February 13, 2004
By Philippa Garson
THE City's Better Buildings Programme - read fixing up its slums - is fast moving into gear. Driven by the Johannesburg Property Company, new strategies are being adopted to bypass the many hurdles that have stymied previous attempts to reverse inner city decline.
Geoffrey Mendelowitz, JPC's programme manager for Better Buildings is upbeat about the task at hand: 28 buildings, relatively unfettered by legal wrangles over ownership and debt, are up for sale and Better Buildings is now awaiting proposals from prospective buyers.
Previously, moves by property developers to buy and fix up slums have deadlocked over the massive service arrears clocked up over time. In many cases, the arrears bill for some of the buildings in need of rescue far exceeds their value. Now the council, which does not own the buildings but has taken control over them because of the arrears, has decided to write off the debt to kick-start the process. Taking this step, Mendelowitz says, "has unlocked the programme".
Better Buildings has also compiled a list of potential developers, investors and managers, and 73 potential investors are now registered with the programme. On 5 February a presentation was made to prospective developers, who have until 5 March to make their offers on the buildings.
"Obviously we're interested in how much the guy's going to pay, but more important is what he's going to do with it," says Mendelowitz. The programme wants to see details of refurbishment, proof that the buyer has the means to refurbish and whether the upgrading plans fit in with the City of Johannesburg's development plans, among other criteria. Most of the properties will be used for commerce and for social housing. Better Buildings is currently doing its own refurbishment costing exercise on the buildings, saving the developers both time and money.
The City is keen to finalise as many contracts as possible by the end of April. The buyer will sign two contracts with the council, a title deed and an obligations agreement, whereby the buyer will have to refurbish the building and ensure that all units are maintained "in a safe, healthy, habitable and attractive state". After purchase, there will be a maintenance and monitoring period by the council of up to five years.
Why 28 buildings? "There are lots of bad buildings - 200, 300 … pick a number," laughs Mendelowitz. "It's difficult to put out the stats on this, because the situation changes all the time. Some buildings are terrible, others can improved, and others should be knocked down." Those being targeted are buildings that have been abandoned by owners because of massive arrears, are derelict, overcrowded, or overrun by illegal squatters and used for crime.
"We realised we had to start somewhere," says a determined Mendelowitz, who describes himself as "an optimist at heart", which is lucky because he and his team have a daunting job ahead.
He speaks of the "ripple" effect of refurbishment. Just as decline spreads from one building to the next, so should improvement. "Once you fix up one block, there's an incentive for the next block to improve too. Soon you fix up all the blocks in the area. It's a knock-on effect."
"There is a great need for delivery," adds Mendelowitz, a civil engineer with an MBA and years of experience in the housing and development field. "We need to prove that the Better Buildings Programme can work. We've chosen these buildings because there is a good chance of quick transformation."
The buildings are also clustered around several precinct areas being targeted by the programme. Most of the 28 buildings are situated in Hillbrow, Berea and the inner city. Of the 28, eight are vacant - including the notorious Chelsea Hotel, which jollers of the 80s and 90s may remember as a sleazy pool hangout. Now it's a shell of its former self and the inside has been completely trashed. The rest, like Little Roseneath, The Pads, Windybrow Joy in Hillbrow and Greendale Estates, and San Jose in Berea, are occupied.
Chelsea Hotel
This presents another potential hurdle for Better Buildings and the developers. Transitional living arrangements will have to be made for those in the occupied buildings and discussions are underway with the Department of Housing to come up with solutions. Also, those developers pitching to buy the buildings must present viable proposals on how they intend dealing with tenants during refurbishment. Consultation must take place between all stakeholders and those resisting attempts to upgrade the building may be evicted.
Mendelowitz speaks of a new breed of property developer attuned to the challenges of today and hardier than the previous generation that became daunted by the rent boycotts of the time and simply lost control. "The new guys understand the market, they understand there's a different set of management criteria today. They are the people showing keen interest in the inner city."
"There are more and more investors looking at Hillbrow and Berea. It's a good return on your investment if you can manage that investment. Because of the whole recovery taking place in the inner city, interest is growing," Mendelowitz adds, describing himself as "a great believer in market forces". "The market is profit-driven. We say to those developers wanting to make a profit, come in, just don't slum it by putting huge families into tiny two-bedroom flats."
One of the new breed of developers is Brian Miller, of Itemba Properties Trust, whose company owns Dudley Heights in Braamfontein and Esselin Towers in Hillbrow, property for middle to low-income tenants, and is looking to acquire more properties in the inner city. Miller says the challenges of today are overcrowding and the non-payment of rentals.
But he agrees there are "new boys on the block who are more aggressive in their management styles" and who can deal with these challenges.
"We have strong management that keeps control." Turnstiles, 24-hour security and a thumbprint system keep tabs on who goes in and out. When tenants don't pay rents or overcrowd their apartments they're evicted. The steps have proved successful, says Miller, who claims 100 percent rent collection. The key to success, he says, is "to be by your till", which is why the company's offices are in the buildings they own.
"We have an agreement with the police," says Miller. "We have to keep crime out of the buildings, they have to keep crime off the streets. The inner city is a minefield or a gold mine," he adds. "There's lots of risk, but there are also huge rewards."
For more information about the Better Buildings programme contact the Joburg Property Company at 011 339 2700
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