Property Partners, the unlisted mezzanine financing and private equity business focused on the property industry, expected to sell the existing buildings in the mixed-use Melrose Arch development, currently valued at between R800 million and R870 million, in the next 12 months, Stuart Chait, the chief executive of Property Partners, said this week.
This follows its acquisition of the Melrose Arch development, including the unbuilt bulk of about 340 000m2, from Sentinel Mining Industry Retirement Fund at the end of last year for R1.27 billion.
"Currently, there are four highly interested parties in the existing Melrose Arch buildings." These buildings include offices, retail, restaurants and a hotel that stretch over 88 000m2.
Chait said lease renewals for the offices were as high as R115 per m2, which was about 20 percent to 25 percent above the rest of the market.
"However, the value lies in the undeveloped bulk, which is probably the single best positioned zoned land in Johannesburg at present, moreover since there is a massive shortage of zoned land."
The group has given itself about five years to unlock all the value in the undeveloped bulk.
Future developments include a 28 000m2 shopping centre for which there already were potential takers, a 10 500m2 international boutique hotel, 160 000m2 in office space and 500 residential apartments.
Chait said the development of the open space also offered Property Partners the opportunity to provide private equity and mezzanine finance to developers.
A listed property analyst, who did not want to be named, said he did not foresee a listed property company bidding for the existing Melrose Arch buildings as the selling price was expected to be above what it was prepared to pay.
He said Madison Property Fund Managers, the asset management company of Redefine, ApexHi, Hyprop and Prima, had looked at acquiring Melrose Arch last year, but the price was too steep.
It was expected that potential takers would include private companies including black economic empowerment firms.
Chait said last year, at the time of Property Partners' purchase of Melrose Arch, that other interested parties included listed funds Sycom, Hyprop, Investec and the Cavaleros Group.