Western Cape-focused property developer and owner Ingenuity – which defied sceptics with an inspired makeover of the well known “Newspaper House” building in St George’s Mall – has latched onto another iconic Cape Town property.
The company recently pushed its total property valuation through the R4,2bn mark by acquiring the “Great Westerford” property on Main Road in Rondebosch. The property – comprising office space with a GLA (gross lettable area) of 30,488m2 – was best known as the head office for life assurer Southern Life (now part of assurance giant Momentum.)
The price tag was a princely R650m – making it one of the biggest deals undertaken by Ingenuity. The building was recently re-furbished, so it will be interesting to see of there are any re-development plans for the longer-term. Although Ingenuity is best known as a property developer, the company does have a substantial portfolio of investment properties as well.
It is not giving away too much around “Great Westerford.” But the recently released financial results noted that of the R128m cash-on-hand available at the end of February 2016, a chunky R100m was earmarked to fund a portion of the “Great Westerford” transaction.
It’s certainly not only the “Great Westerford” building that will be keeping Ingenuity busy in the next few years. Over the last interim period (to end February 2016) the company has been rather active – taking transfer of a handful of new properties. These included “Claremont Central” (situated on the corner of Vineyard and Main Roads) for R85m; “Toffee Lane” in Claremont for R20m; “State House” (situated in Rose Street in the Cape Town CBD) for R35m and the “Ramsay Media Building” in Pinelands for R25,5m.
The big development moment in the past financial year was the completion of “The Aurecon West” development in Century City. The property was transferred to Ingenuity’s investment property portfolio in March with a value of R105m. CEO Arnold Maresky said the “Aurecon” building incurred a total development cost of R98,7m – providing an initial yield of 8.4% with a seven-year lease escalating at 8% per annum.
Overall Ingenuity seems to be churning encouraging rentals with gross revenue increasing 17% mainly as a result of rental escalations and the letting of vacant areas as well as new rentals earned on recently acquired investments and finished development properties.
Maresky pointed out that the ratio of property expenses to gross contractual revenue of 26,9% (down from 27,5% in the interim period in 2015) was due to maintenance and other expenses being well controlled.
Perhaps most heartening for a company with a substantial development angle, is that Maresky reported that the ‘core portfolio’ vacancy ratio was a mere 2,8% on a portfolio of 174,564m2.
Although this is up on the vacancy ratio of 1,9% (on a portfolio of 155,010m2), Maresky pointed out that the ratio had increased due to certain properties being earmarked to be redeveloped in the short term as well as vacancies not being filled and leases not being renewed on expiry.
“Excluding the development-related vacancies, the operating vacancy of 2,3% is considered to be well below market norms and is attributable to proactive management and the quality of the core investment asset base.”
Maresky added that the lease expiry profile of the portfolio comprised 63% rentals expiring beyond February 2019 – which represented 59% of the GLA.
Looking ahead, Maresky said significant inroads had been made with Ingenuity’s development pipeline over the last 12 months. “We are confident that we will reap the benefits of our efforts over the next few years.”