January 10, 2006
By Lucille Davie
THE City has kicked its Better Buildings Programme up a gear, to target far more buildings in the CBD in need of rejuvenation.
Through a number of "project packages", it is hoped that over a three-year period up to 1 000 buildings will be refurbished. Previously the programme focused on high-rise, high-density buildings mostly in Hillbrow, Berea, Joubert Park and the CBD; it will now include areas like the Greater Ellis Park Precinct and smaller, freestanding buildings and houses, in a "broader, more general approach".
The programme is managed by the Johannesburg Property Company (JPC). The new project was conceived by the economic development unit and the Johannesburg Development Agency, together with the JPC.
It focuses on "bad" buildings - ones where the amount of arrears owed in rates exceeds the market value of the building - with the aim of turning them into "better" buildings.
Bad buildings come about when buildings are "invaded" by slum landlords and tenants, becoming overcrowded and rapidly deteriorating when its amenities cannot cope with the demands placed on them. The owner often absconds when these conditions become overwhelming, leaving huge amounts of unpaid rates owed to the City, and tenants living in unhealthy conditions.
The City has moved in on such buildings, in cases expropriating them, offering them to investors who will refurbish and pay the outstanding rates.
There are several hundred bad buildings in the inner city. But there are also a number of buildings that can be classified as "not so bad" or even "good" that have accrued large debts with the City.
Refurbishing the buildings is a protracted process: identifying the bad buildings, finding and screening potential investors; calling for tenders from them and selecting appropriate investors; acquiring the building from the owner and transferring it to the new owner, at the same time moving out the occupants and starting the refurbishment process.
Since April 2003 94 buildings have been placed in the Better Buildings Programme, with 19 refurbished so far and 48 expropriated and acquired by new investors. To date the value of refurbishments stands at R320-million, with R260-million in rates write-offs granted, according to the department of economic development, tourism and marketing.
It is hoped that this process will encourage a "ripple effect" of "increased investor confidence" in the inner city. And it seems to be working: there are an estimated additional 100 buildings being renovated without intervention from the Better Buildings Programme, says the department.
Five main thrusts
The improved project encompasses five main thrusts to kick the programme up to a higher level: the continuation of the existing programme; a database intervention project; a liquidations and auctions project; a revenue deals project; and a sectional title pilot project (STPP).
With the continuation of the existing programme, the new owner is obliged to sign an Obligations Agreement with the JPC. This is a five-year agreement to ensure "ongoing good quality development and management" of the building, involving a due diligence report of each new owner, as well as requiring the investor to tender for the building, submitting BEE and rehabilitation plans, among others.
In the database intervention project, slumlord owners who are operating overcrowded and rundown buildings, even where the rates and service payments are being paid, are being identified and urged to rehabilitate their buildings and bring them under proper management. If they prove to be obstinate, a "naming and shaming" strategy will be considered.
The liquidations and auctions project envisages speeding up the refurbishment process by allowing more write-offs in exchange for fast-tracking refurbishments. This already happens informally but the new Better Buildings Programme will encourage more of these projects while still in the liquidation and auction stage.
The next project, revenue deals, is similar to the previous project but occurs at a less advanced stage. Here the owner or prospective owner can pre-empt liquidation and auction by entering into an Obligations Agreement with the City, and begin the refurbishment process sooner.
The STPP, managed by the economic development unit, involves the rehabilitation of buildings owned under sectional title. Once again, the debt owed to the City will be used to "gain control" of the building.
A certain amount of write-off of the debt will be allowed in exchange for upgrading and managing the building through the establishment of well-run bodies corporate.
Under the original Better Buildings Programme, these buildings were offered to new investors and expropriated, but the process is proving to be difficult, with owner resistance or costly compensation claims.
The STPP will review each case and instead of a judicial administrator taking charge of a building, Obligations Agreements will be signed with individual owners and bodies corporate, to begin refurbishment of the building, to be carefully monitored by the JPC.
Closer working relationship
The new programme is reliant on a closer working relationship between the JPC and the revenue department, City Power, Joburg Water and Pikitup, the agencies and utilities that are owed monies in rates and services.
Estimated costs of the improved programme come to R49,17-million over the three-year period. This includes specialist legal, management and revenue staff, security, cleaning, expropriation and demolition costs.
It is estimated that initial benefits indicate that writing off about R660-million over three years could probably unlock some R1,1-billion in investment in the inner city. This takes into account declining write-offs over time, as well as declining levels of investment per building over the period.
Social benefits, like an improved quality of life for tenants and property owners, will also be seen. Increased property prices and rentals will be another spin-off, and the City will benefit from collecting rates from well-run buildings.
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