McCormick Property Developments: A ground breaking approach to business

By taking a separate path to the one most travelled, some companies are truly able to find a niche market. Unquestionably that is true of McCormick Property Developments, which has one of the most compelling corporate histories in South Africa today.

McCormick01The company started in 1983, during the dark years of apartheid and exclusion. John McCormick, a white South African, had returned to his much beloved Africa, having studied for and attained an MBA degree at Stamford University, USA.

The South Africa that McCormick returned to was one of social exclusion and extreme poverty for millions of black South Africans. His son Jason, current Managing Director, takes up the story:

My father was the first person to focus on developing the black areas which were known as ‘Homelands’, which were often as much as 100 kilometres from the main cities and towns. Many of the people were spending their income on transport rather than food every week.

We began to develop and manage much needed shopping centres in these remote outposts and have today developed into a market leader across Africa in the development of retail centres and in emerging market in South Africa, by which we mean previously disadvantaged areas. In Africa we manage retail centres that anchor big mixed use projects.”

Indeed John McCormick, who still oversees operations as the Executive Chairman, received national recognition in 2008, when the South African Council of Shopping Centres awarded him the accolade of ‘Pioneer of the 20th Century’.

His son says that over the past 30 years the company has completed 51 shopping centres, with many of the South African projects limited to around 45,000 square metres, due to the suppressed economy. Elsewhere, projects tend to be larger, with a recent Harare site covering 62,000 square metres.

Among the many successfully completed projects, McCormick suggests that the Chris Hani Crossing shopping centre is perhaps the most high profile to date; named after the equal rights leader who passed away in 1993.

Whilst recent years have seen the construction industry struggle to secure funding, for McCormick Property, this was nothing compared to the challenges of the early Eighties, as McCormick explains:

Back then it was nigh on impossible for us to secure funding – there was immense resistance to us working with black townships and my father had to go cap in hand from bank to bank. But my father knew his financial figures and eventually he was able to secure R1.5 million from First National Bank, on the basis of the finances of the project. We still bank with them today and for us, financing has become a hell of a lot easier and we are building four or five of these centres every year.

McCormick02We have been able to develop our own unique models having developed our skills and knowledge over thirty years, working in areas nobody else wanted to work in. This has helped to develop our reputation and we are able to adapt our models. When the 2008 meltdown occurred, things became much tighter but we then started to work on the Chris Hani Crossing project in 2009.

With the Homelands of the 1980s often in remote areas, with few, if any facilities, McCormick has a unique view on how infrastructure improvements have changed development planning:

“These were forgotten areas and back in the Eighties you had to put in your own infrastructure – and things have not changed very much. We still have to bore holes, provide water purification, sewage systems, build roads and pay for electricity supplies – and many of the local governments require money as well.”

Despite these drawbacks, the company continues to enjoy double digit growth. McCormick says that a turning point for the business came around 10 years ago when his father entered a partnership with Sanlam Life Insurance, which ultimately gave the business a debt-free shareholding in a project.

Today we still own 22 centres and we not only develop sites but also run an asset management and facilities management business,” he states. “We are currently upgrading one of our centres, expanding it to 30,000 square metres – it is a centre now coming up to its 20th anniversary. Our success is really down to sheer, bloody hard work and the prospect of an 18 hour day does not scare any of us,” he adds.

The company is headquartered in Pretoria, in a fourth generation thatched roof home, from which the managerial works – although the shopping centres are scattered around South Africa, as are the regional managers.

Roughly 10 years ago McCormick had 10 employees – the head office today has around 40 people and including regional staff, the company’s number have swelled to 70. Whilst growth can often change the approach of a business, McCormick says that this remains very much a family-run affair:

For many years my mother was the secretary and father did everything else. Of course things have grown but we try to keep the family ethos as much as we can.

Our business has traditionally been built around reputation and we’ve always been under the radar. We never advertise and we have only recently agreed to publicity in publications. All of our business has come from word of mouth and we often work on joint ventures with land owners who can make great returns with us.

McCormick03Word (of what we do) has infiltrated land owners and retail businesses for 30 years now and because we manage many of the shopping centres, once they have been built, we have also formed excellent relationships with the major retailers. I think we have one of the better reputations in the industry with retailers not only in the development phase but also through managing their stores daily and carrying out upgrades when required.”

Those relationships can be crucial to the viability of each project, with McCormick stating that between 70 per cent and 90 per cent of retail space needs to be sold before a spade touches the ground.

Whilst the company project manages, construction is all outsourced, with tenders often decided by long-standing relationships, with construction companies or engineers that have proved themselves over the test of time.

Whilst the past plays an important role in current decisions on each project, McCormick has an eye on the future. Environmental design is having an increasing influence on construction across South Africa and is an emotive subject for him:

From the outset, whilst we have focussed on shopping centres, our family are first and foremost conservationists. We own a game reserve close to the Kruger National Park and we are very busy rehabilitating this and improve the wildlife demographics.

With that in mind, we thoroughly subscribe to the green initiatives taking shape in the industry and one of our recent projects, the Edendale Mall, won awards for the work we carried out rehabilitating wetlands adjacent to the centre.

It can be a lot easier to attain a 4 or 5 Star Green Rating on an office building – shopping centres can be harder but we try to design LED lighting and insulated walls that reduce the need for air conditioning. We also recently worked with Pick N Pay and Shoprite to decrease their energy consumption.

Going green can be a lot more expensive but we do whatever we can. We are now working on a project in Nelspruit which could incorporate photo voltaic cells which produce up to 30 per cent of the centre’s energy needs and another similar project in Upington.”

South Africa is always likely to remain the spiritual home for McCormick Property Development, but increasingly the business is seeing opportunities across the Continent, having learnt harsh lessons 17 years ago on its first venture beyond its borders:

Africa just wasn’t ready at that time but we looked to do it for a long time and in 2008 we had much better success. My father always says that your first loss is your best and so it has proved.

Whilst South Africa remains a niche market where we just build shopping centres, there is great potential elsewhere and we have gone fully into larger missed use precincts, with hotels and office blocks around the shopping centres.

We will have a big focus on Africa over the next couple of years and we now have a presence in 9 countries, getting projects up and running. It can take time, due to infrastructure, political and planning issues – indeed some projects can take 5 years to come to fruition (in South Africa the average time is 1 to 2 years).

There are a billion people on the Continent and abundant resources and I genuinely feel that the good news story has yet to be told. It is an extremely exciting time and my heart is very much in Africa, which will be our main focus for the next couple of decades.”

McCormick Property Development has proved a ground breaking business in more ways than one, for over 30 years (the actual anniversary is this March), with those family values and such a wealth of knowledge, the company is poised to take the rest of Africa by storm.