We held our tenth monthly Commercial Auction in Sandton yesterday and at the time of writing R224million has been raised, reflecting a success rate of 64%.
The interest rate cut of 50 basis points in early September, which brought the prime rate down from 10% to 9,5%, boosted bidding activity with a packed room of over 250 attendees. Auctions, much like a stock market, immediately reflect market sentiment and buyer demand was buoyed by the mortgage rate which is now at its lowest level since mid-1974.
We were truly delighted with the October results which not only attracted impressive crowds but also spirited bidding. We are the only South African auction house to hold four commercial auctions every month in all parts of the country and we will reach over R5,5billion in sales this year alone. These auctions, and our national footprint, not only make us the largest auctioneer by volume and value but provide us with an unrivalled knowledge of prices being paid and buyers currently in the market.
We are finding the strongest demand for retail properties with enormous demand for fuel station sites. At the auction we sold a shopping centre in Mafikeng for R39,3m reflecting a net yield of 9.4% and a Petrol Station in Soweto for R3.56m.
Industrial property, which is closely allied to the retail sector, is also attracting strong demand. We sold an 8000m industrial facility in Robertville for R17.9m A-Grade office space is strong and achieving good prices, but B and C-Grade Office space is weak. We are having great success with apartment blocks across the country and yesterday we sold a block of 64 apartments in Lakeview Florida for R11.6m. Development land is difficult but despite negligible demand we sold prime vacant land in Krugersdorp for R8.9m.
Stock arising from liquidations and insolvencies attracts a large number of registered buyers with confirmation rates at 100%. We took 9 insolvency properties to auction including 2 sectional title offices in Roodepoort, an industrial site in Westonaria and an apartment block in Florida.
Some notable highlights from the auction include:
* A Durban property was sold on the fall of the hammer for just over R100m to Investec Property Group and then negotiated post sale to just over R160m.
* Average Lot size R6,210,000 (R8,420,000 in March 2010 and R5,100, 000 in October 2009)
* Lots sold under the hammer achieved an average of 5% below reserve
* 7 Lots sold over R5million, 3 of which were over R10million
* 9 lots achieved yields below 10%
* Average Retail Yield – 9.78% (11.23% March 2010) although this masks the difference between long and short income where the spread between the two has widened.
* Average Office Yields – 10,23% (11,96% March 2010) although A-Grade offices have been selling at average yields of 9,9%.
* Average Industrial Yield – 11.08% (11.59% March 2010). Operating costs and municipal costs have put pressure on yields
It should be noted that other factors such as location and covenant strength have a major bearing on the yields achieved. Properties with strong tenants are achieving very low yields.
* 9 Distressed Sales sold reflecting an average lot size R4,676,000.
* Largest lot sold under the hammer was R39.3m being a Retail shopping centre
With interest rates remaining at historically lows for both borrowers and savers the current market conditions provide an excellent opportunity for anyone thinking of selling good quality income. Competitive bidding between cash rich private investors has, in some cases, led to better prices than those achieved in 2007 and with a limited supply there remains a lot of unsatisfied demand.
Be sure to attend our Western Cape and KZN auctions next week!