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Waterfall precinct shifts to industrial property investments

Having developed Waterfall, Attacq teams up with Sanlam and Equites to grow the precinct.

After successfully rolling out office properties and the much-talked-about Mall of Africa, capital growth company Attacq Limited has shifted its focus to developing industrial properties at the Waterfall precinct, sandwiched between Midrand and Pretoria.

The company, which established the 340 hectare Waterfall development with unlisted developer Atterbury, announced on Tuesday a strategic joint venture with JSE-listed industrial play Equites Property Fund with a value of R728 million. 

The joint venture already sees Attacq owning a 20% stake in eight distribution centres in Waterfall, with Equites owning the balance. Attacq’s CEO Morné Wilken says the partnership will allow the company to pursue industrial property opportunities – some of which include greenfield developments around SA.

“With Equites, there is a strategic alliance, given that they are Cape Town based and we are looking for opportunities jointly. The opportunities will all be demand driven,” he tells Moneyweb.

The development of the Waterfall precinct over the past five years has cemented its status as being among the biggest developments currently underway in SA. The precinct has since grown – with more than 15 corporates setting up offices such as Premier Foods, Novartis, Group Five, Cell C, soon PwC and more, and the recent opening of Mall of Africa, SA’s largest single-phase mall to be built from scratch.

Wilken says there are about 1.2 million square metres of development bulk still remaining in the whole Waterfall node.

Attacq’s strategic partnership with Equites is hot on the heels of its announcement on Monday that it will also join forces with insurance company Sanlam for more property investments at Waterfall. Sanlam holds 80% and Attacq holds 20% in the joint venture, and the latter has the option to increase its shareholding to 50%.

The joint venture acquired 28 hectares of Waterfall land from Attacq and an additional 100 hectares of adjacent land from the Mia family. In 2008, Attacq and Atterbury bought the rights for Waterfall from the Mia family to develop the prime land.  All the unusable land, earmarked for light industrial commercial and retail developments, is located on the eastern side of the N1 and south of the Allandale interchange. The retail component of the investment will include a convenience shopping mall of about 15 000 square metres of gross lettable space.  The development of properties might be completed in ten years.

Because of Waterfall’s slick access to arterial highways and a number of existing industrial properties, Wilken says it makes it more appealing to roll out more distribution centres. These investments will build scale to Attacq, which has property investments worth R27.1 billion (as of December 2015), of which 24% is in hard currency, as it has stakes in shopping malls in Central and Eastern Europe, Nigeria and JSE-listed MAS Real Estate.

There hasn’t been much supply of distribution centres, which has created an insatiable demand for properties. This has arguably prompted industrial properties, which incorporate warehouses and usually have a small component of offices to them, to have the second best returns after shopping malls.

MSCI’s Investment Property Databank South Africa Annual Property Index for 2015 shows that industrial properties delivered a total return (capital and income growth) of 14.2%, marginally outperformed by shopping malls, which notched up a total return of 14.3%.

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