Transnet to cash in Carlton

Posted On Friday, 22 June 2007 02:00 Published by
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Transnet CEO Maria Ramos is likely to make a killing from the sale of the Carlton Centre
22 June 2007

By Ian Fife

Transnet CEO Maria Ramos is likely to make a killing from the sale of the Carlton Centre, as she did recently by selling the V&A Waterfront for R7,3bn.

The department of public enterprises has given the transport parastatal the go-ahead to sell the 220 000 m? property - twice the size of Sandton City - that it bought in 1999 for R33m, or R150/m?. That's probably the price per square metre of the carpets in Ramos's modest office on the 49th floor of the centre's tower block. It cost about R50m to build in the early 1970s.

How much does she expect to get for it? "I'm not saying," she said on Tuesday. "If we had set a price for the V&A, we would not have got what we eventually did." Clearly she is hoping for the same frenzy over the Carlton Centre - and she has a good chance of getting it.

The timing of the sale will be excellent.

Its scale and quality make the building an ideal target for the expanding flock of international property investors with their sights on SA. The country's commercial property market is taking off while others are beginning to sag. There is a shortage of properties that are zoned for development and have electrical and other infrastructure available. And Johannesburg CBD is turning around, with property prices rocketing.

The FM understands that V&A buyer London & Regional has already approached Transnet to buy Carlton Centre.

The V&A Waterfront was estimated to be worth R2bn in 2005. Wendy Luhabe and Stuart Chait offered R5bn in 2006 and it sold for R7,3bn in December.

The Carlton Centre was estimated to be worth about R400m last year.

"It's now worth at least R600m," says cities expert Neil Fraser.

"R800m-plus if Transnet signs a lease," says Madison director Marc Wainer.

The Carlton tower block has 72 000 m? of offices, a 52 000 m? shopping centre below, a 2 600-bay parking garage and a 620-bedroom hotel next door. Transnet FD Chris Wells estimates the replacement value to be R1,7bn. But with zoned land now selling for at least R2 000/m? of lettable commercial space and high-rise building costs of at least R15 000/m?, that replacement cost might be conservative.

Given the frenzy around buying it, Ramos could walk away from the sale with more than R1bn, a R967m profit and a compound 300%/year plus return on the original R33m cost eight years ago.

The sale will also refocus the attention of developers and investors on Johannesburg, just as the city council displays clear commitment to regenerating the city after its recent inner-city summit.

An investor who accepts a leading role in Johannesburg's regeneration would be first prize for the city. But Ramos is after money and the highest bidder is often not the most visionary.

Financial Mail

Publisher: I-Net Bridge
Source: I-Net Bridge

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