The remaking of Maboneng?
Though portions of the inner-city precinct are to be auctioned off, there is renewed hope for the project now that players with big balance sheets have become involved
A few years ago, Maboneng was the place to see and be seen if you were part of Joburg’s hipster set. The inner-city precinct — an ambitious plan to save the city from urban decay — was a hive of activity.
It started with Arts on Main, an open-air creative hub that offered Ethiopian fare, craft beer, limited-edition skirts for sale and artworks from around Africa. Then came the entertainment spots: the Bioscope independent cinema, Pata Pata restaurant and, later, Argentine steakhouse Che. On the back of an uptick in tourism, courtesy of the 2010 Soccer World Cup, a backpackers’ establishment opened its doors. In time, the top floor of the 12 Decades Hotel became a venue of choice for trendy soirées. With fresh fruit-and-veg sellers on the street, and barbers and other small businesses lining the roadways, it was reminiscent of London’s Portobello market.
Come April 15, however, Maboneng will go under the hammer. About 20 properties — as well as parts of properties — are up for auction. Experts say the auction will affect less than 10% of Maboneng, which itself is valued at R3bn. But properties at the precinct’s heart will be put up for sale: Arts on Main; the Bioscope; 64-room hotel/ apartment development Hallmark House; and parts of Drivelines’ residential container development.
Maboneng is the creation of Durban-born entrepreneur Jonathan Liebmann — a realisation of his vision for a "place of light" among the dilapidated buildings of one of Joburg’s inner-city slums. Under the auspices of his company, Propertuity, he aimed to draw professionals and businesses back downtown after an exodus to safer northern suburbs in the late 1980s.
From the outset, Propertuity provided private security for the precinct in the hope that it would draw middle-class and affluent South Africans and tourists to visit and live within its confines. The company even provided a private shuttle service for residents to create a sense of safety and to encourage an influx of visitors.
But Liebmann says the scheme didn’t have the resources — or support from the City of Joburg — to grow aggressively and sustainably.
In October last year, Propertuity was put into liquidation.
It’s difficult to blame Propertuity’s failure on any one reason. Residents, for example, suggest a lack of managerial skill and experience. But there’s also the fact that Maboneng was, by its nature, a closed-off entity, separated from the reality of life in inner-city Joburg. At R400,000-R2m, apartments were priced beyond the reach of many of those working closest to the precinct and failed to draw substantial demand. And Liebmann’s shuttle system didn’t serve those outside the precinct. (He said in 2013 that extending the service would be expensive and risky.)
Maboneng has a brighter future now than ever. Divercity is spending more over 18 months than Propertuity did in 10 years.
For Francois Viruly, associate professor in the University of Cape Town’s real estate research unit, it made sense for Propertuity to focus its services on a small, controlled space because mixed-use developments can prove difficult for small players.
"Maboneng got quite big and it became tough to manage," he says.
But market segment also played a role. "In SA, mixed-use developments tend to be geared towards the upper [end of the] market," Viruly says. "Take a look at Melrose Arch: it contains some of the country’s fanciest offices and luxury apartments, and it’s backed by institutional money."
That’s not to say there isn’t a case to be made for mixed-use inner-city developments that are a cut below the likes of Melrose Arch. But the problem for Maboneng, in Viruly’s opinion, was that it was too reliant on shoppers and tourists, but didn’t have quite enough on offer to draw the number and variety of visitors it needed. Moreover, the precinct needed a few anchor tenants — in the form of established retailers such as Woolworths or Pick n Pay — to build density in the area.
According to property economist Erwin Rode, one of the difficulties facing developers is that "resurrecting precincts that are effectively slums is not for the faint-hearted; the down-side risk is huge".
It’s a sentiment echoed by Viruly, who says it’s hard to cite examples of revitalised inner-city nodes in SA that have gone on to garner great success. "The Old Biscuit Mill in Cape Town worked well, but it is a lot smaller [than Maboneng]. Woodstock [in Cape Town] is performing, and is an example of a development that caters for a lower-income earner than other precincts."
According to Park Village Auctions, there is no reserve price for the Maboneng auction. On April 15, the following properties will be sold:
• Fox Street Studios — retail
• 303 Fox Street — retail
• 305 Fox Street — offices and restaurant
• Craftsmen’s Ship — mixed-use
• Living Moad — mixed-use
• Rocket Factory — residential
• 302 Fox Street — backpackers
• Artisan Lofts — apartments
• Remed’s View — mixed-use
• Revolution House — residential
• Drivelines, converted shipping container units — residential and retail
• Main Street Life — retail
• Urban Fox — retail, office and residential
• Arts on Main — retail and art
• Aerial Empire — 51 rooms
• Market Up — commercial
• Hallmark House — 11 one-bedroom apartments, two two-bedroom apartments, one penthouse, 64 hotel rooms, conference centre, eight offices, jazz bar, gymnasium, spa, roof-top bar, coffee bar, 88 parking spaces.
Viruly returns to the question of scale: Melrose Arch and Cape Town’s Century City have been quite successful — but they’ve been run by large corporations, the developments are "mostly closed off, and the managers have control".
He and Rode agree that what Maboneng really needed was collaboration between the public and private sectors: public infrastructure and public amenities, for a start.
But such private-public partnerships should extend to accommodation, says Rode. For revitalised precincts to take off, they need to be supported by adequate, affordable housing.
"In the long run, the only way forward for the Joburg CBD is block-by-block repurposing and conversion to low-middle and middle[-income] housing," says Rode.
"These blocks must be contiguous otherwise the new islands of renovation could be overwhelmed by the slum."
He believes a public sector company such as the Joburg Property Company should expropriate buildings "one precinct at a time and then outsource the buildings to the private sector to do its thing".
In the meantime, there’s general agreement that Liebmann’s Maboneng dream is a long way from done.
RMH Property, the real estate arm of Rand Merchant Holdings (RMH), owned nearly 50% of Propertuity when the company entered liquidation last year — a decision based on its debt levels.
Though "extensive measures" — including a rights issue — were taken to rescue the company, Reanne van der Merwe, Propertuity CEO since July 2018, says it continued to underperform. The decision to liquidate was based on underlying issues such as "overly optimistic asset selection, unrealistic valuation expectations, limited management capacity, excessive gearing and operational challenges".
But RMH Property CEO Brian Roberts is clear that "the properties are not being auctioned because they have problems; they are being auctioned because Propertuity has problems". He says the precinct can flourish without Propertuity, which had sold a large portion of its assets to other private investors over the years.
The auction will allow for new investors to take up space in the precinct, alongside RMH and Nedbank, which are backing an expansion through a fund called Divercity. It already owns R2bn in inner-city assets — some of them in Maboneng — and is rolling out R2bn in investment spend over the next 12-18 months.
Divercity’s projects include the redevelopment of Absa Towers Main, perched on the edge of the precinct, as well as Jewel City — six city blocks in the old minerals-trading district.
What it means
The precinct needed a few anchor tenants to build density in the area
On completion, it will house an affordable private school, gym, clinics, and residential apartments — facilities desperately needed by residents of the inner city. Another R400m has been earmarked for residential accommodation under development in Maboneng.
There are plans to list Divercity once its asset base reaches R6bn.
Liebmann says Maboneng is in a stronger position than ever because it is being backed by institutions that have the balance sheets to survive a downturn in the district. "Maboneng has a brighter future now than it ever has had," he says. "Divercity is spending more over 18 months than Propertuity did in 10 years."
Until the plans come to fruition, it’s business as usual on the streets of Maboneng. Bioscope owner Russell Grant, for instance, says his doors will remain open while he waits to find out who his new landlord will be.
His sanguine approach may, in part, be due to the efforts of the Maboneng Community Association, which has given voice to resident and tenant concerns, and worked to improve the precinct’s security and cleanliness.
"Maboneng is a community now," says Grant. "People who live here want to be proud of where they live and are doing their part."