FINANCE
The Power of Networking
Shrink Costs With Calls and Coffee
BY PRITESH RUTHUN
Are you spending more and more cash to secure prime sites for every new development? You’ re not the only one. Demand for commercial, retail and residential hubs in Gauteng is growing, but access to large enough sites is becoming scarcer and more expensive. You can, however, shrink the amount you’ re spending on development sites by building a meaningful relationship with the land owner and incentivising them accordingly.
By utilising the power of networking, you could build a significant relationship with the owner of your next development site. Building a relationship, and incentivising the site owner to retain a stake in the land, can allow you to secure the space you want for less than the owner’ s original asking price.
Step 1: Get in touch with the owner directly Louis van der Watt, CEO of Atterbury Property, says that his company managed to secure a prime piece of land for its latest project by building a concrete relationship with Pretoria-based Carl Erasmus and family.
Both van der Watt and Erasmus attended Pretoria Boys’ High, albeit at different times, which served as the ice-breaker that Atterbury Property needed to begin networking with Erasmus directly. The Erasmus’ land, formerly a livestock farm, is situated on a prime site bordering the N1 and R21 highways, with Solomon Mahlangu Drive at its northern border.
“ Despite receiving many generous approaches to buy the land over the years, we turned them all down in favour of working with Atterbury Property to realise the vision for this land,” says Carl Erasmus.
Step 2: Incentivise the land owner If Atterbury Property had decided to buy its new development site from the Erasmus family outright, it would have had to part with substantially more cash up front. By negotiating the terms so that the Erasmus’ retain a portion of the land, money was saved.
You can incentivise the owner of the site you are interested in by offering them an opportunity to become involved in the property development sector. By offering them an opportunity to retain a portion of ownership in their land, you could pay less for it up front.
Offering the land owner an opportunity to partake in your development project will allow you to build an even stronger relationship, while mitigating some of your risk. As the land owner will carry some of the risk associated with developing the site, you can carry less risk in your portfolio when it comes to funding the project.
Key Takeaways:
• Building a sound relationship with the land owner can allow you to negotiate a better price for the land
• By offering the land owner a stake in the development, you will be able to pay less up front
RESOURCES
Standard Bank BizConnect
30 FEBRUARY 2017 SA Real Estate Investor www. reimag. co. za