Helicopter Ben’s big property adventure

Big estate agency commissions; extravagant property outings at Old Mutual.

This week in Tabloid Tuesday: South Africa’s estate agents slammed over excessive commissions, and a flashback to back to how their better-paid brothers at Old Mutual’s property asset management division were feted in the media following an extravagant helicopter jaunt and culinary treats.   

dawn chorus

Expensive estate agents.  If you’ve been wondering where all the foreign property buyers have gone, look no further than the yo-yo Rand and excessive estate agency commissions. The Telegraph of the UK reminded its readers  who are considering an investment in sunnier climes to be wary of South Africa.

In a personal finance profile of former England rugby union player Kyran Bracken, 37, it details the sport star’s “worst buy” ever as “a plot of land I bought two years ago in South Africa for £130,000 when I was playing for the Saracens”. He says “a lot of the players were told it was a good deal”. “But instead of doing well the value of land in South Africa has deteriorated so I put it on the market last year. The trouble is the rand has gone down against the pound so I will lose on the exchange rate, and I was unaware South African estate agents typically charge fees of 10 per cent. So I now stand to lose on it in three ways,” says Bracken.

In the UK, estate agents earn more modest amounts. However, even in the UK, sellers consider this lower commission as excessive, as another article on The Telegraph website attests. ” The owner of Hill Lodge in Holland Park has snubbed estate agents in the area by placing a home-made for sale sign outside his property, advertising it as ‘a country house in the heart of London. Two stables and parking for four cars’.

Although the sign does not display the price, the house is known by professional property finders to be on the market for more than £30 million, says The Telegraph. “Estate agency fees are usually about 2.5 per cent; by marketing the property without instructing an agent, the seller could save himself more than £750,000.”  Roarie Scarisbrick of buying agents Property Vision told the paper it is not uncommon for trophy houses in London to change hands privately. “Open marketing is a last resort. It’s often a question of knocking on doors at the top end of the market,” Scarisbrick is quoted as saying.

Tabloid Tuesday reckons that instead of moaning about bankers who won’t easily grant finance for property deals these days, some of South Africa’s bigger estate agency groups should start to allow agents to work for lower commissions than the 7,5% plus VAT (at least)  standard in offer documents. That would go some way to making property deals more attractive in these recessionary times in which every cent counts.

Pampered in high-flying property circles. Someone who is not counting the pennies, or even the big notes, it seems is Ben Kodisang, (former) head of Old Mutual Investment Group of SA’s property arm. Moneyweb’s founding editor-in-chief Alec Hogg reported on an astonishing deal in which Old Mutual apparently threw away R30m of policyholders’ money by rejecting a R120m bid from Hyprop in favour of a R90m bid. Realestateweb, property news site in the Moneyweb stable, has been awaiting a thorough explanation from Old Mutual for at least a week, but in the meantime was reminded of some extravagant cheque-writing, by OMIGSA’s property asset managers around the time this controversial deal was going down.

The high falutin’ Financial Mail reported at length on “Ben’s big adventure”. And what an outing it was!

Kodisang treated a group of investors and “a few journalists” to an aerial tour of Johannesburg in a convoy of five Bell helicopters. “We’ve been to a hole in the ground in Parktown for tea, after which we’ve driven to the Johannesburg Country Club in Auckland Park. We stand in what is probably the city’s most beautiful garden, watching five identical Bell helicopters land on the cricket pitch to pick us up. Then we travel in convoy south to Soweto and retrace our steps to the Jo’burg CBD, where the Gautrain project starts. It gouges its way slowly north to the Sandton CBD from there,” writes journalist Ian Fife.

“You can’t imagine the enormous scale of the Gautrain and its importance to the city until you fly over it. That alone is worth the trip,” gushes Fife, apparently oblivious to the question of who was ultimately paying for “Flying with the FM” that day. Fife tells how the group “eventually stop at Grand Central Airport in Midrand to drink champagne, eat strawberries and look at a 220 ha piece of open land that is to become Old Mutual’s R7bn Zonk’Izizwe mega- mixed-use development”.

As if that’s not enough excitement for one day, Fife tells how: “Over our earphones we hear a conversation between our pilot and OR Tambo Airport ahead of us. It ends with an ego boost: air traffic controllers hold all takeoffs and landings at OR Tambo as our convoy flies past and lands on an open stand among industrial buildings in Jet Park. We see we’re an event. Faces are pressed against every window around us.”  Wow. Talk about importance!

Old Mutual’s policyholders and shareholders, meanwhile, might be pleased to note that such excursions are most probably a newish thing on the OMIGSA expense account – and it is not just their money at stake. Kodisang and pals have apparently been given money by other parties with which to do their best.

Kodisang told Fife over a late lunch in the “biggest warehouse ever” that Old Mutual Properties has “changed radically”.

“A decade or so ago, we had this pool of policyholders’ money we could pour into properties,” says Kodisang. “Then Ian [Watt, former head of property] transformed us into a service company and took us into the Middle East, Europe and India. We’ve taken the next step and become an asset manager. Our unlisted Triangle Fund is taking on other institutional partners, we run a listed fund, SA Corporate Property, and we have other joint ventures. We raise our own funding outside of Old Mutual, for instance for our India projects.”

Nice for some.

Head in the clouds. It’s not just helicopter trips that are an ego boost for the OMIGSA property clan, it seems. A few weeks after the Bell helicopter jaunt and before the Nedbank Gardens deal was concluded, Old Mutual property heavyweight Colin Young tells the Financial Mail that Old Mutual does not want Hyprop to get its hands on the Nedbank Gardens building partly because Hyprop stablemate and listed fund Redefine “made us pay at least a R15m premium for the Standard Bank building in Cradock Avenue, Rosebank”.

In that same article we gather that Tim Middleton, of Intaprop, is toying with the possibility of making a quick R25m by flipping the building to the dreaded Hyprop. At that stage, the deal was still in the “due diligence” phase, so presumably Young and friends would have had time to keep Hyprop away from the building through a conditional clause in the purchase agreement.

Which makes it all the more intriguing, then, that someone at OMIGSA allowed Hyprop’s movers-and-shakers to have the last laugh on Old Mutual’s policyholders and shareholders.

Tabloid Tuesday reckons Kodisang should spend less time in high-flying circles and more time behind his desk on down-to-earth stuff, like basic arithmetic and legal contracts.

BenKodisang_sm

Right: Flying high. South Africa’s Ben Kodisang. The US’s Ben Bernanke is also affectionately known as Helicopter Ben.

This column was published by Realestateweb, South Africa’s fastest growing property website in 2009, when Jackie Cameron was editor. It is republished here along with a few other favourites for old times’ sake. For more in the Tabloid Tuesday series of columns, scroll down the home page or click on the Lighter side of life section of this website.

BS Free Zone ...item 3.. C’mon, Ben, Just Say ...

BS Free Zone …item 3.. C’mon, Ben, Just Say It; Please, Just Say QE3 — Operation Twist (June 20, 2012) …item 4.. Talking Heads – More Songs About Buildings and Food (1978) Full Album + 1 kritikospa Extra Track … (Photo credit: marsmet481)

Got a story about an asset manager, property dealer or business player that deserves airing? Contact freelance business and investment journalist Jackie Cameron at jackiecameron.uk@gmail.com.

Sources strictly protected.

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