Resuscitating a ramshackle CBD

It can only be those residents of Johannesburg that choose to remain ensconced within their greened suburban enclaves that have failed to notice the pockets of development and rejuvenation within the city’s metropolitan heart.

Reflecting successive waves of development and decline, the cosmopolitan metropolis’ inner city is a study in urban juxtaposition, with ramshackle high-rise buildings flanking the headquarters of among the country’s largest banks and mining houses.

In recent years, the inner city has sparked the imagination of audacious property developers that have driven the rejuvenation and renewal of entire city blocks, heralding the return of businesses, white-collar residents and the cultural gentry.

Among many of the politically aware and the civil society cohort, however, the gentrification of the inner city has become somewhat of a dirty word, now associated with the forced eviction of low-income tenants living – often illegally – in dilapidated residential buildings.

Relations between the office of newly incumbent Johannesburg mayor Herman Mashaba and civil society were last year strained when Mashaba, outlining his vision for the city, criticised public interest law firms such as the Socio-Economic Rights Institute of South Africa (Seri) for defending those illegally tenanted in urban buildings that had been earmarked for redevelopment.

“We have over 115 000 people illegally occupying buildings in our inner city, most of whom are living in the most appalling conditions. Some so-called human rights lawyers have used the courts to keep these people under these conditions to the benefit of the slumlords,” he fired.

“What does this say to the people who have patiently waited on our housing lists since 1996? Occupy these buildings illegally and you can jump the queue?

How is that fair?”

Speaking to finweek, Seri co-founder and executive director Stuart Wilson offers a largely disparate position on urban development, arguing that global gentrification in the inner city leads directly to the displacement of the poor.

“It drives property prices up, and makes residence in the gentrified area unaffordable to them. In Johannesburg, the municipality seeks to incentivise property developers to take over properties occupied by poor people, to evict the current residents and to let the properties out to more affluent tenants. 

“However, the city has no plan for what to do with poor people once they are evicted and are unable to afford alternative accommodation,” he notes.

Wilson’s argument is, indeed, entrenched in the Constitution, which outlaws evictions that lead to homelessness and requires the city to operate an effective emergency housing programme to shelter those people who are displaced.

The much-needed development of Johannesburg’s neglected central business district thus cannot be extricated from South Africa’s overarching housing

Pointing to the political sensitivities of the dilemma, City of Johannesburg mayoral communications director Tony Taverna-Turisan puts the blame squarely at the door of the previous ANC-led administration, telling finweek that the current state plaguing the residents of the city is a direct reflection of the “perpetual disdain” the old administration had for the suffering of the poorest and most vulnerable residents of the city.

“Our administration is committed to reversing this trend. To date, the city is in the process of updating our indigent list to ensure that identified people receive support they so desperately require,” he holds.

Holding hands

Mashaba has, meanwhile, made public assurances that the rejuvenation of the inner city and the provision of affordable housing have firmly been placed within his administration’s crosshairs – a commitment welcomed by prolific inner city development group Propertuity.

The company, founded by rainmaker Jonathan Liebmann in 2009, has injected around R1bn into inner city development since its inception, and is responsible for flagship urban developments such as the Maboneng Precinct, Arts on Main and Hallmark House.

However, according to managing director Ricky Luntz, the previous municipal government had proven “very difficult” to work with and had rebuffed attempts by the developer to enter into joint development ventures.

“I don’t think there was a real appetite to see change. Change is hard, it requires sweat and administration, and I don’t think they were interested, to be honest. The level of corruption has been horrendous. We’ve already had far more involvement [from the city’s new administration] than we’ve had in the past four years,” he tells finweek during an interview at the company’s inner city offices.

“We’re extremely optimistic that more will be done under Mashaba. He’s a businessman and he understands the practicalities and that regulation needs to enable business and not inhibit it.”

With only R10bn set aside annually for capital expenditure, and a R170bn funding gap for capital infrastructure over the next 10 years, Taverna-Turisan acknowledges the necessity of public-private sector cooperation. 

“There are investors who have billions invested in the city, and with the potential to invest billions more, but who have to go to court just to get an electricity bill from the city. These relationships must be renewed with our new administration to ensure more investment,” he says. 

Big plans 

Backed by a R200m facility with the Trust for Urban Housing Finance (TUHF) and Futuregrowth Asset Management as well as commercial property finance agreements with Investec, Nedbank and Absa, Propertuity continues to outline ambitious plans for the CBD.

By the end of 2015, the group had supplied the market with 588 new residential units, equating to a total of 22 808sqm of new residential space in the inner city and attracting 939 residents to the Maboneng Precinct.

Nine new residential buildings are currently under development, which will add an additional 34 466sq m of residential space.

By 2020, Propertuity is forecast to have a total of 4 875 residential units, or 500 000sq m, for sale or rent in the CBD.

The company has also expanded its commercial sector offering. By the end of 2015, it boasted 416 commercial tenants occupying 88 369sq m of commercial space, with plans to expand this to 250 000sq m by 2020.

“From a footprint perspective, it is one of the biggest urban regeneration projects in the world. We’ve also just completed our biggest acquisition, which should be announced later this month.

“Comprising six additional city blocks and located in the heart of the Maboneng Precinct, it will allow us to launch the precinct in a way that people can’t fully understand,” he enthuses.

While previous density studies for Gauteng reflect a population density of 672 people/sq km, a 2014 report by United Nations Habitat noted that some built-up areas of the region reach 4 724 people/sq km.

According to a report commissioned by Propertuity into the developing Maboneng area, the broader area reflects a concentrated residential population density of 21 000 people/square km, meaning that the area over-indexes when it comes to high population density. This figure rivals among the densest neighbourhoods in the world.

“Packed city centres are correlated with economic growth, talent levels and diversity. Density – the close clustering of people together in communities – is a big factor in the technological and economic progress of cities and nations.

“Economists, urbanists and placemakers have found density to be associated with everything from greater energy efficiency to higher levels of skilled people, higher rates of innovation and higher income,” reads the report Maboneng: Developing a Neighbourhood Economy.

New appetite 

While the company is now able to secure various sources of finance for its development ambitions, this has not always been the case. During the first few years of its existence, Propertuity’s efforts to secure bank financing were wholly unsuccessful.

“Many of the original buildings were bought with cash because the banks weren’t keen to back investment in the inner city between 2009 and 2012. The CBD was very much shunned and getting any debt was quite something.

“We’ve subsequently developed good relationships with the banks and we’re even at Nedbank’s Top 50 clients dinner every year, so things have really flipped around. I think the reason for this is that everyone loves a financial success story that is socially conscious and economically viable.”

Expanding on the company’s model, Luntz explains that the bulk of Propertuity’s portfolio is purchased from private owners that have inherited derelict property that has been largely written off.

While originally able to secure property for around R1 000/sq m, a gradual improvement in the perception of the CBD and the rejuvenation of former slum areas has driven prices up to around R3 500/sq m today.

“As perception changes, the prices rapidly change, so we’re actually becoming a victim of our own successes. But we’re okay with that, as its signifying positive change. People want the city to come back, I think.”

Luntz believes Propertuity has now become a global market leader in large-scale urban renewal, as no other city offers such development opportunity at the same scale as Johannesburg.

“Johannesburg is one of the top 30 biggest CBDs in the world, and it has been forgotten about; it’s a big white elephant. We see ourselves doing business here for the next 40 years at least,” he asserts.

The company is, however, considering international development opportunities, most notably in Port Louis (Mauritius), Maputo, London and Detroit.

This article originally appeared in the 26 January edition of finweek. Buy and download the magazine here.

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