“Compared to premium rated properties, which
are often fully priced and charge very high rentals,
the buildings we focus on offer better arbitrage
opportunities and the potential to redevelop,” Kane says.
Apart from a higher property valuation, the
refurbishment of these buildings also attracts more
tenants, which means the fund is also able to achieve
higher rentals and negotiate longer leases. VPIF’s
current average lease escalations are around 8.4% and
the fund has a 95% tenant retention rate. According to
Kane, for every rand that VPIF spends, it gets at least
three rand back in value uplift.
“Acquisition and refurbishment of these buildings will
sustain the growth of the fund over the long term,” says
Kane. “Office rentals are currently depressed, which
means there has been limited building activity since
2008. This has led to a shortage of supply that will drive
rentals up as the economy improves.”
VPIF’s exceptionally low vacancy rate of 3.5%
underscores the effectiveness of its approach to building
a fund.
Experience and expertise in refurbishments further
enabled VPIF to explore value-enhancing opportunities
through green refurbishments. “It’s important for us
that refurbishments are both environmentally-friendly,
and that it makes economic sense.”
“Sustainability is no longer a nice to have but is
increasingly becoming a key selling point to attract and
retain discerning tenants. Generally tenant take-up is
driven by different motivators and landlords need to do
a lot of education around the long-term benefits of green
leasing,” he added.
These benef its not only relate to energy and
water efficiencies, but to a healthier overall office
environment, translating into lower absenteeism and
greater productivity.
www.reimag.co.za
He advocates a pragmatic approach as green
leasing increasingly gains in popularity. “We need a
combination of behavioral change and efficiency of
equipment to reduce our carbon footprint and small
changes can make a big difference. Apart from being
a moral obligation, there is also a strong business case,
which we believe will be the main driver for green
leasing.”
Kane uses VPIF’s 14 Loop Street building in
Cape Town’s central business district as an example.
“Our tenant at Loop Street is the Department of
Environmental Affairs which meant we had immediate
buy-in and support for the renovation.”
The renovation saw water consumption cut to a
sixteenth and power consumption to less than a third
of that of other buildings in the group’s portfolio. This
equates to a rental saving of between 10% and 15%
which was passed on to the tenant.
“We installed waterless urinals and dual-flush toilets.
Rain water is collected on the roof of the building,
stored and used as grey water. Extensive use of
renewable and recycled material such as bamboo and
aluminium was used, which reduced the environmental
impact of the renovation. “Double glazed, tinted
windows can open horizontally as well as vertically
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