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We look at today’s sought-after investment propositions, from penthouse properties to hotel apartments and 12J hospitality fund developments

WORDS: DEBBIE HATHWAY :: PHOTOS: SUPPLIED

Wealthy business executives commuting between Johannesburg and Cape Town have their pick of accommodation options. Those who choose a penthouse for a short-term stay in a top hotel may be indulging their desire for a spacious yet exclusive living environment, making a statement about status, or both. It’s about lifestyle, luxury and convenience too. From an investment perspective, the penthouse offering in apartment-hotel (aparthotel) developments affords investors classy accommodation with a lower margin of risk, increased security and low maintenance. The lockup-and-go rooftop space holds obvious appeal and commensurate value for upmarket buyers. “Besides the view, security, exclusivity and convenience all add to the appeal of being a penthouse owner,” says Horizon Capital Residential MD David Sedgwick. “Most purchasers are frequent travellers looking for a home that is secure, futureproof and worry-free.”

The Cedar, a Cape Town development by Horizon Capital Residential

GREEN URBAN SPACES

Mixed-use precincts continue to be a major focus for developers looking to create modern spaces that offer a range of benefits to those who want to live, work and play in the same area. The Amdec Group takes inspiration from cities like Hong Kong, Sydney, London and New York. Its “lifestyle meets real estate” projects include Melrose Arch (and One on Whiteley within this mixed-use precinct), as well as the Yacht Club and Harbour Arch on Cape Town’s foreshore. Only a handful of the 241 apartments at the recently completed One on Whiteley are still up for sale. One-, two- and three-bedroom units start from R2.5m. “One of the challenges to developers is to create green urban spaces and less concrete jungle,” says Amdec Group MD Nicholas Stopforth. “We are constantly striving for unique solutions for green spaces within our developments. We look to trends around urban gardening initiatives and rooftop gardens and we create parks for dog walking and simply enjoying the benefits of being in nature. “There are also many health benefits associated with living in mixed-use developments. You can walk to everything you need ‒ to work, restaurants and even the gym.”

A render of a penthouse in Munyaka by Balwin Properties

TAX BENEFIT

Named after Section 12J of the Income Tax Act, the hospitality fund concept was introduced by Government in 2009. In 2012, Treasury made an amendment to incentivise South African taxpayers to invest in SMEs or micro-enterprises in the local economy. An investor who participates is afforded an immediate tax relief of up to 45% in the year in which the investment is made. “Section 12J has been the fastest growing alternative asset class in SA over the past few years,” says Jeff Miller, CEO and cofounder of Grovest Corporate Advisory, the largest administrator of 12J funds in the market and a pioneer, having launched the first fund in 2014. “It is being recognised as a favourable financial option for smaller businesses that are not able to secure attractive bank financing,” Miller says. “The number of funds in the market cater for varying investor risk profiles and appetites. However, more and more we are seeing the 180-plus funds in the market seeking new innovative ways to attract investors,” Miller says.

Grovest Corporate Advisory’s Mdluli Safari Lodge Limited in the Kruger National Park

“We’re all navigating uncharted territory. As much as we try to maintain business as normal, we know no industry will escape a direct or knock-on effect of Covid-19. Now, more than ever, we should be taking a long-term view – and looking locally. Section 12J requires that investors take a five-year outlook – any investment exited under five years is liable for a recoupment of the tax benefit.” Among the key industries to consider when investigating the right Section 12J investment, Miller says, hospitality has been a strong performer thanks to its significant job creation (a key criteria for Treasury), having a strong asset underpin and strong cash flows. “By far one of the hardest hit industries now is tourism and hospitality, but we believe they will be the most resilient in fighting back when people become eager to travel again and reinstate the many cancelled and postponed trips.” According to Flyt Property Investment, the 12J sector has attracted investment worth more than R6bn to date. The company’s 12J fund offers investors excellent returns in the high-growth hospitality industry. This fund, in partnership with a leading 12J specialist, invests in strategically located hospitality properties with a focus on sectional-title serviced apartments and student accommodation. Aparthotels in Flyt Property Investment’s portfolio are located in Cape Town and Stellenbosch. Benefits include medium to long stay, kitchen amenities, flexible check-in/checkout hours, generous living space and dining facilities. Flyt Property Investment sees the 12J incentive as an opportunity to participate in the Government’s policy of job creation while providing investors with attractive returns and a viable exit strategy. Moreover, for every R1m invested, 4.1 jobs are created.

One On Whiteley, an Amdec Group development in Melrose Arch

HOTEL RESIDENCES

Originally a New York phenomenon, the hotel residence trend has started to catch on in other major cities and holiday hotspots around the world, according to the New World Wealth 2019 Global Wealth Migration Review published in conjunction with AfrAsia Bank. “Hotel residences refer to apartments or villas that can be purchased in existing hotels. They essentially allow owners to live in a hotel permanently and enjoy the same services as regular guests, like room service, dining, cleaning and so on,” says Andrew Amoils, wealth analyst for New World Wealth. The increasing popularity of this offering can be attributed to facilities being maintained regardless of whether owners are present or travelling; access to above-mentioned services as well as facilities such as a pool, spa, entertainment, restaurants and bars; good security; and the benefit of a large reception area for meetings. “It comes as no surprise that hotel residences sell at a premium compared with normal apartments,” says Amoils. South African examples of hotel residences include Cape Royale and Taj Residences in Cape Town as well as The Michelangelo, Raphael Suites and The Houghton in Johannesburg.

“Besides the view, security, exclusivity and convenience all add to the appeal of being a penthouse owner” David Sedgwick, MD, Horizon Capital Residential

INDUSTRY NOTES

HORIZON CAPITAL RESIDENTIAL

David Sedgwick
MD, Horizon Capital Residential

Horizon Capital Residential’s two penthouse apartments in The Aster, in Oranjezicht, Cape Town were the fastest to sell and both went to foreign buyers. They offer panoramic views of Table Mountain and the City Bowl, and have an exclusive roof deck with private pool and entertainment space. Penthouse purchasers look for exclusivity, privacy, security and inspiring views, and tend to be less price sensitive if the development offers something special. These buyers were able to purchase a unique new property for under €1m, which compares affordably with similar offerings across Europe. Following the success of The Aster, the company recently launched The Cedar on the adjacent property. This development includes three penthouse apartments offering expansive living and private roof decks, pools and a Jacuzzi. They are all equipped with airconditioning, integrated appliances and engineered wooden flooring. – David Sedgwick, MD, Horizon Capital Residential

Jason Heywood
Property executive, Balwin
Properties

BALWIN PROPERTIES

Penthouses in the Balwin Properties portfolio have sold fastest at Munyaka in Waterfall, Johannesburg. This top-quality lifestyle estate comprises magnificent apartments metres away from a Crystal Lagoon. Fibre-ready and complete with modern, luxury kitchens and eco-friendly appliances, the penthouses here attract investors thanks to the design and facilities within the development, the location and the lagoon. Secure basement parking and storerooms form part of the offering. The two ultra-luxurious penthouses that were priced at R30m each have both been sold. Of the other four penthouses originally available, only two remain, at R9m and R10m each.” – Jason Heywood, property executive, Balwin Properties

Jeff Miller
CEO, Grovest Corporate
Advisory

GROVEST CORPORATE ADVISORY

Mdluli Safari Lodge Limited is the first and only Section 12J inside the Kruger National Park. The lodge opened in January this year. The development of the lodge was funded through a breakthrough 12J structure: each investor receives a 12J tax deduction, dividends year one through 10, capital repayment in tranches years six through 10, plus an annual package of free bed nights each year for 10 years. The project is a partnership with the Mdluli community, which enjoys direct financial and indirect socioeconomic benefit from each guest’s stay. There are limited investment options remaining, from R500,000, and the capital has been fully underwritten.

The other fund to consider is Pepperclub Invest. The underlying asset is the Pepperclub Hotel, which occupies prime real estate in the heart of Cape Town’s business district. Investors in this fund get a management-backed performance guarantee each year for the first five years of shareholding, with an average yield of 7.6% over five years. The fund offers shares with zero cash outlay for anyone with a taxable income of R1m. Investors are also offered a guaranteed buy-back after five years and receive six complimentary room nights at the hotel for each year of their shareholding. Investments start from R1m, with full financing available. – Jeff Miller, CEO and cofounder, Grovest Corporate Advisory

Tim Kloeck
MD, Tricolt Property
Developments

TRICOLT PROPERTY DEVELOPMENTS

Penthouses offer exclusivity, being located at the top of a tower or block, as well as an attractive solution to those “downscaling” from a freestanding house to a spacious apartment. Rooftop gardens, pools and Jacuzzis can all be factored into a bespoke penthouse design. It’s about maintenance-free, secure, fibre-ready accommodation. Security is big. Once you close the lift door of your penthouse, you don’t have to worry. You can’t buy that. At Ellipse in Waterfall City, one buyer bought and combined three penthouses to create a super-penthouse of 850m2. It’s at the top of this iconic, beautifully designed building and bound to show capital appreciation in years to come. A penthouse at The Houghton, overlooking what we like to call “Joburg’s Central Park”, with views of Sandton, Rosebank and Northcliff, can sell for up to R70m. – Tim Kloeck, MD, Tricolt Property Developments

Munyaka in Waterfall by Balwin Properties

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