Print this page

A class and cash clash

Posted On Monday, 13 May 2002 10:01 Published by
Rate this item
(0 votes)
Should Liberty and Sage refuse to sell to slumlords?

Should Liberty and Sage refuse to sell to slumlords?

Johannesburg Metro has won an urgent application and lost another to stop landlords converting commercial buildings in the heart of the CBDs financial district to residential rooms. But what makes business and officialdom really angry is that the buildings sellers are Sage Life and Liberty Life, two of the biggest inner-city property owners.

The Metro stopped Liberty Lifes buyer, Farad Ahmed Gani, from converting the eight-floor Burlington Court at 22 Rissik Street to house up to 1000 tenants.

Yet Cape Developments CC (Capedev) has successfully appealed against the Metros refusal to let it convert a six-floor building at 16 Frederick Street, Johannesburg, next to Standard Banks R500m headquarters.

A known slumlord, says one official of Gani. Gani hotly denies this but refuses to identify his other properties. Liberty Life claims it did not know what Gani planned for the building. He offered a good price and met all his obligations, says Liberty Life Properties director Eric Bernstein. He was the perfect buyer. It was one of the best deals Ive ever done.

Sage director Bernard Naicken says Sage was told the building would be used for educational purposes when it was bought in 1999. So the criticism of us is totally unjustified.

As businesses debate property owners obligations to vet their buyers, there are two crucial issues they must still address. One, tenants are lining up to make the converters of buildings rich because they are fulfilling a desperate need which the authorities and business are ignoring. And two, is it fair to call their unwelcome neighbours slumlords when they obey the by-laws and their tenants are happy?

Gani was stopped because Burlington Courts zoning did not allow for residential use, not because his rooms have broken any by-laws. And, as seedy as its building may look, Capedev is altering it to conform to by-laws that allow a landlord to have 30 rooms to a floor, each accommodating up to three people and having toilets and showers to share at one end of each floor.

Tenants pay Capedev an average of R650/month/room R104000/month for 160 rooms. Capedev says its overheads are about R10000/month, which gives it a net return of R1,1m/year. Capedev paid Sage R600000 for the building, which with refurbishments has cost it R1,3m. That gives it an initial yield of 87%/year. No wonder the company is willing to fight the authorities tooth and nail to stay in business.

Capedev member Shaun Stevenson says he has full-time management on site; that permanent staff clean the toilets daily and provide toilet paper; and that we only rent to people who have been employed for at least two years. He adds: We have queues of tenants lining up and less than 0,5% payment defaults.

Stevenson says Capedev is a successful incremental builder in SAs low-cost housing areas. We are not slumlords. We are waiting for confirmation that our plans have been approved and will spend another R100000 on upgrading the fire rating of the stairwells and partitioning.

The measure of a slumlord is the way a property is managed, Stevenson argues. Whether rooms become overcrowded and are not maintained; and whether criminals are tolerated.

But Central Johannesburg Partnership CEO Neil Fraser says another measure of a slumlord is his willingness to break the law to maximise his return. Capedev broke the fire laws until the Metro took action against it.

Fraser concedes that converters are as entitled to certainty of their rights as the surrounding businesses and property owners. The fault lies with inappropriate zoning.

Ian Fife

Publisher: I-Net Bridge
Source: Ian Fife
eProperty News

Latest from eProperty News