New negotiations for the sale of South Africa’s oldest rugby stadium are continuing, paving the way for the defunct property to be transformed into an upscale live, work and shop hub.
However, the redevelopment of the Newlands rugby stadium, which involves a lengthy rezoning and demolition process, may take another five years.
Though he isn’t privy to what the new bidder plans to do with the stadium, Munnik tells the FM that “from all my engagement with the City of Cape Town and independent town planners, the precinct will have to be developed into a mixed-use precinct”.
The cash-strapped Western Province Rugby Football Union, which has owned the 52,000-seater stadium since the late 1800s — but in 2021 moved its headquarters to Cape Town Stadium in Green Point — has tried unsuccessfully to sell the Newlands property since 2019.
The union was placed in administration in 2021 after it reneged on a 2020 development agreement with Flyt Property Investment and associate company Dream World Investments, which planned to turn the stadium into a R2bn mixed-use precinct spanning more than 60,000m² of retail, residential and office space.
Dream World granted a R112m loan to the union as part of the deal. The debt has yet to be repaid and has since ballooned to R250m as unpaid interest and other costs piled up (as of end-February).
Dream World, the primary bondholder of the rugby stadium, last month instituted legal action to force the union to auction the stadium — and potentially other properties — to settle the debt.
Riaan Munnik, property director at Dream World Investments, says the total compensation sought from the union comes to about R400m. It includes a contractual development charge and damages claim.
The damage caused by the previous [WP rugby] regime … is still fresh in people’s minds
— Riaan Munnik
He says it could take 12 to 24 months before a court date is set for the litigation.
Munnik says the union still owns the stadium and has the prerogative to sell it, so this is the reason for the legal action. “We want to ensure Dream World can take over the property or auction it in case the union doesn’t sell it before the litigation process is concluded.”
Munnik hopes a deal to buy the stadium could be clinched sooner rather than later, given that the union was recently taken out of administration.
He says rugby politics is the reason it has taken so long to secure a buyer, despite the property having one of the best locations in the southern suburbs.
“The damage caused by the previous [WP rugby] regime, under former president Zelt Marais, reneging on the deal with Flyt/Dream World, is still fresh in people’s minds.”
The FM believes the union has placed a minimum sales price of R250m on the stadium. Munnik says how much it will fetch depends on how eager the buyer is, the development rights obtained and the mix of uses approved by the city.
The property must still go through a “rigorously scrutinised” zoning and public participation process, which he estimates will take 18 to 24 months. Munnik says if the price achieved for the stadium doesn’t cover Dream World’s debt, the union will have to sell some of the 11 other properties it owns.
Besides the Newlands property, other sites are the Brookside property in nearby Claremont (home to Villagers rugby club) and the Gardens rugby club in Oranjezicht.
Some believe that the Oranjezicht property, in one of the city’s most desirable residential neighbourhoods, could fetch a higher price than Newlands. Munnik disagrees, saying the title deed restrictions on the Oranjezicht property are onerous, limiting its development potential. “The ultimate rights attributed to all three properties post-rezoning are what will determine the value.”
Industry insiders suggest that redeveloping Newlands will demand significant financial resources. Quintin Rossi, CEO and co-founder of JSE-listed Spear Reit, whose R5.4bn Western Cape-based property portfolio includes Newlands Terraces, a large office building next to the stadium, says the scale of a redevelopment will require “very, very deep pockets”.
Given the scarcity of development land in the southern suburbs and the residential densification in the area, he says the site presents a prime opportunity for a retail-led mixed-use precinct. Still, there are plenty of development risks, such as the complex and costly demolition of the stadium, which could take two years. Developing the precinct will probably take another three to four years, he says. High interest rates and rocketing construction and labour costs are other inhibitors.
“We are watching it carefully, but it’s not something I think a listed Reit will be able to develop on its balance sheet,” says Rossi. “It will probably have to be something you do in a joint venture on a pension-fund level or perhaps in a tripartite with the union or the bondholder in a shared risk development model.”
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