Johannesburg - Municipal councils should give property owners some kind of rates holiday to encourage them to redevelop their properties, which would create jobs and in a few years widen the council’s rates base, Redefine Properties chief executive Marc Wainer said yesterday.
Owners were penalised with higher rates for redeveloping but their rates remained the same if they did not redevelop, he said at a briefing on the company’s annual financial results.
Wainer said many property owners were not redeveloping their properties because older buildings had a rates advantage. “In the old days, you paid rates on land only so everybody’s rates were the same. Rates holidays are common throughout the world… to encourage development. You are no worse off as the council [because] you are getting the rates that you were getting, you are encouraging development and in two or three years time expanding your whole rates base.”
He said Redefine owned 70 buildings where the rates in terms of the current valuation increased in excess of 10 percent a year and, in several instances, by more than 30 percent. He said these increases were passed on to tenants to pay but Redefine’s revenues were increasing at 7 percent or 8 percent a year and rates by 15 percent.
“It’s crazy. Tenants will stay where they are, development will slow down and the rates base will stay the same. It’s an unsustainable model but you can’t do anything about it.”
Wainer was also critical of the time it took to rezone land for development, particularly retail developments in rural areas. He estimated that for every 100m2 of retail space developed, about 4.5 jobs were created between security, cleaning and people working in the retail stores but excluding logistics and transport of goods to the mall.
He said red tape and corruption meant it took three or four years to get the rights to build a retail centre in a rural area. Attempts to obtain comment from the SA Local Government Association were unsuccessful.
Redefine reported a 7.3 percent annual growth in distributions to 68.7c in the year to August to outperform market expectations. Wainer attributed the performance to the expansion of its local property portfolio through the acquisition of prime quality assets, and rigorous cost control, which had combined to produce strong income growth.
Redefine made acquisitions worth R1.3 billion in the year, had R2.6bn in approved developments in progress, along with redevelopments under way of R619 million and concluded disposals of R366m. The strengthened portfolio helped improve vacancies in lettable space from 5.8 percent to 5.3 percent and achieved an 80 percent tenant retention rate.
He said the company would complete the restructuring of its property portfolio in the coming year and was well advanced in disposing of 26 government-tenanted office properties valued at R2.2bn through a new listing.
Subsequent to year-end, Redefine had concluded agreements, subject to conditions precedent, to acquire properties for R3.4bn. Wainer said its restructured property portfolio was in a good position to show continued improvement and, despite challenges in the sector, anticipated the company’s distributable income would grow at a similar rate in 2014.
Redefine linked units closed 0.48 percent lower at R10.33 yesterday. - Business Report