Renprop: A triumph for diversity

Spreading risk in the turbulent recent history of the property market has not been a bad ploy at all. With the first glimpses of a recovery now starting to appear, Renprop, the Bryanston-based company with a business model entrenched in diversity, is well-positioned to benefit from better days ahead.

Renprop is the only multi-faceted property services company in the country. Established in 1983, Renprop has grown to become one of the largest providers of residential property in South Africa after forming a strategic joint venture alliance with Probuild Construction Group in 1994. This joint venture resulted in the formation of Space Developments in 2007.

Diversity has become a byword for Renprop, which primarily operates four major divisions:

Renprop Commercial is involved in a wide spectrum of broking services focusing on lease, sale, acquisition, disposal and development of such assets in their respective market on behalf of its clients or any other potential property investment entity.

Renprop Commercial has grown over the years and now operates within 10 high-density, prime areas in Gauteng. Aside from its own development arm, Renprop has good relationships with blue chip property funds and therefore has access to a wide range of commercial, retail and industrial stock. This division also specialises in sourcing premises within South Africa on behalf of international clients.

“Our Commercial Division has grown rapidly over the past decade with a focus on the Johannesburg and Midrand regions, providing a wide range of services covering leasing, rental valuations, location analysis, relocation and property acquisition and development structuring and documentation,” says Chris Renecle, who has been the managing director of the company for the past 20 years.

“We have worked on a number of head offices and office parks and completed a half a billion rand project to build a new head office for Sinosteel.”

Renprop Residential offers a turnkey service in the sales and marketing of new sectional title properties developed by Space Developments or other joint venture partners as well as selling and letting of various residential properties.

Since it was established Renprop Residential has been involved in over 50 residential development projects equating to 7,000 sectional title units that have been delivered to the market totalling around R1.8 billion.

Renprop Residential is currently involved in the development and sales of The Cube and The Link in Rivonia, The Boundary in Lonehill, Greenwhicih Villiage in Paulshoff, Douglasgate in Douglasdale, Nottinghill in Randburg and will be launching Manhattan in Sunninghill during the course of July.

Urban Housing is the marketer and administrator of sales of new entry-level houses in the broad base of the South African property market.

Renprop’s involvement in low-income housing projects strengthened in 2009, when, in collaboration with Probuild, they teamed up with Old Mutual in a low-income housing venture called Space Securitzation (Pty) Ltd. The company has been tasked and funded to deliver in excess of 20,000 houses to the value of R6 billion over a 10 year period under the Urban Housing brand.

Renecle says that the this business tends to concentrate on developments costing between R250,000 and R500,000, with Probuild dealing with the construction side and Renprop undertaking the marketing.

Funding for these projects comes from Old Mutual but also Government involvement through the National Housing Finance Corporation (NHFC) and they are proving highly popular, with projects such as Oasis Manor in the West Rand sold out. The company has also entered into a joint venture with Standard Bank in KwaZulu-Natal.

Ongoing projects are located around the country and include the Beverley Hills complex in Evaton West, South Gauteng; Oasis Palms, West Rand; Sunset Manor, Kimberley; Morena Manor, Mafikeng; and The Woodlands in Port Elizabeth; Raceway Park in Bloemfontein as well as Hillside, Glenway and Carnival Green in Gauteng.

 

Renprop Property Management focuses on the management and maintenance of property assets on behalf of institutional and private investors in both the commercial and residential property sectors, as well as facilities management.

Renprop Property Management is registered with the Estate Agency Affairs Board and is also a member of the National Association of Managing Agents, SAPOA and is registered with the Financial Services Board. All of its sectional title portfolio managers have successfully completed the UCT Sectional Title course presented by sectional title specialist company, Paddocks. Renprop Property Management is also backed by acknowledged experts in the field, which means its portfolio managers enjoy regular updates on changes in sectional title legislation ensuring that they are able to provide clients with expert advice on important issues.

“This division manages a number of residential projects with a high density focus (mainly high-rise apartment blocks) in northern and north-eastern Johannesburg, including two projects in Rivonia (called The Link and The Cube) along with Greenwich Village in Paulshof which was developed for an organisation called International Housing Solutions which is fund-managed with international money,” adds Renecle. “Renprop develops a range of residential properties for International Housing Solutions and then rents or manages the properties on their behalf,” he continues.

Greenwich Village has been exceptionally well received by the market due to the high demand for rental property in the area, so much so that 55 of the available 80 units were rented in the first three weeks since the completion of the first phase of the project at the end of April 2013.

Talking about the South African property market, Renecle says that at the beginning of the property slump in 2008 as the global economic crisis began to take hold, Renprop had seen sufficient warning to spread its risks.

“On the residential side of the business we anticipated the downturn and stopped developing roughly 8 to 12 months before the market dropped, which left us with very little left to sell.

“At the same time the commercial side also slowed down but because we provide property management services we had other business interests that were still very much in demand. Our relationship with the banks also helped with work and we were able to concentrate more on affordable housing,” he explains. “The company has strategic development equity partnerships in place across a spread of organisations including Old Mutual, Standard Bank Ltd, International Housing Solutions and Investec.”

Renecle suggests that one of the main challenges presented by the global economic downturn was the provision of bonds to prospective buyers:

“The problem with affordable housing has been that the banks tightened their criteria (following on from the Credit Act) and many would-be purchasers had already acquired too much unsecured credit and did not meet requirements. The advent of Basel II banking laws made this problem greater.

“In the residential housing market, obtaining a home loan remains a challenge for many prospective buyers and investors due to the financial institutions’ lending criteria. To save time we pre-qualify all prospective buyers when we receive enquiries and carry out credit checks (with their permission) right up front and I believe this approach is fairly unique.

“The rental market however remains strong and there is a continued shortage of rental housing, with many people migrating from rural areas into cities.”

Renecle suggests that lack of knowledgeable resources in many town planning offices can significantly delay projects getting underway but cites lack of infrastructure – and the expectation that property development companies will cover these additional costs, as a far bigger issue:

“In the affordable space, infrastructure is a major challenge and we often end up paying for power provision or water systems or roads, before we can begin our intended project. Right now we are lobbying Government as the costs have become too much to develop these townships.

The property market has had a tough time of it for the past five years but Renecle says that diversity has helped to carry Renprop through. Today he is starting to see small signs of recovery, although he remains cautious.

“While new development has slowed down dramatically over the last five years in the traditional high-density residential market, particularly in the northern Johannesburg suburbs, there has been increased demand from the public and investors recently leading to a sustainable volume of sales. We have seen an improvement but not a marked one, over the last four to six months. We expect to see the capital value of properties enjoy some growth in the next 12 to 18 months due to the increased demand and shortage of rental stock in this market.

“The industrial sector of the commercial market remains strong although there are still rental vacancies in commercial office space. There has however been a huge uptake of, and a continuing strong demand for, sectional title offices from companies looking to take ownership of smaller buildings.”

When asked about opportunities to expand the Renprop operation up Africa, Renecle cautions against property development in the rest of the continent due to the risks of security of ownership, lack of resources and the possibility of corruption.

“With that in mind we will stick to what we know best – I believe that the domestic market will turn again but remain sustainable – with the residential shortage there has to be opportunity but the politics governing this area pose the biggest questions. However my gut feeling is that things will improve and hopefully get back to normal in the next two to three years,” he concludes.