R570 000 for a parking bay?
Tower Property Fund, the developer and owner of the popular Cape Quarter Precinct in De Waterkant in Cape Town, is selling parking bays in a development in Napier Street for R570 000 each (including Vat). The development, which comprises 16 apartments along with two floors of retail space, will have 140 parking bays for sale. This means potential gross proceeds of R80 million. A cavernous basement parking lot was built under Napier Street as part of the development on the north-western side of the Cape Quarter.
Marc Edwards, CEO of Tower Property Fund, says the parking situation in the area is acute: “In De Waterkant, demand for parking exceeds supply. The situation in neighbouring Green Point and Sea Point is not nearly as bad.
“There is high demand in the area because people spend a lot on their houses or apartments but there is very little parking available,” he says, adding that properties sell for “enormous prices”, sometimes with no parking. He describes the problem as “similar” to that experienced in Clifton.
Tower announced the residential development – its first such standalone project – in 2016, and said the project had been modelled on selling prices of R40 000 per square metre. Asking prices in the area were then R65 000 per square metre. In 2016, Tower said 119 parking bays, which are part of the Napier Street development, were being let at R2 500 per month.
In its results presentation for the 12 months ended May 31, Tower says current asking prices are averaging R90 000 per square metre, including Vat. In November last year, it said the development was projected to cost R153 million. It anticipates capital profits of R20 million to R25 million from the Napier Street development.
All but five units have been sold, and asking prices on the remaining apartments average in excess of R100 000 per square metre. One-bedroom units (43m2) on the second and third floors are priced at over R4 million. Six units were sold within the first 48 hours of the development’s launch in February 2017. At the time, the apartments started at R2.85 million.
Edwards says “each apartment in the Napier Street development gets one bay included in their apartment price. Some buyers want more than one bay.”
Tower is not stopping with the Napier Street development. In April, it said it would redevelop the Cape Quarter Piazza, which will be renamed ‘Old Cape Quarter’, and add apartments to the existing retail space and offices.
“In Tower’s view, the current demand for residential property means that a residential development offers the best opportunity for Tower to realise the capital value in the developable bulk to its best advantage,” read a statement.
“Upon completion the Old Cape Quarter will comprise parking, two floors of retail and office space (the re-developed existing structure) and 55 apartments. The retail offering will be focused towards a unique food market type offering while the offices are expected to be let to strong local and national tenants given the current high demand in the node. The apartments will be upmarket residential apartments, with budgeted selling prices in the region of R79 000 per m2.”
Apartments in the Old Cape Quarter start at R5.5 million (65m2) and run to R12.1 million (125m2). The prices for the two penthouses (190m2 and 340m2) are not disclosed.
Construction will start early next year. Tower anticipates capital profits from the residential units of R106 million.
The Cape Quarter Precinct is arguably Tower Property Fund’s biggest success story. The valuation of the property in 2013, when Tower acquired it, was R650 million. As at end May, the property is worth R1 billion, representing a “total return of 15.6% per annum”. Tower says the precinct’s value, “post-sale of residential units” will be R1.2 billion.
It has attracted a number of blue chip tenants to the area, including Deloitte, Pernod Ricard and J Walter Thompson. Edwards says office rentals in the area average R200 per square metre. Demand has traditionally been high, but has “dropped off slightly,” says Edwards.
Author: Hilton Tarrant