Financial crisis offers new partnership opportunities

Aengus Property Holdings (APH) specialises in refurbishing older inner city buildings into stylish and affordable loft-style apartments. Over 1500 units in 15 buildings in Johannesburg and Durban have been converted boasting almost 100% occupancy rates, attractive to up and coming income earners and urban dwelling students. Aengus Property Management, a division of APH manages the financial processes of all buildings by overseeing rent collection and paying profits to investors.

In the past the company successfully secured the vast majority of capital for the renewal projects from traditional service providers. But with banks lending less to developers in the property market, Aengus says this opens up an opportunity to team up with real estate owners. “Aengus’ ability to secure paying tenants timeously means that joint-venture projects would benefit both parties. Real estate owners would see greater occupancy rates, and receive continuous income generated by reliable tenants,” says Mark Kaplan, managing director of Aengus Property Holdings.

Renowned for its pioneering success in urban renewal projects and unique approach to property management, Aengus Property Holdings has felt the economic pinch in the last two to three years. “The capital-hungry real estate sector as a whole has come under immense pressure.” Kaplan adds. “The financial institutions have always been very supportive of ourselves and the affordable sector, but the reality is that there is a shortage in the capital markets.”

“Historically, in a R100m development, the bank may have leant a property development company up to R90m. The company would fund R10m in cash. Today that R10m is more likely to be between R40m and R50m. It’s a figure even bigger business would struggle to come up with.”

However the company believes there are plenty of properties that are as yet undiscovered gems, with inherent value, which once exposed, could secure their owners future returns from much higher occupancy rates. Aengus would enable this by adopting a joint-ventures approach.

“We are confident there are real estate owners around the country, especially in secondary locations, who are looking to redevelop or refurbish their buildings, but lack the capital to do so. We are looking to partner with landlords with buildings that have unrealised equity potential, or value,” says Kaplan.

Aengus would be especially interested in abandoned or under-utilised commercial or industrial buildings around the country - typically brownfield projects which could be transformed into modern money-making residential buildings.

The combination of presenting equity in the form of buildings and Aengus’ specialist skills in overseeing redevelopment projects from start to finish offers financial providers a much more attractive lending proposition compared to offering finance to only one party. By controlling aspects such as costings on brown field projects, and ensuring the buildings receive adequate debt funding, tenanting and property management, the potential for returns for the partners is much greater.

“One has to be entrepreneurial in these times and in this market, in particular,” notes Kaplan. “By doing business this way we are not only growing our portfolio in a way we have not done before, but we are contributing to the continued success of inner city renewal, to which we are committed.”

Kaplan’s words echo those of Nobel Laureate Professor Mohammed Yunus. Yunus, founder of Grameen Bank and microcredit pioneer, said last year during a visit to South Africa that companies and entrepreneurs should view the current economic crisis as an opportunity to explore new ways of doing business.

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