Special economic zone (SEZ) Dube TradePort says its long-term leasehold model allows investors to access land over long periods without the need to buy it outright and ensures that it has a stable revenue stream over the lease period.
The SEZ has noted a growing awareness and interest in the benefits of a long-term leasehold ownership model and has had one in place for the past ten years, says Dube TradePort SEZ property investment head Andile Mnguni.
“The leasehold model facilitates access to land, thereby launching commercially viable industrial projects by eliminating the need for property developers having to buy land upfront and reducing the capital requirements to initiate the deals while meeting the criteria for commercial banks to fund these notarial leasehold developments,” he adds.
By lowering the initial expenditure needed for development, leasehold agreements enable a wider range of property developers to enter the commercial real estate market segment.
“We have a stake in both the overall prosperity of our property developers and their tenants. We have worked with developers to enhance the industrial precinct, consistently funding amenities, support services, and new infrastructure, which has increased value and the overall experience of our investors in our zones,” says Mnguni.
Dube TradePort SEZ's teams have also helped with due diligence reports to enhance the business cases for developers' projects and highlighting the leasehold's ability to provide stable revenues for funding institutions over decades.
“Dube TradePort SEZ has been working in tandem with development finance institutions, like Ithala Development Finance Corporation Limited and KwaZulu-Natal Growth Fund, as well as with some of South Africa's development finance institutions and large commercial banks, to secure funding for emerging property developers developing with our precinct.”
Dube TradePort has also piloted programmes where it substitutes fixed rentals and opts to take a percentage of a tenant revenue which helps the developer and its end clients' cash flow.
“In the initial stages of operations, we are invested in the success of our developers and their clients and work hand-in-hand to ensure their growth.”
The SEZ also supports black-owned small, medium-sized and microenterprises with up to 15% discounts on rental rates and has worked to provide linkages with established businesses within the precinct and providing tenants with a platform to market their products.
“The leasehold property development model will continue to evolve as it is adopted in more segments of the property market because it enables access to land while providing consistent revenues for landowners and financing institutions,” he says.