There is a popular saying that to make it big in business you need to go where the money is. For South Africa’s property market, the last few years have been a struggle. Ezulwini Investments has managed to buck the trend through a combination of smart financing and following the money.
The company, based in Bedfordview, Johannesburg, began life in 2001 and has gradually migrated from buying and renting out properties to buying land and overseeing the property management of the high end, luxury market.
It is a strategy that has worked but has had to adapt to the changing economic climate, as Brian von Holdt, Director, explains:
“Our sole focus is developing high quality, luxury homes in security estates around the Sandton area. We offer a turnkey customised solution and we believe that by staying local, we can optimise the level of service.
“The business started more from the buying of residential properties back in 2001, at a time when the market was very soft. Back then companies were able to obtain 100 per cent bond financing on projects; the bank were lending at 100 per cent, so we bought and then rented out small properties.
“Over the next few years the price of property doubled in value and we acquired the capital that enabled us to start our first development project.”
The site in question was a 16 unit complex in the Bedfordview area, called Chagall. The company brought into place some extra partners and work began on the project in 2007, with luxury homes selling for between R3 million and R4 million.
“Since then of course the market has changed dramatically in the context of financing,” states von Holdt.
“100 per cent bonds are no longer granted and our approach at the high end of the property market means that we are dealing with lots of cash buyers who do not require bonding finance.
“On our development side it has become very challenging to get financing for new developments. Our latest project saw us purchase vacant land – but bank assets are problematic, so we have devised clever structuring schemes where we loan from other investors or put together cleverly structured financial deals with land sellers.”
Von Holdt says that identifying the right location and understanding the market are essential aspects to Ezulwini Investment’s strategy – and combined with unique and attractive architecture, have made for a winning formula:
“We are a small company, so we are not really worried about market share and competition. We just try to find strategic locations and develop a product that the area is in need of.
“With our latest project (at Ballyntyne, Bryanston), we identified a gap in the market and pricing in the area – we found something that fitted at the right price and because the area was built-up, there was very little competition.
“Whilst the property slump of 2008 hit everyone hard, it did also weed out a lot of the competition – especially in strategic locations. We have tended to focus on well developed areas with a severe shortage of land.”
Of course finding suitable land is anything but a straight forward prospect. In fact, sourcing land and obtaining all the necessary paperwork from local government, can be a frustrating time, as von Holdt explains:
“Our business is purely built on sub-contracting out work: we will source the land, zone it, put a package and the marketing together and sell and liaise with the client. We will do everything up to the point where the keys are handed over.
“However we do not do the design or construction work – that is all outsourced. Typically in the property market companies have to achieve sales ahead of spades but because of our structure we are ready to go when the buyers put down the money, with no requirement for pre-sales.
“One of our biggest challenges is undoubtedly obtaining approvals from the City Council, which can affect timelines. We have to put the right contacts in place and we are wary that a curve ball can come from any corner.
“Before I buy a site I go through a full due diligence process to discover what infrastructure is in place and what needs to be built. In the past, it was a given that supplies of electricity and water and sewage systems would be in place already and you would find these services on any site – but now we have to assess them and the potential for added costs to rectify problems.
“I rely heavily on the professional team to assess risk areas like, electricity and other basic services and issues around them, ground conditions and market demand, before I commit to buying land.
“Our current project is a good example of the kinds of challenges we can encounter: we have had to provide external infrastructure – at our own cost, as well as organising this on-site. We have had to build a service road next to a minor road and create external storm water systems at the request of the council. We have also had to pay for power to the site – all of which pushes initial costs up.”
Despite these additional issues, Ballyntyne remains on track. The project comprises of 23 cluster houses ranging in price from R2.7 million up to just over R4 million each, with an additional 22 apartments attached to that development, which will sell from between R600,000 and R1.2 million.
“We are currently in the marketing phase and on-site with civil grounds work. The approvals are all done and just waiting for final endorsement from the City Council and we are hoping to have the on-site work completed by the end of March,” von Holdt confirms.
The project is very much in line with Ezulwini’s portfolio. The first development at Chagall, in the Bedfordview area, proved hugely popular and von Holdt still receives phone calls from people registering an interest in either purchasing or renting a home on the site.
“Our other project is Loudoun Lane in Morningside has also proved popular and was well located for Sandton and locally has been acknowledged for the architecture.”
That architecture is primarily carried out by Chris Pattichibes and his team, who undertake all of the design work, developing unique and fresh concepts that appeal to prospective buyers. Von Holdt says that increasingly the design phase involves green consideration and acknowledges that whilst there may still be the odd teething problem with new green build, there is an irrepressible trend towards green design:
“We have been looking into green design a lot of late but new things can be problematic, so we are investigating and letting them iron out the challenges. That said we are using energy saving devices like water heating and gas supply for cooking and heating (given the electricity problems in South Africa) and the taps we use will produce water savings, while the lighting is also designed with savings in mind.”
“Chris’s team are keeping up to date with green initiatives but in the meantime their graphics capabilities have helped us enormously by producing excellent marketing brochures that incorporate off-plan images that help us to sell properties.”
Green design may be more for the future, but the present remains challenging, if rewarding for Ezulwini:
“The market has come through a bad period but has made us stronger. Tough times mean you have to rationalise processes and cost effective products that still deliver client value. We have gone back to the drawing board but the crux is that you still have to be in the right area and at the right price.
“The market has improved but we are not in a boom time, it feels more like a normal market and I expect it to remain this way over the next few years.
“Our plans for this year are to maintain our pipeline: first and foremost we are looking to build up Ballyntyne and then look for new land once the first transfers of land there have taken place. I hope to be on the lookout for new land by the middle of the year.
“We have one other development in Bedfordview which we are looking to build out and we will probably do the selling once this complex is built. The key is to then replace these projects and keep that pipeline going with two new development opportunities,” he concludes.