The heart of Maboneng beats on

Reselling the city: Eighteen buildings in the Maboneng precinct, located in Johannesburg’s CBD, are going to be up for auction next week. (Alaister Russell/Gallo Images/Sunday Times)

Reselling the city: Eighteen buildings in the Maboneng precinct, located in Johannesburg’s CBD, are going to be up for auction next week. (Alaister Russell/Gallo Images/Sunday Times)

Parts of Maboneng, one of Johannesburg’s trendiest inner-city districts, will be up for auction this Monday, when as many as 18 of its buildings will be on the block.

The auction is only open to those able to buy what is on offer lock, stock and barrel — and it is not the entirety of the 18 buildings, but rather just the portions owned by property developer Propertuity, which applied for liquidation in October last year, citing economic difficulties.

“Propertuity had a highly geared business model and as it grew, it was unable to sustainably keep up with its debt repayments at various levels of the business, which led to a severe cash-flow shortfall,” said Reanne van der Merwe, Propertuity’s chief executive.

Eight entire buildings will be auctioned while each of the other 10 is being part-auctioned because Propertuity does not own the whole building. Sectional title holders of individual apartments will not be affected.

Jaco du Toit, portfolio manager at Park Village Auctions, said he expects the sale to raise R150-million. He said the auction is significant because all the properties have a single owner leaving the market but “it will create an opportunity for fresh money and ideas to come in, which could revitalise the area”.

“You would usually have auctions of several buildings, but it will be from different clients.”

News of the sell-off has come as a surprise to tenants, who say they were unaware that the company was struggling.
Others say it will be a chance for the area to rebrand itself.

Stuart Thomson, founder and director of the Maboneng Civic Association, a community body and nonprofit organisation, is sure that the place will continue to soar. “I think the story of Maboneng is only just beginning — it was started by one developer and he had an idea and a vision and what you are seeing now, it’s sort of that.

“What is happening is that you have a lot of investors and developers who, 10 years ago, would not have looked at this place at all; now you have R2.5-billion invested to create 2 000 residential units. That is all because of the initial plan — it’s a lot busier and more vibey than it has ever been,” he said.

Maboneng began in 2009 when the founder and owner of Propertuity, Jonathan Liebmann, started acquiring buildings in the run-down district of Jeppestown, leading the rehabilitation of the area and turning the precinct into one of the coolest in Jozi. Buildings owned by Propertuity include: Driveline, Betty Fox, Market Up, Evolution House, 305 Fox Street, Jeppestown, Remeds View, Rivers of Steel and 58 Auret Street.

The company also owns portions of Hallmark House, Aerial Empire, Arts on Main, Urban Fox, Main Street Life, Artisans Lofts, Curiocity, Living Moad, Rocket Factory, Fox Street Studio and Craftsmanship.

As Propertuity grew, it took on shareholders such as RMH Property and Buffet Investments, the former holding 34% and the latter 20% of Propertuity’s share capital while management held 46%. But that all changed after the rights issue in April last year.

Brian Roberts, chief executive of RMH Property, said: “We were disappointed by the liquidation of Propertuity. It followed extensive measures by the company to rescue the business, but fundamentally there were a number of underlying company-specific challenges which led to its liquidation, including overly optimistic asset selection, unrealistic valuation expectations, limited management capability, excessive gearing and operational challenges.”

Although financial problems are at the centre of the sell-off, Thomson believes the company did not do its homework properly when buying the buildings. “I think Propertuity ran into financial difficulties a while ago. From what I have seen and understand is that they bought too many properties too quickly and at prices that were too high for what they can afford.

“Keeping in mind that their business model was to buy unutilised industrial buildings and rebuild those into Maboneng’s exciting residential units, I think there was not enough planning and research done with respect to putting together a detailed business model for each building that they acquired.”

Thomson said corporate governance was another factor in the company’s filing for liquidation.

After Liebmann left the company last year, Van der Merwe, who had joined in September 2017, stepped in to try to steer Propertuity out of its financial woes, but he was not successful. “As chief executive, I did all I could to manage the gradual completion and sale of the various assets that had been developed before Jonathan Liebmann left the company. Unfortunately, I did not have much time to establish my mark on the business before the high level of debt (which had accumulated before I started at the company) made operations untenable,” he said.

But Roberts said the liquidation of Propertuity is not an indication of problems faced by all property developers in the urban area, and he is encouraging the renewal of the inner city to continue taking place.

“Propertuity’s liquidation is a reflection of company-specific performance challenges, not of the urban renewal landscape in Johannesburg. We are confident that the value of development in the region will remain a key driver for other investors so they can continue to support economic development, upliftment and social progress in urban environments like Maboneng.”

In emailed responses to the Mail & Guardian, Liebmann said he was not surprised by the news that buildings would be auctioned off because the company had “battled for some time under difficult macroeconomic circumstances.” He said, however, that the precinct’s future looks bright.

“I think Maboneng is in great hands with large developers like Divercity spending billions of rands in the next year. There is more development by value happening in Maboneng in the next two years than the entire 12 previous years combined,” he said.

“I’m especially excited about Jewel City, which will see the neighbourhood get a convenience retail element, including the much-awaited grocery store, pharmacy and gym.”

Tshegofatso Mathe is an Adamela Trust business reporter at the Mail & Guardian

Tshegofatso Mathe

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