Investing with confidence
While the recession has brought many building projects to a standstill, one South African organisation is seeing no good reason to put investment on hold, as Jeff Daniels learns.
There is a sound argument for businesses to continue investing through difficult periods, so that full advantage can be taken when the good times return. The logic seems even more relevant to commercial building projects but nevertheless, the world is littered with shopping malls, office blocks and hotels that have been put on hold, despite a completion date well into the future when almost all economists agree the current recessionary pressures will have melted away.
One organisation willing to bet on being ready to capitalise on the good times is South African property investor Attfund, which is currently involved with massive extensions of two of GautengÔÇÖs premier shopping and entertainment complexes.
Attfund was founded in 2002 with a portfolio worth R670 million which, over the intervening years, has grown to more than R8 billion. ItÔÇÖs a public unlisted property fund with 11 per cent of shares held by a black economic empowerment consortium of property specialists, led by Sisa Ngebulana and Nazeem Khan.
The fund was formed through the efforts of a group of individual professionals working together, each with specific expertise in essential fields. As such, Attfund Limited represents the property investment vehicle for the three main property development companies in the group: Atterbury, Parkdev and Gryphon. Although these companies develop jointly for Attfund, they still maintain their individual identities.
The strategy adopted by Attfund has been to focus on a limited number of high value investments at the top end of the market, which is where the experience of the management executives lies. By limiting the spread, it enables the group to devote more time and attention to each investment. 
The first of the two flagship ventures currently undergoing construction work is Clearwater Mall in the affluent north-western suburbs of Johannesburg, where there is a rapidly expanding residential corridor. The other is Woodlands Boulevard, an up-market shopping, dining and lifestyle destination in the trendy, vibrant quarter of Pretoria East. Clearwater Mall is being expanded by 24,000 square metres and Woodlands Boulevard is having another 29,000 square metres added. Both projects are underway and destined to be completed by October 2010.
Conversely, it may be the ideal time to undertake such expansions. Firstly, the cost of development tends to be lower as suppliers and contractors compete for business; in addition, when the economy begins its recovery, the extensions will already be complete and generating income. And there has been no shortage of contractors to choose from, due to the sheer number of construction projects currently taking place in South Africa, largely thanks to the 2010 World Cup.
The Clearwater complex has been built as a 65,000 square metre triangle, with an anchor tenant at each point of the triangle. The inner court, grassed and open to the heavens, is where cinema and dining entertainment facilities can be found and is accessible via each leg of the triangle.
Although the winter climate in this region is sunny and dry, it does get very cold, thanks to its 1,500 metre-high altitude. So to make the courtyard usable all year round, there is a retractable roof that encloses the restaurant zone and brings it inside the mall. Named after a stream and waterfall at the nearby Kloofendal Nature Reserve, the centre has several water features, which set the scene for wonderful pedestrian areas.
Thirty miles away in Pretoria, Woodlands Boulevard provides 42,000 square metres of shopping and entertainment hedonism, with over 100 tenants offering an upmarket shopping, dining and lifestyle destination. It is designed to be a place for food, fashion, furniture, jewellery, health and beauty, as well as being home to a complex of seven cinemas.
As with all Attfund investments, Clearwater and Woodlands are managed by Parkdev, an asset and property management company with extensive expertise and systems to manage retail and commercial real estate. With offices in key cities and a staff of 106 people, it manages a total retail gross leasable area of 328,760 square metres and a further office component of 46,000 square metres in the form of office parks, which offer tenants the flexibility to gradually increase or decrease their space requirements as demands dictate. This in turn makes ParkdevÔÇÖs life easier by helping to keep vacancy levels particularly low.
Both Clearwater and Woodlands have been successful in generating employment opportunities for their respective communities, with local people becoming tenants within the mall, or perhaps working with the sub-contractors on the construction. As part of AttfundÔÇÖs wider social responsibility programme, a R3 million per annum grant is made towards running the Parkdev Training Academy, dedicated towards raising skills levels within the industry.
During the first two years of its existence, almost 1,500 individuals have passed through the academy, learning skills appropriate to work in a commercial environment in its widest sense. Training sessions provide opportunities for Parkdev employees to grow and develop their potential, with a large proportion of attendees coming from a historically disadvantaged position. They may be employed by others on Attfund sites or even unemployed, and without the means to undertake self-funded education. Often, candidates have used this opportunity to make a stepping stone into employment with Parkdev.
Four years ago, Attfund realised there were relatively few investment opportunities remaining in its upper income niche and the decision was made to diversify its portfolio, as well as hedge its operational and currency risk by investing offshore. The plan was to invest in like-minded businesses and as such, Attfund took an interest in New York-listed Simon Group and later, a stake in Deutsche Euroshop, which focuses on quality shopping centres in Germany and neighbouring countries and is listed on the major German exchanges. In 2007, Attfund acquired 22.5 per cent of Stenham European Shopping Centre Fund, which had acquired one of EuropeÔÇÖs large shopping malls in Leipzig, Germany.
Attfund's future strategy is twofold: to increase its offshore component to the point where approximately 40 per cent of its total portfolio is offshore; and to move down the luxury scale to more middle income retail property investments in South Africa. 
Even though the fund is unlisted, it is run in full compliance with the same governance standards as a JSE-listed company and by industry standards, is geared low at just 31 per cent. Its performance has been nothing less than dramatic, with share prices (based on NAV) starting at R13.67 on 1 July 2002 and currently standing at well over R100 a shareÔÇörepresenting a compound growth of over 35 per cent per annum.
As Attfund branches out to invest in more mainstream properties, it will undoubtedly be hoping to maintain a similarly strong growth rate and see its current confidence bear fruit as the effects of the recession gradually begin to recede.
