Analysis of a Real Estate Refurbishment Project by Craft Properties.
Using a real estate refurbishment project of your own choice in Zimbabwe:
a) Define the term comprehensive refurbishment.(5)
b) Explain how comprehensive refurbishment differs from comprehensive redevelopment (6).
c) How did comprehensive refurbishment enhance real estate performance of the real estate project? (7)
d) Examine how public and private partnerships can be initiated in comprehensive redevelopment. (7)
a) All new buildings have a life cycle. The life cycle of a building starts from the inception stage, design, and construction, in use phase and lastly demolition and or renovation. Over time buildings suffer from wear and tear that is they depreciate due to age and by virtue of them being used and at the same time the value of the building decreases thus the need for refurbishment .This is done so as to make the state of the building better and to make sure the building yields returns to the owner. Thus the main purpose of refurbishment is to make a building efficient, functional and in line with the interests of the people. The main purpose of this essay is to define comprehensive refurbishment focusing on the example of the refurbishment of Semi levy shopping complex in Kadoma. The property was refurbished in 2016 by Craft Properties.
Refurbishment is renovation, rehabilitation, extension, improvement, conversion, modernisation fitting out and repair which is undertaken on an existing building (Mickaityte et al 2008). In other words it is part of maintaining property to accommodate changing pace requirements from users. Refurbishment is often accompanied by change of use (Barker 2009).This means that a building can be refurbished from being a service station to being a shopping mall.
Comprehensive refurbishment entails the upgrade, major repairs work, renovations, alterations, conversions, extensions and modernization of existing building but exclude routine maintenance and cleaning work (Quah, 1988).This means that comprehensive refurbishment is any work done to change the look of the building but excluding the maintenance work. When something is comprehensive it means it is broad or it completely covers or includes a large proportion of something. Thus comprehensive refurbishment can be referred to as the renovation of many buildings at once.
Comprehensive refurbishment focuses on renovating buildings without changing their physical form. According to ( Aikivuori (1996) comprehensive refurbishment work is influenced by a building’s physical deterioration, and obsolescence such as change in use, economic change, investment decisions, historical value and change in condition. This means that a building or buildings can only been refurbished if they have lost their value, when they have deteriorated and when the need to change its use arises.
Refurbishment works become an alternative when a building has reach to the end of its service life, or fails to perform as required in its use. This means that the failure of buildings of buildings to meet their intended use necessitates comprehensive refurbishment. Comprehensive refurbishment is whereby the structure of the building is not changed or remains the same but there can be some adjustments on the building such as painting, the insertion of new furnishes and also change in type of materials used for example change from concrete floor to ceramic tiles.
In conclusion comprehensive refurbishment helps in increasing the property value, meet the demands of the tenants and also helps in the sustainability of buildings.
b) The distinction between comprehensive refurbishment and redevelopment has culminated debates among many scholars. It is difficult to bring out the differences between these two forms of real estate development. However the main aim of this essay is to distinguish between comprehensive refurbishment and comprehensive redevelopment.
To begin with redevelopment occurs when existing old buildings are demolished and replaced by new ones. Jowsey (2011) highlights that redevelopment occurs when the present worth of the expected flow of future net returns from the existing use of buildings becomes less than the value of the cleared land. This means that redevelopment is coming up with a different structure altogether, the old building will be demolished and new structure that meets the required standards would be set up.
When redevelopment is undertaken on a large scale, it becomes comprehensive redevelopment. Jowsey (2011).Jowsey (2011) goes on to say that comprehensive redevelopment takes two forms, which include slum-clearance in the ‘twilight’ zones of older towns and city centre redevelopment through the provision of modern shops and offices. Comprehensive redevelopment can be defined as the demolition of old redundant or unfashionable buildings and the construction of new ones on the same site, it is done on a larger scale. Thus in general redevelopment I the basic change of everything to bring up a while new different building.
To begin with the major difference between comprehensive refurbishment and redevelopment is that of the nature of the end product. According to the definitions given above comprehensive refurbishment is the modification of old and existing buildings whereas redevelopment is the demolition of the old buildings. The difference then becomes that of the end products with comprehensive refurbishment in the end the old building is still there but with modifications but whereas with redevelopment the old buildings will not be retained, new buildings all together will be formed.
Another difference between the two is that of cost. According to Kelly (2012) comprehensive refurbishment is cheaper or less resource consuming as compared to comprehensive redevelopment. This is in the sense that in redevelopment a lot of activities have to be done. These activities include the demolition of the old buildings, purchasing of materials for the reconstruction and also it requires a lot of manpower. Whereas in comprehensive refurbishment a lot of activities can be done but they do not amount to those of redevelopment. Thus refurbishment is cheaper as it requires less resources. In simple terms modifying something is cheaper than restarting it all over again, hence explaining the difference in cost of the two.
To add on another difference between comprehensive refurbishment and comprehensive redevelopment is that comprehensive refurbishment involves renewing the old existing buildings whereas comprehensive redevelopment involves developing something anew. This means to say that comprehensive refurbishment is more concerned with the already existing to such an extent that it does not do away with old buildings but rather modifies them to meet the required standards in other words it upgrades the old. With comprehensive redevelopment the case is not the same the process is all about doing away with the old and coming up with something new and different from the old buildings.
Comprehensive refurbishment is mainly concerned with the improvement of the old buildings whereas comprehensive redevelopment also focuses on the improvement of other facilities around the place which redevelopment is taking place. Comprehensive refurbishment only change the building and not anything else surrounding the buildings for example the parking area. Whereas redevelopment results in the improvement of the parking area and even road systems. This is in the sense that the new scheme to be developed in the site which demolition took place will be planned so as to meet the current demands.
Furthermore another difference between comprehensive refurbishment and comprehensive redevelopment is that refurbishment is done in situ whereas redevelopment involves the evacuation of people and property for the process to commence. Since it was said earlier on refurbishment involves repainting, renovating among other things, the processes can be carried out with the tenants still occupying the buildings. For redevelopment the case is different as tenants have to move away as the buildings have to be demolished to come up with new structures.
In conclusion it can be noted that there a lot of differences between comprehensive redevelopment and refurbishment a mentioned in the above essay.
c) Real estate is a unique investment. It can be touched and admired and improved, unlike a stock or a bond. It also depreciates and requires maintenance, like other investments. However, real estate performance is often summed up in terms of prices rather than cash flow (Hartzell et al 1987). This part of the essay is going to explain how comprehensive refurbishment enhance real real estate performance of the project.
The project enhanced real estate performance in that it increased the value of the refurbished shopping complex. The complex before refurbishment was dilapidated and no one was willing to pay rentals for the place as it was no longer up to standard. However it should be noted that after comprehensive refurbishment tenants were more than willing to settle and have their businesses at Semy Levy shopping complex. This is evidenced by the moving in of big businesses such as Telecel and Barbours among others. This is so because they were improvements which were made on the business complex which increased the value of the land thus prompting tenants to like the place even more.
Refurbishment of the project also enhanced real estate through increasing the investment value. This is in the sense that the investment that was done long back and due to age and obosolence its investment value was now decreasing. After the refurbishment the investment value increased as the price of the rentals increased as tenants bided for higher process as the place was now better as compared to any other shopping complex in Kadoma, thus increasing the investment value of the complex.
To add on the comprehensive refurbishment of Semi Levy shopping complex enhanced the existing space and increased productivity and supported future growth of the enterprise. This is in the sense that the refurbishment made the place more attractive to investors and tenants through increased productivity. In turn which improved the real estate performance of the project. The refurbishment project enhanced real estate performance.
Furthermore the comprehensive refurbishment project enhanced real estate performance through the creation of better environment for end users such as workers, customers and clients.
Before refurbishment the complex was suffering from wear and tear, it was also being faced by the risk of collapsing. However after the refurbishment project the pace became attractive and it was now a better working environment. This resulted in the increase in the number of tenants who wanted to occupy the place as well as increase in business as people now felt the environment was safe.
To add one comprehensive refurbishment of the Semi Levy shopping complex in Kadoma enhanced real estate performance through increase or rise in asset price. Before refurbishment the buildings were now in a dilapidated state and were outdated. After the renovations the buildings were modernized and were now in line with the modern day technology, this increased the asset value of the asset.
In addition the refurbishment of the shopping complex enhanced real estate performance through the intensification of the use of space. The place through refurbishment was renovated and all the places that needed to be maintained were maintained. This made the place better than it was before as a result attracting people and businesses to the complex thus intensifying the use of space as a result reducing voids.
The comprehensive refurbishment of Semi Levy shopping complex lead to sustainability of the building. The building was maintained and renovated and this increased the life span of the building. This reduced the need to routinely maintain the building, saving resources. Hence a move towards sustainability.
In conclusion it can be noted that comprehensive refurbishment enhances real estate performance as highlighted by the above essay.
d) Public and private partnerships refer to the mechanism by the government to procure and implement public infrastructure and or services using the resources and expertise of the private sector (Robinson et al 2009). This usually happens when governments are facing ageing or lack of infrastructure and require more efficient services, a partnership with the private sector can help foster new solutions and bring finance. According to Robinson et al (2009) public and private partnerships combine the skills and resources of both the public and private sectors through sharing of risks and responsibilities. This enables governments to benefit from the expertise of the private sector, and allows them to focus instead on policy, planning and regulation by delegating day-to-day operations.
Public and private partnerships can be initiated through the enforcement of favourable indigenization laws or favourable investment terms .If the terms on which the investors are to operate on are stiff and unfavourable it will result in investors shunning engaging in public private partnerships. For example the indigenization policy in Zimbabwe which states that the investor is to get 49% and the public 51% that is in the case of the investor not being from Zimbabwe. This law makes investors not to be interested in partnering with the government. Thus the revision of the laws would lead to the initiation of public private partnerships.
Public private partnerships can be initiated in comprehensive redevelopment through the maintenance of key institutional roles and responsibilities. If the responsibilities and roles to be played by an institution are cleared stated before the project begins and their maintenance throughout the redevelopment process, a sense of belonging is created. If this is done the investors feel the need to keep partnering as they would have been considered in the redevelopment process and they feel their participation is greatly appreciated thus initiating partnerships for more other projects.
Ensure that all significant regulation affecting the operation of Public-Private Partnerships is clear, transparent and enforced (Emery et al 2000).They further assert that red tape should be minimised and new and existing regulations should be carefully evaluated. If the above mentioned measures can be adopted the initiation of public private partnerships will be successful.
In conclusion public private partnership can be initiated in a country if the responsibilities each sector is going to play are clearly stated and if the terms for investment are favourable.
REFERENCES
Aikivuori, A. (1996), “Periods and demand for private sector housing refurbishment”, Journal of Construction Management and Economics, Vol. 14, pp. 3-12.
Emery, J., Spence Jr, Wells T, and Buehrer, S. (2000). Administrative barriers to foreign investment: Reducing red tape in Africa. Washington, DC: International Finance Corporation and the World Bank.
Hartzell, D, Hekman, J, and Miles, M. (1987). Real estate returns and inflation. Real Estate Economics, 15(1), 617-637.
Jowsey, E. (2011).Real Estate Economics. U.K, Palgrave: MacMillan.
Kelly, E. D. (2012). Community planning: An introduction to the comprehensive planning through redevelopment and refurbishment. Island Press.
Mickaityte, A, Zavadskas, E, Kaklauskas, A, and Tupenaite, L. (2008). The concept model of sustainable buildings refurbishment. International Journal of Strategic Property Management, 12(1), 53-68.
Quah, L. (1988). “An evaluation of the risks in estimating and tendering for refurbishment work”, PhD thesis, Herriot Watt University: Edinburgh.
Robinson, H, Carrillo, P, Anumba, C, and Patel, M. (2009). Governance and knowledge management for public-private partnerships. John Wiley & Sons.
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