28 August 2008
Johannesburg — PAUL Simpson, former head of Woolworths' real estate division, has formed a development company that plans to construct a huge R3bn mixed-use precinct in North Riding, Johannesburg.
The project, which will be developed on a 45ha site, is the first major undertaking for Simpson's new company, RED Developments, which was launched earlier this year.
Simpson is also part of a growing trend of retail experts launching new careers in the property sector.
In October, Business Day reported that Edcon retail property executive Mike Lewin was joining listed property asset manager Madison Property Fund Managers and that John Rabbolini, the property manager at Mr Price Group, was joining listed property loan stock company Resilient Property Income Fund.
It was reported at the time that a global shortage of specialised retail property expertise often led to top South African talent being lured abroad, worsening the skills shortage in SA. Both these appointments were seen as coups for the listed funds concerned.
Simpson left Woolworths at the end of February after 19 years heading its property portfolio. "Towards the end of (last) year I took a decision that it was time for me to change and that was before the whole (real estate) market did a loop," he says.
Since December, the real estate market, particularly the retail and residential sectors, has come under increasing pressure because of rising interest rates and high inflation.
Simpson is confident that RED Developments - because of the strong retail, office and industrial expertise its team has - will do well, even though the market is under a bit of pressure.
"The specialisation is very much retail and that is the common denominator of the team I have pulled together."
He says the skills in the team run across the spectrum of the commercial property market.
Costs have become a major issue in the development sector because rentals have not followed the same growth path as costs.
As far as the North Riding development is concerned, Simpson says RED has mixed-use rights for the entire site, as well as a power supply.
He says RED is planning a major office, retail and residential development on the site and that a specialist residential developer will be brought on board for this aspect of the development at a later stage.
Construction of the office and retail component of the site will get under way by early next year.
The group also has a number of other projects lined up and will be collaborating with other developers on these.
"We're confident that in spite of difficult market conditions, we have quality projects and we will be able to develop. Property is a long-term play and the market will recover."
Simpson says that another factor that bodes well for property's long-term prospects is that retailers, both national and smaller ones, have still got "massive expansion potential".
"So for the majority of national traders, growth through real estate has been a fundamental aspect of their growth plan."
Other prominent property players involved in RED Developments include its financial director, Warren Rovelli, who before joining RED worked for the Orion Property Group as financial director, for RMB Properties as GM of property trading and structured finance, and for the Billion Property Group, where he was executive head of acquisitions and developments.
Sidney Bernic, who joined the team as a director, has been involved in the property industry for the past 27 years and has built up a large group of private companies operating in healthcare, insurance, property and manufacturing industries.
Another director, Herman Grobler, worked for Elmado, a development company focusing on convenience shopping centres, filling stations and motor city developments.
In 1996, Grobler joined Woolworths as real estate development manager and helped expand the company during its aggressive convenience food drive across SA.
He also spearheaded the expansion of Woolworths across the rest of the continent as well as the Middle East.
RED's development director, Nicky Butler, has 23 years' experience in the property industry working for Dorbyl and Matrix Projects.
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