Big guns lose battle for Buffalo City

The race to build Buffalo City's (East London) first regional shopping centre has finally come to a head with black-owned property developer Billion Group emerging as the front runner.

Following months of uncertainty about which one of four proposed regional malls would eventually see the light of day, Billion development manager Warren Rovelli last week confirmed that earthworks for its Hemingways Mall have commenced. The 72 000sq m shopping centre will be built next to Tsogo Sun's Hemingways Casino, alongside the N2 highway in East London.

The Johannesburg-based Billion Group, a relatively small player in the commercial property market founded by Sisa Ngebulana, was up against three of South Africa's largest property developers/owners including Zenprop, Investec Property Group and Atterbury Property.

Ngebulana, a law graduate from Natal University (Maritzburg), has close ties with East London. He grew up in the Eastern Cape and matriculated at St John's in Mthatha in the early Eighties.

Until recently, the four rival developers were vying aggressively to win the support of national retailers, who usually dictate whether a proposed shopping centre goes ahead or not.

Though major retailers Woolworths, Edcon and Foschini each initially supported a different centre, it seems that all three are now going into Billion's Hemingways Mall. That follows Zenprop's withdrawal of its proposed Beacon Bay shopping centre end-2006. Atterbury Cape director Gerhardt Jooste says they have also decided to put their plans on hold. Atterbury, which joined the race at a relatively late stage, announced ambitious plans in October last year to build a 50 000sq m lifestyle mall, a value mart, a private hospital, a number of office blocks, a Motor City, a hotel and a residential component on a 117ha site on the Gonubie/N2 interchange.

Jooste is still convinced that their site is best placed to give East London residents their long-awaited mega-mall. But he concedes that at the moment the Buffalo City area can only support one new regional shopping centre.

Says Jooste: "We will still go ahead with our project but it will probably not happen for at least another four to five years, when the area will be big enough to support another regional mall."

That leaves only Investec Property Group. Although the local council approved planning and zoning applications for its proposed East Coast Mall end-February, the group is now reconsidering its options.

Investec Property Group's Ronnie Sevitz says it seems that Billion now has the major national tenants on its side. "We believe Gonubie is the best place for a regional mall, but I don't think we can compete with the scale of the Hemingways development."

Sevitz says the group may consider downsizing its East Coast Mall from the original 60 000sq m to 30 000sq m. A decision will be made within the next few weeks, but industry insiders doubt whether Investec Property Group will proceed at all given that it has yet to sign up a single national tenant.

It no doubt comes as a blow for Zenprop, Atterbury and Investec Property Group that a relatively unknown such as Billion has managed to thwart their efforts to tap into the potentially lucrative and under-serviced East London retail market.

It's been suggested by some that Billion doesn't have the experience to play successfully in the regional shopping centre arena - usually the domain of large institutions and developers. The group has only been involved in one other retail development to date - a 35 000sq m township mall currently under construction in Mdantsane on the outskirts of East London.

But it's not an unlikely scenario that Billion could end up partnering with an astute retail developer such as Atterbury now that the latter has put its own development plans on hold. More so given the fact that the two already have an established relationship - Billion is the BEE shareholder in Atterbury's R6,5bn private property fund, AttFund.

Who is the Billion Group?

The company was founded some 10 years ago in Johannesburg by East London born lawyer Sisa Ngebulana. Ngebulana first started dabbling in property by developing an upmarket cluster complex in the northern suburbs of Johannesburg.

The company's residential business grew from there and four years ago Billion opened a commercial branch. A few derelict office buildings in downtown Joburg were converted into A-grade offices for which Billion secured blue chip, long-term tenants before selling the buildings on.

The group has to date acquired and developed commercial properties valued at R1,8bn.

Article by: Joan Muller - Finweek