CPF promises more township shopping centres

Futuregrowth Asset Management took a bold step in 1996 when it launched its Community Property Fund (CPF), dedicated to establishing shopping centres in townships and rural areas.

Futuregrowth Asset Management took a bold step in 1996 when it launched its Community Property Fund (CPF), dedicated to establishing shopping centres in townships and rural areas.

“No-one would finance them,” says CPF product manager Smital Rambhai “They were no-go zones for developers.”

Nearly 20 years on, CPF owns 30 shopping centres with a combined value of R3,3bn in seven provinces. “Most of our centres are from 10000m² to 20000m²,” says Rambhai. “The biggest, Bridge City in KwaMashu [KwaZulu Natal], is just on 40000m²”

CPF’s centres have been of huge benefit to the communities they serve. “They cut travelling costs drastically for many people and raise the spending power of communities,” says Rambhai.

The centres have also helped to create almost 7600 jobs. Of those employed, 84% are drawn from local communities.

Big-name retailers have flocked to CPF’s centres. Shoprite and Spar feature prominently as anchor tenants. Rambhai says that in one of CPF’s centres Shoprite has a 6000m² store which is doing three times the sales persquare metre of an average Shoprite store.

CPF has no shortage of investors either. They are all pension funds attracted by the absence of the price volatility that is associated with listed property investments, says Rambhai.

The fund’s returns are also respectable, coming in at an annual average of 9,56% over the past five years and 10,58% over the past 12 months. They were achieved without debt.

That is about to change. “We are in the process of adding debt to the fund,” says Rambhai. “With gearing added, returns could rise to 17% or even 20%.”

CPF is enjoying a first-mover advantage in the township sector. With the entry of other players the market is now well served, says Keillen Ndlovu, Stanlib’s head of listed property funds. “There is now limited potential to develop more big shopping centres.”

Rural markets have also become a hard nut to crack. “It has become very difficult to get land for development in rural areas,” says Rambhai. “A lot of land is in tribal areas and requires negotiations with tribal chiefs. It takes at least three years to secure land.”

This has led to supply constraints at a time when the demand from retailers is “huge”, he says. Fortunately, existing sites are big enough to allow for expansion, he adds.

Operating in rural areas also demands a handson approach. “You can’t manage centres from an office,” says Rambhai. “I do a lot of engaging with chiefs and local communities.”

Engagement has enabled CPF to assist in the upliftment of communities.

Rambhai highlights a recent success in Nelspruit where the local community requested that CPF’s shopping centre be fenced for security. The community wanted the project to create local job opportunities. CPF obliged, bringing in experts to train locals. “They were certified as fencing installers and can now take their skills anywhere in SA,” says Rambhai.