Property: Quiet rebirth of SA cities
Jonny Friedman makes an awkward attempt to pose for a photograph on the bustling streets of Durban. Relatively unknown in SA business circles, the 50-year-old London property entrepreneur is dressed in jeans and a T-shirt. Friedman, who has ploughed hundreds of millions of rand into buying city blocks in Durban, appears to have avoided the limelight throughout his career. He isn’t nearly as funky as the hipsters jostling past him.
Friedman says his Urban Lime group, founded in the UK in the early 1990s, has spent about R1bn in SA in the past two years.
The investments, in Cape Town and Durban, include iconic buildings such as Durban’s 320 Pixley KaSeme Street (formerly West Street) and the "upper Bree quarter" on Cape Town’s Bree Street. He buys buildings grouped together because scale is critical to his enterprise.
Urban Lime has gathered a portfolio of about 90 buildings in the two cities and London — 75 of them in SA. Collectively they are worth R3bn. Friedman’s family trust is the sole shareholder of the company, which employs more than 50 people and has about 1,500 tenants in the three cities.
Friedman was raised in London and as a youngster was impressed by the Big Apple aesthetic that emerged out of the conversion of rundown warehouses in New York.
He studied politics and graduated with an MBA from Manchester University before joining a brokerage firm that sourced commercial property loans. He then went solo and, after the 1990 crash, bought a building worth £1.5m in Hoxton, in London’s East End, for £155,000. He still owns it.
Friedman came to Durban via Cape Town in 2014. He now has a home in Durban and three of his five children go to school there.
"I’m fascinated by this city," he says. "It is confident, with wide streets, good infrastructure and critical density. It has a beach-front promenade that is rivalled only by Rio’s. It is a city that went deeply out of fashion, mainly because fund managers made their decisions looking at spreadsheets. They saw only empty buildings. They should have seen streets heaving with people and money."
Before investing in Durban, Friedman said his team undertook detailed research, producing a 200-page report that identified "huge" opportunity, particularly in 16 nodes.
Urban Lime is now invested in four of those, having bought eight buildings in Florida Road, the city’s prime recreational area, which Friedman describes as a symbolic link between the CBD and developments north towards Umhlanga.
In Durban’s inner city, Urban Lime owns 10 buildings outright. In two nodes it has partnered with Propertuity and Genesis, firms backed by billionaires Jonathan Beare and Natie Kirsh respectively. Both of them are also publicity shy and have made fortunes in property.
The first joint venture in Durban, now under way, is 320 Pixley KaSeme Street, a landmark building of 31 floors, each of 1,200m². The purchase, from Redefine at R65m, went through last year and occupancy has risen from 40% to 70%, Friedman says.
Urban Lime is spending R70m breaking open floors into usable spaces for small and medium enterprises, installing new lifts and refashioning the second floor to accommodate a 1,600m² Virgin Active gym with a jogging track.
Friedman says three factors have been key to filling the office tower: cleanliness, security and value for money.
The public spaces around our buildings are more important than the buildings themselves. We are interested in making those exceptionalJonny Friedman
Half the tenants are in offices ranging in size from 25m²-50m² and rates are about R70/m². The other 50% are large tenants such as Cell C and government departments, which occupy entire floors.
A building away, Pioneer Place also fronts onto Pixley KaSeme. Its 14 floors are fully let, with about 200 tenants occupying funky offices of about 15m² that are painted psychedelic colours. Most tenants are seamstresses or tailors.
"It’s working extremely well," says Friedman. "Most of these tenants were here, we’ve just listened carefully to what they need and responded appropriately."
Friedman, part social scientist, part architect, is energetic and talks of transforming precincts, understanding the language of areas and making appropriate changes. He doesn’t do new builds or residential property. He’s about regeneration, unlocking vibrancy and extracting opportunity.
"The public spaces around our buildings are more important than the buildings themselves. We are interested in making those exceptional, so the people interacting in those spaces get the maximum out of the experience. Real estate is only the value of what you can get out these spaces.
"This is what I do. I have my family and I have this — and it is absorbing," he says, hopping off a tuk-tuk. He’s introduced the taxis in Florida Road as a free service for people flitting up and down the street.
Urban Lime has also bought a pair of buildings fronting Anton Lembede Street (formerly Smith Street). One of them is the old Nedbank building. Constructed in 1961, the building was designed by Norman Eaton and is celebrated as a frontrunner to "green buildings".
About 1km north, a few blocks towards the sea, Urban Lime and its joint venture partners have purchased what is reputedly the largest transfer of Durban city land in the deeds office — three blocks with a combined size of about 25,000m² opposite the International Convention Centre.
Friedman says he and his partners are "super excited" about the deal, but won’t be in a hurry to develop the precinct.
Despite the bad press the city has had, he describes Durban as "fit for purpose".
"It needs a few tweaks here and there. It has been put down, but it has enormous potential, which is why we have invested as much as we have, early on. Also, we can make a big difference with 100 buildings in a city the size of Durban or Cape Town. Johannesburg is brilliant, but with that many buildings we wouldn’t even touch the side of the problem."
Analyst Erwin Rode says pioneers who started identifying opportunities in Pretoria and Johannesburg about a decade ago saw a gap in the conversion of office space into affordable flats. Friedman, on the other hand, has retained commercial use.
"The key to the success of these projects is always that the CBD has to hit rock-bottom first, so the rebirth becomes financially feasible," Rode says.
What it means: Urban Lime has spent about R1bn in SA properties, mostly in Durban.