HILTON TARRANT: JSE-listed retail property fund, Hyprop, the owner of Canal Walk, Clearwater Mall and Hyde Park Corner amongst others, kicked off a R920m redevelopment of the Rosebank Mall late last year. Pieter Prinsloo is chief executive of Hyprop. Pieter, R920m, almost a billion rand investment on completely redeveloping the Rosebank Mall, why Rosebank?
PIETER PRINSLOO: Yes, it’s been a project that’s been under planning for a number of years now. We acquired Rosebank Mall exactly ten years ago this year and then about two, three years ago we acquired land adjacent to Rosebank Mall, earmarked for future extension. So it is a project that we’ve worked on for a while and the reason for it mainly is we can see the potential that Rosebank has as a node, especially with all the other development projects happening at this point in time as well as the Gautrain Station, which opened I think just over a year ago. In addition to that we’ve also seen a number of new office developments taking place. The centre itself has been earmarked for a substantial refurbishment and when we started looking at the planning we realised that it’s not going to be good enough just to refurb the existing centre, it’s got some shortcomings, it’s got some design flaws, which we need to address and at the same time we had a good appetite from the national retailers who wanted bigger stores. So we put all of that together and we looked at our opportunities and we came up with a substantial full redevelopment of the existing mall and at the same time we’re doing an enlargement where we take the rentable area from about 35 000 square metres up all the way to over 60 000 square metres.
HILTON TARRANT: You speak about that land acquired, I’m guessing you’re referring to the Nedbank Gardens site - across Bath Avenue for those listeners in Johannesburg who are familiar with that site - the Nedbank Gardens was demolished, is that what you’re referring to?
PIETER PRINSLOO: Yes, exactly that and the idea then is we’re going to span across Bath Avenue onto retail levels as well as rooftop parking level and then the end result is that we created a seamless shopping environment that spans across Bath Avenue.
HILTON TARRANT: Pieter, just to put this into perspective, this R920m investment is pretty much half, exactly half, of the R1.8bn that Liberty spent on redeveloping Sandton City suggesting that the scale of this addition, the scale of this redevelopment is significant?
PIETER PRINSLOO: Yes, certainly and, as I said, a big driver behind this development is the introduction of national retailers that have never been in Rosebank. For instance there a good example is Edgars that’s coming with a 6500 square metre store, as well as Dis-Chem that’s not in the node and then at the same time we will also incorporate a new flagship Woolworths store.
HILTON TARRANT: Aside from those retailers, is there appetite from the other national retailers who perhaps already lease area from you in the existing Rosebank Mall or perhaps at another level, perhaps on a smaller level, beyond these kinds of top tier Edgars, Woolworths, Pick n Pay, those kinds of players, appetite from the rest?
PIETER PRINSLOO: Definitely, definitely, good appetite, it’s going to be a lot fashion focused, I think that’s the nature of the mall, it’s what it was always known as, especially with the Stuttafords store in there and so on. We’re mostly going to expand on that theme as well, so most fashion retailers will be in the mall, the national retailers and they will go bigger, like Truworths, Foschini, Mr Price, they will all enlarge their stores. In addition to that we will also introduce some of the more upmarket label stores as well and that’s something we’re currently working on to finalise that aspect of the mall.
HILTON TARRANT: Interesting competitive environment you’re in in Rosebank, given that Old Mutual’s Zone @ Rosebank is pretty much in many ways bordering the Rosebank Mall development and shares a lot of common space, the common Square parking area, etc, etc. Two separate malls but you are vying and competing for footfall, for tenants, etc.
PIETER PRINSLOO: Yes that’s correct but even if you were to combine it it’s still not as big as Sandton City. We feel there is at this point in time capacity to do both, as I say, the focus is a little bit different, we’re more an enclosed mall, the way malls are traditionally designed, it’s more going to be focused on the big fashion retailers. Even though we’ve got Pick n Pay as the food anchor, which is the only Pick n Pay in Rosebank but if you look at the scope and the opportunities in Rosebank and where it’s going we see a number of office developments either happening or under planning. Certainly we feel that Rosebank as a node will be able to sustain all the retail offering.
HILTON TARRANT: One of those office developments, Standard Bank, the regional office, which is almost complete, 5600 employees will be transferred to that building. Is this scale of an office building of that size with 5600 people working in it every day large enough to change the dynamics of typical weekday trading in a place like Rosebank?
PIETER PRINSLOO: Well, on its own it’s not enough and we know that. That’s why the way we’re looking to enlarge the mall it will cater for both your weekday, your pedestrian shopper, as well as the weekend shopper that uses their motorcar and, therefore, we’re building a substantial amount of new parking on the Gardens site. But certainly I think the number of employees that Standard Bank is going to bring to the node will be substantial but that’s not the only development that’s taking place, even though it’s by far the biggest one, there are other projects also earmarked, office developments for Rosebank.
HILTON TARRANT: Pieter, you mentioned Gautrain right at the beginning of this conversation, what impact has that had on the node? Has it really kick-started all of the development we’ve seen to date?
PIETER PRINSLOO: Yes, I think it just forms a more traditional transport hub where people use the train and then from there they either work in Rosebank or from there they convert into other modes of transport like motorcars, taxis, bus services and so on. It definitely brings also a lot of energy and activity to the node, it helps the hotels, we can see it in the way we run our businesses because Hyprop moved its head office to Rosebank just over a year ago and we can see the benefits of that where now staff can use the Gautrain or even visitors, people coming from other parts of the country. It just forms a natural commercial hub and I think it’s the same with Sandton and other places where the Gautrain stations are, that over time these areas will probably become more important economic drivers and land values around these stations will probably increase faster or at a faster rate than some of the other areas.
HILTON TARRANT: Just beyond Rosebank, generally looking at the market we are seeing data showing retail sales slowing, we saw those figures, we’re seeing credit growth slowing, anecdotally you are hearing stories of consumers under severe pressure. With your portfolio of malls, I’m thinking specifically of the bigger ones, Canal Walk, Clearwater, Hyde Park Corner, you also have exposure through the value centres, what are you seeing on the ground as far as consumer spending is going?
PIETER PRINSLOO: Yes, we had a good year last year, 2012 we did see very good trading conditions but you’re correct we have seen a slowdown towards the end of the year and also we look at the forecasts and the results that our retailers are bringing out and definitely there is a trend. We expect to see that trend to continue for this year where we will see a further slowdown probably in consumer spend, which in a way affects the whole economy, it’s not just shopping centres, everybody gets affected by it. But what we’re seeing with our own portfolio as the bigger shopping centres, the large regionals, super regionals like Canal Walk and Clearwater they’re a lot more defensive. Retailers there tend to offer better products to customers and there we haven’t really seen any substantial negative impact from the slowing down of consumer spend. So they’re a lot more defensive in nature, while we probably see more pressure from our value centres. Normally when you go through a cycle like this where there’s a slowdown the first to get affected is sort of the second tier, by that I mean your value centres.
HILTON TARRANT: As far as vacancies are concerned, empty stores where tenants either shutdown, relocate, move to a smaller premises, I’m thinking specifically among your smaller tenants, not necessarily your national retailers, what trends are you seeing there? Just walking through some malls and I’m not referring specifically to your portfolio but I do get the sense that there are more of these stores closing or relocating or struggling.
PIETER PRINSLOO: Yes, we haven’t experienced it in a substantial way yet. Where we do see them…fortunately for us currently the demand is still fairly strong so we are able to replace them with other tenants or national tenants that want to increase their footprint or we even have some international tenants, retailers, coming into our market and they tend to pick up some of that space as well. So for us at the bigger centres we are fortunate that at the moment we’ve still got enough demand in order to manage that process. Where we probably will see some vacancies and where we have vacancies in our portfolio again it comes back to the value centres because there the space tends to be bigger in size and when tenants move out it’s more difficult to replace them with the same kind of tenant.
HILTON TARRANT: Pieter, good to talk to you. Pieter Prinsloo is the chief executive of Hyprop.