State land – opportunities for urban development parnerships

SA Cities Network SeminarMarch 2007

2

State land holdings in cities

• Large percentage of urban land owned by state– Public Works departments– State Owned Enterprises– Municipalities

• Of this, large percentage is no longer core to government • Strategic urban land holdings

– Underutilised and degraded– Strategic location and potential for urban expansion– Major investment needed to unlock value– Private sector cannot do it alone

3

SOE properties

• SOEs are in a process of focusing on core business, divesting themselves of assets and enterprises that are non core

• In 2005/06 the Department of Public Enterprises and the SOEs conducted an audit of all non-core properties, and examined optimal ways in which to dispose of these properties

• R2b worth of non-core properties identified• Non-core property holdings have been classified into commercial and

non-commercial properties, as follow:

Property PortfolioProperty Portfolio

CoreCore

Non-coreNon-core

Disposal to GovernmentDisposal to Government

Housing Housing

SaleSale

DevelopmentDevelopment

Non-Commercail

Non-Commercail

CommercailCommercail

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Non-Core Property Share by SOE

Denel20%

Eskom13%

SAA0%

Transnet67%

TransnetDenelEskomSAA

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Spread of SOE Non-Core PropertiesLegend

Number of Non-Core Properties per Location1 - 2

3 - 6

7 - 10

11 - 15

16 - 23

SA railway

SA ProvincesEastern Cape

Free State

Gauteng

KwaZulu-Natal

Lesotho

Mpumalanga

North West

Northern Cape

Northern Province

Western Cape

30 March 2006

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Bloemfontein

Touwsrivier

De Doorns

Kimberley

Breyton

Upington

De Aar

Vryheid

PECoega

Durban

Pretoria

Saldanha

Cape Town

Mossel Bay

East London

Beit Bridge

Richards Bay

Johannesburg

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Major urban development opportunities• Newtown North Precinct, Johannesburg

Extension of cultural precinct and link with Braamfontein and Gautrain station• OR Tambo Airport

Development opportunities linked to major expansion of passenger and cargo terminals

• Kaserne / City Deep Inland PortOpportunity for logistics hub development with Eskom and Transnet land

• Durban Port and Non-port related sitesPoint, Victoria Embankment and NMR development projects being led by Ethekwinimetro

• East London CBDSleeper Site and Signal Hill offer opportunity to reconfigure CBD and waterfront

• Port Elizabeth HarbourMove of port activities to Coega will enable integration of city and port spaces

• Culemborg Black-River, Cape TownTransnet land acts as bottleneck on city, development could achieve greater urban efficiency and expansion of CBD

7

Newtown North precinct

OR TAMBO AIRPORT

9

Kaserne / City Deep

Major Transnet and Eskom land holdings clustered around inland port in Kaserne / City Deep area

10

Embankment development could further open up city / port interface

Point development is leading urban regeneration linked to port

Bay Head land degraded and underutilised –

major opportunity for

urban expansion

11

East London CBD

Sleeper Site and Signal Hill in city centre are the key link areas

between the city, the port and the sea, and offer the

opportunity to reconfigure the orientation of the city

12

PORT ELIZABETH

Managanese dump and tank farm are

“dirty” port activities that logically belong in

Coega

13

NATIONAL PORTS AUTHORITYNATIONAL PORTS AUTHORITY

V&AWV&AW

TRANSNETTRANSNET

Transnet property in Cape Town

14

Cape Town: Culemborg / Black River site

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Developing non-core property

• Major SOE land holdings in cities are a significant opportunity for development

• SOE’s do not have the capacity or mandate to develop these properties

• New partnerships needed to take this land into development process, with– local authorities and development agencies– developers and property funds– consumers and residents

• Municipalities can play key role in unlocking land & initiating development processes

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Provision of infrastructure services

Construction of improvements

PROPERTY DEVELOPMENT PROCESS

PROFESSIONFEESPROJECTMANAGELANDENABLECOSTS

Property in current transport usezoning, improvements & infrastructure to support historic use

DEVELOPED PROPERTY TO END USERDEVELOPED PROPERTY TO END USER

Acquisition of alternative land use rightsdevelopment rights to support mixed alternative land use

Marketresearch

Viabilitystudy

ContextPrecinctPlan

TownPlanning

Developframework

RezoneSurvey

PROPERTYHOLDINGCOSTMANAGEFEE

ELECTRICSEWERAGEWATERROADSSTORMTELECOM

BRICKSMORTORCONSTRUCTION

MARKETINGSALESLEASINGADVERTISING

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Capital requirements

• All of the property developments identified require:– Capital for holding costs;– Capital for preparation costs;– Large scale investment in infrastructure to realise value; – Specialised capacity for creating maximum value

To deliver these requirements most efficiently and optimise urban development impact, partnerships with urban developers, property funds and financial institutions needed

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Options for local development

• Municipalities, government development agencies and private sector have key roles to play in each of these steps

• Options for the enablement of the land in key projects include

– Direct disposal to property developers & funds

– Joint ventures with developers

– Special purpose vehicles

– Municipal Development Agencies

– Direct development by property development vehicle under PIC

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Partnerships for development?

• MFMA and PFMA, while strengthening sound fiscal management, have limited local initiative and creativity

• Relationships with private sector increasingly limited to clearly defined contractual relationships

• Designing and managing procurement processes is now the critical skills gap

• Partnerships not useful if limited capacity in Local Authority to engage in partnership– but partnerships could focus on strengthening core municipal

functions in relation to a development process

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Partnerships for development?

• Tendency to focus on interesting new stuff (LED, IDPs, PPPs, partnerships) while neglecting the essentials

• Not a substitute for getting the basics of municipal service delivery in place– Land use management system, with efficient processing of

applications– Bulk and reticulated services– Public health, environment and waste management

• Most important municipal contribution to partnerships is leading a process for a shared and consensual vision for development

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Conclusion

• Municipalities can play a key role in unlocking non-core state land for development

• Be realistic, focus on the basics first• Partnerships not a solution in themselves, rather

a means to an end• Outcome based partnerships?

– Each party focuses on clear set of deliverables in pursuit of an agreed common set of outcomes