South Africa's property market recovery excites Sable

Sable Holdings' managing director Gavin Bowes talks to Africa Outlook.

By Ian Armitage

Property investment company Sable Holdings has interests in various property related activities.

Its portfolio comprises property investments and developments in the retail, industrial, residential and commercial sectors in Gauteng and Cape Town.

The Alt-X listed firm has a market capitalisation of R211.0 million.

"What sort of year was 2012? Well, we enjoyed a fruitful year in which growth projects within our existing portfolio were exploited and we streamlined some of the deadwood," says managing director Gavin Bowes. "Indeed, it was certainly one of the better years in terms of the recession we have been going through from 2007 to 2011."

The residential market has picked up, he says, encouraged by the fact that several banks have eased up on their lending criteria.

"I think the worst of the recession is probably behind us," explains Bowes. "On the residential side, banks have started to make funds available. That has improved our sales and our project rollouts.

"We enter 2013 with optimism."

So what's on the agenda?

For one, Sable has commenced, along with fellow shareholder Abland, one of the leading property developers in South Africa, the 35,000m² upmarket commercial park development known as Hertford Office Park, located in Midrand.

Development costs to date amount to R80.0 million.

"That's a major project," Bowes admits. "We've lots else planned such as several retail investments. In Midrand we'll develop a retail shopping centre together with our long-standing business partners. It is an 8,500m² convenience shopping centre with national anchors and franchisee retailers. To date letters of intent have been signed with Pick 'n Pay and Food Lovers Market, which will account for 52 percent of the gross lettable area. Further interest has been shown by national line shops, which will complement the strong tenant offering. The centre will be ready in November 2013.

"We also have various phases of retirement, residential and commercial developments happening in Pretoria. A 30 residential cluster development is also being built in Bryanston. The development is a R45 million project and that has been sold out in just five weeks, proving our pricing on this one was spot on and the product we have developed is exactly what the market wants. The price range per unit of R1.6 million up to R2.5 million is affordable, desirable and it appeals to younger buyers and professionals. We'll look to roll that successful formula out and are seeking well located land in the Northern suburbs. It is a well thought out residential model for the future."

Since the property market hit rock bottom five years ago, things appear to be picking up.

Commercial office leasing still remains challenging with rental rates remaining static, as most property owners endeavour to re-sign leases at competitive rental rates

"I think if one prices aggressively, you are in with a good chance of securing good tenants in commercial office space," Bowes says. "But there is a lot of choice in that segment, particularly in the office market. A lot of A Grade tenants are happy to downgrade to B Grade premises where they save 30 percent on rentals and you are fighting that market, which has certainly opened up in parts of the northern suburbs. One has to price fairly, provide a good service to tenants, for which we have got a good reputation in the market.

"It is not easy. You have to be pragmatic about how many developments you are going to do every year. But we are in for the long haul and we are patient."

One significant change in store for 2013 is that Sable is expected to delist from the Alt-X.

"We have announced our intention to delist," says Bowes. "The valuation and independent fairness opinion process is detailed, complex, and ongoing.

So why delist?

"The primary reason is cost," says Bowes. "With us being reasonably small, and having already moved off the primary listing to the Alt-X, it is the next step in a process of cutting cost and simplifying our business strategies. We are caught up in a lot of governance issues being on the listed stock exchange and it is becoming more and more onerous each year, more and more challenging – social committees, environmental committees etc.

Things are certainly looking up for Sable, a company worth keeping an eye on.


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