property management company that manages flats and houses owned by mines. The Royal Bafokeng Nation holds the other 50%.

It is a shift for Broll, which is better known as a manager of large institutional shopping centres.

"We want to extend facilities management to mining," says CEO Arnold Meyer. "In Oasis we have a few clients with enormous residential holdings, so we don't have to deal with thousands of small tenants."

Oasis manages leased and owned units in Rustenburg. In a small mining village such as Mooinooi, Oasis becomes the municipal authority.

Apart from the monthly income stream generated by rentals, the deal gives Broll empowerment kudos and, says Meyer, brings the company "closer to the Royal Bafokeng and their property holdings".

Oasis manages 500 000 m² of residential space made up of about 2 400 units, some owned by the mine, some rented from private owners in the town.

Oasis is focused on Rustenburg right now but Meyer says the plan is to tender for several mining towns in North West province. "Our core competence is to run small, confined and defined towns with all the necessary services," he says.

Broll is looking at wider possibilities in mining towns.

Residential property is just a start: offices, workshops and recreational facilities are also in the company's sights.

It is generally agreed that outsourcing property services for mines is a good idea. It moves away from the paternalistic mine management style of the past, say analysts.

"But who is the property manager working for?" wonders Petro Heydenrych, CEO of iProp (formerly Rand Mines Properties).

"Mine houses are by definition rental stock and maybe that's still a little paternalistic."

Perhaps the real opportunities lie not in property management but in fresh development approaches for mine land. Analysts urge caution, however, saying that mine land is far more complex than developers tend to expect.

Take iProp industrial estate Crown City, for instance. South of the Johannesburg CBD, the 65 ha of land took about eight years to sell. Now 95% of it is committed for development. Prices are much the same as those in high-demand northern nodes at around R200/m², though the location is less popular.

"The land was covered by a dump that took 10 years to remove," says Heydenrych. "Underneath, we found shafts, contaminated soil and old mine infrastructure."

iProp's land holdings are in Johannesburg and, unlike far-flung mine land, generally enjoy rising demand. "There needs to be demand - mining land can be costly to bring to market," says Heydenrych.

And things can become even trickier when developers have to contend with heritage considerations. The controversial Crown Mines village is a case in point. Built in the 1920s, the village now consists of just 34 houses in the middle of a large industrial area.

Heydenrych feels that the village is no longer of heritage importance after decades of informal refurbishment, add-ons and deterioration.

She concedes that others do not share her view.

Indeed, because the original village was built so long ago and because of its history as a mixed area during apartheid, Crown Mines has been proclaimed a heritage site.

iProp recently sold the village to an undisclosed private developer who, Heydenrych hopes, will have more success in creating a practical residential area. Transfer is expected to take place in a few weeks.

The risk of developing mine land lies in its location: much of it is distant or isolated. Developers need to carefully consider who their target market would be.

As Heydenrych puts it: "Sell it? Who wants it? At least iProp's land is urban and has commercial or industrial value."

Financial Mail
Publisher: Business Day
Source: Business Day