Waterfall City, the next Gauteng CBD?

01-10-2014
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Moneyweb
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Corporates consolidate head offices in the development node.

JOHANNESBURG – If Attacq Property CEO Morné Wilken has his way, Waterfall City might be the next CBD of Gauteng in a few years’ time.

That is if companies continue to consolidate their head offices in the 323-hectare development sandwiched between Midrand and Sandton.

To date, Attacq has completed a total of 162 269 square metres of the 1.7 million square metres approved development bulk, with a number of operational office spaces.

Some of the completed developments include Cell C’s Campus, Group Five head office, a new distribution centre for MBT Technologies, two buildings within the Maxwell Office Park and Waterfall Corner.

Described as a “game changer” by Wilken, PwC has decided to relocate its Gauteng head office to Waterfall – a building boasting more than 40 000 square metres with 25 stories.

The transaction is still subject to a number of conditions. “To attain such a corporate will most definitely be a great honour and feather in our cap,” he says.

In total Attacq has a secured pipeline of projects planned or underway totaling 296 493 square metres.

It is Attacq’s development pipeline in South Africa (largely through the Waterfall development), further into the African continent and Europe that has catapulted it to report an increase in net asset value per share of 24% for the year ended June 2014.

Investec analyst Peter Clark says the Waterfall development is a large portion of Attacq and will provide lots of development activity over the next five years as the area expands.

“The capital growth focus driven by developments is one of the key propositions of Attacq,” he says.

Executive director of Meago Asset Management Jay Padayachi says the challenge for Attacq is to replicate that level of growth given a substantially higher base.

“Attacq will have to increase the company’s pipeline considerably as well as the rate of completion of their new developments.

“But there is inherent risk that a lot of plans at Waterfall may not come to fruition and the market has priced a lot of the Waterfall development into the share price,” Padayachi explains.

Critical for Attacq, with a market capitalisation of R14 billion, will be the execution of the development, as Wilken says “Waterfall offers opportunities for corporates to consolidate.”

Another part of Waterfall is the R4.5 billion retail development Mall of Africa. The mall, with a planned retail space of 130 000 square metres, is the “largest single phase super regional mall to open its doors.”

South Africa’s retail space has seen an influx of international fashion brands, which Mall of Africa will host. Wilken says the international fashion brands Attacq has secured include Zara, Hennes & Mauritz (H&M), Forever 21 and River Island.

There have been concerns in the market as to whether Attacq’s strategy is overly reliant on the Waterfall development. Wilken disagrees: “If you look at our total balance sheet of R18 billion roughly, let’s ignore the completed buildings, really the land [Waterfall] is about R2 billion - that’s about 15-18% [of our portfolio].”

“As a capital growth fund we are in an ideal position to take a long-term investment view, which is well suited to property as a long term asset,” he adds.

Wilken admits that it is unclear where growth will be, given the recovery of the international market.

“You have got nice growth in Africa, we have a nice pipeline in South Africa. I think use the opportunities as they arrive, I think there are some untapped markets that we can potentially go into,” Wilken says.

Clark says Attacq has secured a strong development pipeline in South Africa and the rest of Africa, despite development opportunities slowing down in recent years in the local market.

Attacq’s share price closed Tuesday 0.76% higher to R20.