This is the biggest business property transaction ever in South Africa, and accordingly Sentinel enlisted the services of independent property consultant Jim McLean to advise them in negotiating the sale. With Melrose Arch, Sentinel has created for Johannesburg and South Africa an international icon.
Sentinel conceived the concept of the mixed-use Melrose Arch development in the early 1990's and then assembled the site thereafter. The design and layout has won a number of prestigious international awards. The complex has a very good and strong list of tenants. The mixed-use concept of combining residential, entertainment, retail and commercial buildings in a single safe and secure precinct, combined with state-of-the-art technology, has become a world-wide trend. It is particularly relevant in bustling cities such as Johannesburg at a time when South Africa is enjoying strong growth and has the attention of global investors.
"The uniqueness of Melrose Arch as a mixed-use property, its popularity and potential for further development, probably all contributed to the exceptional selling price," says Eric Visser, CEO of Sentinel. He believes it was a good deal for both seller and buyer, adding stability for the tenants of Melrose Arch.
Visser says the agreement is also beneficial for the members of the Sentinel Pension Fund. It finalizes Sentinel's decision, taken in 2001, to rebalance its investments, achieve the right mix of diversification, downsize on direct property portfolios and to focus instead on more liquid investments, which do not require capital commitments, for members' contributions.
Payment guarantees have been delivered to the seller and the process of transferring ownership has started. Property Partners will concentrate on reducing costs and improving income of the 100 000 sq m first phase of the Johannesburg mixed use property in 2005, that is already built. It will also start designing a further 150 000 sq m for development from late 2005 onwards.
Property Partners CEO Stuart Chait will take personal charge of the development team and roll out of the new phases coming on stream. Tony Criss, UK based head of Highneal Limited, has been appointed non-executive chairman of Melrose Arch.
Property Partners is jointly owned by Chait and Highneal. Property Partners' corporate advisors, Javelin Capital Limited, have a minority stake and were instrumental in engineering the deal.
Chait says Melrose Arch is one of the few prime property developments in South Africa today that can be used to attract the scale of capital international investors seek. "Attracting investment capital is not our problem," he says. "It is finding investment big enough for our investors.
"It's typical in a country like South Africa which is poised to reap the benefits resulting from decades of political and economic uncertainty. Most property investors and developers, previously nervous of some sudden event that could send the market into a downspin are regaining confidence.
"Investors are now becoming more assured of ratings particularly where large, long term developments have tended to be undervalued. We think, due to South Africa's sustained stability and international re-rating, their confidence is well founded and Melrose Arch represents one of the major opportunities in South Africa, particularly in Johannesburg,
a world city, the hub of Africa's business with a population set to grow from 9 to 20 million people over 15 years - and where office and retail rents are currently among the lowest in the world."
