Following some recent and big contract awards like Dipula and Mergence Africa, property services company JHI is eyeing further expansion, says Johann Boshoff, property management director. Is the property management market showing signs of recovery?

By Ian Armitage

The past year has been extremely positive for property services company JHI, which has seen signs of recovery in several sectors.

Finance Minister Pravin Gordhan says the South African economy has moved out of recession, but the recovery has been mixed, uneven. Property Management companies have been reporting varied results.

“2010 and 2011 have been good years for JHI with strong growth in our property and retail management client base, as well as growth of existing clients’ property portfolios,” says JHI property management director Johann Boshoff. “JHI currently manages approximately R45 billion in property assets, which reflects an increase of 25 percent in the value of properties managed in 2008/9. We are also experiencing a marked increase in facility management, development management and valuations activities.”

JHI is an independent property services company with specialised skills and over a century of experience.

It currently manages some 1,550 buildings, comprising eight million square metres, and over 14,000 tenants.

The Gauteng-based firm operates in all major centres in South Africa and has a presence in Namibia, Mozambique, Zambia, Botswana, Lesotho, Zimbabwe and Ghana. It strives to be a “key property partner” in Africa, Boshoff says. Plans are well under way to open in Kenya later this year.

“With a gamut of tools at our disposal, our services include property management, retail management, broker services, property development and redevelopment, as well as marketing of property developments, facilities and project management, maintenance planning, research and consulting, valuations and tenant representation service,” he explains.

In a significant contract win, JHI was recently awarded the management contracts for the property portfolios of Dipula Property Fund and Mergence Africa Property Fund (funds we profiled back in issue 13).

Dipula has 91 buildings with a capital value of R773 million, and Mergence Africa has 51 buildings, with a capital value of R597 million. Both portfolios include commercial, retail and industrial properties in most major cities around South Africa.

The Dipula Property Fund was established in 2006 and is co-owned by Redefine Property Fund and the black-owned and managed Dijalo Property Services, which is headed by Saul Gumede. Mergence Africa Property Fund is similarly co-owned by Redefine and the black-owned and managed Mergence Africa Properties. Mergence Africa Holdings operates in the property and financial sectors and was formed in 2004 by Izak Petersen and Masimo-a-Badimo Magerman.

Boshoff says JHI was invited to tender for these two contracts along with two other companies.
“JHI was invited to tender and based on our track record as a reputable property management company, our national footprint and property management model, which covers a broad spectrum of services over and above the norm, we were awarded the management contracts for the property portfolios of Dipula and Mergence,” he says.

Despite the outstanding performance of 2010 and, so far, 2011, as well as contract wins like this, there are causes for concern.

Extreme weather, political protests, financial upheavals and declining job opportunities across Europe and the US have increased the possibility of a double-dip recession, according to economists, and interest rate rises are likely – a fact not lost on Boshoff.

“That is a challenge,” he admits. “An economic slow recovery in South Africa, exacerbated by the fact that globally we appear to be headed for a double-dip recession and the possibility of rising interest rates due to inflationary pressures, is a major worry. This is coupled with a market contending with ongoing, restrained access to finance, and consumers/marketplace beset by increased municipal rates, rising fuel and electricity costs, among others, and in Gauteng impending toll fees, which will impact negatively on the business sector. In addition, we believe that a lack of resources such as energy and water will see ‘Green’ living become a priority for all - with an associated cost factor - which in turn presents an opportunity for JHI.

“Other opportunities include socio-economic development, including infrastructural improvements, an emerging market focus, with increased prominence of Africa as an investment option and environmentally friendly/sustainable development, plus opportunities to capitalise on new technology and practices,” Boshoff adds. “There are opportunities for investors investing in commercial property at today’s low base levels, with the potential for significant growth in values in the medium- to long-term.”

He says JHI is “exploring every opportunity” to expand its footprint into Africa based on annuity income generating assignments. It is also striving to offer existing and potential clients a “one-stop” service with a comprehensive and quality driven offering to cater for all their property related needs.

He sees Zimbabwe too, a market where JHI has been expanding, as a strategically important.

“We see Zimbabwe as an emerging nation poised for fast turnaround growth,” Boshoff says. “JHI has always viewed Zimbabwe as a country with huge potential and the ability to change rapidly, and despite the current problems experienced there, we believe it can become a sought after business destination not only for South Africa but also for the rest of the continent and the global market.

“With no proper credit system in place and purchases made on a cash basis, the credit crunch has hardly affected these countries, as is the case with Africa in general – apart from South Africa,” he continues. “And the fact that the US Dollar is the common or base currency in use – in addition to their own local currencies – adds appeal for investors. This is borne out by the success of supermarket chains such as Shoprite and Game, as well as mobile phone operators and business hotels. Such expansion through Africa and increased trading continues to boost the local economies of these countries, while providing new jobs and catering for an emerging middle-class. It is positive to note that increasingly, forward-thinking governments in Africa are encouraging foreign direct investment and opening up trade with the rest of the economies in the region.”

With the recent conversion of Zimbabwe's monetary system to US Dollar, JHI is “seeing a strong trend among the country's local developers and fund managers to begin exploring ways of catching up with the international property markets,” Boshoff says.

JHI entered the Zimbabwean property services market with the acquisition of East African Properties, a company with an existing property management portfolio comprising 48 properties, which are a mix of industrial and retail.

These managed assets represent a total capital value in excess of US$40 million, spread across Zimbabwe, but with a concentration in the commercial hub of Harare.

JHI also plans on opening its doors in Kenya towards the latter part of this year.

In Ghana, JHI is soon to commence management of the Marina Mall in the Airport City area of Accra.

From South Africa Magazine, issue 17.