The last reported value for Oryx Properties, which is the only listed property company in the country, was N$2.3 billion at June 30, 2016. This is an astronomical increase when compared to the company’s first annual report in 2003 when it was valued at a mere N$188 million.
Oryx is the company that owns Windhoek’s Maerua Mall shopping centre and a long list of commercial and light industrial properties in and around Windhoek. Many of the properties house car dealership showrooms and workshops.
This week the company announced that Maerua Mall, which was established in 1990, would undergo yet another a complete facelift, bringing both its look and its offerings up to date. The revamp will introduce new and exciting tenants such as the first John Dory’s franchise in the country. The phased upgrade will include a redesign of the food court over two levels, making space for new restaurants and an outside eating area, and will introduce, amongst others, a trampoline park, glow-in-the-dark putt-putt, a bowling alley and climbing wall.
Now as Oryx embarks on a massive and complete overhaul of one of its flagship properties, New Era Weekend sat down with its newly appointed Chief Executive Officer, Carel Fourie, for an in-depth conversation on the intricacies of the Namibian property market.
“As the biggest investor in commercial property in Namibia, Oryx has a very important role to play in facilitating business and economic growth,” said Fourie who recently took over from Gerhard van Zyl.
“We are one of the main providers of space to do business, which is critical, as not all businesses have the capital to start a business and acquire or develop the property in which the business has to operate … I think the way that prudent investments are made in good locations and with strong tenant covenants has made Oryx very successful over the last few years. Its focus on the Namibian commercial property market and good relations with tenants has assisted Oryx in always keeping its vacancy rates at below market levels,” said Fourie.
He noted that the main advantage of being listed on the stock exchange is the access to capital that the listing provides, noting that equity participation from investors is critical in order to balance sources of capital in terms of exposure and cost.
“I would encourage other businesses to pursue a listing, as there is capital available for sound businesses that offer enough transparency,” he said.
Oryx Properties is now looking to diversify from large exposure projects to single assets, while also protecting its market share and the value of the assets that are already part of its portfolio.
“We will be selling some non-core assets (mostly in South Africa), as they do not align with our company’s aim of investing in properties which offer reliable, growing and sustainable income streams,” he said.
Fourie noted that from a commercial point of view there are some clear areas of saturation in the local property market, mostly in the office and retail sectors.
Specifically, the office market in some segments is over-supplied and is struggling to retain tenants. “There are quite a few new offices still being developed, which could place even more strain on the potential returns in office space. In terms of retail, retailers are themselves struggling to justify further expansion and we do not foresee any major new retail developments in Windhoek. I believe this sector is in a bit of a consolidation phase, with both new and old retail properties trying to find their place in the new retail environment. We still find good demand for well-positioned industrial space, especially in the warehousing sector. However, location is critical in this sector,” Fourie pointed out.
He cautioned however that the residential market has very unique dynamics. And, while demand at the higher end of the residential market has decreased, he still views demand on the lower end as strong. “The supply of affordable housing is still not sufficient to cater for demand. There are not a lot of investors in the residential market that will view capital appreciation as in the past five to ten years. I believe the residential market to be at a high and not offering great returns in the medium term,” Fourie said.
On the commercial front, Fourie was quick to admit that the scope is definitely reducing for shopping malls, emphasising that the main problem with new malls being constructed, especially in smaller towns, is the negative effect it has on existing commercial properties. “Councils have a fine balancing act to perform to not allow their existing commercial areas to become degraded as a result of a new developments, typically on the outskirts of towns. I do not foresee any major new retail development in Namibia being announced very soon,” he said.
When asked about the possibility of the property bubble bursting in the near future, he commented: “I do not believe that we will see a commercial bubble bursting. Most commercial properties are still performing relatively well and the basic demand is still good. Commercial property has not seen the massive spikes in value that some residential investors have seen. A residential property bubble would unlikely burst as a lot of investors and owners are not under financial strain yet. Banks are less liquid and lending criteria are stricter, which could see less development in the short term, thus keeping a lid on new developments and exacerbating the low supply side.”
Fourie continued that values would possibly stagnate in the short term and potentially grow again once government spending picks up again.
When questioned on the impact a rent control board could have on the property market, Fourie said the impact could be less developments and even a possible collapse in property prices.
“Any investor in property will assess his returns on his asset and if it is threatened, might decide to exit. Any asset is valued on its income potential, when the income potential diminishes, the asset is worthless. This could put pressure on banks as well as they have loan to value ratios which will drop and affect their ability to borrow and lend money. This will in turn detract from banks’ ability to lend money to first-time homeowners. I believe it is seen as a quick fix for fundamentally larger issues, which can only be fixed by a concerted, well administered, long-term process,” Fourie explained.
He said the main challenge for Oryx Properties is that the company is as exposed to economic downturns just as tenants are. “If our tenants hurt, we hurt. It is finding that balance between investing capital in a tough environment and holding off until things look better. We are still very positive about Namibia in the medium term and will continue investing in our existing portfolio. We will also seek to identify new investments in this environment, as Oryx is well positioned to access capital for the right yielding property”. – This article first appeared in New Era Weekend