City project rejuvenates the untouchable

Posted On Wednesday, 04 September 2002 10:01 Published by eProp Commercial Property News
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With arrears written off by the municipality, the inner city is beginning to look attractive

Leila McKennaJohannesburg Property Company's Better Buildings Project is turning 81 previously untenable inner city buildings into viable investment prospects.

Leila McKenna, executive director of the city's Property Company, says many landlords have abandoned degraded buildings. The buildings have had huge service arrears attached to them, making them unsaleable. Where landlords are untraceable, the company will bring buildings onto the market. The city waives service arrears for the investor; without this, the bills would exceed the cost of the buildings.

With the debts written off by the city, an investor can buy a building over a period of up to 10 years.

Among the 81 buildings for sale, mostly in the inner city and surrounding areas of Braamfontein, Doornfontein, Berea, Hillbrow and Jeppestown, are a number of hotels the Chelsea, the Mark, the Sands, the Casa Nostra and the Europa. Harley Chambers is another old landmark up for sale. A further 75 buildings have been earmarked between Wolmarans and Hancock Streets in the city centre, and Claim and Wanderers Streets, encompassing most of Joubert Park.

The project was initiated by Graeme Reid of the Johannesburg Development Agency. His first housing project, Brickfields, has given rise to many more. A particularly successful example is the old Landdrost, once a 400-bedroom hotel, turned police barracks, which was bought for R2,5m and refurbished for R10m, producing 241 flats ranging in size from bachelor to two-bedroom units.

Paul Jackson, acting CEO of Johannesburg Housing Company, says his organisation has refurbished 17000 flats in the city and aims to have 3500 by 2004. The company has invested R96m, and all its buildings are full.

Although banks unofficially redlined the inner city, Absa was persuaded to invest in Elangeni, a 168-unit building costing R16,3m the first such bank involvement in more than 20 years.

The first Better Buildings project, the 145-bachelor unit Lake Success in Peterson Street, cost R670000 plus R6m in refurbishment. Finished in May, it is full and performing well as an investment.

Brian Miller, chairman of the inner city Landlords and Managing Agents' Forum, warns that investing in Johannesburg's centre is 'not for the faint-hearted. You can't manage buildings by phone or by proxy.'

The process has to be planned by precinct so that, block by block, each area is uplifted, he says.

Investors need enough funds to buy and refurbish, as banks are unlikely to advance funds for projects in the inner city for another two or three years, he says. Owners must also be prepared to manage their properties themselves or get dedicated agents to do it.

Investors also need to ensure that systems are in place to control the flow of people through their buildings so that they know at any time who is there.

'More people have lost their boots over this kind of thing than have made money,' he warns. However, unlike Sandton, the inner city's buildings were beautifully built by masters of the trade, and designed as a classic city, with 14 entrances, and sewage and transport systems that work it has a number of advantages over the upmarket office node.

The inner city is also benefiting from the provincial government's commitment of R238m through Blue IQ to the Newtown cultural precinct, including its investment in the Mandela Bridge, which will be finished in the middle of next year and will help streamline inner city traffic; Metromall, a transport exchange for 160000 commuters; and five new housing developments providing more than 2000 units.

 

Last modified on Friday, 16 May 2014 09:35

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