ApexHi will acquire and fund the purchase and refurbishing costs and Aengus will provide the expertise to lease, administer, refurbish and market the apartments to investors.
ApexHi CEO Gerald Leissner says the joint venture will retain a portion of the refurbished buildings as investment property and share the monthly income, after charging interest, on a 50:50 basis. The balance of the portfolio will be sold to investors and the surplus shared on the same basis.
The Dunwell portfolio, which consists of 15 residential properties located in Braamfontein, Johannesburg, will be acquired for R115-million. An additional R78-million will be incurred in refurbishing costs. A portion of the portfolio, at a cost of R47-million, will be refurbished and held as investment property, which is expected to show a return of 12,14%. The balance of the portfolio, purchased and refurbished for R146-million, will be sold to investors at an estimated profit of R56-million over three years.
The purchase of the Dunwell portfolio is subject to a number of conditions precedent that still need to be fulfilled.
The Softstone portfolio will be acquired for R131-million and a further R11-million will be incurred in refurbishing costs. The portfolio consists of nine residential properties in Hospital Hill, Johannesburg, Hillbrow, Braamfontein, Parktown and Berea. The joint venture will retain a portfolio of R86-million, which will show a return of 12,12%. The balance of the portfolio will be disposed of, with an estimated profit over two years of R19-million.
Leissner says ApexHi’s partnership with Aengus commenced in 2006 when ApexHi sold Biccard House (Braamfontein Lofts), Kelhof (Fashion Lofts) and the mothballed office space in 66 Smal Street (Lofts @ 66) and African City (Tribeca Lofts) to Aengus for conversion from office accommodation to residential apartments.
The conversions were funded by an interest bearing loan of R14,4-million from ApexHi and R75,8-million from Standard Bank, and ApexHi acquired a 10% equity investment in Aengus for R100.
The bulk of the 514 residential apartments in Fashion Lofts, Lofts at 66 and Tribeca Lofts have subsequently been sold to investors, in most cases within days of the launch of the selling programme. The loans to Standard Bank and ApexHi will be repaid from the proceeds and ApexHi expects to receive a R5-million dividend on its equity interest in Aengus.
ApexHi is investing R15,5-million in the conversion, undertaken by Aengus, of the office accommodation into 133 apartments at the ApexHi owned Berea Centre in Durban.
Aengus has entered into a lease covering all the apartments providing ApexHi with a 12% return on the conversion. It has been agreed that all the units will be sold, with Aengus and ApexHi sharing the surplus. ApexHi expects to realise a development profit in 2008 of R10-million on this development. The 133 apartments were all sold pre-launch.
Leissner explains that ApexHi is comfortable investing in residential apartments in the same way as it invests in commercial, retail and industrial property. “We have decided to acquire properties with Aengus who possess the skills to convert office accommodation to apartments, professionally manage and administer residential property and market for sale those apartments which Aengus and ApexHi decide to dispose of. Disposals will generate development profits for ApexHi over time,” he says.
