Rabie goes to Lisbon – seeking fellow investors (Golden Visa a bonus)

LONDON — In the Cape property development scene they don’t come bigger than Johnny Rabie. From humble beginnings, his Rabie Property has become an institution in the Mother City. Among its achievements has been the mixed use development of a staggering one million square metres at Century City, which after a slow start has become one of the most successful property developments in South African history. Now Rabie is heading into a new geography, inviting fellow investors to join him in Lisbon. With Portugal’s Golden Visa – which transforms into an EU passport five years on – an optional extra. Appropriately, the offshore development arm is called Neworld. I caught up with Rabie and fellow director Malcolm Lobban ahead of next week’s presentations to potential investors in Johannesburg and Cape Town. – Alec Hogg

This Special Podcast is brought to you by Neworld. For further information regarding the LX Living Investment Opportunity, please go to its website by clicking here. Sign up on the site and they will invite you to attend the launch event in Cape Town on the 30/4/2019 or Johannesburg on the 6/5/2019.

Hello. I’m Alec Hogg and this special Podcast we find out about a Lisbon Property Investment which will surely appeal to many South Africans wanting to externalise some of their asset base. But first let’s meet the man behind the project, Capetonian Johnny Rabie. After four decades in the business, the Rabie name is synonymous with quality property investments in the Mother City. I love business success stories, so I asked Johnny how it all began…

I had finished studying at University and I then decided then it was time to start to get into business and the entry point was to paint to get into the building industry. So that’s, well the first two or three jobs were painting jobs, which then evolved into a construction company and of course that was the start. It was not that we wanted to be builders but my love for property and real estate was the overpowering desire and what I really wanted to do, and that is how it evolved. So, in fact soon in the early 80’s we were actually selling more than what we could build and at that stage we started to use go to tender and use outside contractors to do our construction work. Although we construction and managed the work to keep the control to the standards that we require.

You say we ?

That’s myself and Leon Cohen. We started together. We studied together and we are still partners in Rabie Property Group today. We were the two originators.

It’s extraordinary that you have a partnership that has lasted that long. What do you think accounts for it?

Alec. It’s about trust and it’s about being like-minded. They say opposites attract and I think in many ways our personalities are opposite, but we have a great respect amongst ourselves and we have always been able to work out what we needed to do in the best interests of the business. You know we have other partners that we have taken on in our growth over the years. It is still run as a very professional business, open and transparent. We have a unique situation of respect and trust amongst all of us today.

The big breakthrough from a national perspective is when you bought that land that became Century City at Canal Walk. It was a huge project in South African terms at the time and I presume for yourselves it was quite a big step up as well.

We had done two projects at Century City with Nedbank who were then the owners of the land. We also felt this was something that we could really get our teeth into because we could encapsulate the work/play relationship is what we really wanted to develop in terms of a new urbanism where people could be in one spot for sublistic reasons and this particular land offered that to us.

It had it’s zoning in place. It had it’s rights in place and that was 2004 we acquired the land from Nedbank and there was 1.4 million square meters of bulk and today we have completed a million square meters of that 1.4 million, plus/minus. It’s got a critical mass. It’s got a dynamic and a dynamism about it where people want to work and certainly want to live and probably one of the major reasons for the success.

Now the project that we really want to talk about today. It’s an international project that you have put your name to and very strongly associated with. Did you learn much from what happened at Century City that you could apply into what you are now doing in Lisbon?

Yes definitely. I think South Africans we sometimes fight far above our weight and I think the standard and I think we have seen by the World Awards that we have won, that there was definitely a similarity that we could utilize whatever we had achieved at that development in Cape Town at Century City and around the inner city of Cape Town which would be very applicable to Lisbon and LX Living and that informed a lot of our design and in terms of what the building would look like and the mixed use aspects of having the commercial at the bottom where you have your convenience Retail and then above it your residential, swimming pools and your spas’ for all the owner occupied and the hospitality side of things. So, it definitely was not too dissimilar from what we are currently developing in Cape Town.

Why Lisbon?

I had been introduced to a Newman Leach, CEO of GM Real Estate. He had come to Cape Town and wanted to see what we were doing, and we just hit it off that we were on the same wavelength. And he said to me would I be interested in coming to look at they had acquired a great site in Amoreiras in Lisbon, and I said Why not? And I got on the plane, met him in London. He flew me there and as soon as I saw that site, I realized that this was something that we could put together and be confident that we could do something very special. The particular site is right in the heart of Lisbon and it’s got fantastic accessibility to transportation routes. It’s very close to the Avenue that the Librada which is like the Champs-Élysées. It runs down the heart of Lisbon down to the river and that’s I said to Newman we have got to joint venture with you, and we put together the deal and here we are almost ready to go and start marketing it.

Was it just open land? Or was there a building on it?

It is quite unique because Lisbon in fact, the majority of development in Lisbon is taking place on existing buildings. Where developers are required to renovate the buildings to a standard, a historical standard, then behind can then develop the apartments. This was a unique site that is a total knock down and we are putting a four-story basement parking and then the development on top of it, because in Lisbon there is a shortage of parking. So parking is a very important tool to have when marketing that you have got an underground parking bay that’s yours and forms part of the ownership of your unit. So that’s the reason was it’s not common to have sites like LX Living where you are able to actually totally demolish, go down and then come up from scratch. Brand New building

So presumably your partner then wanted to find something or someone and somewhere else in the world where you had been successful which was similar to what they had in mind?

Correct and that was the unique thing in that we were on the same wavelength. We just had to look at carefully at the design and we weren’t quite comfortable what they had in mind. We tweaked it modelled it and remodelled it in line with what we believe will be a product that would be, is there would be a demand for it from a Global perspective, because Lisbon not only offers, you know there are big markets from Brazil because of their association between Brazil and Portugal. So, there is a close link there. There is obviously a big link to Europe and those European Countries and then of course South Africans are getting to learn about Lisbon. What a great City it is and what a great country Portugal is and what its developmental prospects are going forward and there are very accurate numbers produced by Price Waterhouse Coopers touting Lisbon as the number one growth city in Europe for 2019. When one is there you can understand why it’s got lots and lots going for it.

And also this Golden Visa. How does that work?

Well Alec what we looked at this project as a project that it stands on its own merits and that it would be sold to a Global Village. The Golden Visa is a benefit to people from around the world and the Golden Visa gives an EU passport after 5 years. It’s a European Passport, Portuguese passport and of course that is something that is desirable, and people are attracted to it and it’s part of the one stop package that we are going to be offering to our purchasers. There is a big market for Golden Visas also from Brazil, but China is the biggest taker up of Golden Visas in the Portuguese market is way more than South Africa or any of the other countries from around the world. They lead the amount of applications that have been made. If one wants it, it’s available where you qualify for it and we got our international lawyers from Portugal who deal with the Golden Visas to attend our launches in Cape Town and in Johannesburg to take the various buyers who what is required and what one needs to do with in terms of qualifying for the Golden Visa.

Is this your first International Project?

This is the first one where are directly involved. In other words, we are the core of it. We’ll be managing it. We will be building it. We’ll be handing it over. We will be intimately involved with all the clients. We have invested abroad but not as the main developer. I always wanted to do it that I could see that with what we did in Cape Town and have done through South Africa, could be repeated elsewhere in the world. Lisbon offers a fantastic opportunity where it’s not too dissimilar from the development program, the development aspects of the South African market. Lisbon ticked a lot of the boxes which made me feel very comfortable.

Are you now fully immersed in this project? I see you have also got Signatura and New World?

So I am the non-Executive Chairman of the Rabie Property Group. I remain that and I’m the Chairman of Signatura which deals with Inner City refurbishments and renewable projects in Cape Town and New World is the International arm. You know I have travelled to Lisbon on numerous occasions getting to understand it. We have done a lot of research and understanding about how Lisbon works. What it needs. What we felt it needed and getting to understand what it is like to live in Lisbon. It’s a sophisticated city and it’s had great growth in terms of property prices, but it also has a big growth in tourism and that is also very important to us.

Right but what about gearing the investment? At this point Johnny Rabie handed me over to his colleague Malcolm Lobban, a former Chief Executive of a JSE listed construction company and someone who is very comfortable with financial complexity. For South Africans given the exchange control caps that are put onto can be taken abroad, is there an opportunity to gear up in this project.

There is Alec and we formed a relationship with Nova Banco which is the biggest bank in Portugal which has a big appetite to extend loans to foreign investors in the likes of the City of Lisbon up to as much as 75% on a loan to about 75% of the purchase price. They are able to offer foreign investors at very attractive interest rates from as little as 1.5% per annum. So an important part of what we are offering our clients and investors in this project is access to the end user finance opportunities and hopefully a fairly simple process. Fairly quick turnaround suggesting 72hour turn around but that we think is an important consideration for the point of the highlights that you have just mentioned.

Malcolm is there a way of earning income out of the investment i.e. Clearly you can go and stay there, or you could use it for holidays but can you let it out?

You may indeed. In fact, what we are offering on the smaller apartments. The studios and one-bedroom apartments is a guaranteed 4% yield. Gross yield in years one and two from the developers. There is a huge demand for the reasons that Johnny has explained and the know the tourism market. The shortage of rental accommodation, particularly the short-term accommodation but equally the long-term rental market is showing tremendous growth from a point of view of landlords. So, we think that many of our South African clients will be looking to buy into Lisbon as an investment and hence will be seeking an income return. A rental income returns but equally those who want to buy it to have as a unit they can go and utilize for themselves or their families that stay out of the rental pool if you like. So, the options are there. But certainly, income generating which is then enhanced significantly by leveraging and getting a return of as much as 8 to 9% growth on their investment.

So you could actually get a slice of this given that you can gear it up by 70 odd % for 60 – 70,000 Euros.

Well exactly right. Our entry level is around the 260 -270,000 Euro mark. So, if you take 25% of that, that is the 60 to 70,000 Euro and you will be getting a return on that at the handsome return on that relatively modest amount of investment.

And what has the interest been like?

It is fair to say Alec that we have had a wonderful response from our own sort of private networks and the people that are close to the Rabie Properties and Rabie Network of investors we have been supporting them over the years. So, I think we are getting a very positive response. Not only from people who are seeking to externalise in accordance with the Reserve Bank rules up to R10m a year but also for folks who have got offshore portfolio. They see this as an interesting opportunity to fit into that Offshore portfolio.

What makes this project different to the many others that we have seen invest in Mauritius. Invest in London. Invest in Granada, Cyprus. You name it. South Africans wanting to externalise their funds have almost got a smorgasbord of opportunity.

That is a very important question and we’d like to believe what makes us quite different is that first and foremost we are looking to offer a really good investment opportunity as opposed to a Visa/Offshore, you know a passport or have a residency in another country. Our departure point first and foremost is to develop a product backed up with all the right components of gearing and most importantly a market  is favourable going into the future, not just the first two years but a 4% guarantee as resides but way beyond a sustainable returns on a good investment and you investing in tried and tested people of the likes of Johnny Rabie who has got a track record as good as anybody in the Property Development Industry in this country.

So that’s your departure point. If you want the Visa. Clearly that is accessible as well provided you spend R500,000, R8m and above but our departure point is that investment and dealing with people who tried and tested as opposed to just getting a visa?

You talking to South African who may be staying in South Africa but for travel reason or perhaps other reasons would like to have the opportunity to live in the EU or go there more often through this Golden Visa Opportunity but that’s not really the main driver.

That’s not the main driver and your figure is very important. €60,000-70,000. Call it a million rand up to R1.5m into an offshore investment, regardless what your intentions are. You know whether you think you want to go and live there or spend time there or one day go and retire there, whatever it might be from a point of view of an investment portfolio, here is an opportunity to get a high yielding Capital Growth Investment what we would argue is a fairly modest quantum of investment.

Malcolm makes a compelling investment case, but how has the market responded?  Here is Johnny Rabie again.

It has been very favourably received. I think a lot to do with past experience and our ability to deliver over time. Reputational quality that we have been able to achieve. So it has been our data base. Existing data bases which have showed very strong interest and our first launch, as I have mentioned on the 30th at the one only in Cape Town. We have 300 people coming just off our data bases coming to the presentation there. So I think it is a compelling offering to look at because it offers an investment return as Malcolm has mentioned. It offers a high-quality building in a brilliant position and when it is complete you have your own unit which you can go and knock on. It is yours. It’s not a share in a syndication and you are not involved in a massive big building where you have got a tiny piece as being offered by lot of the Reit’s etc. etc. This is something that is yours. You can see it and it will be built to the high standard in a great part of Lisbon at what we believe are very completive prices relative to what is being offered at the moment.

When will it be finished? What is the time line?

So, Alec we are going to be in the ground on 1st July 2019. We start on the basement and that would be complete by the end of November and the construction would be 2 years. So, you looking at the last quarter of 2020/2021 it will be complete.

And the finishes?

The finishes in Portugal are higher than back home here. They are standard finishes and it will be high-quality services.

That was South African Construction Industry doyen, Johnny Rabie and you also heard from his colleague at Neworld, Malcolm Lobban.

This special podcast was brought to you by New World. For further information regarding the LX Living Investment Opportunity, please go to the website by clicking here.  Sign up on the site and they will invite you to attend the launch of it in Cape Town on 30th April. 2019 or Johannesburg on 6th May 2019.