Property investment opportunities for those who can identify value and mitigate risk

In uncertain times, opportunity beckons and fortune favours the brave, says Norman Raad, CEO of Broll Auctions and Sales. “By brave I do not mean the reckless, but those who identify value and can make calculated assumptions and mitigate the risk with vision while giving due consideration to ‘what if’ situations.

“It has been a while since the uncertain political landscape has overshadowed the property bulls and market chasers. Who knows what the future holds, and sometimes it is good for an event to spark some movement and bring reality to a situation. I believe the past month has delivered just that, with the property bears selling short and the bulls finding what cash resources they have to seize the opportunities presented.”

Raad says the current period is no different from many other political and financial uncertainties we, as country or as investors, have not faced before.  “A predictable economist will always state both sides of the coin, but there will be a leaning towards one. However current sentiment is definitely focused more on the potential downside and the need to place one’s trust in a hedge against the rand. Saying that, direct property has always held its value more than any other investment over time and direct property investment could be the internal hedge investors could be looking for.

“The corporate disposal process has already begun and non-core assets have recently found their way to the market. Properties which have no short term or long term investment strategy may well be a liability - as these corporates have recently discovered.

“The fact is, compared with between five and 10 years ago, property holding costs today have increased more than tenfold, with rates, security and electricity costs rising to untenable amounts just to keep the properties in acceptable condition. Overvalued properties seldom enjoy a reduction in rates which are a direct related cost to value, and when these properties are no longer core to investors and corporates, it increases the liability by holding on to them.”

Raad adds that realistic market expectations are now the order of the day, with sellers accepting that property is not as liquid as stocks or shares. “As a result a non-suspensive offer carries far more weight and a higher price, valuation or promise by a potential purchaser or bank. A property’s value in cash is worth only what a buyer is prepared and can afford to pay for it.

“Our next Broll multiple auction at noon on 24 May 2017 at the Wanderers Club in Johannesburg has some incredible properties coming to the market.  The reality of selling and accepting has never been more correct and present. All properties presented at this auction are subject to a reserve, which, after serious consideration, has in each instance been adjusted to the current market and economic expectations.”

Among a number of prime properties which come under the hammer is the Samrand Hotel in Midrand, which incorporates a 112 room hotel with conference, dining and office facilities. This property is part of a corporate disposal as the property no longer forms part of their long term investment strategy due to the size and value.  With a GLA (gross lettable area) of 4 044sqm, with each residential unit 31sqm in size and set on an erf of 14 694sqm, this opportunity will be well sought after from different sectors of the market, says Raad.

“Residential developers, schools and colleges will all find value in this opportunity and property. Well located just off the Samrand off-ramp to Midrand , the property could be used for staff residences and training facilities. With a value of around R300 000 per hotel room, we expect the property to be comfortably sold on or before auction. Rebuild costs excluding the land are coming in at no less than R9000 per square metre, so the property, which is in immaculate condition, should be a steal at half this price.

“A prominent retail and commercial building with a GLA of 6 300sqm in the heart of the Durban CBD is expected to be the most sought after property as the increased investment trend and demand to own in the greater metropolitans continues to increase. The competitive rentals afforded to be charged in buildings in these areas of demand makes for a less risk investment. The Durban CBD property is ripe for a student or residential conversion.”

Other prime located buildings in key nodes include the landmark Vogue House in Thibault Square in Cape Town’s central city, with a GLA of 4 230sqm including ground floor retail and 10 floors plus rooftop for use as offices or a hotel or residential conversion opportunity.  In Parktown in Johannesburg pristine offices with a GLA of 3 278sqm on an erf of 3 689sqm are well suited to an investor or corporate owner-occupier.

Show rooms in Bloemfontein – comprising 3 434sqm in the city’s busy Main Road, and 3 777sqm in Boksburg’s ‘mini motor hub’ are further rare property opportunities which should attract considerable interest, as well as 2 053sqm of warehousing with cold storage facilities for distribution situated in Bellville in Cape Town’s popular and constantly growing Northern Suburbs.

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