FirstRand, Old Mutual’s R1.6bn offices

06 Oct 2011

A planned R1.6 billion Cape Town CBD office development is set to encourage more property developments to make use of the UDZ Tax Incentives.

Done deal: Stephan Claassen (FNB regional head), Helen Zille (Premier of Western Cape), Derick Henstra (chairman of dhk Architects), Colin Young (nanaging director of Nine Cubed Group), Michael Anderson (director of Nine Cubed Capital).

The 60 000 square metres iconic tower is a co-development office project planned by FirstRand and Old Mutual for the Portside site in Cape Town’s central business district to be completed in March 2014.

It will be the provincial headquarters for the three divisions of FirstRand – First National Bank (FNB), Rand Merchant Bank and Wesbank.

Co-owners Old Mutual will offer an additional 25 000 square metres in the lower portion of the tower for leasing to corporate office tenants. 

When completed, the 32-storey office building designed by dhk in conjunction with Louis Karol Architects will help entrench the surrounding node as Cape Town’s newest financial district.

Derick Henstra of dhk Architects says the gateway location of the site presented a unique intellectual and design challenge.

It encompasses an entire city block of 6 642 square metres with a bulk utilisation of 60 000 square metres bounded by Bree and Mechau Streets, Buitengracht, and Hans Strijdom Avenue.

The conceptualisation took account of FirstRand and Old Mutual‘s business requirements and the vision of a new multi-tenanted dual-entranced tall office tower, he says.

Henstra says it was important to ensure the building integrated with the pedestrian street activity, complied with all tall building heritage, traffic, wind, structural, environmental and green building considerations, as well as contributing to the pedestrian and retail revitalisation of the area.

According to Portside dealmakers, Colin Young and Michael Anderson, executive directors and co-founders of Nine Cubed Capital, this move is likely to prompt other corporates to invest their capital in upgrading or constructing new buildings within the demarcated urban development zones (UDZs) in South Africa.

They say the South African government’s UDZ tax incentive was introduced to encourage office and residential development projects within carefully selected UDZ areas of major cities.

“The UDZ tax incentive scheme offers real benefits to those corporates wanting to invest in inner cities and notably to own and occupy their own buildings,” they say.

Young and Anderson say the challenge for those corporates considering investments, such as consolidating space need to move quickly if they are to benefit. Construction needs to be completed before the UDZ tax incentive expires at the end of March 2014.

Nine Cubed Capital proposed and brokered the sectional title co-development of what will become Cape Town’s tallest building.

Young explains that the site is situated in the northwest corner of the CBD anchoring the connection between the V&A Waterfront, Atlantic Sea Board and the southern and northern suburbs of Cape Town.

Colin Young, managing director of Nine Cubed Group says the UDZ Tax Incentive is a very important aspect to urban re-generation and a useful economic tool to encourage investors and property developers to fast track their development schemes.

He says they are proud to have been behind the deal from the outset and their clients, FNB and Old Mutual, have always been understanding partners throughout the process.

The pair first learned in January 2010 that the First Rand Group was considering a consolidation of satellite offices in the Western Cape metropole, and was reviewing various development proposals.

This was shortly after Nine Cubed Capital was founded as a private equity property investment business offering corporate finance and property investment expertise.

Stephan Claassen, provincial head of FNB says the Nine Cubed Capital proposal highlighted the multi-faceted financial benefits of the development, underpinned by the UDZ tax allowance as well as the appeal of the site as a key new CBD financial district location.

“The final investment case was extremely compelling and eventually accepted by the FirstRand board,” he says.

Young and Anderson say the deal took many months to finalise, given the complexities of a sectional title co-development scheme and to ensure that the interests of both Old Mutual and FirstRand were covered.

Both parties embraced the vision and the detailed legal co-development agreements were finally signed in June 2011.

Young says the UDZ Tax Incentive is a very important aspect to urban re-generation and a useful economic tool to encourage investors and property developers to fast track their development schemes.

“We appeal to the central government to extend the deadline beyond March 2014 because global economic meltdown has also had a negative impact on lending by banks thus delaying many projects.”

The dealmakers are calling for government to extend the UDZ Tax Incentive by another five years to March 2019.

“This will allow many more projects to be kick started during this extended period and benefit our nation,” says Young. - Denise Mhlanga

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