Transnet has again abandoned the sale of Joburg CBD’s iconic landmark, the Carlton Centre, after bidders could not produce funds to back their bids for the tower of 50 floors, which the ports and rail operator was selling for R900m.
The sale was part of Transnet’s drive to dispose of non-core properties to bolster cash flow.
Speaking on the sidelines of the SOE’s results in Kempton Park, Kapei Phahlamohlaka, the CEO of Transnet’s property division, said people couldn’t back up their ambitious bids. “We had people promising the world, but when we said, ‘show us what you have’, they had nothing. Some of them do not have experience in property development. Their bids fell off.”
He said one bidder proposed managing the Carlton Centre in partnership with Transnet, but this was not in line with their plans. “We went to the market not to do a partnership, but a disposal. We then had to let the bid die.”
The entity bought the Carlton Centre in 1999 and used it as its head office from about 2000. In 2018 it moved staff to a building in Waterfall, Midrand, to enable a revamp of the centre. However, renovations never happened. It announced in May last year it was putting the building up for sale for R900m.
After the failed bids, Transnet has now decided to refurbish the tower, reviving its retail offering and converting the hotel into residential apartments or affordable housing units. Retail group Shoprite is set lease 3,000m² of space previously occupied by rival Pick n Pay, to open a Shoprite supermarket and Shoprite Liqour.
Carlton Centre has a lot of sentimental value to many people. Everyone thinks they can participate, but when they look at the costs — not only the cost of buying, but the cost of refurbishing once they buy — it becomes a challenge.
— Kapei Phahlamohlaka, CEO, Transnet Property
The Foschini Group’s Jet and Skipper Bar stores — which are already trading there — are likely to remain after negotiations with Transnet.
Phahlamohlaka said Transnet would go back to the market at some point in search of private partnerships to manage the centre, as disposing of a property the size of the Carlton Centre was difficult. “It has a lot of sentimental value to many people. Everyone thinks they can participate, but when they look at the costs — not only the cost of buying, but the cost of refurbishing once they buy — then it becomes a challenge for them. That’s why it fell [through],” he said.
As part of Transnet’s commitment to the revival of the Joburg CBD, it will be moving its head office back to 96 Rissik Street by the end of this financial year. “We are spending R460m to rebuild 96 Rissik Street. It is going to be a grade-A building next to Park Station. We are building parking for 150 [vehicles]. We are spending almost R600m in the CBD.”
Transnet has a R13bn property portfolio that includes offices, warehouses, retail buildings, land, vacant stands, houses, lodges, hostels and line camps. Its property division generated R1.6bn in 2023/24.
Speaking at the results presentation, group CEO Michelle Philips said: “You will see Transnet Property going to the market with a huge property portfolio; some for sale, some for development leases, [and on others] we will pursue public-private partnerships to leverage additional funding we need to strengthen the balance sheet.”
The Carlton Centre is the second-biggest asset in Transnet’s property division after the 640ha old Durban airport, valued at R2bn. It also has another 5,600 residential properties and several hostels. Phahlamohlaka said they were looking at disposing of around 3,700 non-core properties, vacant land and other properties. “We have identified properties that have no value to us but can have value to other people because we want to build a proper portfolio,” he said.
“We are just giving hostels away. They are costly for us to keep. By giving the hostels away, I will save R100m a year in maintenance, rates and taxes, and in water and electricity. We are disposing of the entire residential property portfolio. We are disposing of some commercial properties, not because we do not like them, but because we need cash flow. We have development leases. We have identified 30 prime properties; we need to go out and partner with developers so they can be developed into proper properties.”
The property division is also collecting old debt. “We have a number of people sitting in Transnet properties and not paying for them. In the first six months of the recovery plan, we collected R100m of old debt, in the second six months we will collect another R100m, and in the third six months we will collect another R100m. We said in this recovery period we will collect no less than R300m of old debt, even in commercial properties.”
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