The Dube TradePort Special Economic Zone (SEZ) has introduced a long-term leasehold ownership model to unlock new opportunities for emerging property developers who often face considerable challenges in getting projects off the ground.
Andile Mnguni, head of property investment at the Dube TradePort SEZ, yesterday said property development should not be confined to big business, especially during tough economic times.
Speaking at the South African Institute of Black Property Practitioners conference, Mnguni noted that emerging property developers often faced substantial challenges in getting their deals off the ground, especially in the lucrative commercial and industrial segment of the market, due to unaffordable land and inadequate access to the necessary capital.
However, Mnguni said Dube TradePort SEZ has noted a growing awareness and interest in the benefits of the long-term leasehold ownership model as the sector begins to adapt to a changing economic landscape.
Against the backdrop of the theme “Levelling the Playing Field”, a discussion took place regarding making access to land fair and equitable in South Africa.
“The leasehold model can facilitate access to land, launching numerous commercially viable industrial projects by eliminating the need for property developers having to buy land upfront, and reducing the capital requirements to initiate the deals. This while still meeting all the criteria needed to enable commercial banks to fund these notarial leasehold developments,” Mnguni said.
Notarial leasehold contracts allow investors to access land that can be developed over long periods without the need to purchase it outright, and ensure the property owner a stable revenue stream over the lease period.
Mnguni said by lowering the initial expenditure necessary for development, leasehold agreements enabled a wider range of property developers who could add value to the commercial real estate market segment.
“In the 110 years since the leasehold model was implemented in the Dube TradePort Special Economic Zone, we as the landlord have a stake in both the overall prosperity of our property developers and their tenants in our zones. We have worked with developers to enhance the industrial precinct, consistently funding amenities, support services, and new infrastructure, which has increased value and the overall experience of our investors in our zones,” he said.
“Furthermore, Dube TradePort Special Economic Zone has been working in tandem with development finance institutions like Ithala Development Finance Corporation Limited and KZN Growth Fund here in KwaZulu-Natal, together with some of South Africa’s development finance institutions and large commercial banks to secure funding for emerging property developers developing within our precinct.”
Mnguni added that Dube TradePort SEZ’s teams had helped with due diligence reports to enhance the business cases for these developers’ projects, highlighting the leasehold’s ability to provide stable revenues for funding institutions over decades.
“We go as far as supporting black SMMEs with up to 15% discounts on rental rates and have worked smartly to provide linkages with established businesses within our precinct, providing them with a platform to market their products,” he said.
“Dube TradePort has also piloted programmes where it substitutes fixed rentals and opts to take a percentage of a tenant’s revenue, which helps the developer and its end clients’ cash flow. In the initial stages of operations, as the landlord, we are invested in the success of our developers and their clients and work hand-in-hand to ensure their growth,” Mnguni said.
The leasehold property development model will continue to evolve as it is adopted in more segments of the property market, enabling access to land while providing consistent revenues for landowners and financing institutions, he said.
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