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Leasehold model assists Dube TradePort SEZ property developers

Home Business Management Finance & Investment Leasehold model assists Dube TradePort SEZ property developers

BECAUSE emerging property developers often face considerable challenges in getting projects off the ground, the Dube TradePort Special Economic Zone (SEZ) has introduced a long-term leasehold ownership model to unlock new opportunities.

Speaking at the South African Institute of Black Property Practitioners conference at the Durban ICC, Andile Mnguni, Dube TradePort SEZ’s property investment head noted that emerging property developers often face substantial challenges in getting their deals off the ground especially in the lucrative commercial and industrial segment of the market due to unaffordable land and inadequate access to the necessary capital.

However, he said Dube TradePort SEZ has noted a growing awareness and interest in the benefits of a long-term leasehold ownership model as the sector begins to adapt to a changing economic landscape.

Mnguni explained: “The leasehold model can facilitate access to land, launching numerous commercially viable industrial projects by eliminating the need for property developers having to buy land upfront, and reducing the capital requirements to initiate the deals, whilst still meeting all the criteria needed to enable commercial banks to fund these notarial leasehold developments.”

Notarial leasehold contracts allow investors to access land developable over long periods without the need to purchase it outright and ensure the property owner a stable revenue stream over the lease period.

Mnguni added that, by lowering the initial expenditure necessary for development, leasehold agreements enabled a wider range of property developers who could add value to the commercial real estate market segment.

“In the ten years since the leasehold model was implemented in the Dube TradePort SEZ, we, as the landlord, have a stake in both the overall prosperity of our property developers and their tenants in our zones.  We have worked with developers to enhance the industrial precinct, consistently funding amenities, support services, and new infrastructure, which has increased value and the overall experience of our investors in our zones.”

“Furthermore, Dube TradePort SEZ has been working in tandem with development finance institutions like Ithala Development Finance Corporation Limited and KZN Growth Fund here in KwaZulu-Natal, together with some of South Africa’s development finance institutions and large commercial banks, to secure funding for emerging property developers developing with our precinct.”

He added that Dube TradePort SEZ’s teams had helped with due diligence reports to enhance the business cases for these developers’ projects highlighting the leasehold’s ability to provide stable revenues for funding institutions over decades.

Mnguni says: “We go as far as supporting black SMMEs with up to 15% discounts on rental rates and have worked smartly to provide linkages with established businesses within our precinct, providing them with a platform to market their products.’

“Dube TradePort has also piloted programmes where it substitutes fixed rentals and opts to take a percentage of a tenant revenue which helps the developer and its end clients’ cashflow. In the initial stages of operations, as the landlord, we are invested in the success of our developers and their clients and work hand-in-hand to ensure their growth.”

The leasehold property development model will continue to evolve as it is adopted in more segments of the property market as it enables access to land, while providing consistent revenues for landowners and financing institutions.

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