Steven Herring, a property developer with an impressive track record of developing shopping centres and multi-use real estate developments, says he and his team can turn One Thibault into Cape Town’s standout residential building with views to envy.
Herring also heads Heriot Real Estate Investment Trust (Reit), a diversified listed property fund founded in 1998. Heriot owns assets worth R4.6bn.
It has 19 industrial properties valued at R1.68bn, 12 retail centres valued at R2.304bn, with a gross lettable area of 150 360m² in CBDs, townships and rural areas that focus on the mass market.
The property portfolio also includes seven office properties, including Heriot’s head office located in the mixed-use precinct of Melrose Arch.
Landlords, some with no experience in owning and managing residential properties, are converting office buildings into residential properties across SA as they look to fill vacancies and meet demand for housing for groups with varied affordability.
Comprising 180 fully-serviced studios and apartments, the housing units in One Thibault are being financed via private group Flyt’s section 12J property investment fund, presenting a significant tax rebate and a guaranteed rental return for investors.
At 126 metres, One Thibault will be the tallest residential building in Cape Town and the second-tallest building overall in the city, shorter only than the FNB Portside office building.
Why were you drawn to One Thibault?
We have followed One Thibault since 1995 when the Mines Pension Fund sold the asset after BP vacated the top seven floors. It was always an iconic building and the tallest in Cape Town until 2014. Now it’s the second-tallest building in Cape Town and the tallest residential building in Cape Town.
The views are world-class and the way Revel Fox Architects designed the building ensures maximum views from all angles. The floor plans lend the building to a residential conversion. There is a central core and the columns are on the outside of the building; so no internal columns.
How many residential buildings have you developed in the past?
One Thibault is our fifth residential project.
Is it a good time to develop and redevelop large buildings given the state of the economy?
It is a large building. The conversion will create a fantastic mixed-use project. Standard Bank runs a retail branch adjacent to the main tower and also has the sign on the top of the building. Floors 1-14 will be for commercial use, floors 15-28 for residential use and floor 29 for something special! The economy is showing low growth and everyone is looking for value. We will certainly be very competitive on all fronts. We are long-term holders of this asset so we are taking a longer-term view of growth.
Who is behind Thibault Investments?
Thibault Investments is owned by Heriot Investments, which in turn is owned by my family Trust. I am the CEO. Grant Elliot, the COO, will run the operation. He hails from Redefine after being there for 19 years.
How is the Section 12J tax incentive applied to the development?
Investors have the option of investing into the One Thibault project via Anuva Investments Limited, one of SA’s leading section 12J companies, which will give the investor a 100% tax deduction on their investment amount. This is a significant benefit as investors can use their tax refunds towards their investment.
Is the redevelopment of One Thibault completely separate from Heriot Reit?
Yes. Heriot may become the long-term owner once the income stream has stabilised.
Who owns One Thibault now and if Heriot considered buying the building outright, when would it?
Heriot Reit is an income fund so would prefer to step in once the cash flows are sustainable for the long term.
Heriot has recently bought stakes in shopping centre owner Safari Investments and diversified group Texton Property Fund. Is Heriot eyeing a takeover of or merger with either?
It’s challenging taking over other Reits as different shareholders have different opinions on value. There is a group of Safari shareholders who have unrealistic expectations on price. We are considering buying a 51% stake in Safari and taking control of that entity.
Texton owns some very good UK industrial assets with long WALT (weighted average unexpired lease terms). The market here seems to have missed this. The UK makes up 40% of Texton’s assets. The UK is a highly liquid market and is ahead of the curve in terms of business recovery. We would be happy to take over these UK assets.
How strong is SA’s residential market now? Is there enough rental stock for middle-class and entry-level renters?
The SA residential market is strong but is also very price and rent sensitive. It’s a deep market and there is lots of demand but pricing is key.
andersona@businesslive.co.za
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.