Issue 34: September 2008

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Foreword with Mark Taylor

Having just returned from London, Scotland and Mauritius this month, it is evident that the credit crunch is being experienced to a greater degree in more parts than just Southern Africa. Part of my trip (besides touring with the South African Rugby Legends) was to grow our eLan footprint in the UK. I enjoyed a number of meetings with individuals and organizations based in the UK making inroads into promoting South Africa as a destination.

The recent change in the government in South Africa will, we believe, bring about exciting times! We remain upbeat and confident about the future, as we believe the new cabinet intend harnessing the skills that exist in South Africa and focusing on service delivery!

An interesting development on the horizon for the eLan Group is a wine estate in Paarl. The farm has already been subdivided into smaller farms and members will soon be able to own a little piece of the Cape Winelands. We have a signed agreement and are currently completing a due diligence on the property. Assuming all is on track, we will launch this development to you, our Investor Club Members, with Platinum Members enjoying first opportunity at purchases.

You may recognise: Ian MacIntosh, Rob Lowe, Robby Fleck, Japie Mulder, Breyton Paulse, Wayne Fyvie, Niel Penrose, Joel Stransky, Garth Wright, amongst others.

Warmest regards,

Chairman The eLan Group

Come blog with us

We are happy to include a new feature on our website in the form of 2 new blogs... One from Mark Taylor relative to property investment and the other from John Smit, Captain of the Springboks! Chat directly with them, post a comment, and have some fun!

Black Business joins arms with The eLan Group

Members of the National African Federation for the Building Industry (NAFBI) were hosted by eLan recently to learn more about property development from the Group. Presentations were made by management staff at eLan with the objective of starting a series of engagements enabling black entrepreneurs to become developers.

NAFBI is an autonomous board for black-owned construction businesses and focuses on the construction industry across South Africa. Its aim is to empower and grow black businesses through a charter which covers ownership and control, management, employment equity, skills development, enterprise development, procurement and CSI.

The eLan Group, with 20 years experience in property development, will be mentoring these individuals and passing knowledge on to create partnerships with emerging black developers and contractors. The property industry has been highlighted as a vehicle to building real and lasting wealth and NAFBI members were encouraged to rise to the challenge!


Patrick Kleu eLan CEO, Thami Kamanga eLan Director, Aubrey Tshalata NAFBI Secretary General and Mark Taylor Chairman of eLan.	Present at the NAFBI conference were Brad Sparks from Betterbond, Deena Yagan and Rani Pillay from ABSA

New Development on the horizon – Somkhanda Reserve

A visionary partnership developed through a lengthy facilitation by Dr. Andrew Venter from Wildlands Conservation Trust and a private sector partnership negotiation process has seen the establishment of a 50/50 Joint Venture development company consisting of the Gumbi Community (represented by the Emvokweni Community Trust) and the eLan Group. Situated in northern rural Zululand, the project focuses on ecotourism and game and aims to provide a model for sustainable Land Restitution on conservation-based land.

The project is anticipated to create an estimated 130+ permanent jobs from the lodge development generating R 4.9 million per annum to the community and an estimated 48+ permanent jobs from reserve management activities generating an annual return for the community of R 1.9 million.

The Shared Development Initiative has attracted key partners who are committed to the project’s success. These partners include the Department of Land Affairs, Wildlands Conservation Trust, Zululand District Municipality, Phongolo Local Municipality, WWF Black Rhino Range Expansion Project and Ezemvelo KZN Wildlife.

A shareholders agreement has just been signed which will lead into a 90-day period of project planning and finalisation of concepts and feasibilities.

Blythedale Coastal Resort making tracks...

Blythedale Coastal Resort has recently experienced a lot of press coverage on the topic of the land claim and as a result there is a full investigation taking place on the claims being processed in the province of KwaZulu-Natal. The positive spin is that as a result, resources have been added to the KZN office and a task team has been set in place to resolve the land claim as quickly as possible.

We are noticing the number of enquiries increasing with a rapid rate and land prices are appreciating in value of between 15% to 20% annually. The North Coast is almost in a climate of its own, booming with the infrastructure such as the new airport and the multi billion rand resort and leisure development a mere 10 kilometres from Blythedale.

KwaZulu-Natal North Coast infrastructural developments:

	Approximately 29 875 residential units to be developed between Ballito and Zinkwazi within a 10 to 15 year period which will generate approximately 1.6 million jobs.
	Approximately 500 new Hotel Rooms to be developed over this same period.
	Approximately 30 000m² of commercial and 80 hectares of industrial space to be created over this same period.
	Provincial Government has allocated R160 million over 3 years for tourism and related infrastructure along this key corridor.

The initial phase of the King Shaka airport will accommodate 7.5 million passengers annually. The terminal will attain full capacity by 2015 and require expansion to accommodate twice that number by a decade later. By 2035 the terminal will be catering for 25 million passengers annually which will require a second runway. Maximum capacity will be obtained in 2060 when the airport will accommodate 45 million annually.

International statistics reflect that every nine tourists create one permanent job. The Dube Tradeport will handle 100 000 tons annually compared to the 39 000 tons currently handled via Durban International Airport. This will eventually be expanded to accommodate 1 million tons.

Current progress shows that the levelling and compacting of the Support Zone is now 30% complete. Bulk earthworks for Support Zone (One) are already 75% complete.
Construction of the 55m high air traffic control tower is complete. 100 000m³ of concrete, 4700 tons of structural steel and 230 000 tons of asphalt will be used during construction. There are between 1800 and 2000 contractors and sub-contractors at the site and King Shaka Airport is an investment of R6,8 Million.

Dubai-based Ruwaad Development Group has launched a 16500ha development North of the Thukela River. This R19 billion project will include 8 themed precincts and will be based on the concept of a city within a city. The development will consist of an internationally branded entertainment theme park with residential, hospitality, leisure, medical, education, sport, health and retail facilities. The development will also include a cultural focus centred around a statue of King Shaka Zulu. This R150 million statue will bring thousands of tourists to KwaZulu-Natal and is projected to stand at 106m high, eclipsing the Statue of Liberty in New York.

Savannah Show house ready at Simbithi!

Five homes on Savannah are nearing completion with three of these forming the show houses for viewing. They are fully furnished and will showcase the choices available with regards to kitchen cupboards and counter tops.

As part of the ongoing process of scrutinising development and architectural plans to consider functionality and form, the reputable services of Lee Moon Interiors were engaged. Lee's mandate was to consider all plans and apply her experienced eye to the practicality and functionality of each unit layout. She has added real value to Savanna, having put the "owners" hat on.

1. Garage door entrance into unit

2. Extra shower added to the main en-suite

3. Walk-in dressing room in the Mahogany main bedroom

4. Study in Maroela

5. Extended balconies in the Mdoni/Mopani

6. Ceilings in the Garages

7. Appliance space with water and power connections in the garages

8. High ceilings throughout

9. Frameless glass showers with sandstone mosaics

10. Double plug sockets

11. Synchronous palette of wall colour, floor tiles, counter cupboards and tops etc


Alan Coetser	082 508 7921	alan@elan.co.za
Greg Taylor	082 577 1022	greg@elan.co.za
John Kruger	082 891 2436	john@elan.co.za

Buying off Plan – Buy into the Vision!

Buying off plan offers investors many benefits, but there are also some potential pitfalls, which can be avoided if you do your research correctly. Buying off plan means you buy a piece of land, or a property before it has been completed or built, and therefore basing your decision on the developers’ vision.

Essentially one would pay a deposit, sign all the contracts and only pay the balance upon transfer of the property into your name.

The benefits of buying off plan
	Often more affordable that buying an existing piece of land or unit
	Low deposits, average of 10%
	Deposits are paid into interest bearing trust accounts with attorneys therefore secure
	While Bond approval is required upfront, actual bond repayments are delayed until all construction is complete (on average of 18 to 24 months later) providing investors with ample time to adjust cash flows and get budgets in order
	You buy the property at today’s property price, although by the time you take transfer, the property would more than likely have increased in value by as much as 20% to 30%. In essence capital appreciation without too much of a cash outlay.
	There is no transfer duty when you buy directly from a developer, off plan.

The only risk is that the market price could drop between the time of you signing the contract and taking transfer. As unlikely as this seems, it is something one should consider.

Essentially buying off-plan is a low risk investment provided you have done your homework, you know the future demand for the area and you have confidence in the developer.

Calculation of performance
The below graph calculates the performance of two pieces of land, of the same size and value, same location, with the same assumed growth and interest over an 18 month period. However, one is bought off plan from a developer while the other is freehold land outside of an estate.

Property: 1500m² of land	Off Plan Developer	Immediate Purchase	Off Plan Developer	Immediate Purchase	Off Plan Developer	Immediate Purchase
Purchase Price	R 570,000	R 570,000	R 2,000,000	R 2,000,000	R 3,520,000	R 3,520,000
Transfer Duty	R 0	R 3,500	R 0	R 105,000	R 0	R 226,000
Deposit	R 57,000	R 0	R 200,000	R 0	R 352,000	R 0
Interest earned on deposit invested	R 8,500	R 0	R 30,000	R 0	R 52,000	R 0
Bond Repayments	R 0	R 135,102	R 0	R 474,044	R 0	R 834,317
Capital Growth	R 627,000	R 627,000	R 2,200,000	R 2,200,000	R 3,872,000	R 3,872,000
Profit	R 65,500	R -81,602	R 230,000	R -379,044	R 404,000	11%
Return	11%	-14%	12%	19%	R -708,317	20%
Variance	26%		30%		32%

Notes
1.	Transfer Duty is not applicable to properties brought directly from a developer.
2.	A 10% deposit is the norm with an off-plan purchase and this money is invested in an interest bearing trust account until transfer by the developer is effected.
3.	Calculated on investing in an account that earns 10% interest.
4.	Estimation is 20 year bond at 15% and the figure represented are the repayments over an 18 month period.
5.	Growth of 10% is assumed for both properties over the 18 month period.
6.	Capital Growth plus interest earned minus cash outlay (purchase price + transfer duty + bond repayments).

Weighing it all up…

Off plan purchases place less strain on immediate cash flows with a greater yield in the end.

Continually rising construction costs are a negative factor in an off plan purchase as the purchaser cannot build straight away and would need to wait until transfer of the property

Traditional land purchases will be liable for rates and levies immediately while off plan purchasers will only incur these costs some 18 months later.

Players in Property

The opportunity to live and work in South Africa – made easy!

Global Migration SA is a dedicated Immigration service operated and owned by experienced Immigration Practitioners, who offer foreigners the service of relocating to live and work in South Africa. In partnering with The eLan Group, the company offers direct access to the eLan portfolio of developments, where land can be purchased off plan. The inbound division focus of Global Migration on South African Immigration services including Temporary and Permanent Residence as well as Citizenship applications.

The South African economy has been growing at 5-6% per annum for the last 4 years. Areas of activity which are rapidly growing are construction, engineering, oil and gas, IT, scientific professions and others sectors relating to infrastructural contracts. These include 2010 World Cup infrastructure requirements, Gautrain construction, infrastructure development and refurbishing such as ports and roads and IT related projects for telecommunications networks.

The way we see it – a new entry level for investors

Whenever an economy is challenged by above average interest rates, increased petrol prices and inflation, the future appears to be bleak. But for the informed, these factors indicate the most promising conditions for investors!

Each up and down turn of the property cycle poses opportunities in different ways. At the moment, fewer people are buying property which results in increasing tenants entering into the market. The result is that the demand for rentals outstrips supply and yields are good. While fewer people are buying, it causes house prices to drop, which then creates the perfect platform for investor-driven buys.

The market is changing, and one of the unique characteristics of successful investors is their ability to adjust to a changing market and to read the market.

The way we see it, you have 2 options when it comes to property investment opportunities:

1.	You can bury your head in the sand, convince yourself that no one is making money in real estate anymore, and avoid today's real estate market.

2.	Or you can increase your wealth by investing in property when prices are down and properties are increasingly available.

At eLan, we are adapting to changing market demands and will be bringing property to you that falls into the entry-level category and is affordable. A growing number of investors want to form syndicates to manage their risk and through our Investor networking functions, we’ve seen the need to create small start up ‘development packages’ that individual investors can buy into. These are being worked on at the moment and will be available to you early in the new year.

Our opinion poll conducted last month indicated that the R200 000 bracket is most suitable and this will most probably be the benchmark for entering the property syndicate.

I’m interested, please call me when you launch the syndicate

Introduce Friends and WIN a Cruise

Congratulations to Zelda Odendaal, Introducer Winner for August!

Refer 50 names to the eLan Investor Club and automatically win for yourself a spot on a cruise aboard the Spirit of eLan Catamaran!

The Introducer Concept allows you to refer friends or colleagues to the club by adding their details. They will receive an e-mail invitation to join the club, following your referral. Once they have joined, they will be referenced under you and should they purchase property from the eLan Group, you will earn a referral commission of R20 000 per sale!

Opinion Poll

If you could join a property syndicate developing a spec home, which bracket would you be more likely to invest in?
R100 000	36.54 %
R200 000	23.08 %
R300 000	15.38 %
R400 000	11.54 %
R500 000	13.46 %

What’s hot and what’s not…
I would buy property in:

North Coast, KZN
Midlands, KZN
The Cape
Gauteng
Offshore

Warmest regards,

Investor Club Manager

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