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What makes the Station House development in Sea Point so unique?

It’s a piece of art in a strategic position at a time of low interest rates – Paul Berman from Berman Bros Group and Robin Magid from D2E Properties.

SUREN NAIDOO: Cape Town’s Atlantic Seaboard is one of the most scenic coastal spots in South Africa. It also remains a property hotspot and, despite Covid-19 bringing some uncertainty into the overall property market, the Atlantic Seaboard continues to see new residential and mixed-use developments. Station House in upper market Fresnaye is an innovative new development being brought to market by Cape Town-based developers Berman Brothers Group in collaboration with D2E Properties.

Joining us in this special Moneyweb podcast are Paul Berman and Robin Magid to tell us more. Paul is the founder of Berman Brothers Group, together with his brother Saul. Robin is from D2E Properties. Welcome, gents.

PAUL BERMAN: Thanks very much.

ROBIN MAGID: Thank you.

SUREN NAIDOO: Let’s start off with you, Paul. Please give us some background on Berman Brothers Group. I believe your company has developed over a dozen residential and mixed-use developments, largely in the Sea Point and greater Atlantic Seaboard area over the last 20 to 30 years.

PAUL BERMAN: Well, thank you. My brother founded the company in 1989. I was a practising lawyer at the time and I joined him in 1994. The company has been going for about 31 years and my brother and I celebrate our 27th anniversary this year on August 1.

In terms of development and mixed-use development and residential developments, we’ve done a significant amount over our partnership of 27 years, having [introduced] thousands of apartments into the marketplace, and a number of mixed-use developments with strategic joint-venture partners, one of which was Investec at the time when we had the privilege of meeting Robin some years ago. And currently we very excited about our new joint venture partnership with D2E.

SUREN NAIDOO: Paul, going down to the hot topic for the companies at the moment, Station House – the mixed-use development – what made the group decide to go ahead with such a development right now?

PAUL BERMAN: It’s an interesting question. The timing is I think perfect in terms of what we see as a strategy and our vision. I think today – if my memory is correct – marks 333 days of lockdown since lockdown was initiated, on I think March 27. The economic disruption and dislocation caused by the pandemic has manifested itself in many life-changing events. We are experiencing one of the global challenges in modern history which has disrupted our lives. Yet business goes on, life goes on, and we see this as a strategic opportunity.

We have looked at this site for many years, but it was always difficult to acquire all the surrounding properties and then consolidate all the properties. It was originally a strategic partnership between ourselves and HCI, and then D2E bought out our partners in the last few months. We see this as a strategic property.

There’s a lot of history in terms of its proximity and its position.

I’m not sure if you’re aware, but I think it was in 1862 that the Sea Point Tramway Station was first inaugurated just opposite that site, which linked or connected Sea Point to Camps Bay. So we are very excited about the site; it took some years to acquire all the surrounding properties and then to consolidate them into a sizeable piece of land of just over 3 000 square metres – which gives you the critical bulk to do a sizable development.

SUREN NAIDOO: Robin, I think it’s your turn to chip in. Tell us how D2E Properties is involved in the project as collaborators with the Berman Brothers Group. Paul did mention that you bought HCI out, but you might want to give us a little background to your company and then go into how the groups are collaborating on this project.

ROBIN MAGID: Yes, thank you. I spent the better half of 25 years at Investec Bank, and 20 years at Investec Property, where I headed up the training and development business. I’d come into contact with Paul and Saul, whom I’d seen over many years and, as Paul previously mentioned, we had done one or two joint ventures in the past.

In August of 2018 I decided to go down this property road by myself and establish D2E Properties with some shareholders and friends. And in speaking to Saul, like I do on a regular basis, this opportunity came about.

For me, what immediately struck a chord was its location.

For me, being a puristic property person, it’s location, location, location, and this was something [in which] D2E really believed that we could bring an absolute unique product offering to potentially Cape Town, one that maybe not even South Africa has witnessed before.

In terms of working with Berman’s, I think that’s completely on an equal basis, whether it is on the development, the design, the construction, the financial side. So it’s really been a marriage that is split down the middle, that we both bring our expertise to the game and jointly work on everything together and collaborate.

SUREN NAIDOO: Gents, I think both of you would want to pitch in and comment on this question. What makes the Station House development so special and unique in the market? Maybe Paul, you want to start?

PAUL BERMAN: The design is absolutely world-class and cutting edge. It really is. It’s a piece of art in a very pivotal and strategic position as you enter and embrace Sea Point. They say a rising tide lifts all boats. We did that with our Point Centre in Main Road, Sea Point, which is a boutique shopping centre, and we intend to do the same with Station House.

It’s quite amazing what a new strategic development does to all the surrounding properties in terms of improving and attracting other businesses and retailers and developers to the area.

Robin will go through the ingredients of the development, which sets this development apart. But what we’ve tried to do is we’ve tried to make it extremely attractive, affordable and cutting-edge. I think it has all the ingredients I’ve described above.

The principle that we tried to enhance was to make it affordable, to see to what extent people in the rental market could convert that rental to paying [off] a bond. With that in mind we try to make it as affordable as possible. The principal part of the development is micro-apartments. Our slogan is ‘Sleep small, live large’. Robin, perhaps you can go through all the different ingredients that we put into the development.

ROBIN MAGID: When sitting down with the architects we had a very crystallised brief of what we wanted to achieve. And the brief was along the lines of “give me a reason to leave the building”. Obviously we can’t provide a beach, we can’t provide a walk up Lion’s Head, and a drive to a wine farm, but let’s have an attempt at going at everything else.

So from cupboard basements and storage, parking, 24-hour concierge [to] full fibre access and WiFi-enablement; we have secured a signature Pick n Pay supermarket, we have a street-front deli bar and restaurant [and] we have a private-residents’ lounge with braai areas, because we know how popular that is in South Africa.

We have a little pet park so people with pets – obviously of a certain size – are welcome to bring their pets and live in the building.

We have an outdoor kinetic gym. We have amenity business parks that can accommodate business meetings, facilities. We have a commercial sky bar, pool and restaurant. We have a private residents’ pool. We also have a unique little boutique offering within the building.

So we’ve really tried to cover all our corners in that why would you want to not live in this building?

We feel we are providing for a community and a community within a community, and we know there’s a strong sense of community in Cape Town. So we really feel this offering is something special that has not been delivered before.

PAUL BERMAN: If I can just get to Robin’s points – there’s a blend of apartments within the building. We have approximately 230 apartments made up of studios, one-beds, two-beds and micro apartments.

What we found attractive at this point in time is that interest rates are quite low so it makes it more affordable for those entering the market.

That’s why we designed it and priced it accordingly.

SUREN NAIDOO: You actually went on to some of my follow-up questions. How many apartments did you say?

ROBIN MAGID: There are 233 apartments, of which there is a bespoke element of roughly 30 hotel rooms within that. And 72% of the product is price under R3 million, and 88% priced under R4.5 million, which we believe is extremely competitive within the Cape Town and specifically the Sea Point environment.

SUREN NAIDOO: One more question, Paul. Just in terms of total development value, can you give us a ballpark figure of the overall development value?

PAUL BERMAN: The estimated project cost is just over R600 million that we are investing. It’s not a collaboration. It’s a partnership that we are investing in Sea Point, into this new development.

SUREN NAIDOO: So it’s much bigger than I even anticipated. Sums like that in this market are clearly welcome. Just from a market perspective, Paul, I know that you talked a little bit about where the market is, and the fact that you are targeting it as a well-priced product, but how is the market really doing? You clearly must be pretty confident of demand for this kind of development, considering its launch right now.

PAUL BERMAN: Yes. Before we embarked on this particular development or any type of development, we analysed the market, and we looked at the stats on the Atlantic Seaboard. I’m talking about from Mouille Point all the way up through to Llandudno.

You’d think that during lockdown or with the rise of Covid, as well as the impact on the Deeds Office, it would have had a significant impact on sales and registrations in the Deeds Office. I looked at the numbers. Just to give you an idea, in 2018 roughly R3.4 billion worth of sectional-title transfers were effected in the Deeds Office. In 2019 that was R2.8 billion and in 2020, notwithstanding lockdown it was virtually the same as in 2019 – R2.8 billion that was transferred.

What I found quite significant was the ratio between mortgage bond and cash, which changed quite significantly. Of that number that I just mentioned, the R2.8 billion, only 26% was mortgage finance. The rest was cash, which is quite a significant number. And of course the foreign inflow was also fairly on par at just over R500 million, in relation to local money of R2.3 billion. These type of stats give me confidence.

But I think the lower interest rates, attractive sales prices, which include Vat, of our entry apartment – I think it’s R1.595 [million], Robin – which include[s] Vat, are very attractive and very competitive. When you take all the facilities into account, it is just world-class. And perhaps when you see the design of the building you’ll understand what we are talking about and why are we so excited about this development.

SUREN NAIDOO: Robin, over to you. In terms of pre-sales, have you had any pre-sales on this, or is it going to be a clean-cut launch in March? And maybe give us a little idea on when you expect construction to start, and when this development is expected to be completed.

ROBIN MAGID: We have started basic construction with WBHO. In terms of our bank funding, we do require a 75% pre-sale. We are launching to the public on March 6, and up until then from about a week ago, we have been doing a soft launch through social media – Facebook, Instagram and the like. We are hoping and are confident, as Paul has stated, that we will have a quick pre sell-out, and that we will be able to give a full go-ahead to our contractors.

We are anticipating a November 22 handover period. For us that would be a perfect handover period in terms of it being just before the December break, where people would renegotiate their leases or are relocating. So, all things being equal, we think the timing is spot on and we just hope the people buy into the product as much as we do, because it really is something fantastic.

PAUL BERMAN: May I just add one or two other points. I think we need to acknowledge our professional team which is world-class, namely Vivid Architects and Inhouse Architects, together with our marketing company Rainmaker, our attorneys Werksmans, and our selling agents, Dogon Group. We are excited despite the economy. We’re excited that interest rates are low. We’re excited about this development. We’re excited about this partnership.

And when we launch the product to the market, I think you’ll understand our excitement or what gives rise to our excitement, because we spent months and months and months of designing each and every component and aspect of this building and development to make it absolutely world-class.

ROBIN MAGID: Suren, being electively along as the guy – myself and the Bermans – we’ve been through cycles before. We’ve been through the economic crises of 2008 and 2003, when the market collapsed. Things come back. And when you bring real value to a market and people can identify that value – I don’t know how many times I’ve heard everybody’s leaving South Africa and nobody’s investing – the money and the clever money is there for proper investments that bring either the investor or the buyer value to his life or his investment. For us that starts with property, and that goes back to the fundamentals of the location and the offering.

SUREN NAIDOO: Fantastic. Gents, you both kind of went on to my last few questions. Maybe as a concluding question to you, Robin, who should be investing in Station House? Whom are you targeting?

ROBIN MAGID: I think it’s a very good question but, because if you look at the uniqueness of the offering and whom we are offering the product to, as Paul said, we have the micro/studio type apartment, which would be very attractive to the first-time home buyer.

We then have the hotel investment offering. And because it’s a unique boutique offering, for the investor into a hotel room, we believe these occupancy levels are going to be very high.

You then have your traditional investor, who is going to invest in a product and try to achieve long-term rentals.

And lastly, there’s the resident who wants to live.

So we think there are four very strong cases, or alternative type buyers, to all live and co-function within Station House.

SUREN NAIDOO: That was Paul Berman of Berman Brothers Group and Robin Magid of D2E Properties. All all the best, gents. I’m looking forward to seeing how Station House turns out.

Brought to you by Berman Brothers Group.

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